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Outside a Cadbury plant: The company keeps resisting kraft

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Health-Care Milestone

One close vote in the House, one giant leap for health-care reform. After weeks of give-and-take, the House of Representatives on Nov. 7 managed to push through a bill by the tiny margin of 220 to 215. One Republican, Joseph Cao of Louisiana, voted in favor, while 39 Democrats turned thumbs-down. No sooner was the bill passed than it came under savage attack for failing to curb costs adequately and restricting coverage of abortion-related services. The Senate aims to begin debating its version on Nov. 16.

—Edited by Harry Maurer & Cristina Linblad

Verdict: Not Guilty

Were they simply lousy money managers, or did they lie to clients? A federal jury in Brooklyn apparently decided on the former, acquitting on Nov. 10 two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin, of securities fraud. Many viewed the trial as a test case for prosecutions growing out of the subprime crash. Cioffi and Tannin oversaw funds that collapsed in 2007 after making huge bets on mortgage securities, resulting in $1.6 billion in losses. Prosecutors alleged that they deceived investors, waxing optimistic about the funds while in private they foresaw disaster. But that's often tough to prove, and jurors didn't buy it. Cioffi, 53, and Tannin, 48, still face civil charges brought by the SEC.

—Edited by Harry Maurer & Cristina Linblad

The Galleon Case Widens

Ripples from the Galleon Group insider trading case are spreading, and the Street is worried. On Nov. 5 federal prosecutors in New York accused 14 more people—including an attorney and Wall Street traders—of trading on nonpublic information. Then, on Nov. 11, The Wall Street Journal reported that a key witness told a judge he had bought information from a Marvell Technology Group (MRVL) staffer, the first detailed indication that a corporate insider was paid off. Investigators are also tracking transactions at one of the largest and highest-profile hedge funds, SAC Capital Advisors.

—Edited by Harry Maurer & Cristina Linblad

Benmosche Brouhaha

AIG (AIG) CEO Robert Benmosche has made plenty of waves in his three months at the helm, starting with his early bluster about not being pushed into selling assets too soon. On Nov. 11 he found himself in rough water again after The Wall Street Journal said he'd threatened in front of board members to quit because of pay limits imposed by Washington, which owns 80% of the bailed-out insurer. Ben- mosche's own $10 million pay package got the O.K. in October. In a letter to employees, Benmosche didn't deny the report, though he termed it "speculative." He acknowledged his ire over the pay caps but assured employees: "I and the board remain totally committed to leading AIG through its challenges and to continuing to fight on your behalf."

—Edited by Harry Maurer & Cristina Linblad

A Roadblock for Oracle

As Oracle (ORCL) waits, Sun is fading. Back in April, the top database maker offered $7.4 billion for Sun Microsystems (JAVA), which makes computer hardware and software, but on Nov. 9 the European Union formally objected to the combo. Regulators fear Oracle's ownership of Sun's open-source MySQL database would stifle competition. Oracle disagrees, but with the deal in limbo, Sun continues to burn money. On Nov. 6 it said revenues sank 25% during its first quarter, ended Sept. 27, and losses hit $120 million. The EU has until Jan. 19 to make a final call. U.S. officials have already approved the deal.

—Edited by Harry Maurer & Cristina Linblad

Chipmakers Make Peace

The feud between the chipmaking kings of China and Taiwan came to an end on Nov. 10 with a victory for the Taiwanese. China's Semiconductor Manufacturing International (SMI) said it agreed with its bitter rival and the industry's top player, Taiwan Semiconductor Manufacturing (TSM), to settle lawsuits alleging theft of trade secrets. SMIC will pay $200 million to TSMC and give it shares and warrants worth a 10% stake in the Shanghai company, which hasn't made money since 2007. SMIC also said its founder and CEO, Richard Chang, had resigned. Despite its history of red ink, SMIC could prove valuable to TSMC, which only possesses one small plant in China. SMIC operates large facilities in Shanghai and Beijing and owns a former Motorola (MOT) chipmaking fab in the northern city of Tianjin.

See "TSMC's Next Move in China"

—Edited by Harry Maurer & Cristina Linblad

Why You'd Better Beware of the 'Big Shift'

Conventional wisdom says productivity is a key driver of corporate profitability. Yet this long-held assumption is challenged by a report from Deloitte's Center for the Edge. The study, led by John Hagel III and John Seely Brown, finds that despite major improvement in labor productivity over the past four decades, many U.S. industries have experienced "alarming" declines in return on assets (ROA), a key metric of corporate performance. The authors say that trend is being driven by what they term the "Big Shift"—a tremendous increase in competitive pressures, combined with the increasingly pervasive digital infrastructure.

In a follow-up report released on Nov. 10, Hagel & Co. delve deeper into the numbers to figure out how the Big Shift is playing out in nine U.S. industries. Surprisingly, the steepest declines in ROA came in technology, telecommunications, and media—sectors traditionally regarded as innovation hotbeds. The auto industry also had a poor showing, though that's not so startling. Banking, retail, consumer products, and insurance fared better. But only two sectors, health care and aerospace/defense, saw ROA climb. Keep in mind that these industries are subject to heavy government regulation, which tends to muffle competition.

Overall, the Deloitte report provides fodder for those, like BusinessWeek's Michael Mandel, who argue that the woes of the U.S. economy extend beyond the financial sector and began showing up well before the housing bubble. (Deloitte's Center for the Edge, "2009 Shift Index")

—Edited by Harry Maurer & Cristina Linblad

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