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"There are a lot of things we have to do, and that's one of them." -- Mark Fabiani, adviser to Wesley Clark, on having Clark officially register as a Democrat On Oct. 2, Hewlett-Packard (HPQ) launched a $300 million global marketing campaign to sell consumers on its latest digital imaging and computer products. But the bucks don't stop there. Business-Week has learned that HP will invest up to $200 million more in a 10-year marketing alliance with Walt Disney (DIS) to give HP some of the Mouse House's family appeal.

The first joint marketing project will plug a new thrill ride at Epcot Center, called Mission: Space. The flight simulator is a collaboration between Disney designers and HP's NASA-hardened engineers. On Oct. 9, the pair will air TV ads touting the attraction. HP also is planning its first consumer promotion: a sweepstakes offering chances to spend New Year's Eve traveling to Mars (on the ride) and enjoying an HP home-technology makeover.

Will all this liven up what many perceive as HP's reliable, but staid image? "HP's brand is about to go from a walk to a run," says Steven Addis, CEO of Addis Group, a brand-strategy firm. Maybe "Mickey Mouse marketing" is a compliment? The list of woes at HealthSouth (HLSH) keeps growing. The ailing hospital chain already faces a criminal investigation into its accounting. Now regulators say that by 2007, at least 75% of patients in a rehab hospital will need to have one of 10 medical conditions for the hospital to get paid by Medicare.

That means HealthSouth would lose reimbursements for 39,000 patients, or about 32% of its rehab clients. HealthSouth predicted its 2003 revenue would hit $4.1 billion, and rehab accounts for most of that. "HealthSouth would have the greatest exposure," says Jeffries analyst Frank Morgan.

HealthSouth could feel the pinch as early as next year. As an interim step, the feds propose that 65% of rehab patients must be receiving treatment for one of 12 conditions by 2004. The government wants patients to recover in nursing homes or at home, where Medicare won't pay. HealthSouth has reserved $46 million to cover short-term losses from the changes. The company says the government may reconsider, since seniors, a powerful lobbying group, need the hospitals. HealthSouth has a lot riding on it.

Editor's Note: An earlier version of this story incorrectly referred to HealthSouth as being in bankruptcy.

When the lights went out on the East Coast this summer, Rick Rashid, Microsoft's (MSFT) head of research, knew about it within minutes simply by glancing at news headlines on his watch. These days, Rashid straps a prototype of the software giant's latest creation, the Spot watch, to his wrist every morning.

Rashid's timepiece is hardly a fashion statement -- a hulking chunk of plastic with an oversized display. But when the hoi polloi get their hands on Spot watches late this fall, they'll be able to choose from more fashionable models from Fossil (FOSL) and Finnish sports watch maker Suunto. The timepieces will sell for $100 to $300. Buyers will have to pony up $9.95 a month or $59 a year for the service, which beams the latest news, weather, and a host of other data using FM airwaves.

Microsoft isn't the first to make a run at wearable technology. Five years ago, Sun Microsystems (SUNW) unveiled the Java ring, a concept that one day might let users go to any Web-connected device and call up their personal information. Today, the Java ring is little more than a memory. Rashid hopes his watch won't meet a similar fate. "We'll cross our fingers," he says. And he'll hope that consumers will want to be connected as much as he does. When Paul Heth came to Moscow in 1993, the cinemas were dumpy and single-screen. No popcorn, no comfy seats. Ten years later, the plush multiplex has arrived. KinoStar De Lux -- 11 screens, 3,250 seats -- opened on Sept. 19, thanks to Heth and National Amusements. They want to build others in Moscow and St. Petersburg. More will follow: Prof-Media News & Publishing is building a new chain, and Karo Film is updating some of its 15 theaters and adding more. Only 8% of Russians catch at least one flick a year. But Prof-Media says box-office sales have risen tenfold since 1999. Popcorn, anyone? In Saving Capitalism from the Capitalists, University of Chicago finance professor Raghuram Rajan argues that free financial markets can benefit the poor. Now he's getting a chance to test that theory. On Oct. 1, the 40-year-old academic became the International Monetary Fund's new chief economist.

He's also the first top IMF economist from a developing country. His predecessor, Kenneth Rogoff, calls that "a huge plus." Born in Bhopal, India, Rajan could boost the IMF's credibility with those who say its lending policies favor creditors and are too restrictive for developing nations. "You don't want to impinge on the sovereignty of [developing countries]," says Rajan, "but...you want to give the people a better chance."

Unlike his predecessors, Rajan studied banking, not economics. With many economic meltdowns accompanied by banking crises, Rajan may be uniquely equipped to address them. The California recall election is shining a spotlight on how little Native American casinos pay in taxes. Candidate Arnold Schwarzenegger has risen in the polls since running ads that urge tribes to "pay their fair share" of state taxes. But under deals negotiated by Governor Gray Davis in 1999, California's Native American casinos don't contribute directly to state coffers. Instead, they pay about 3% of their winnings to other tribes and to reimburse state and local governments for some costs.

Critics say Davis should have cut a better deal. C. Shawn Bookin, a casino analyst at money manager Trust Company of the West, figures the pact has cost the state $700 million in tax revenue yearly, which could have supported a $12 billion bond issue.

Nationally, 6 of the 24 states with Native American gaming get a piece of the action. Connecticut collects 25% of slot machine revenues from its two tribal casinos, worth some $400 million a year. Other states seem to be moving in that direction. Arizona and Wisconsin recently renegotiated pacts to obtain substantial tax payments.

Last March, Davis suggested raising $1.5 billion in taxes from the casinos to help solve the state's budget crisis. But he cut that figure in half after tribes began running TV ads that praised the contributions of gaming to the state. They've since contributed big bucks to his recall rivals. Here's something everyone will agree on: There's a huge jackpot at stake. By yearend, 150,000 Americans will use the Web to make phone calls. By 2005, that's expected to swell to 1 million, says researcher IDC. But as consumers discover the joy in Web phones, so too are state regulators -- and that could crimp profits in the fledgling field.

Regulators took notice last year when Vonage, an Edison (N.J.) Web-calling service, advertised that it could replace traditional phone service. On Aug. 13, Minnesota became the first state to declare Vonage a telephone service subject to state regs, including paying fees to fund 911 service. Such fees could hike providers' costs 10%, says CIBC World Markets.

On Sept. 24, Vonage appealed, saying it shouldn't be regulated because it's an "information" service. A day earlier, Vonage asked the FCC to protect the industry against state regulators. The FCC says it will examine the issue by yearend. Alabama, Colorado, Illinois, Ohio, Pennsylvania, and Wisconsin are mulling similar rules. So much for cheap rates on Web phones. Percentage of Gen Xers who expect help from their parents to pay for a child's college education: 20% But only 7% of those parents are stashing cash to put a grandchild through college.

Data: UCLA School of Law


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