Yahoo 1st-quarter profit triples, but it's probably not enough to cause Microsoft to raise bid

Yahoo Inc. delivered first-quarter results that eclipsed analysts' modest expectations, but the performance did little to support the Internet pioneer's demands for software maker Microsoft Corp. to raise its takeover bid above $45 billion.

The Sunnyvale-based company said Tuesday that it earned $542.2 million, or 37 cents per share, more than triple its profit of $142.4 million, or 10 cents per share, at the same time last year.

Most of the first-quarter improvement stemmed from a non-cash gain of $401 million recorded to recognize Yahoo's stake in the parent company of Alibaba.com, a leading e-commerce site in China that went public last year.

If not for the Alibaba windfall, Yahoo would have earned 11 cents per share -- comparable to its profit at the same time last year, on an apples-to-apples basis.

The earnings were two cents above the average estimate on the same basis among analysts surveyed by Thomson Financial.

Perhaps even more importantly, Yahoo provided the same full-year revenue outlook that it made in late January -- just two days before Microsoft made its unsolicited bid.

"This doesn't change the picture much at all," Susquehanna Financial Group analyst Marianne Wolk said.

Yahoo's first-quarter revenue climbed 9 percent to $1.82 billion.

After subtracting commissions Yahoo paid its advertising partners, its revenue totaled $1.35 billion -- just $30 million ahead of analysts' average projection.

Investors didn't seem to be impressed as Yahoo shares shed 15 cents in extended trading after dipping a penny to finish the regular session at $28.54.

The first-quarter numbers provided a reminder of the ever-widening gap separating Yahoo from Google, whose profit during the same period climbed 30 percent to $1.3 billion on revenue that rose 42 percent to $5.2 billion.

Now it appears more likely the standoff between Yahoo and Microsoft will be resolved in a divisive battle that could drag on into the summer, opening the door for Google to grow even stronger while its two rivals are distracted by their duel.

Microsoft has threatened to oust Yahoo's board if the 10 directors don't accept the current offer Saturday. That risky course of action, known as a proxy contest, probably wouldn't be settled until Yahoo's shareholder meeting, which doesn't have to be held until July.

The cash-and-stock bid -- valued at $44.6 billion, or $31 per share, when it was first made -- is now worth about $43 billion, or $29.88 per share.

Without specifying a precise price, Yahoo has maintained it's worth more to Microsoft even though its shares had fallen below $20 before the bid.

Yahoo gained a little more credibility to its argument by topping analysts' estimates, said Canaccord Adams analyst Collin Gillis. "They cleared another hurdle," he said. "You can't take a strong stance on your value and then not deliver the earnings."

Steve Ballmer, Microsoft's chief executive officer, reiterated the software maker has no plans to sweeten its offer. "We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said in remarks made before Yahoo's first-quarter report came out.

Jerry Yang, Yahoo's co-founder, CEO and a board member, made it clear the company won't sell to Microsoft unless the bid is raised. "Our ability to execute on multiple fronts is clearly improving," he told analysts during a Tuesday conference call.

Yahoo expects its revenue to increase more dramatically in 2009 and 2010 as the benefits from its expanded Internet advertising network start to kick in. "We feel we are on the verge of fundamentally changing the game," Sue Decker, Yahoo's president, said in Tuesday's conference call.

An experimental advertising partnership with Google also could help boost Yahoo's profit.

Yang and Decker to declined to discuss the Google tests, which began two weeks ago. Analysts believe a long-term partnership between Yahoo and Google would be difficult to pull off because of the antitrust concerns that would raised, given the two companies control more than 80 percent of the U.S. search market.

Yahoo also has been exploring a possible merger with the Internet operations of Time Warner Inc.'s AOL, which has been struggling in recent years.

"We will not enter into any transaction that doesn't recognize the full value of this company," Yang said.

The confident tone of Yahoo's management on Tuesday contrasted with a more glum attitude in late January when Yang warned economic "headwinds" might complicate the company's turnaround efforts.

Given the Microsoft bid, Global Crown Capital analyst Martin Pyykkonen said the company's optimism should be taken with a grain of salt. "You almost have to discount anything positive management has to say because they are just trying to get the (sale) price up," he said.

Microsoft's bid conceivably could rise above its original value without management upping the ante. It might happen if Microsoft's own quarterly earnings report -- due out Thursday -- pushes its shares above $32.60. Microsoft's stock price finished Tuesday at $30.25, down 17 cents.

Many analysts believe Microsoft will raise its offer to between $32 and $35 per share, or about $46 billion to $50 billion, to prevent its prickly courtship of Yahoo from becoming even more acrimonious.

Microsoft stands a better chance of making the complex deal work if it has Yahoo's cooperation during the daunting process of melding the two companies' disparate cultures and technologies.

Yahoo ended March with 13,800 employees, down from 14,300 workers at the end of 2007. The company jettisoned more than 1,000 workers during the first quarter, but offset some of the purge by hiring about 600 new employees.

AP Business Writer Rachel Metz contributed to this report from New York.

Yahoo 1st-quarter profit triples, but it's probably not enough to cause Microsoft to raise bid

Yahoo Inc. delivered first-quarter results that eclipsed analysts' modest expectations, but the performance did little to support the Internet pioneer's demands for software maker Microsoft Corp. to raise its takeover bid above $45 billion.

The Sunnyvale-based company said Tuesday that it earned $542.2 million, or 37 cents per share, more than triple its profit of $142.4 million, or 10 cents per share, at the same time last year.

Most of the first-quarter improvement stemmed from a non-cash gain of $401 million recorded to recognize Yahoo's stake in the parent company of Alibaba.com, a leading e-commerce site in China that went public last year.

If not for the Alibaba windfall, Yahoo would have earned 11 cents per share -- comparable to its profit at the same time last year, on an apples-to-apples basis.

The earnings were two cents above the average estimate on the same basis among analysts surveyed by Thomson Financial.

Perhaps even more importantly, Yahoo provided the same full-year revenue outlook that it made in late January -- just two days before Microsoft made its unsolicited bid.

"This doesn't change the picture much at all," Susquehanna Financial Group analyst Marianne Wolk said.

Yahoo's first-quarter revenue climbed 9 percent to $1.82 billion.

After subtracting commissions Yahoo paid its advertising partners, its revenue totaled $1.35 billion -- just $30 million ahead of analysts' average projection.

Investors didn't seem to be impressed as Yahoo shares shed 15 cents in extended trading after dipping a penny to finish the regular session at $28.54.

The first-quarter numbers provided a reminder of the ever-widening gap separating Yahoo from Google, whose profit during the same period climbed 30 percent to $1.3 billion on revenue that rose 42 percent to $5.2 billion.

Now it appears more likely the standoff between Yahoo and Microsoft will be resolved in a divisive battle that could drag on into the summer, opening the door for Google to grow even stronger while its two rivals are distracted by their duel.

Microsoft has threatened to oust Yahoo's board if the 10 directors don't accept the current offer Saturday. That risky course of action, known as a proxy contest, probably wouldn't be settled until Yahoo's shareholder meeting, which doesn't have to be held until July.

The cash-and-stock bid -- valued at $44.6 billion, or $31 per share, when it was first made -- is now worth about $43 billion, or $29.88 per share.

Without specifying a precise price, Yahoo has maintained it's worth more to Microsoft even though its shares had fallen below $20 before the bid.

Yahoo gained a little more credibility to its argument by topping analysts' estimates, said Canaccord Adams analyst Collin Gillis. "They cleared another hurdle," he said. "You can't take a strong stance on your value and then not deliver the earnings."

Steve Ballmer, Microsoft's chief executive officer, reiterated the software maker has no plans to sweeten its offer. "We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said in remarks made before Yahoo's first-quarter report came out.

Jerry Yang, Yahoo's co-founder, CEO and a board member, made it clear the company won't sell to Microsoft unless the bid is raised. "Our ability to execute on multiple fronts is clearly improving," he told analysts during a Tuesday conference call.

Yahoo expects its revenue to increase more dramatically in 2009 and 2010 as the benefits from its expanded Internet advertising network start to kick in. "We feel we are on the verge of fundamentally changing the game," Sue Decker, Yahoo's president, said in Tuesday's conference call.

An experimental advertising partnership with Google also could help boost Yahoo's profit.

Yang and Decker to declined to discuss the Google tests, which began two weeks ago. Analysts believe a long-term partnership between Yahoo and Google would be difficult to pull off because of the antitrust concerns that would raised, given the two companies control more than 80 percent of the U.S. search market.

Yahoo also has been exploring a possible merger with the Internet operations of Time Warner Inc.'s AOL, which has been struggling in recent years.

"We will not enter into any transaction that doesn't recognize the full value of this company," Yang said.

The confident tone of Yahoo's management on Tuesday contrasted with a more glum attitude in late January when Yang warned economic "headwinds" might complicate the company's turnaround efforts.

Given the Microsoft bid, Global Crown Capital analyst Martin Pyykkonen said the company's optimism should be taken with a grain of salt. "You almost have to discount anything positive management has to say because they are just trying to get the (sale) price up," he said.

Microsoft's bid conceivably could rise above its original value without management upping the ante. It might happen if Microsoft's own quarterly earnings report -- due out Thursday -- pushes its shares above $32.60. Microsoft's stock price finished Tuesday at $30.25, down 17 cents.

Many analysts believe Microsoft will raise its offer to between $32 and $35 per share, or about $46 billion to $50 billion, to prevent its prickly courtship of Yahoo from becoming even more acrimonious.

Microsoft stands a better chance of making the complex deal work if it has Yahoo's cooperation during the daunting process of melding the two companies' disparate cultures and technologies.

Yahoo ended March with 13,800 employees, down from 14,300 workers at the end of 2007. The company jettisoned more than 1,000 workers during the first quarter, but offset some of the purge by hiring about 600 new employees.

AP Business Writer Rachel Metz contributed to this report from New York.

Economic Calendar for week 22st - 25th April 2008

All times GMT not BST. BST is +1 Hr.


Tuesday April 22nd:

US - 14:00 - Existing Home Sales.
US - 14:00 - House Price Index Q/Q.
US - 14:00 - Richmond Fed Index.

Wednesday April 23rd:

FR - 06:45 - Consumer Spending M/M.
GE - 07:30 - Manufacturing PMI.
GE - 07:30 - Services PMI.
EU - 08:00 - Manufacturing PMI
EU - 08:00 - Services PMI.
UK - 08:30 - MPC Meeting Minutes.
UK - 08:30 - BBA Mortgage Approvals.
EU - 09:00 - Industrial New Orders M/M.
US - 14:30 - Crude Oil Inventories.

Thursday April 24th:

GE - 08:00 - Business Climate Index.
GE - 08:00 - Business Expectations Index.
UK - 08:30 - Retail Sales M/M.
UK - 10:00 - CBI Industrial Trends Orders.
US - 12:30 - Core Durable Goods Orders M/M.
US - 12:30 - Durable Goods Orders M/M.
US - 12:30 - Unemployment Claims.
US - 14:00 - New Home Sales.

Friday April 25th:

EU - 08:00 - M3 Money Supply Y/Y.
UK - 08:30 - GDP Q/Q.
UK - 08:30 - Index of Services Q/Q.
UK - 14:00 - Consumer Sentiment.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

On a day when you hear about the worlds largest bank CITI Group losing $5 Billion and cutting 4,000 jobs world wide, you might expect markets to be down severely. You might also have expected the FTSE to stumble on the news that RBS is preparing a rights issue to shore up its balance sheet. However, apart from some early nervousness on Friday, the UKs benchmark index managed to close the week up 3.2%. The CAC & DAX both managed 4.3%.

The worse is behind us argument continued to gather pace as evidenced by RBS share price actually rising on the day of the rights issue announcement. Investors had been speculating for months that RBS would be taking this step and in some ways the eventual announcement relieved some of the pressure on the UK banking sector. More than anything markets hate indecision and traders seem buoyed by the hope of an eventual end point to the liquidity crisis.
A significant catalyst last week was some positive earnings announcements from some heavy hitting US companies; Intel, Coca Cola, Honeywell, Caterpillar, Google and IBM all surprised to the upside. According to Bloomberg, profits have slumped 26% on average from the companies releasing results so far with the financial sector being the worst hit. However, this was largely expected to be the case, and share prices have adjusted to price in consensus estimates. One important question is whether US companies have truly under promised and over delivered, or if investors are just fearful of missing out on a rally.

On the currency markets, the Pound and Dollar made up lost ground lost after figures showed Eurozone inflation hitting a 16-year high. Chinese CPI was also red hot with staples such as soyabeans and rice continuing to rise. The price of rice has doubled since August 2007 while sugar and wheat have retreated from recent highs. The king of commodities, oil, continues to make record highs and until this market significantly retreats, inflation projections will remain high. This will put further pressure on central banks such as The Bank Of England, which has to balance fighting inflation with easing the liquidity crisis in the credit markets.

Inter bank lending rates have remained stubbornly high since the summer, with the actual cost of lending being a quarter point higher than the official LIBOR rate. The fact that The Bank Of Englands recent loan action was over subscribed by three times the amount tells its own story. With little movement on LIBOR or mortgage fees so far, the next move could put further pressure on the Bank of England to cut rates.

While the worst may or may not be behind us, what is probable is that it wont be plain sailing from here in either direction. There may still be some pull backs along the way even if March turns out to be the low point of this credit crunch for the FTSE. A one touch with the trigger set to 5900 could return 50% over the next 17 days.

David Evans

Copyright : BetonMarkets

Top 5 Incentives for Home Sellers(1)

Just when it seems housing news can't get any worse, media reports surface regularly that cast an even longer shadow over an already doom-and-gloom sales market. By now, most home owners already know there's a glut of properties on the market this spring and that they're competing with banks, auctions and highly motivated sellers for what seems like a shrinking universe of buyers.

As of March 2008, there were nearly 4 million homes for sale in the U.S., up one-third from just two years prior.

But home sellers needn't compete with another opponent: common sense. Just because sellers have shifted into survival mode does not mean they need to push the panic button as well, say real estate veterans who've endured previous down cycles.

To many, desperate times seem to call for desperate -- and increasingly bizarre -- measures and incentives. One seller threw in his classic 1967 Pontiac GTO to seal a deal. Some family members found themselves wearing "Buy my house" T-shirts with their home's own Web address on the back. Others have resorted to faith-based home marketing, buying $10 St. Joseph Statue Home Sales Kits, featuring a small plastic statue of the saint that owners are supposed to bury under for-sale signs. (If you're into that sort of thing, the company's phone number is 1-888-bury-joe.) One woman in California offered to bake cookies for a would-be buyer every week for a year, says journalist Ben Jones, author of "The Housing Bubble Blog."

Thousands of distressed owners have turned to short sales or discounted payoffs, where the lender is asked to accept less than the total amount due -- only to sometimes find that lenders won't accept these offers if it makes more fiscal sense for them to foreclose. Others owners are requesting that lenders restructure their loans or accept delayed-payment arrangements, oft times discovering that lenders are surprisingly accommodating in order to avoid taking back properties in a declining market.

But before they even get to that point, many buyers have considered offering a litany of incentives to sweeten the pot in this buyer's market. Two distinct sets of guidelines seem to be emerging for sellers: one for those who need to sell almost immediately and another for slightly less-pressured sellers.

Top 5 Incentives for Home Sellers(2)

Tips for Frustrated Sellers

For owners who absolutely, positively must sell, and can't bear the thought of simply relinquishing the keys to the lender, here are some of the current incentives and strategies in use:

Toting the note: Offering buyers seller-financing "carry-back loans," which are essentially mortgages or loans financed by the seller, sometimes done in conjunction with "zero down payment" incentives. This can be risky. Sellers have found that it's to their advantage to partition this "carry back" into first and second lien-trust deeds. That prevents the new owner from obtaining additional financing that would weaken the home's equity position in the event the seller is forced to repossess the home. This works best of course if the home does not have an existing mortgage, many of which contain "due-on-sale" clauses, meaning the mortgage has to be paid in full if ownership is transferred. Many lenders, however, recently have been passing up their right to invoke the clause because they're happy that the payments are still being made. But this could be risky and you might try discussing it with the lender and seeking written approval.

Cash-back offers: These include offering to pay a year's worth of property taxes or even a year's worth of mortgage payments. Also increasingly common are "cash-back" offers that can be credited toward buyer down payments, repairs, landscaping, closing costs or mortgage points.

Glamour and glitz: Exotic vacations, timeshares, cars, season tickets for professional sports or even the opera, art, high-definition TVs, thousand-dollar gift cards for gasoline, all-appliances-included and even mineral rights (often worth $3,000 or more per quarter acre in some markets).

Lease-to-own options: This can be a motivator for tentative buyers who fear the market will drop further or for buyers who are short on down payments or who can't get traditional financing in tightening credit markets. Option structures differ greatly. A rent-to-own agreement, also called "lease-to-own" or "lease-purchase," is generally a binding agreement to buy a home at a set price at the end of a set period. It offers a little better security for the seller. A lease-option arrangement gives the renter a legal buy-option after a given period, but isn't an obligation.

"Mr. Big" of incentives -- proper pricing: "It's pretty simple," says William E. Brown, president of the California Association of Realtors. "A home is going to have to be priced correctly in relation to comparable sales as they exist today, not the 2004-2005 pricing that your neighbors got. Incentives and everything else take a back seat to this."

Top 5 Incentives for Home Sellers(3)

The Value of Staging

The biggest incentive packages are being offered by builders, Brown stresses. While many of those can add up to tens of thousands of dollars in the form of price breaks, throw-ins, credits and add-ons, buyers should be wary that the biggest home-value drops are also occurring in areas where there has been an abundance of new construction. Incentives offered by owners in more established, mature markets carry more relative weight, he notes.

There's a Catch-22 aspect to this, however. Too many concessions and incentives have a tendency to make buyers suspicious, says veteran Realtor Barb Schwarz, author of "How To List and Sell Residential Real Estate Successfully" and "Home Staging: The Winning Way to Sell Your House for More Money." "Buyers think: If they're going to do that, then they must really be desperate," she says. "And then they think, 'What's wrong with this house?'" When it all boils down, two things really sell a house, she says. "One is pricing and the other is staging."

Schwarz, who has sold more than 5,000 homes in her career and is considered a pioneer in the home-staging movement, says many homes languish on the market because they are cluttered, dirty and poorly presented and have been branded as tough sells by agents. "The agent doesn't want to show these because they are embarrassing and feel they are wasting people's time," she says.

The average investment in home staging -- about $2,200 -- costs far less than a price reduction on the average home, she says. Staging focuses on relatively simple touches that Schwarz calls the "three C's": cleaning, clutter removal and colors, the latter "C" calling for mostly neutral colors with splashes of bright accents thrown in for balance, she says. "Staging doesn't conceal, it reveals," she says. "No one will purchase your home unless they can imagine themselves living there."

A 2007 survey by HomeGains.com of 2,000 real estate agents in all regions of the U.S. indicates that staging a for-sale home nets a 343 percent return on investment. A survey of 400 homes in the U.S and Canada by Schwarz's own firm, Stagedhomes.com, says that homes prepped for sale by an accredited staging professional sold in an average 31.8 days compared with 161 days for nonstaged homes.

Top 5 Incentives for Home Sellers(4)

Tips for Less-Pressured Sellers

Here are some tips and additional incentives for sellers who foresee selling in the next year or so and have the luxury of more time to adjust to the changing markets:

Offer a more inviting home atmosphere: Stage it left and right (see above). A well-staged home -- perhaps with feng shui treatment -- becomes a psychological incentive for the buyer, giving the home a more positive energy, Schwarz says. "Once somebody stages and gets top dollar for their home, they will do it for the rest of their lives."

Selectively refurbish: Present all remodeling and other home-improvement receipts to potential buyers to help illustrate recent improvements. According to Remodeling Magazine's 2007 Cost vs. Value Report, a minor kitchen remodel recoups 83 percent of its cost in a home sale, as does a siding replacement (85 percent of cost is recouped). Even if improvements don't fully pay for themselves, they will help sell a house, Realtors say. Homeowners are showing less willingness to use their home equity to remodel in the current housing slump, according to recent research by Harvard's Joint Center for Housing Studies. That means good rehabbers are more readily available for work and a little more amenable to negotiation.

"Incentivize" the right agent: There's a natural tendency for sellers to negotiate lower commissions in a flat market. However, some of the more serious sellers have added 1 percent to the customary 3 percent their listing agent would get in a traditional 6 percent split with the buyer's agent -- even tossing in a cash bonus for an executed sale. In this market, hire and motivate the best if you want the best results.

Lead the market: Incentivize yourself, says "Bubble" blogger Jones. "Don't chase the market down," he says. "It's a natural tendency, but if a seller will recognize how these cycles work, getting out ahead of the competition is the only way to get the place sold."

Become a market researcher: Get on the Internet, read Bankrate.com and business-journal stories, real estate blogs and newspapers. Chat up several Realtors. Learn where the biggest home-inventory backlogs are and where there have been an abundance of foreclosures and new construction. "A lot of areas that haven't been hit as hard are areas that have not seen new construction," Brown says.

Forget the incentives and just sit a spell: "If you're not happy with the current pricing, it's probably not the right time to sell for you if you don't have to sell," Brown says. "Don't come out expecting 125 percent of market because your home will be ignored."

Andrea Geller, a Realtor with Sudler Sotheby's International Realty, summarizes: "The numbers are what the numbers are. The big challenge is getting the buyer and seller engaged in negotiations. There was a period when the buyer was not engaging in the market. That is changing this spring. We are finding that there really is a real estate (buying) market out there."

False Alarm

Reports that the Social Security system will soon run out of money have been greatly exaggerated.

As surely as day follows night, the annual report from the board of trustees of the OASDI fund (Old Age Survivors and Disability Insurance, otherwise known as Social Security) has brought forth alarms that the fund will run out of money in the not-too-distant future.

Although flush with cash now and over at least the next 10 years, the Social Security system is expected to gradually begin paying out more in benefits than it takes in from payroll taxes with the result that by 2041 its assets, in the words of the trustees, will be exhausted.

For those who look at only the summary page, this conclusion is nothing new. Indeed, the trustees have come to the same conclusion every year, the only exception being the year the fund is expected to run dry.

In 2000, the system's actuaries thought the assets of this fund would be exhausted by 2032. Two years later it was 2037. Now the projected exhaustion date is 2041.

Meanwhile, the Congressional Budget Office, which makes these projections as well, recently thought the system will remain solvent until at least 2052.

I don't make these projections personally, but I would like to point out that this year, as has been the case every year in the past, the actuaries have made and released not one but three projections. They call them low cost, intermediate and high cost.

The projection that has provoked these alarms is the intermediate projection. This reflects the trustees' consensus views regarding such inputs as economic growth, productivity, inflation, earnings, employment and interest rates.

Judging by past history, assumptions underlying the intermediate projection are very conservative, especially when it comes to economic growth. And as you might imagine, the speed at which the economy grows has a lot to do with the other variables, including the interest the fund earns from investing its surplus in Treasuries.

The intermediate projection assumes that the economy will grow by an annual rate of 2.3% per year between now and 2085. This may be higher than the 1.9% per year that was projected as recently as three years ago, but it is still well below the 3.4% that the economy grew on average between 1960 and 2005.

The actuaries' own low cost projection assumes an average annual growth rate of 2.9% between now and 2085. This is higher than the 2.3% pace embodied in the intermediate projection, but it is still well below the 3.4% average of the past.

Guess what? Under the actuaries' low cost projection, the Social Security system never runs out of money.

That said, you might ask the question why this more realistic projection has escaped politicians from both major parties.

I don't know why, but I can only theorize that it's because they haven't taken the time to read the entire report, which is available on the system's Website.

If you go beyond the highlights section to the projections section, you will see exactly what I mean.

In other words: If it ain't broke, don't fix it.

Dr. Irwin Kellner is the chief economist for MarketWatch and for Capital One Bank.
Copyrighted, MarketWatch. All rights reserved. Republication or redistribution of MarketWatch content is expressly prohibited without the prior written consent of MarketWatch. MarketWatch shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Introducing Social Entrepreneurship

What do you get when you cross venture capital at its best with passionate social entrepreneurs who want to change the world? Echoing Green.

Social Entrepreneurship

Founded in 1987 by the senior leadership of global private equity firm General Atlantic LLC, Echoing Green is an altogether different kind of nonprofit organization.

Echoing Green applies a VC mindset and discipline to funding and supporting entrepreneurs seeking not to build profit-generating business models, but rather to create organizations intended to tackle some of society's most important social problems. Call them aspiring social entrepreneurs.

Over the past 21 years, the group has awarded nearly 450 fellowships, investing more than $25 million in seed capital to emerging entrepreneurs across 40 countries on five continents seeking to drive social change. Program areas have included education and youth development, human rights, healthcare, environmental sustainability, and economic development. Some of Echoing Green's notable successes include the funding and support to launch national service organizations such as Teach for America and City Year; model education programs such as Peace Games and College Summit; and economic development programs such as micro-lender SKS Microfinance (which is actually a for-profit social enterprise) and the One Acre Fund.

Not Your Grandfather's Nonprofit

Here's how it works. In 2008, Echoing Green received nearly 1,500 applications from individuals competing for 20 fellowships. Each grants up to $90,000 in funding and comes with a community of like-minded social entrepreneurs who work together to help each other, with Echoing Green's access to support resources. On May 1, 30 finalists undergo an intensive selection process with interviews by and presentations to a panel of judges, during which they'll pitch their bold ideas for social change.

When the fellows are selected, they join a growing pantheon of social innovators including Teach for America founder Wendy Kopp, Echoing Green Fellow 1991; College Summit founder J.B. Schramm, a 1997 fellow; and 1994 fellow Van Jones, creator of the Ella Baker Center for Human Rights.

The philosophy of Echoing Green bears little resemblance to traditional nonprofit mentality. Rather than the traditional philanthropic model of giving charity to worthy causes, the organization believes that innovative social change starts with an individual's passion to solve the world's biggest problems, and generates impact by driving toward measurable results to address those problems. "These social entrepreneurs are not do-gooders," says Dr. Cheryl Dorsey, president of Echoing Green and herself a 1992 fellow. "They are problem-solvers. But while they have no shortage of determination, they lack start-up funding, skills-building opportunities, and access to key networks required to build impactful models for social change."

A Charter for Change

I attended an Echoing Green presentation last week called "Entrepreneurs in Education," which featured one of the most inspiring examples of social entrepreneurship at work.

John Alford, a 2007 Echoing Green Fellow, is the principal of Langston Hughes Charter Academy, a new public school in New Orleans. Prior to Hurricane Katrina, many experts considered the New Orleans public school system to be the worst in the country. The high school dropout rate stood at 70 percent, and 7 out of 10 eighth-graders failed to meet even the most rudimentary reading, writing, and mathematics skills.

Alford, a Harvard MBA, says, "One of the silver linings of the Katrina catastrophe is that we have the chance to rebuild the school system virtually from scratch." In the aftermath of Katrina, half of New Orleans' public schools have been replaced with charter schools, and the city is moving to become the first all-charter school system of public education in the United States.

In addition to spending the majority of his time as principal, Alford is also CEO of NOLA 180, a start-up charter school management organization that aims to transform failed public schools into high-functioning charter schools that prepare all students for college. NOLA 180's goal is to send over 80 percent of enrolled students to college. Alford says his approach is to "incubate a team of educators who work together to turn around failing schools in New Orleans." By focusing on restructuring existing schools into new charter schools instead of opening new ones, Alford is convinced that the New Orleans school system can in fact be reformed at scale.

Experience in Action

Growing up in a housing project in Brooklyn, N.Y., Alford has intimate experience with the problems confronting large urban public school systems. He first went to New Orleans in 2004, when he opened a new school supported by the Knowledge Is Power Foundation (KIPP). Alford and most of the students at Langston Hughes Charter Academy (and across New Orleans' public school system overall) are African American, and its student body is comprised almost entirely of low-income students.

"It was difficult at first for the students and the teachers to follow our approach," Alford says. "The last thing that these students wanted, or anyone else in New Orleans for that matter, was another program. So our challenge was to make substantive progress without students thinking that it was through a prepackaged plan imposed on them.

"So we focused on the little things that over time actually become the big things," he continues. "We required students to keep their shirts tucked in, to say their 'pleases' and 'thank you's,' and to not interrupt. We extended the school day and began assigning homework with the expectation that students do it or face consequences. We had students wear red school uniforms and be disciplined with detention if they fought in the hallways or disrupted the learning environment in other ways."

Tackling America's Most Pressing Problems

Alford believes that if NOLA 180 can take schools that have historically had a 70 percent dropout rate and transform them into ones with an 80 or 90 percent college graduation rate, then they'll be able to prove that public education in the United States can indeed be saved.

"I've spoken to far too many Americans -- black and white; rich and poor -- who have given up on public education and are convinced that it will never be fixed. I want to prove all of those people wrong," he says conclusively.

Seeing Echoing Green at work and meeting some of their amazing fellows, it's evident to me that social entrepreneurship is proving itself a viable strategy for attacking some of society's most important problems today.

Copyright : yahoo.com

Intel's 1st-quarter sales, sunny guidance surprise Wall Street, reassure investors

Investors knew Intel Corp.'s profits would fall sharply in the first quarter because memory-chip prices had slid. What surprised Wall Street was how well the chip maker's core business in microprocessors held up.

Intel's shares jumped more than 8 percent Tuesday after the technology bellwether reported first-quarter profits that matched analysts' subdued expectations, along with sales that were slightly better than estimates and topped the company's first-quarter record.

A sunny forecast that kept profit-margin predictions for 2008 intact also helped boost the stock by signaling that the Santa Clara-based company expects to protect its profits despite falling memory-chip prices and fears of a slowdown in technology spending.

"The guidance was encouraging -- it tells me that Europe and North America haven't fallen into the ocean," said David Wu, semiconductor analyst with Global Crown Capital. "Those markets appear pretty good for Intel. And what's good for Intel is good for PCs."

Intel shares eventually settled 22 cents below the closing stock price when someone sold 145,840 shares at $20.69 in the last trade of the after-hours session. Wu attributed the dip to the light volume in extended trading and profit-taking from the after-hours jump.

Analysts lowered their profit estimates for Intel last month after it warned that plunging prices for NAND flash, a type of memory chip widely used in consumer electronics, hit the company harder than expected. Intel had only recently entered that market.

Tuesday's report reassured investors worried that global economic jitters had harmed Intel's microprocessor business, which accounts for the bulk of its sales.

Intel is the world's No. 1 maker of microprocessors, which act as the brains of personal computers and servers. Advanced Micro Devices Inc., which has been dragging under the weight of heavy acquisition costs and fierce competition, is No. 2.

Intel's net profit for the three months ended March 29 was $1.44 billion, or 25 cents per share. That's 12 percent lower than a year earlier, when Intel earned $1.64 billion, or 28 cents per share. But it was in line with the average estimate of analysts polled by Thomson Financial.

Intel's sales of $9.67 billion -- a 9 percent improvement over last year -- came in slightly higher than Wall Street's estimate of $9.63 billion.

Intel's chief financial officer, Stacy Smith, said the results reflect the company's ability to overcome slumping prices in some segments of the semiconductor market with a new chip-making process that lowers the manufacturing costs for each chip.

"What we're seeing is the strength of the core business is offsetting that weakness," he said in an interview.

Intel began making NAND flash in 2006 under a joint venture with Micron Technology Inc., a move that some analysts now say was ill-timed considering the price plunge for those chips.

Intel Chief Executive Paul Otellini said the joint venture is rethinking how much factory space it wants to devote to making NAND flash and has delayed construction on its new factory in Singapore for the memory chips as a result.

He added that economic turbulence didn't appear to have harmed Intel in its major markets during the latest quarter.

Microprocessor prices were flat in the first quarter, and unit sales declined from the fourth quarter, but Smith said those results were in line with seasonal trends in the semiconductor industry.

The company forecast second-quarter sales between $9 billion and $9.6 billion, in line with analyst expectations.

Intel's gross profit margin -- a key measure of its ability to control the cost of making its chips -- is expected to be 56 percent, plus or minus a couple percentage points, higher than its gross profit margin of 53.8 percent in the first quarter.

For the year, Intel expects a gross margin of around 57 percent, same as its previous forecast.

Intel and AMD, which is to report first-quarter results Thursday, both have been hurt by their intensifying competition with each other.

Sunnyvale-based AMD warned last week that sales across all its business units were lower than expected and it plans to cut 10 percent of its global work force, or about 1,600 workers. Analysts expect AMD to report a loss of 51 cents per share on $1.51 billion in sales.

Intel finished cutting about 10,500 workers, or 10 percent of its work force, last year in a move to shore up profits amid fierce competition with AMD.

Intel shares rose as high as $22.63 in after-hours trading, a gain of $1.72 from their closing price Tuesday of $20.91.

Copyright : yahoo.com

What's the deal with 4G?

Reader kitty87 writes: You've been writing a lot about "4G" tech like WiMax, but some of us are still getting our heads around plain-old 3G. Can you give us a quick primer on what 4G means and why it's important? You bet—but first, a little background.

When we talk about 2G, 3G, and so on, we're referring to generations of cellular wireless networks. You could call the old, voice-only analog AMPS network (remember those vintage car phones from the 80s with the distinctive winged antennas near the trunk?) 1G, while digital GSM (think AT&T and T-Mobile) and CDMA (Sprint, Verizon Wireless) networks—which handle both voice and data—count as 2G. On their own, 2G networks can send data such as SMS messages and caller ID info, but otherwise, they're pretty poky.

Moving further up the ladder, you get 2.5G add-on technologies like EDGE (for GSM networks) and 1XRTT (for CDMA), which deliver data speeds that are just a bit faster than dial-up, followed by 3G networks such as EV-DO (CDMA) and UMTS/HSDPA (GSM), which give you data speeds somewhere between DSL and cable modems. (Check out my earlier post for help with this alphabet soup of wireless terms.)

Now that most of the major U.S. carriers have 3G under their belts (save T-Mobile, which is still looking to launch its own 3G network), everyone's looking to the next big thing: 4G.

In general, 4G networks promise even faster data speeds than 3G—speeds that will rival, if not surpass, the throughput you'd get over the speediest cable modems. And indeed, once 4G networks go mainstream, you're not really going to need a wired DSL or cable modem anymore.

Here in the U.S., wireless operators are looking at two main 4G technologies: WiMax, which is essentially a turbo-charged version of Wi-Fi, and LTE (Long Term Evolution), which is the next step in existing GSM/UMTS cellular networks. (A third 4G technology—UMB, or Ultra Mobile Broadband—has yet to gain traction Stateside.)

So far, WiMax has a bit of a head start here in the States. Wireless carrier Sprint already has three WiMax test markets (Chicago, Baltimore, and Washington, D.C.) up and running, and it's promised to officially launch its WiMax network—dubbed Xohm, and pronounced "Zoom" [update: oops, it's actually pronounced "zome," as in "home"; sorry, folks]—later this year (in just a handful of areas, mind you).

Here's the problem, though: Sprint's been going through some tough times lately, and it's not clear how the carrier is going to cover the cost of a national WiMax rollout (estimated at a cool $5 billion). There have been rumors that cable operators like Comcast and Time Warner (neither of which want to be left out of the 4G party) are interested in partnering with Sprint on Xohm, but there's been no official word so far. Meanwhile, this month's planned launch of the first few Xohm markets has been delayed until later this year.

Meanwhile, AT&T and Verizon Wireless are banking their 4G fortunes on LTE. Both carriers have just paid billions to the FCC for rights to the 700MHz swath of wireless spectrum, and both look financially poised to crank out nationwide LTE networks with all due speed. That said, it'll take the FCC some time to clear the 700MHz spectrum (which will be occupied by analog TV broadcasts until next year's digital TV changeover), so we're looking a couple of years or so until AT&T and Verizon are ready to launch their respective LTE networks.

Either way you slice it, we'll be getting blazing-fast wireless data for our cell phones and at home—it's simply a matter of when (and how), not if. In the short term, it looks like Sprint might cross the 4G tape first with its WiMax network, but it could be years before Sprint's Xohm is available nationwide—and by that time, AT&T and Verizon's LTE networks stand a good chance of closing the gap. In any case, most of us will probably have to settle for 3G until about 2010 (unless Sprint, with the help of some big-name partners, manages to put the pedal to the metal).

Want the technical nitty-gritty? Then check out the Wikipedia entries for WiMax, LTE, and UMB, for all the detail you can stand.

Copyright : yahoo.com

Economic Calendar for week 15th - 18th April 2008

All times GMT not BST. BST is +1 Hr.

Tuesday April 15th:

FR - 06:45 - CPI M/M.
UK - 08:30 - CPI & Core CPI Y/Y.
UK - 08:30 - RPI Y/Y.
GE - 09:00 - ZEW Economic Sentiment.
EU - 09:00 - ZEW Economic Sentiment.
US - 12:30 - Empire State Business Conditions Index.
US - 12:30 - PPI & Core PPI M/M.
US - 13:00 - TIC Net Long-Term Transactions.
US - 17:00 - NAHB Housing Market Index.

Wednesday April 16th:

GE - 06:00 - CPI M/M.
UK - 08:30 - Average Earnings Index + Bonus Q/Y.
UK - 08:30 - Claimant Count Change.
UK - 08:30 - Unemployment Rate.
EU - 09:00 - CPI Y/Y.
US - 12:30 - CPI & Core CPI M/M.
US - 12:30 - Building Permits.
US - 12:30 - Housing Starts.
US - 13:15 - Capacity Utilization Rate.
US - 13:15 - Industrial Production M/M.
US - 14:30 - Crude Oil Inventories.
US - 18:00 - Beige Book.

Thursday April 17th:

EU - 09:00 - Trade Balance.
US - 12:30 - Unemployment Claims
US - 14:00 - Philadelphia Fed Manufacturing Index.
US - 14:00 - Leading Index.

Friday April 18th:

GE - 06:00 - PPI M/M.
UK - 08:30 - M4 Money Supply M/M.
UK - 08:30 - Public Sector Net Borrowing M/M.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

The economy, stupid was a phrase widely used during Bill Clintons successful campaign against George Bush Snr. Right now, we could simplify the phase even further in relation to the prospects for the UK and US in 2008; Its the housing market, stupid.

Fed Chairman Ben Bernanke has stated that much depends on the depth of US housing declines from here, and in the UK Gordon Brown has said that the Government will do everything in their power to help homeowners. Prior to the MPCs quarter point rate cut last week, Brown went as far as saying that the Bank of England can afford to cut rates because the UK has low inflation. With oil around $109, low inflation might be gilding the lily somewhat, but Brown knows and fears that a plummeting UK housing market could have a dramatic impact on the wider economy.

Last week it was revealed that some mortgage companies actually put up their rates following the Bank of Englands rate cut. It was a further blow for consumers when it was announced that UK mortgage approvals were down 3.5% on the previous month, and to make matters worse house prices experienced their biggest monthly fall since 1992.The two factors are of course inextricably linked. Many, including chancellor Alistair Darling have argued that the UK wont follow the US with a housing slump. It is not just politicians who are be hoping the optimists are right.

Friday got off to a bad start and got worse as the day progressed. European equities were stagnant until the news of General Electrics earnings miss hit the wires. Almost immediately, the FTSE crashed 100 points with the DAX and CAC falling even further in percentage terms. GE was at one stage the worlds largest company by market
capitalisation, and due to the fact it earns most of its revenue outside of the US, it is often seen as a bellwether for the global economy. US markets opened down on the news and were driven down lower with the release of the Michigan Consumer Sentiment Survey and inflation data, which showed the worst readings since 1982 and 1900 respectively.

Next week starts with UK PPI data on Monday, and the RICS house price balance around midnight. Tuesday starts with more UK inflation data, with CPI figures in the morning followed by US PPI and Empire State Business Conditions Index around midday. Average UK Earnings and bonus data arrives on Wednesday morning followed by US core CPI around lunchtime. US Unemployment Claims come in on Thursday with Friday being a relatively light day on the data front.

At one point last week the Nasdaq recorded its lowest volume for over a year and the VIX volatility index dropped to its lowest level since February. Low readings of the VIX can indicate complacency in the market and Fridays rout could be an indication that this was the case. As it is, Fridays sell off has hardly moved the VIX from its recent low and next week earnings season starts in earnest. There may therefore be some value in a volatility trade next week. An Up or down trade pays out if either of two triggers are hit. An up or down trade on the Nasdaq Composite with the triggers set as 2200 and 2400 could return 20% over the next 16 days.

David Evans

Copyright : BetonMarkets

What to Do With a Boss Like Michael Scott

So your boss is a buffoon. He's devoid of strategic vision, yet equates his management of a backwater branch office with the duties of a CEO. He cares about his employees yet regularly insults them, with antics that could form a cultural-gaffe highlight reel. Everybody knows he's in over his head, a lawsuit waiting to happen. Except him.

This guy needs to go, right? That's the conventional wisdom regarding Michael Scott, the affable but invasive regional manager of paper merchant Dunder Mifflin's Scranton office. But while his outlandish behavior might never fly in corporate America, his incompetence is more familiar. "Ninety percent of the population deals with a Michael Scott in their lives," says Aine Donovan, a professor of business ethics at Dartmouth's Tuck business school. Such undertalented middle managers aren't just ubiquitous, she argues—in many companies, they're indispensable: "Who else would put so much energy into selling paper, when everything is going paperless?"

Michael's character has an Everyman appeal because he embodies the "Peter Principle" espoused by author Laurence J. Peter: In most companies, employees tend to rise just above their abilities, then plateau at a level of incompetence. Viewers recognize their own colleagues or bosses in him, even endearingly. Kelly Leonard, a New York City publishing executive, recalls early in her career working for a "female Michael Scott type" who, among other things, would invite staffers into her office to watch Lifetime movies on TV. "Other departments thought we were hapless idiots who lucked into our good work results," she says. "Just like the gang in Scranton."

For many people, a boss who knows no boundaries, thinks a mandatory hot-dog-eating contest builds morale, and appoints the creepiest guy in the office to spy on his workers can be a deal breaker, one reason Michael's bumbling causes as much discomfort as hilarity. When Michael outs Oscar, the gay accountant, the company bribes the employee with a Lexus and a three-month paid vacation to keep him from quitting or suing. The boss's oafish behavior might be plausible—but the resolution isn't. In many workplace confrontations, subordinates end up feeling threatened by a vindictive or territorial boss, with few good practical options. "It can be really difficult, especially for a woman, to work like that," Donovan says. "I've had a boss like him, and I left the job."

Advice. As viewers know, Michael is beyond help. "You'd need to find an amazing career coach and link him up with Michael 24 hours a day, for a few years," says Greg Hessel, an executive recruiter for Korn Ferry International. Real managers worried about outrunning their talents have plenty of options. One tactic is to ask trusted friends and colleagues to evaluate your strengths and weaknesses—then follow their advice, however painful. Other resources include old-fashioned mentors who work in the same company or industry, company-provided training, online professional chat rooms, and courses tailored to full-time workers. But the only resource Michael taps is his supervisor, Jan, with whom he has a fling.

Michael also needs to be liked and makes the mistake of trying to befriend his subordinates, which makes ordinary management responsibilities—laying somebody off, trimming healthcare benefits—excruciating folly. "His job is his total identity," Hessel says. "He puts too much attention into everything that comes his way. Insecurity eats at him at all times."

That's why he prizes loyalty over talent, another management flub. When Michael thinks he's going to get promoted out of Scranton, for instance, he anoints Dwight Schrute, his rabidly devoted No. 2, as his successor, assuring a legacy of lunacy.

But Michael does have a few redeeming attributes. He shows genuine empathy toward his employees, buying a painting by Pam, for instance, that others deride as dreadful. Michael also knows how to sell paper—and turns in decent enough numbers to keep the Scranton branch afloat. Dunder Mifflin might just keep Michael around for a while.

Copyright :yahoo.com finance

Wachovia Could Announce Capital Infusion of Up to $7B Monday, Wall Street Journal Reports

Wachovia Corp. said Sunday it will move up the release of its first-quarter financial results, an announcement that closely followed a report that the nation's fourth-largest bank is about to get a multibillion-dollar cash infusion.

The Charlotte-based bank, which is struggling to digest its admittedly ill-timed purchase of mortgage lender Golden West Financial Corp., will report before the market opens Monday. The bank had been set to report its results Friday.

The change was announced shortly after The Wall Street Journal reported Wachovia was working on the final terms of a deal that would bring in between $6 billion and $7 billion of capital. In return, the investor group would get shares priced at roughly $23 to $24 apiece -- about an 18 percent discount to Wachovia's closing share price Friday of $27.81.

Wachovia's shares have sunk 48 percent in the past year, dropping from a 52-week high of nearly $57 as the housing slump and credit crisis pounded the nation's leading banks and financial service companies.

The Journal cited people familiar with the matter and said officials at Wachovia could not be reached for comment. Wachovia officials did not immediately return calls from The Associated Press.

The cash infusion would be Wachovia's second of the year. In January and early February, Wachovia added $8.3 billion in capital by issuing preferred stock and other securities to investors.

"These securities strengthened our regulatory capital position and provide greater certainty that we are well positioned in 2008," chief executive Ken Thompson wrote in a letter to shareholders in February.

Wachovia's troubles with the housing slump have been compounded by its 2006 acquisition of California-based Golden West, a $24 billion deal whose timing, Thompson has admitted, "was not the best."

"With the benefit of hindsight, it is clear that the timing was poor for this expansion in the mortgage business," Thompson wrote in February.

Golden West's loans were concentrated in California, one of the hardest-hit housing markets in the U.S. Wachovia said this month that it was considering halting the making of loans, including its signature Pick-A-Payment mortgage loans, in 17 California counties heavily affected by falling home prices and rising foreclosures.

Last week, it announced a new set of lending guidelines that appeared to be a broader step to help manage losses at the bank.

"The problem is they keep doing deals, and they hit a deal that didn't work," said Nancy Bush, an independent analyst with NAB Research LLC in Aiken, S.C. "A capital infusion may not be the answer. There needs to be some restructuring."

Wachovia said in February it expects to set aside more money for bad loans, although it did not give a specific amount. The company took more than $3.2 billion in write-downs in the second half of 2007, losses tied mostly to the housing market and the falling value of its collateralized debt obligations. CDOs are a kind of security often backed by subprime mortgage loans -- or those given to customers with poor credit histories.

In last year's fourth quarter, Wachovia's net income plunged 98 percent because of a $1.7 billion write-down of some holdings -- primarily assets backed by subprime mortgages -- and $1.5 billion set aside to cover bad loans.

The Journal said Wachovia's cash infusion is similar in structure to the $7 billion in new capital Washington Mutual Inc. obtained last week from an investment group led by private equity group TPG.

Copyright : yahoo.com

(movie)21 (2008)

The true story of the very brightest young minds in the country - and how they took Vegas for millions. Ben Campbell is a shy, brilliant M.I.T. student who -- needing to pay school tuition -- finds the answers in the cards. He is recruited to join a group of the school's most gifted students that heads to Vegas every weekend armed with fake identities and the know-how to turn the odds at blackjack in their favor. With unorthodox math professor and stats genius Micky Rosa leading the way, they've cracked the code. By counting cards and employing an intricate system of signals, the team can beat the casinos big time. Seduced by the money, the Vegas lifestyle, and by his smart and sexy teammate, Jill Taylor, Ben begins to push the limits. Though counting cards isn't illegal, the stakes are high, and the challenge becomes not only keeping the numbers straight, but staying one step ahead of the casinos' menacing enforcer: Cole Williams.

Also Known As:	21 (Sony) Beat the House Beginner's Luck Breaking Vegas (MGM/Ratner/Spacey) Bringing Down the House: The Inside Story of Six MIT Students Who Took Vegas for Millions The System Untitled Blackjack Picture
Production Status:	Released
Genres:	Drama, Crime/Gangster and Adaptation
Running Time:	2 hrs. 2 min.
Release Date:	March 28th, 2008 (wide)
MPAA Rating:	PG-13 for some violence, and sexual content including partial nudity.
Distributors:	Sony Pictures Releasing
Production Co.:	Michael De Luca Productions, Relativity Media, Trigger Street Productions
Studios:	Columbia TriStar Motion Picture Group
U.S. Box Office:	$46,770,173
Filming Locations:	Boston, Massachusetts, USA Las Vegas, Nevada, USA
Produced in:	United States

Copyright : yahoo.com

As Regulators Take Tougher Stance on Airline Safety, Travelers Likely to Face More Disruptions

The air travel misery will probably get worse.

Massive flight cancellations by American Airlines are likely to spread to other carriers as federal regulators step up their scrutiny of aircraft inspections after years of more lenient enforcement.

And as oversight tightens and Congress puts its glare on the airlines, passengers are paying the price.

Flying on U.S. airlines has never been safer. But mutual trust between the Federal Aviation Administration and carriers was undermined by last month's revelation that Southwest Airlines flew planes that had missed inspections -- a violation of federal standards.

Since then, the FAA has played hardball -- auditing carriers' maintenance records and promising a less cozy relationship with the industry. And the airlines only have to look at Southwest's $10.2 million fine to recognize the cooperative spirit may be over.

"There's always going to be extremes, just as there are in politics, and to some extent this is a political issue," said Bob Harrell of New York-based travel and aviation consulting firm Harrell Associates.

The broken trust between airlines and regulators has created scheduling misery for the flying public. And as scrutiny of safety procedures rises, flight delays and cancellations could soon get worse, particularly for carriers with older fleets, Harrell said.

Roughly 250,000 passengers have been affected by the American cancellations this week so that its mechanics could inspect wiring in hundreds of jets. Thursday was the third straight day of trouble for customers of the nation's largest carrier, particularly in New York, Chicago and Dallas, where bad weather magnified delays.

Alaska Airlines and Midwest Airlines also canceled flights Thursday to inspect their Boeing MD-80s, while Delta Air Lines said it was likely to ground "a handful."

Perhaps the worst part for travelers: There's no way to know which carrier will be affected next.

Stacey Pillman, 42, of Miami, said she couldn't help but keep glancing at the American Airlines departure board every five minutes Thursday at Miami International Airport. She stayed behind as her family left to buy magazines and snacks for the trip to Mexico City.

"I just want to stay here and see what happens. I am not one who likes surprises," Pillman said.

In Washington, Nicholas Sabatini, the FAA official who ordered stricter compliance with federal safety standards after the Southwest debacle, faced tough questions from Congress about his responsibility for the lapses.

He told a Senate subcommittee he was accountable for the recent breakdowns in compliance, and blamed the Southwest incident on the failure of both FAA and airline employees.

Another sign of the political stakes: The Senate confirmation process for acting FAA Administrator Robert Sturgell, who was nominated by President Bush in October, has been put on hold.

Before the latest turmoil, the industry could point to a solid record of safety in recent years, a laurel the FAA could also rest on. The last U.S. crash of a jumbo jet was in November 2001, when an American Airlines flight plummeted into a New York City neighborhood, killing 265 people.

After a ValuJet flight crashed in Florida 12 years ago, some in Congress questioned the FAA's dual mission of aviation regulation and promotion. But there has not been today's level of government scrutiny on airlines since the industry was deregulated about 30 years ago, said Daniel Petree, dean of the College of Business at Embry-Riddle Aeronautical University in Daytona Beach, Fla.

FAA spokeswoman Lynn Tierney said the agency is simply doing its job.

"We are aware and sympathetic ... but the role is clear, it's a regulator's role," Tierney said. "We understand the disruption this causes, but (the airlines) had 18 months to complete the work."

Tierney was referring to the safety order issued on the Boeing Co. MD-80 aircraft that recently have been grounded. The FAA ordered visual inspections of certain wire bundles on those planes after reports of shorted wires, evidence of worn-down power cables, and fuel system reviews conducted by the manufacturer. The order was effective Sept. 5, 2006, and the airlines had 18 months to comply.

Transportation Department Inspector General Calvin L. Scovel III on Thursday repeated his findings about the FAA's inspection office responsible for Southwest Airlines having "developed an overly collaborative relationship" with the carrier.

The FAA last week announced a new reporting system designed to make it easier for inspectors to raise concerns and said it was strengthening ethics policies aimed at easing potential conflicts of interests.

"The FAA needs to do more than just trust these airlines," Sen. Amy Klobuchar, D-Minn., said to conclude the hearing. "We have some good ideas on the table, but we need to go beyond the letter-writing back and forth and into action."

AP Writer Damian Grass in Miami contributed to this report.

Copyright : yahoo.com