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"It takes a lot and a very long time to kill an airline." --Former Pan Am CEO Tom Plaskett, on the tenacity of the U.S. airline industry despite a five-year downturn, in an interview with USA Today

Eliot Spitzer is turning up the heat on spyware. On Apr. 28, New York's Attorney General sued Intermix Media (MIX), alleging its software violates laws against false advertising and deceptive business practices ("Spyware: Suddenly, Eliot Pops Up," BW -- Apr. 25). Now Spitzer may go after advertisers and ad networks that work with spyware suppliers -- some of the Web's most powerful players, including Yahoo! (YHOO) and America Online (TWX).

Kenneth Dreifach, chief of Spitzer's Internet Bureau, wouldn't identify companies but says ad networks and their advertisers may be on the hook. "To the extent that they are driving [spyware] and ratifying it, they may face issues of their own liability," says Dreifach.

AOL recently stopped working with Intermix, which says it ceased distributing the programs at issue. Yahoo works with Intermix; it's trying to clarify how it will treat spyware vendors.

With tensions mounting over the valuation of China's currency and how to deal with North Korea, President George W. Bush and Chinese President Hu Jintao are set to hold a series of high-level meetings later this year, BusinessWeek (MHP) has learned.

A source familiar with Bush Administration plans says that when Hu comes to the U.S. in September for the opening of the U.N. General Assembly in New York, he'll also travel to Washington for a formal state visit. Hu is likely to return the favor in November, hosting Bush for a bilateral summit in Beijing when he attends a meeting of leaders of the Asia-Pacific Economic Cooperation forum in Busan, South Korea.

The meetings would mark the most substantial discussions to date between the two leaders and could shape what many analysts see as the most important bilateral relationship of the 21st century. Hu met with Bush for 30 minutes at the White House in 2002 when Hu was Vice-President. Since then they have met at international gatherings such as a November APEC meeting in Santiago, Chile. "This is really an unprecedented level of interaction," says David Lampton, a China expert at Johns Hopkins School for Advanced International Studies. "Despite all the kinds of frictions that are very much in the news, this relationship seems to be getting institutionalized."

They have plenty to discuss. Many experts believe that by November, Beijing will have revalued the yuan -- but not by enough to make a dent in the yawning U.S. trade deficit. The Chinese worry about a U.S. protectionist backlash. Tensions over Taiwan may be easing. But talks on curbing North Korea's nuclear weapons are headed nowhere.

Bush may not have looked into Hu's soul, as he famously declared to have seen into Russian President Vladimir Putin's. So the summits could serve only to paper over the two sides' many substantial differences.

Revolutionizing the phone business costs a bundle. Just nine months after it raised $105 million in financing, Vonage Holdings, the privately held broadband phone-service provider, is about to raise $200 million more, says CFO John Rego. The deal -- led by private equity firm Bain Capital -- would make it the largest one this year, says researcher VentureOne.

Vonage needs the cash to maintain its feverish growth. The company has more than 650,000 users and is adding 15,000 new ones a week, at a cost of up to $200 per subscriber.

Vonage is battling cable and phone companies for the residential voice-over-Internet market, which will swell from 3 million users this year to 27 million in 2009, says researcher IDC (IDC). Cable and telecom companies may have an advantage because they can bundle other services and market to their large installed base. Vonage also must contend with voice-over-Internet provider Skype, which has 1 million paid users. If Vonage doesn't become the largest Net phone company, it could set a record as the largest fund-raiser.

Hank Greenberg, ex-CEO of American International Group (AIG), may have to reach deeper into his very deep pockets. A source close to AIG says the board will look at whether he can be forced to return bonuses and other incentives under the Sarbanes-Oxley Act, which says CEOs shall pay back bonuses, stock-option profits, and other incentive pay following misstated results stemming from misconduct. While AIG says accounting errors will slash about $2.7 billion off its net worth and affect financial statements back to 2000, proving misconduct may be tough. Greenberg, through his lawyer, has denied wrongdoing. With millions at stake, says one insider, "expect a fight."

Every may, TV pitches its prime-time lineups to ad execs. This year, Microsoft's (MSFT) MSN became the first big Net portal to crash the party.

The presentation was more staid than the usual TV glitz (last year, CBS (VIA) hired The Who). MSN execs showed clips of video-on-demand from NBC's Today and Fox Sports, as well as entries from Maxim and IFilm, a site for short, independent films. MSN has already signed up Procter & Gamble (PG), Sprint (FON), Ameritech, and BMW. With online ads booming, Web portals can afford to let their numbers do the talking.

Henry Schleiff, the 57-year-old CEO of Court TV, would be the last person to deny that live trial coverage is some of the most compelling fare on the air. His network, owned by Time Warner (TWX) and Liberty Media (L), has been instrumental in the fight to allow cameras into courtrooms in 44 states; Schleiff is pushing his home state of New York to be next. But as part of a plan to reach a broader-based and more youthful audience (today the median age of viewers is 48), Schleiff decided in March to split the network. It is now Court TV News during the day, with trial coverage, and Court TV Seriously Entertaining at night, with original series and movies. "This is a revolutionary step in our evolution," he says.

Last year, Schleiff hired Marc Juris away from video music channel Fuse. One of the new offerings: Casino Takedown, in which former card-counters test casino security. It may not be O.J. trying to fit into that infamous glove, but it's all part of the nurturing of a network.

In the next few weeks, Microsoft (MSFT) will take the wraps off the latest version of its Xbox video game console, technology to rival Research in Motion's (RIMM) BlackBerry mobile e-mail device, and even so-called business-intelligence software to help companies make sense of corporate data. Chairman Bill Gates is pushing the company as the engines that propelled it to the top of techdom -- its Windows and Office monopolies -- slow down. But Gates doesn't see Microsoft slowing down. On May 2, Seattle Bureau Chief Jay Greene interviewed Gates at the Society of American Business Editors & Writers conference. Here are some excerpts:

On corporate blogs:

You used to have spokespeople and you could call them together and say: "Make sure you don't give out the earnings before we're supposed to," or whatever it is that you wanted them to understand. Now you have thousands of spokespeople, where speaking off the cuff is part of the whole charm of the thing. So you'll get into issues.

But just the blogging for internal use, where our people are seeing each other's blogs, has allowed groups to work together on a better basis.

On the new game consoles:

Our goal in the last generation was to be in the game. We came out of this round a very strong No. 2 [behind Sony's (SNE) PlayStation]. What we got -- at some significant financial cost -- was the opportunity to play again.

Now people are looking, really, at two companies (Sony and Microsoft). Nintendo (NTDOY) is more likely to be a niche player this time around.

On moving from stock options to stock grants for employees:

We probably never should have used stock options. But we got away from many of their ills because we happened to be in such a small stage of the company [when they were first offered]. I actually regret that we ever used them. There's some benefit, but the approach we're taking now is just a better approach.

With a cash hoard exceeding its value on the stock market, distressed carmaker General Motors (GM) may look like a bargain to Kirk Kerkorian. But don't expect to find GM or Ford on the buy list of value investor Warren Buffett.

At the Berkshire Hathaway (BRK-A) annual meeting on Apr. 30, Buffett told shareholders that GM and Ford each has "an extremely difficult hand to play." The companies' legacy costs -- namely pension and health care -- put them at a major disadvantage. Those expenses add up to $1,600 per car at GM. "Imagine if [Ford and GM] had to sign contracts that made them pay more for steel than competitors do," he said. "People would feel that was untenable."

The Oracle of Omaha has never been a fan of auto makers because most lack a franchise brand that would let them raise prices without hammering market share, the way Coca-Cola (KO) and Anheuser-Busch (BUD) do. (Both are Berkshire holdings.) That means Buffett's biggest auto investment is likely to remain the Lincoln Town Car he drives.


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