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Winging Away


A week after European rival Airbus bagged about 60 new orders at the Paris Air Show, Boeing Commercial Airplanes CEO Alan Mulally finally has something to smile about. His Seattle-based airplane unit on July 1 landed a multibillion-dollar order with AirTran Airways to build up to 110 Boeing narrowbody jets.

The Orlando-based discount carrier ordered 28 737s, which can seat 120 to 190 passengers, will lease 22, and took options for 50 more. The carrier also ordered 10 717s -- Boeing's smallest commercial jet, with 100 seats. The total contract is worth about $6 billion at list prices, but airplanes are usually sold at a discount. Equally important for Mulally, the AirTran deal closes the gap with Airbus, which has had a strong lead in orders this year. Airbus had airplane orders for 215 aircraft by June 30, while Boeing counted 86 orders, not including the AirTran business.

With Boeing's board expected to decide soon whether to build the 7E7 Dreamliner, a superefficient widebody aircraft, the AirTran deal makes Mulally's efforts to launch a big new airplane just a bit easier. Let the investor beware. That was the message sent by two district court judges on July 1 in the first major cases about research since Wall Street's largest firms agreed in April to pay $1.4 billion to settle charges about research conflicts of interest. U.S. District Judge Harold Baer dismissed claims that research analysts at Goldman Sachs (GS) Credit Suisse First Boston (CSR) and Morgan Stanley (MWD) deceived investors about the prospects for Covad Communications (COVD) Group. Meanwhile, Southern District of New York Judge Milton Pollack granted Merrill Lynch (MER)'s motion to dismiss class actions related to the stocks of 24/7 Real Media Inc. and Interliant Inc. He dismissed claims that former Merrill Lynch star analyst Henry Blodget caused investor losses. "Plaintiffs brought their own losses upon themselves when they knowingly spun an extremely high-risk, high-stakes wheel of fortune," Pollack wrote. Wireless phone competition is getting rough. On June 27, Verizon Wireless filed suit against rival Nextel Communications (NXTL) alleging that Nextel had illegally obtained test models of a new Verizon phone. Verizon alleges that Nextel used "illegal corporate espionage" to obtain the devices, which will compete with Nextel's popular walkie-talkie-like service. The suit, which seeks compensation and punitive damages, doesn't explain how Nextel allegedly obtained the phones. Nextel said it was baffled by the complaint, filed in U.S. District Court in Alexandria, Va. Nextel's service has been hugely successful, and Verizon and other carriers are expected to roll out similar offerings this year. Fore! Callaway Golf (ELY) maker of beloved Big Bertha clubs, is acquiring Top-Flite Golf out of bankruptcy for $125 million. Long the leader in value-priced golf balls, Top-Flite struggled under a heavy debt load assumed by parent Spalding Sports Worldwide (RML) after a 1996 leveraged buyout. Top-Flite's financial problems were compounded by the late-1990s golf ball wars, which saw new players, such as Nike, Adidas, and Callaway, enter the market just as demand hit a rough patch. Callaway will consolidate Top-Flite with its ball and club research and manufacturing operations, taking charges of $70 million this year. Justice Dept. antitrust watchdogs have all but guaranteed that Oracle's $6.3 billion hostile takeover of PeopleSoft won't close anytime soon. On June 30, Justice asked Oracle about the deal's impact on competition in the corporate-software market, where Oracle and PeopleSoft rank second and third, respectively. Despite Justice's request and a separate antitrust lawsuit filed by the state of Connecticut, Oracle said it believes the deal will be approved. Oracle has set a July 7 deadline for its all-cash $19.50 a share offer, but it may extend the date. In a victory for investor advocates, the Securities & Exchange Commission on June 30 ruled that companies must obtain shareholder approval before granting stock options and other equity compensation to executives and employees. The new rules apply to companies on the New York Stock Exchange and the NASDAQ. The SEC effectively closed a Big Board loophole that had allowed companies to avoid shareholder votes if compensation plans included options grants for lower-level employees. The SEC also said that companies must get shareholders' O.K. to change the exercise price of options. -- As obesity concerns grow, Kraft Foods (KFT) on July 1 promised to cap portion sizes.

-- American Airlines (AMR) is laying off 3,100 flight attendants.

-- MGM, Viacom (VIA), NBC (GE), Liberty Media (L) and Edgar Bronfman Jr. made a second cut to bid for Vivendi (V) Hollywood assets. Mesa Air (MESA) took off after it signed a tentative 10-year pact to become a full-fledged feeder carrier for United Airlines (UALAQ) Under the deal, Mesa would fly 35 to 60 United Express jets in addition to the 10 prop planes it now flies for United. Mesa shares gained 6%, to close at $8.42 on July 1.


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