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Free-Speech Ruling Of The Week


It wasn't the signal Wall Street was looking for. In a June 5 speech, Fed Chairman Ben Bernanke sent the message that a rate cut anytime soon is unlikely. Data indicating an economic slowdown had some investors crossing their fingers that the Fed would soon trim back its benchmark rate from 5.25%. Bernanke put the kibosh on that by saying that inflation risks haven't subsided. Bernanke did opine that housing would continue to undermine growth for longer than most dismal scientists have figured. The Dow, which had closed at a record high the day before, fell 81 points.

Another roaring bourse took a much more serious hit this week. China's wild and crazy market, up more than 300% over two years, plunged 8.3% on June 4 and remains down about 13% since Beijing raised trading taxes last week. Unlike previous sharp sell-offs in China, this one left markets in Europe and the U.S. largely unruffled.

See "Bernake: The Dilemma Ahead"

Tea and crumpets with the Bancrofts on June 4 seemed to go swimmingly for Rupert Murdoch, who moved closer to winning approval for News Corp.'s (NWS) $5 billion acquisition of Dow Jones (DJ). Murdoch and the Bancrofts hashed out issues of editorial independence for four hours--two more than initially anticipated. Further talks are expected, but a rival may still emerge. Los Angeles dealmaker Ron Burkle, who failed to buy the Los Angeles Times, signed on to help The Wall Street Journal union members seek funding to take Dow Jones private.

See "Murdoch, Bancrofts: "Very Solid" Progress"

German Chancellor Angela Merkel planned for the Group of Eight to grapple with climate change at the summit she's hosting in Heiligendamm on June 6-8. What she didn't expect was a May 31 speech by President George W. Bush that proposed a new set of talks outside of the current process. Critics called it another example of delaying tactics by a White House bent on avoiding mandatory curbs on greenhouse gas emissions. Others saw merit in Bush's idea of forging a voluntary accord among the top polluters, then building out from there.

See "Merkel's Plan for Saving the G-8 Summit"

Finally caving to investor pressure, Wal-Mart (WMT) said on June 1 it would cut back on U.S. store-building in a bid to boost return on capital. The discounter said it would open between 190 and 200 supercenters this year, down from a planned 265 to 270, and slow expansion through 2010. Wall Street cheered: The stock rose 3.9% that day.

Wachovia's (WB) $7 billion acquisition of regional brokerage A.G. Edwards (AGE) has Wall Street trying to guess who will be next. Shares of Raymond James Financial (RJF) jumped 7%, and Stifel Financial (SF) shares gained 8% on May 31 after Wachovia announced its plan. The A.G. Edwards deal will catapult Wachovia into the top three among all brokers, behind only Merrill Lynch (MER) and Citigroup (C).

See "Wachovia Deal Boosts Smaller Brokerages"

Suddenly, private equity has telecom's number. Wireless carrier Alltel (AT) accepted an offer in May, and on June 4, equipment maker Avaya (AV) agreed to be acquired by TPG Capital (also a player in the Alltel deal) and Silver Lake Partners for $8.2 billion. Many figured Avaya was takeover bait: Although it's a leader in sales of gear for Web-based calls, the $5 billion outfit is a minnow in a market dominated by big fish such as Cisco (CSCO) and Alcatel-Lucent (ALU).

How can a CEO get investors to fall back in love with an industry hurt by too many factories, slim margins, and tepid spending on tech products? Flextronics (FLEX) CEO Mike McNamara thinks the $3.6 billion acquisition of smaller contract manufacturer Solectron, announced on June 4, will do the trick. But with $30 billion in sales, the combo will still lag far behind the leader, Hon Hai.

See "Flextronics' Merger Muscle"

Reversing a hiring binge, Dell (DELL) announced its first job cuts since late 2001. On May 31 the struggling company said it will axe about 10% of its workforce, some 8,800 people, over 12 months. Shares jumped more than 5% that day.

See "Dell's Road to Recovery"

Word on the streets of Silicon Valley was that Palm's (PALM) days were numbered because of an aging line of smartphones. But on June 4 came an infusion of capital when private equity firm Elevation Partners invested $325 million for a 25% stake. One of Elevation's partners is former Apple CFO Fred Anderson, whom Apple blamed in large part for its options backdating woes. And longtime Apple hardware engineering chief Jon Rubinstein signed on to be Palm's new chairman.

See "Palm's New Dough--And New Blood"

Not being able to sell gas-electric hybrids with gas prices crowding $4 per gallon is like not being able to sell beer at a Chicago Cubs game. But Honda (HMC) managed it. The Japanese automaker on June 5 said it won't offer a hybrid version of the new Accord sedan due out later this year because sales of the current one are so dismal.

See "Failure Of Accord Hybrid Is A Marketing Fiasco"

Bill France Jr., who built NASCAR from a scruffy Southern circuit into a national money machine, died on June 4.

If President Bush can get away with it, so can Cher. That's the opinion of the U.S. Court of Appeals for the Second Circuit in New York, which on June 4 found that the FCC can't punish broadcast television stations for airing fleeting vulgar language. Under the Bush Administration, the FCC has come down hard against what it calls inappropriate on-air behavior and language. In one case, the agency fined the Fox Network after singer and actress Cher blurted out a profanity during a 2002 broadcast of the Billboard Music Awards ceremony. After a series of such fines, Fox, CBS, ABC, and NBC filed suit against the commission last year. In a 2-1 opinion, the three-judge panel said the FCC's enforcement was "arbitrary and capricious" and said fleeting expletives often are used in excitement and aren't necessarily obscene. The court noted that "even the top leaders of our government" have used such language. In 2002, Bush was caught on tape uttering a vulgarity in conversation with British Prime Minister Tony Blair. FCC Chairman Kevin Martin said he was "disappointed" with the opinion and that the court was "divorced from reality." The FCC is weighing an appeal to the Supreme Court.


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