The Wall Street Journal Education Program
Weekly Review & Quiz
Covering front-page articles from June 24-30, 2006
Professor Guide with Summaries Summer 2006
Developed by: Scott R. Homan Ph.D., Purdue University
Questions 1 – 12 from The First Section, Section A
A Big Shot in China
By STEPHANIE KANG in Cleveland and GEOFFREY A. FOWLER in Hong Kong
June 24, 2006 Page A1
http://online.wsj.com/article/SB115100736891387899.html
In the National Basketball Association, Cleveland Cavaliers' guard Damon Jones is a
journeyman who averages 6.8 points per game and toils in the shadow of his superstar
teammate, LeBron James. But on Tuesday, Mr. Jones will land in Beijing and be greeted
as a star.
Despite his low profile in the NBA, Mr. Jones has a plum deal endorsing a line of
basketball shoes for China's Li Ning Co., the country's leading domestic athletic-shoe
brand. Mr. Jones has never been to China, and speaks just one Chinese phrase: Yiqie jie
you keneng -- "anything is possible," the Li Ning advertising slogan.
Already, less than six months after striking the deal, Mr. Jones's face appears on Li Ning
billboards and on Chinese television, where he recites his Mandarin-language phrase on
highlight reels broadcast with NBA games.
A Damon Jones signature shoe, which is likely to be available later this year only in
China, is Li Ning's attempt to keep pace with its global rivals. Nike Inc. is endorsed in
China by Mr. Jones's famed teammate, Mr. James, and Adidas AG's Reebok International
Ltd. has a long-term deal with Yao Ming, the popular Chinese national who plays for the
Houston Rockets.
Mr. Jones's deal shows how some Chinese companies are fighting back against global
giants on their home turf. Li Ning's goal isn't to conquer America, but to take back China.
Named for an Olympic gymnastics hero of the 1980s, Li Ning is one of China's bestknown domestic brands. But aggressive incursions by Nike and Adidas in recent years
have knocked Li Ning to No. 3 from No. 1 in China's athletic-shoe market.
Basketball's exploding popularity in China -- the NBA now considers China its secondbiggest market -- has turned the nation into the next battleground in the global sneaker
wars. "If you want to build and be a very cool brand, it happens through basketball," says
Abel Wu, Li Ning's vice president of marketing and international business. Five years
ago, Li Ning, which is listed on the Hong Kong stock exchange, didn't have any
professional-grade basketball products at all. Today, the basketball category accounts for
20% of its sales.
Mr. Jones, a 29-year-old who has done time in basketball's minor leagues and has played
for 10 different NBA teams since 1998, was far from an obvious choice for Li Ning. But
most of the NBA's biggest stars already had sneaker deals, and Li Ning felt it couldn't
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 31
afford any of those who didn't. The company found its way to Mr. Jones after first
working with the NBA to come up with a list of potential candidates who were available
and affordable.
Mr. Jones says his career path, which he describes as "all uphill," is one reason he
appealed to Li Ning. He describes himself as "a guy who wasn't drafted," whose career
demonstrates to young people "that if you work hard enough, it can happen for you."
Mr. Jones, the eldest of four children from a middle-class Galveston, Texas, family, was
one of the highest scorers ever for the University of Houston. But he was passed over in
the NBA draft in 1997 when he left school after his junior year, and found himself
earning $450 a week playing for the Black Hills Posse in the International Basketball
Association. After he made his NBA debut in 1999, he hopscotched from team to team,
unpacking and repacking in New Jersey, Boston and Dallas, among other stops.
Finally, after a successful 2004-'05 season with the Miami Heat, he landed a four-year,
$16.1 million deal with the Cavaliers. Mr. Jones moved into a seven-bedroom home
outside Cleveland, where his closet holds more than 200 suits and his garage holds a
silver Mercedes-Benz SL600.
To Li Ning, Mr. Jones's career seemed to fit its "anything is possible" slogan. It offered
him the kind of shoe deal that Mr. Jones concedes would be nearly impossible for him to
get from the likes of Nike or Adidas. The contract pays Mr. Jones an annual salary of
between $200,000 and $300,000, and offers bonuses tied to personal and team
performance, according to people familiar with the deal. That's small change compared
with the $100 million that Nike agreed to pay Mr. James over seven years. But for many
NBA players, a sneaker endorsement often means free gear and minimal money.
The contract puts Mr. Jones in the unusual position of wearing and endorsing shoes that
won't be sold in the U.S. When his signature shoes go on sale, he will also earn royalties - a provision typically enjoyed only by the NBA's superstars.
Li Ning and its competitors see the 2008 Olympics, slated for Beijing, as a potential
marketing bonanza. Li Ning wants to capture China's growing basketball fan base, which
now rivals that of such popular Chinese sports as table tennis and badminton.
Chinese have played basketball for decades, but the sport's popularity has exploded
recently. In the 1980s, in an effort to nurture interest in China, the NBA began allowing
Chinese broadcasters to broadcast games for a small fee. Mr. Yao's jump to the NBA
from a Chinese league in 2002 further fueled fan interest, which soared in 2004 when the
NBA organized two games in China between Mr. Yao's Houston Rockets and the
Sacramento Kings. The marketing muscle of Nike and Adidas added to the momentum.
With more than 400 million people under the age of 21, China is one of the world's
fastest-growing sporting-goods markets. According to Chinese sports-marketing firm Zou
Marketing, Nike leads the market with annual sales of $410 million, followed by Adidas,
with $385 million. Li Ning is third with $300 million. Li Ning also faces local
competition from companies such as Anta, based in Fujian province, which has $100
million in sales and a sponsorship deal with the Chinese Basketball Association.
Terry Rhoads, a Zou managing partner, says he expects the market to grow by 20% to
40% a year for the next decade. Dominance in basketball, he says, will help determine
who will be the biggest athletic-shoe brand.
In China, all basketball sneakers are manufactured by the same companies under
outsourcing arrangements, says Li Ning's Mr. Wu. "In terms of quality, we are the same"
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 31
as international brands, he contends. "But our brand doesn't have a very strong image
yet."
To woo young consumers, Li Ning has boosted spending on marketing. Nielsen Media
Research estimates that the company has increased advertising spending more than 20fold between 2001 and 2005. Nevertheless, Li Ning's ad spending remains only about a
third of Nike's 2005 China budget of about $37 million, says Nielsen Media Research,
which based its estimates on published rate-card data.
Marketing in China can be complicated. In 2004, complaints from some consumers
caused the Chinese government to ban a Nike TV commercial in China featuring Mr.
James, Mr. Jones's teammate, beating a cartoon kung fu master in a battle. The
government cited "indignant feelings among Chinese consumers."
But Chinese teens are also huge fans of foreign brands and lifestyles. With basketball
gear, they associate street credibility with American stars, not Chinese pros. The jerseys
of NBA stars Tracy McGrady and Allen Iverson now outsell Mr. Yao's jersey in China,
the league says. "The NBA is cooler than the CBA, because the NBA's performances are
full of passion and skill, and the players have magnificent physiques," says He Zizhang, a
15-year-old Beijing middle-school student who says he plays basketball daily and
watches NBA games at least twice a week.
Nike and Adidas are rapidly opening retail stores in China. Nike has signed an up-andcoming Chinese basketball player, Yi Jianlian, whom some people in the basketball
world are calling the next Yao Ming. Nike also plans to bring top NBA players to China
later this summer.
1. Cleveland Cavaliers' guard Damon Jones has a plum deal endorsing a line of basketball
shoes in ________.
a. France
b. Korea
c. Taiwan
d. China Correct
2. Cleveland Cavaliers' guard Damon Jones speaks just one Chinese phrase: Yiqie jie you
keneng which translates in English to __________.
a. the shoes are great
b. anything is possible Correct
c. fly with the shoes
d. no gravity boundaries
Lost Sparkle Chasing Upscale Customers Tarnishes Mass-Market Jeweler
By ANN ZIMMERMAN and KRIS HUDSON
June 26, 2006; Page A1
http://online.wsj.com/article/SB115128487853890421.html
DALLAS -- In early January last year, after a disappointing Christmas season and amid
worries about competition from discount retailers, Zale Corp. decided to shake things up:
The self-proclaimed jeweler to Middle America was going to chase upscale customers.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 31
In a few months, Zale drew up a plan that involved replacing almost a third of the
merchandise at its Zales Jewelers division. To dodge a battle with retailers such as WalMart Stores Inc., Zales dropped inexpensive, low-quality diamond jewelry for
fashionable 14-karat gold and silver pieces with higher margins. It started buying direct
from overseas dealers, cutting out U.S. middlemen, and even dumped a decades-old
marketing slogan: "The Diamond Store."
The move was a disaster. The Irving, Texas, retailer lost many of its traditional customers
without winning the new ones it coveted. A second poor Christmas badly dented the
company's annual profits. Within weeks, Zale's chief executive officer, Mary Forté, was
forced to resign, according to people familiar with the matter, and the U.S. Securities and
Exchange Commission started investigating Zale's accounting.
Sensing weakness, Zale's archrival, the United Kingdom's Signet Group PLC, made an
unsolicited merger approach this spring, which Zale rebuffed. Signet last year passed
Zale to become the U.S.'s largest retailer specializing in jewelry. (See related article1).
Throughout its 82-year history, Zale has mirrored and occasionally led changes in
American retailing. In the 1920s, it kick-started the mass-market jewelry trade. After
World War II, it moved out of cities and into burgeoning suburban malls. Now it's joined
the ranks of businesses that, spooked by competition from mass retailers, have struggled
to go upscale.
J.C. Penney Co., the quintessential middle-class merchant, ran into trouble a decade ago
when it turned to pricier designer clothes and home furnishings that alienated customers.
Last holiday season, Limited Brands Inc.'s Bath and Body Works unit suffered slumping
sales as it struggled to determine the right mix of merchandise and promotions to convey
its shift upscale. And Pier 1 Imports Inc., the home furnishing retailer, this year
introduced sleeker products to combat discount operators, but the changes have yet to
boost sales.
Founded in 1924 in Wichita Falls, Texas, by M.B. Zale and his brother William, the
company grew through the brothers' decision to offer friendly service and liberal credit
terms to the working class. The deal they offered: a penny down and $1 a week. After
World War II, Zale furiously bought up other stores and smaller chains.
The company's divisions include Piercing Pagoda, which runs mall-based kiosks selling
jewelry to teens, Zales Jewelers, for working-class mall shoppers, the upscale Gordon's,
and Bailey Banks & Biddle Fine Jewelers, which sells even pricier products out of
fancier malls.
In the late 1980s, the Zale family cashed out, giving up control of the company. In recent
years, discounters such as Wal-Mart and J.C. Penney were grabbing an increasing
amount of the jewelry business. At the same time, Internet retailers and TV shopping
networks were selling more diamonds and other fine jewelry, encroaching on Zale's turf.
Ms. Forté, now 55 years old, headed the company as the industry shifted. She had come
to Zale after stints at home-shopping channel QVC, a unit of Liberty Media Corp., and
Federated Department Stores Inc. At Zale, she headed Gordon's, where she successfully
introduced pricier watches and other items. "Upscale products were in Mary's DNA,"
says a former colleague.
While Zale was losing its momentum, Signet, its chief rival, was doing well. Signet's
roots stretch to 1949, when Leslie Ratner opened his first jewelry shop in Richmond, just
outside of London. The retailer entered the U.S. in 1987 with its purchase of Sterling Inc.,
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 31
a 117-store chain. It bought Kay Jewelers in 1990 and launched Jared the Galleria of
Jewelry in 1993, which was designed to appeal to people who don't like malls.
Key to Signet's success was its decision to buy less expensive cut diamonds and finished
products directly from overseas suppliers, rather than relying on the middlemen that long
characterized the jewelry business. Tapping new diamond centers in countries such as
India, Signet now buys directly more than half the products it sells to consumers. The
Zales Jewelers division -- which accounts for the majority of the Zale Corp.'s sales and
profit -- by contrast, buys only about 5% that way.
With the savings, Signet ploughed money into marketing and staff training. It blanketed
the airwaves with commercials equating jewelry with romance through the tag line:
"Every Kiss Begins With Kay."
"Signet continued to evolve and get stronger, but Zale hadn't evolved or changed with the
landscape as much," says David Sternblitz, Zale's current treasurer.
When Zales Jewelers missed its 2004 sales plan for the Christmas season -- the year's
most important period, accounting for more than half its sales and almost all its profit -executives concluded it was time to do something drastic. Discount retailers like WalMart, they worried, were dominating sales of low-priced jewelry.
Early in 2005, Ms. Forté moved to cultivate a higher-income clientele. "We are in the
process of really tearing things apart now," Ms. Forté told Wall Street analysts in
February.
3. To dodge a battle with retailers such as Wal-Mart Stores Inc., Zales dropped
inexpensive, low-quality _____ jewelry.
a. diamond Correct
b. silver
c. gold
d. costume
4. Zales was founded in 1924 in Wichita Falls, Texas, by M.B. Zale and his brother
William, the company grew through the brothers' decision to offer friendly service and
liberal credit terms to the working class. The deal they offered was: _________.
a. a penny down and $1 a week Correct
b. a dollar down and $2 a week
c. 5 dollars down and $1 a week
d. 5 dollars down and $5 a week
Garage Brand With NBC Pact, You Tube Site Tries to Build a Lasting Business
By KEVIN J. DELANEY
June 27, 2006; Page A1
http://online.wsj.com/article/SB115137083424491406.html
Over the past decade, large media and tech companies have tried to build mass-market
services offering video over the Internet. Someone has finally succeeded big: a startup
with 35 employees and an office over a pizza restaurant.
Through YouTube Inc.'s Web service, consumers view short videos more than 70 million
times a day, ranging from clips of unicycling jugglers and aspiring musicians to vintage
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 31
Bugs Bunny cartoons and World Cup soccer highlights recorded from TV. Users post
more than 60,000 videos daily, with a limit of 10 minutes for most clips.
The big question for YouTube now: Can it turn this loose bazaar of videos into an
enduring business?
It will take a step in that direction today when it gets a big endorsement from General
Electric Co.'s NBC Universal. NBC plans to announce that it will make available on
YouTube promotional video clips for some of its popular shows, such as "The Office,"
"Saturday Night Live" and "The Tonight Show with Jay Leno." NBC plans to market its
new fall lineup using clips on YouTube, and is holding a contest for consumers to submit
their own promotional videos for "The Office." It will also buy ads on the site and
promote YouTube with mentions on television. That's a significant step for NBC, which
earlier had demanded that YouTube take down clips of its programming. (Time Warner
Inc.'s Warner Bros. has made a deal1 to distribute movies and TV shows via Guba.com.)
YouTube is a classic Silicon Valley garage-to-glory tale. Two friends, Chad Hurley and
Steve Chen, started a company in a garage to tackle an issue they were grappling with
personally: how to share home videos online. They maxed out Mr. Chen's credit card on
business expenses before a financier bankrolled them. They built a huge consumer
following under the noses of richer, better-known companies with vastly larger payrolls.
The young company burst forth as the dominant player.
But for every Apple Computer Inc. or Google Inc., Silicon Valley's history is filled with
dozens of hot startups that gained 15 minutes of fame but couldn't sustain their brief
success. YouTube's executives, including some alumni of Internet flameouts, are now
furiously planning strategy and making deals to sustain their upward arc.
YouTube's 29-year-old chief executive, Mr. Hurley, and its 27-year-old chief technology
officer, Mr. Chen, see two big challenges. The first is to figure out how to make money.
The second is to address concerns of copyright holders that many of their TV and movie
clips, music videos and songs are available through YouTube without permission.
Messrs. Hurley and Chen, who worked together at eBay Inc.'s PayPal electronic-payment
unit, are trying to tackle both issues with a major stroke. They're quietly building an
online-ad system with Google-scale ambitions, which they intend to use to entice
producers to post their best videos on YouTube. When the system rolls out later this year,
YouTube will share revenue from ads that appear alongside some videos with the
producers of those videos. Messrs. Hurley and Chen hope that Hollywood will come to
see YouTube much as it now views network TV: a legitimate means of distributing
content with revenue and promotional payoff.
5. Through YouTube Inc.'s Web service, consumers view short videos more than ______
times a day.
a. 5 million
b. 10 million
c. 50 million
d. 70 million Correct
6. The ________ network plans to announce that it will make available on YouTube
promotional video clips for some of its popular shows.
a. ABC
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 31
b. CBS
c. NBC Correct
d. The Golf Channel
Core Value At Apple, Secrecy Complicates Life But Maintains Buzz
By NICK WINGFIELD
June 28, 2006; Page A1
http://online.wsj.com/article/SB115146095308592693.html
Apple Computer Inc. generates buzz for its new products by obsessively enforcing a strict
secrecy policy. But the policy can sometimes leave partners, big customers and even
employees in the dark.
Consider Hewlett-Packard Co.'s recent experience. In early 2004, H-P cut a deal to
repackage Apple's iPod digital music player and sell it with the H-P label. Even though
they were partners, Apple often didn't tell H-P about new iPod models until the day
before they were introduced to the public, people familiar with the matter say. That left
H-P scrambling to package and stamp its name on the jointly branded iPods for months
after Apple put its version on sale.
What's more, Apple insisted H-P work on iPods under tight security, even though Apple's
versions in some cases were already sitting on store shelves, one person who was
involved in the relationship between the companies says. For reasons including the
secrecy issue, H-P terminated its Apple deal last August.
An H-P spokeswoman said the company and Apple had a "mutually beneficial
relationship," but declined to comment on how the partnership worked. Apple declined to
comment about the H-P deal, or more broadly about its policy of secrecy.
Apple's singular focus on secrecy is unusual, even among high-tech companies that
closely guard their product plans. Microsoft Corp., far more often than Apple, talks about
its products well in advance of releasing them. Manufacturers that use Microsoft software
in their products and big customers thus have an opportunity to prepare for them.
Apple, based in Cupertino, Calif., mostly keeps its plans for new products to itself. It
rigidly compartmentalizes itself so that even its own employees don't find out about
coming products. It has fired and later sued workers who leaked information about
unannounced products. More recently, it has filed suits against Apple-enthusiast Web
sites that publish tidbits about the company.
While many tech companies assign internal code names to products, Apple goes a step
further. It often gives different departments dissimilar code names for the same product,
current and former employees say. If a code name leaks, Apple can more easily track
down the department from which the leak originated.
Apple managers carefully track who knows what about secret projects, maintaining
"disclosure lists" of those who have been briefed, according to the former and current
employees. When employees receive documents containing sensitive information about
unannounced products, the documents are often watermarked with the recipient's name, a
practice meant to discourage carelessness.
Closed-Lips Approach
This closed-lips approach is a key underpinning of Apple's marketing strategy. To the
envy of many in the tech industry, co-founder and chief executive Steve Jobs uses
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 31
secrecy expertly to amplify interest in Apple's products. Regis McKenna, a veteran
Silicon Valley marketing executive who worked on some of Apple's earliest product
introductions, says he marvels at how Apple continues to stimulate so much public
curiosity about its coming products. "There's a great deal of mystery and speculation
about what it will be," says Mr. McKenna. "That's created a marketing aura for them."
The mystery helps Apple attract crowds at its retail stores and generally garner much
more visibility than its relatively modest advertising budget would suggest. Apple spent
$287 million on advertising last fiscal year, compared with $995 million for Microsoft
and $1.1 billion for H-P, according to the companies' filings with securities regulators.
While new wares from Dell Inc. or H-P rarely get front-page treatment, Mr. Jobs has
repeatedly appeared on the covers of Time, Newsweek and Fortune showing off a new
iPod or Macintosh computer.
The secrecy has been a particular boon to Apple's fastest-growing product line, the iPod,
which accounted for nearly 40% of the company's $4.36 billion in sales last quarter.
Apple's reluctance to talk about new iPods, which are aimed at consumers, can add to the
products' cachet. And consumers have proved willing to abandon their old iPods in favor
of the sleeker and more feature-packed versions that the company unveils with such
fanfare.
It's a different story for corporate customers and other big technology purchasers, which
buy about 60% of personal computers world-wide. Because of the hefty investments
involved and the long lead times required by budgeting processes, surprises are anathema
to them. They favor tech suppliers that give them "roadmaps" for products, letting them
see major product plans a year or more in advance. One fallout: Even as Apple has
enjoyed growth in its Mac business in the past two years, its share of new world-wide
personal computer shipments remains near a historic low of about 2.3%, down from 9.4%
in 1993, according to research firm International Data Corp.
Until his retirement last year, Russell Vaught was an associate vice provost for
information technology at Penn State University, with more than 15 years of experience
buying Apple products for the school. While Mr. Vaught has three Macs at home, he was
uncomfortable making sizable commitments to buy Apple products for the university.
"Apple went from being the most open company in the mid-'90s to being an impossibly
closed company," Mr. Vaught says. "You could no longer strategically position the
institution to take advantage of Apple products. You ran the constant risk of purchasing
stuff that was soon to be obsolete."
People familiar with Apple say this approach is deliberate, as the company increasingly
shifts toward the consumer market. Mr. Jobs has made it clear he favors selling
technology directly to consumers rather than to chief information officers and other
gatekeepers that buy technology for enterprises.
In orientation sessions with new employees, representatives of Apple's corporate-security
department stress the dire consequences of leaking information. A gruff member of
Apple's corporate-security team often delivers a sermon on security, telling new staffers
that leakers will be caught, fired and prosecuted, current and former employees say.
Apple has recently gone after enthusiast Web sites that cover the company, variously
suing them for allegedly divulging trade secrets or seeking court orders forcing the sites
to divulge their sources. In one such case involving the Web sites PowerPage and
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 31
AppleInsider, a senior investigator in Apple's corporate-security department described
why the company vigorously protects its product information.
"Secrecy surrounding announced products enables Apple to generate more publicity for
the product at the time of launch," said the investigator, Al Ortiz Jr., according to court
documents.
Several years ago, as Apple plotted to open its own chain of retail stores, Mr. Jobs
instructed Ron Johnson, the head of the new-store initiative, to build a store prototype
before the outlets were rolled out. The project was so hush-hush, Mr. Jobs said when
announcing the stores, that he asked Mr. Johnson and his crew to build an exact replica of
the 6,000-square-foot store entirely inside a sealed-off warehouse away from Apple's
main campus.
Much of the fortress-like security at corporate headquarters -- an oval of buildings
surrounding a courtyard next to Silicon Valley's Highway 280 -- reinforces the
compartmentalization imposed by Mr. Jobs. Apple employees are outfitted with
electronic badges that grant them access only to specific areas and no others. "No
tailgating" signs are posted outside entry doors, staffed by security guards, to deter people
from bypassing Apple's badge system by holding the door open for others.
7. To the envy of many in the tech industry, co-founder and chief executive Steve Jobs
uses _____ expertly to amplify interest in Apple's products.
a. security
b. scarcity
c. secrecy Correct
d. separation
8. Mr. Jobs has made it clear he favors selling technology directly to _____.
a. consumers Correct
b. CEO’s
c. chief information officers
d. Web sites
Energy Stalks Big Players Join Race to Put Farm Waste Into Your Gas Tank
By JOHN J. FIALKA and SCOTT KILMAN
June 29, 2006; Page A1
http://online.wsj.com/article/SB115154654862893860.html
WILMINGTON, Del. -- One way to wean America from its addiction to foreign oil
might well lie in the muddy solution swirling about a glass container on top of a DuPont
Co. laboratory bench.
Inside the liter-size vessel, a desert-loving bacterium is making motor fuel. The organism,
which normally lives on the agave plant of tequila fame, is munching on the chopped-up
leaves and stalk of a plant, and excreting a dilute form of ethanol, the gasoline substitute
normally made from corn kernels in the U.S.
The tiny organism -- and others being engineered in competing labs around the country -could hold the keys to a new U.S. fuel source: cellulosic ethanol, which can be made
from crop residues, wood chips, switchgrass and even municipal garbage.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 31
The effort to make cellulosic ethanol into a full-blown power source to run America's
cars is embryonic, and its outcome uncertain. But the fuel has two big things going for it:
High oil prices and backing from the Bush administration, which sees it as a potentially
important part of future energy supplies and is putting up money to help launch the first
"biorefineries" to make it. Adherents think it could reduce U.S. dependence on imported
oil, cut emissions that cause global warming and shore up the nation's rural economy.
Already, the race is attracting big names, with the likes of Archer-Daniels-Midland Co.,
Royal Dutch Shell Group and Goldman Sachs Group Inc., investing time and seed
money.
In the U.S., ethanol for fuel is typically made from corn. But growing corn gobbles up a
lot of power in the form of everything from fertilizer to pesticides. The economics of
cellulosic ethanol, made essentially from waste, could be different. With the booming
economies of China and India helping increase the world's appetite for petroleum faster
than new sources of fossil fuel can be found, economists figure there will be a need for
tens of billions of gallons of alternative fuels within just a few decades.
"Suddenly, there is a race out there to develop a new source of energy," says Thomas
Connelly, DuPont's chief innovation officer.
Until recently, the idea of squeezing ethanol from farm waste and other sources was
barely clinging to life in the recesses of university campuses and federal labs. Few in the
private sector seriously pursued the idea for the simple reason that it's far easier to make
ethanol from corn. The microorganisms good at making ethanol prefer eating the sugar in
corn kernels.
9. One way to wean America from its addiction to foreign oil might well be ______.
a. fungus
b. corn batteries
c. water batteries
d. cellulosic ethanol Correct
10. In the U.S., ethanol for fuel is typically made from _______.
a. corn Correct
b. soybeans
c. rice
d. garbage
Homeless Reporter Gets Job, and Story, Evicting Others
By MICHAEL M. PHILLIPS
June 30, 2006; Page A1
http://online.wsj.com/article/SB115160627154594444.html
WASHINGTON -- Early one morning this spring, Jake Ashford woke up, as usual, in an
alley behind a downtown office building. He might have taken his schizophrenia
medicine, or perhaps not. Sometimes, he says, he skips a dose.
Next, the 43-year-old Mr. Ashford headed to the headquarters of a nearby charity for a
shower and breakfast. Then he joined a group of men getting into one of several
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 31
unmarked vans cruising the neighborhood and began his career as an undercover reporter
for Street Sense, the city's newspaper for the homeless.
Mr. Ashford's work that day helped the paper break the biggest story in its three-year
history, an exposé of businesses that allegedly recruit the homeless to evict people from
rental homes -- and allegedly pay them less than the legal minimum wage to do so. In
light of the article, the National Coalition for the Homeless, an advocacy group, and a
team of attorneys from the Washington office of Cleary Gottlieb Steen & Hamilton say
they are investigating whether to sue the eviction firms.
"I would hope and pray that homeless people are not being hired out to make other
people homeless, but if they are, they should be paid minimum wage," says Michael
Stoops, the coalition's acting executive director.
Street Sense was founded in 2003 by Ted Henson, then 23, and Laura Thompson Osuri,
then a 26-year-old reporter for American Banker, an industry daily. Both were troubled
by the plight of the homeless and together they raised money from friends, family and
foundations to launch the paper. Mr. Henson, who bussed tables at night so he could put
in days at Street Sense, now works as a labor-union researcher and volunteers on the
paper's board. Ms. Osuri left mainstream journalism and works as Street Sense's only
salaried employee, earning $40,000 annually.
The monthly paper, run out of a rented room at the downtown Church of the Epiphany,
follows the general business plan set by many of the 24 publications in the North
American Street Newspaper Association, a trade group of papers focused on
homelessness. Street Sense is sold by a roving crew of 45 vendors, most of them
homeless, who pay 25 cents a copy and sell the paper on the street for a dollar. A diligent
vendor with good curb appeal can make $60 a day, Ms. Osuri says. Last month, the
vendors sold 11,500 copies out of a run of 13,000.
POWER OF THE PRESS
The vendors write about half of the articles, with the rest written by non-homeless
volunteers. "The vendors are really dedicated," says Ms. Osuri. "They'll call if they're in
the hospital or in prison. It's a job, and they feel responsible for it."
The articles range from the mundane -- which shelters are open -- to the whimsical. Last
month's issue examined executive compensation among directors of charities that work
with the homeless. August Mallory, one of the paper's vendors, has written 31
installments of a mystery story, chronicling the adventures of Marvin Hammerman, an
attorney who goes to bat for the homeless.
The homeless journalists also do restaurant reviews, accompanied by a non-homeless
volunteer entrusted with the Street Sense credit card. They are told to limit the bill to $70
-- and no alcohol. "This is indeed great service, I said to myself," Mr. Ashford wrote
about an establishment called Georgia Brown's. "I was asked if I would like some sort of
beverage while looking over the menu, and I asked for water and iced tea."
Another vendor, Donald Brooks, panned Zaytinya, a trendy Mediterranean-style
restaurant, saying managers turned rude when they found out the diners were from Street
Sense. "We would not eat there again if we were spending our own money," he wrote.
General manager Sandy Lewis declined to comment on the Street Sense review.
The paper has broken a few notable stories, such as the piece about a carpenters' union
hiring the homeless to staff picket lines. But none has made as big a splash as the article
about evictions in April's issue.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 31
11. Street Sense is sold by a roving crew of 45 vendors, most of them homeless, who pay
25 cents a copy and sell the paper on the street for a dollar. A diligent vendor with good
curb appeal can make $_______ a day.
a. 15
b. 30
c. 60 Correct
d. 100
12. The biggest story in the three-year history of Street Sense, was an exposé of
businesses that allegedly recruit the homeless to _______.
a. sell drugs on the street
b. evict people from rail cars
c. evict people from empty warehouses
d. evict people from rental homes Correct
Questions 13 – 17 from Marketplace
Warren Buffett Gives $30 Billion to Gates Foundation
By KAREN RICHARDSON
June 26, 2006; Page B1
http://online.wsj.com/article/SB115126355210390044.html
In a dramatic shift in his philanthropic plans that will create a colossus in the world of
giving, Berkshire Hathaway Inc. Chairman Warren Buffett, the world's second-richest
man, plans to give away the bulk of his fortune to the Bill & Melinda Gates Foundation,
run by the world's richest man.
The gift, valued today at more than $30 billion, will create a philanthropic organization
with potential to significantly shape social issues including child mortality, disease
control and education. The Gates Foundation, headed by Microsoft Corp. Chairman Bill
Gates and his wife, Melinda, already has assets valued at $30 billion, meaning it is on
course to double in size.
Combining the two fortunes will create a $60 billion philanthropic vehicle that will dwarf
the $11 billion Ford Foundation, the $8.3 billion Lilly Endowment and the $5.5 billion
Andrew W. Mellon Foundation. By comparison, the United Nations and its agencies
spend about $12 billion per year.
The agreement has the potential to mark the beginning of a new era of megafoundations.
Mr. Buffett's gift to Mr. Gates is "revolutionary," says Daniel Borochoff, president of the
American Institute of Philanthropy, a watchdog group based in Chicago. "Rather than
competing, they are going to pool their resources for common causes. They are going to
affect millions of lives."
Mr. Borochoff said that many charities might even redirect their missions to causes that
the Gates Foundation supports -- which now include tackling malaria and AIDS in Africa
and raising U.S. high school graduation rates. But he warned the enlarged Gates
Foundation will need to practice care in fragile places, making sure to stimulate self© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 31
sufficiency rather than fostering dependence or the kind of corruption that often follows
aid.
Mr. Buffett, 75 years old, will give away about 85% of his Berkshire Hathaway stock,
currently valued at about $44 billion, to the Gates Foundation and four other foundations,
beginning in July, according to a Berkshire Hathaway statement. About five-sixths of the
allocated Berkshire Class B shares will go to the Gates Foundation. Mr. Gates is a
member of Berkshire Hathaway's board. At Friday's 4 p.m. price, the 10-million-share
allotment was valued at $30.7 billion.
The gift was large enough even to impress Mr. Gates. "We are awed by our friend
Warren Buffett's decision to use his fortune to address the world's most challenging
inequities," the Microsoft chairman said in a statement also released by Berkshire, "and
we are humbled that he has chosen to direct a large portion of it to the Bill & Melinda
Gates Foundation."
While his decision to give to charity during his lifetime is new, Mr. Buffett's decision
against bequeathing most of his wealth to his children isn't. He has long argued that
children of wealthy parents can be sapped of motivation and spoiled if they inherit all of
their family's riches.
Mr. Buffett also made pledges to the Susan Thompson Buffett Foundation, named after
his late wife; the Howard G. Buffett Foundation, run by his elder son; the Susan A.
Buffett Foundation, run by his daughter, and the NoVo Foundation, run by his younger
son, Peter, and Peter's wife, Jennifer.
Mr. Buffett will give 5% of the designated shares to each recipient this year, then 5% of
the residual shares each year until either his death or until certain conditions are no longer
met. In the case of the Gates's foundation, one condition requires that either Mr. or Mrs.
Gates is alive to set and administer the foundation's policies, according to a letter Mr.
Buffett sent to the foundation dated June 26, 2006. After Mr. Buffett's death, his estate
will distribute the remaining earmarked shares in an as-yet undisclosed manner.
News of the gift was earlier reported on Fortune.com by Carol Loomis, the magazine's
editor-at-large and a longtime friend of Mr. Buffett. She is also an investor in Berkshire
and a director of the Susan Thompson Buffett Foundation.
Mr. Buffett, who owns only Berkshire Class A shares, will convert them into the B shares
he needs for the gifts. One A share is convertible into 30 B shares. On Friday, Berkshire
Class A shares closed up 0.13%, or $120, at $92,100 on the New York Stock Exchange.
The Class B shares closed up 0.16% at $3,071.01.
13. Warren Buffett, the world's second-richest man, plans to give away the bulk of his
fortune to the Bill & Melinda Gates Foundation, run by the world's richest man.
The gift, is valued today at more than $______.
a. 20 billion
b. 30 billion Correct
c. 100 billion
d. 300 billion
How $60 Billion Behemoth Will Affect World of Charity
By SALLY BEATTY, MARILYN CHASE and GAUTAM NAIK
June 27, 2006; Page B1
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 31
http://online.wsj.com/article/SB115136998683691375.html
What impact will a $60 billion megacharitable foundation have on the causes it espouses,
and on the world of philanthropy in general?
As the Bill & Melinda Gates Foundation prepares to roughly double in size in coming
years with a massive contribution from Warren Buffett, will its financial firepower and
entrepreneurial approach change the course of global health care, and even society? Or
will its size work against it, sucking oxygen from other efforts and attracting critics at
every turn?
The Gates Foundation will receive only a small portion of Berkshire Hathaway Inc.
Chairman Mr. Buffett's $30.7 billion gift this year. (An article about investor reaction to
the gift1 appears on page C1.) But the charity is already the world's largest philanthropic
organization with a $30.6 billion endowment. Since its founding in 1994 it has built a
track record in targeting the world's three biggest killers -- AIDS, tuberculosis and
malaria -- among other major scourges, and funding programs in prevention, diagnosis
and treatment using existing tests, drugs and vaccines. Last year, the Gates Foundation
spent $1.36 billion -- already, approaching the World Health Organization's budget for
2006 of $1.66 billion.
In a joint appearance with Mr. Buffett in New York yesterday, Mr. and Mrs. Gates
emphasized that their goal is to work collaboratively with other foundations and
government agencies. The foundation regularly invites experts from the WHO to
brainstorming sessions in Seattle, and has hired experts from the Centers for Disease
Control and Prevention and nonprofit groups. Melinda Gates pointed out the Gates
Foundation already works with foundations like those of Michael and Susan Dell, Eli
Broad, David and Lucille Packard, and the Rockefellers on areas including high-school
education and agricultural biotechnology.
Richard Feachem, executive director of the Global Fund to Fight AIDS, Tuberculosis and
Malaria, an independent Swiss-based foundation, says the Gates Foundation hasn't tried
to compete with or replace traditional donors like governments. Instead, he says, it has
used its money to make "strategic investments" with partners for new initiatives like
disease-treatment programs and vaccine-development projects that work with initiatives
from other funding bodies like the Global Fund.
For example, he says, the Gates Foundation has invested heavily in a HIV/AIDS testing
and treatment program in Botswana. He says that is creating "a model that other countries
can follow with Global Fund financing."
Many nonprofit officials say they expect the Buffett gift to inspire generosity in other
donors, but some worry that could pose challenges by shifting responsibility away from
government and onto the private sector. "There could be lawmakers who will look at
these wealthy donors and say, 'You solve the problem, rather than us,' " says Diana Aviv,
president and chief executive of Independent Sector, a nonprofit group that represents
foundations, charities and corporate-giving programs.
The gift promises to give more attention to the Gates Foundation's two main focuses,
education and global health, and potentially divert donor dollars away from other causes.
The arts, for example, is not a big part of the Gates Foundation agenda, and that could
make it harder for cultural institutions to call attention to their needs. "We're not against
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 31
culture," said Bill Gates Sr., who serves as co-chairman of the Gates Foundations. "We
just can't do everything."
The younger Mr. Gates said at the news conference he hopes the foundation's enlarged
endowment won't discourage other givers but draw them in. "There will continue to be
foundations of all sizes," he said. "If you want to deal with billions of people, you need
scale." He said he's optimistic that the Buffett gift will spark more of the nation's
superrich to become donors while they are still alive. "I hope we're seeing a rise in
philanthropy and that people with wealth will give wealth back and give it back at a
younger age," he said. "Ted Turner started it all by scolding people. We're trying to
complement that by showing how much fun it can be."
In assuming the role as one of the biggest funders of global health programs, the Gates
Foundation has taken an approach long eschewed by pharmaceutical companies and
groups like the WHO: to use cutting-edge science to develop drugs and vaccines against
diseases that kill millions in the developing world.
Some long-established foundations and international health officials initially worried that
Mr. Gates would charge into philanthropy like a bull in a china shop, but some of that
fear has abated. Some smirked at his initial hard-landing in places like India, where he
quoted dire projections for geometric AIDS growth and ruffled government feathers. But
his diplomatic skills have grown since then, along with the foundation's credibility for
working with local project managers in countries from India to Mozambique. He also
showcases his wife, whose modest demeanor has won over new friends for the
foundation.
"I've heard both him and his wife speak," said David L. Heymann, who heads polio
programs for the WHO. "They are both keen listeners. They ask the right questions. It's a
pleasure to hear the right questions." He gave high marks to certain African malaria
projects, that, instead of a single intervention, offer a whole panoply of services from bed
nets and spraying, to diagnosis, and treatment. "It's a superb program leaving behind a
public-health good."
Government officials say the Gates Foundation is not duplicating the work of public
agencies. "They are really apples and oranges," said Anthony Fauci, director of the
National Institute of Allergy and Infectious Diseases. (Dr. Fauci's institute is involved in
some projects with the Gates Foundation.) "The natural question is not, 'Why do we need
WHO?' " he said. "WHO has never been one to put a lot of money into things. They are a
coordinating, bully-pulpit kind of organization, and the need for that doesn't change."
14. Since its founding in 1994 the Gates Foundation has built a track record in targeting
the world's three biggest killers --_________ -- among other major scourges, and funding
programs in prevention, diagnosis and treatment using existing tests, drugs and vaccines.
a. cancer, diabetes, and heart disease
b. ebola, starvation and AIDs
c. alcoholism, STDS and malaria
d. AIDS, tuberculosis and malaria Correct
More Mileage for Hummers?
By LEE HAWKINS JR.
June 28, 2006; Page B1
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 31
http://online.wsj.com/article/SB115146424497792752.html
DETROIT -- With inventories of the Hummer H2 and H3 piling up amid high gas prices,
two Detroit area Hummer dealerships are getting creative about boosting fuel efficiency.
But the move has raised the eyebrows of General Motors Corp. and Hummer brand brass.
Detroit Hummer and Hummer of Novi are trying to woo consumers with what they call
the "Mileage Maximizer," a mechanical modification they claim helps the hulking
vehicles get 25 miles per gallon in highway driving. By comparison, an unaltered H3 gets
19 to 20 miles per gallon on the highway, according to Hummer spokesman Nick
Richards.
The improvements come at a price, though. GM and Hummer officials haven't endorsed
the adjustments, and say they may not honor the warranties on the altered vehicles.
Even so, the promotion has helped ignite H2 and H3 sales at the two Detroit area
locations, says Gary Krupa, general manager of Hummer of Novi. The dealerships are
charging customers $189.95 for the "Mileage Maximizer." Mr. Krupa says they sold
about a dozen modified Hummers in the first three weeks of the promotion. The chain is
now considering modifying vehicles at other Detroit-area Chrysler, Jeep and Dodge
stores it owns "within the next month or so," according to Russ Reimer, the service
director who runs the service shops at both Hummer dealerships.
The modification uses a device manufactured by Air Synergy Labs Inc., one of hundreds
of aftermarket parts companies across the country that are using homegrown methods to
try to boost fuel efficiency. Spencer Robley, chairman and president of the Las Vegasbased company says his company's product -- which it calls a "Vortex Valve" -- can help
drivers increase fuel efficiency as much as 30%, though he concedes there's no official
verification of that claim. "Federal, state, local [government agencies], nobody will
certify anything that has to do with us," Mr. Robley says. "Nobody wants to hang their
hat on it and certify anything that has to do with mileage." The company says it has sold
120,000 valves since they launched the product in 1998; the Detroit area stores are the
first car dealers to feature it.
According to Synergy Labs, the valve works by rechanneling and increasing the air that
goes into a vehicle's intake manifold, allowing more oxygen to be present during engine
combustion. As a result, the company claims, fuel is burned more efficiently. Mr. Robley
says the technology can be used in any vehicle's engine and with any kind of fuel,
including petroleum, hydrogen, and ethanol.
Hummer's Mr. Richards says that while GM hasn't had a chance to examine the vehicles,
the company generally advises consumers and dealers against making tweaks. "We spend
years optimizing everything for performance, ride and handling, overall vehicle
efficiency, durability and long-term reliability and to meet current and future emission
standards," he says. "We've got a lot of very smart engineers who have been doing this
for their entire lives. If it were that simple, they would have already discovered it."
John Millett, a spokesman for the U.S. Environmental Protection Agency, which
regulates vehicle emissions, says the agency isn't aware of the Hummer promotion in
Michigan, but warns that attempts to boost fuel economy can sometimes increase vehicle
emissions. "It's safe to say, in general, that in any situation, tampering with the emissions
controls devices on any vehicle certified by the EPA is against the law," Mr. Millett says.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 31
Mr. Reimer at the Hummer dealerships contends that "if you are burning the gas better,
you are actually creating [fewer] emissions....We've had some customers already call us
back and say they have seen an improvement."
15. The "Mileage Maximizer," a mechanical modification claiming to help Hummer
vehicles get ____ miles per gallon in highway driving. By comparison, an unaltered H3
gets 19 to 20 miles per gallon on the highway.
a. 25 Correct
b. 27
c. 30
d. 32
Selling TV Like Tupperware
By DIONNE SEARCEY and PETER GRANT
June 29, 2006; Page B1
http://online.wsj.com/article/SB115153565528493550.html
Deep inside the gated subdivisions of San Antonio, AT&T Inc. is reaching back to the
past to market the future, hosting get-togethers reminiscent of 1950s Tupperware parties
to show off its Internet-based TV service.
At house parties throughout the area, neighbors gather in living rooms and snack on
cheese cubes and finger sandwiches while they pass the remote control, watching a sideby-side comparison of the phone company's new TV service, which is delivered over the
company's broadband Internet connection, against Time-Warner's cable TV. The services
are viewed on a 50-inch television set that AT&T has rigged to simultaneously display
both systems.
AT&T says the gatherings have been successful in generating buzz for the service,
dubbed "U-verse," with some attendees signing up for the service on the spot.
The TV bashes are the brainchild of Republican strategist Matthew Dowd, who was one
of President Bush's chief campaign strategists in his 2004 re-election campaign. AT&T
has hired his Austin, Texas-based consulting firm, ViaNovo, to help market TV to the
phone company's customers. The marketing push draws on campaign experiences that
have proved to be successful for Republicans and harnesses them for commercial
purposes.
Using an approach the president's team employed in Ohio in the 2004 election, AT&T's
local marketing teams are burrowing deep into communities to find neighborhood leaders
to pitch its new service. They have come up with a list that includes Sunday school
teachers and other "navigators," or trend-setters whose opinions are sought out and
valued by neighbors.
The navigators will receive some sort of compensation for their help, but exactly what
they'll get hasn't been decided. (Mr. Dowd's firm confirmed its work for AT&T but
declined to comment.)
AT&T is starting to tap those individuals to host TV parties and otherwise help sing the
praises of U-verse. Initially AT&T is using its own employees, but it has identified
hundreds of so-called navigators in San Antonio and the Chicago area, where it hopes to
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 31
soon roll out the service, and is working with them to host TV parties. (Since the process
is in its early stages, AT&T declined to make any navigators available to comment.)
"People were like, wow," said Yollie Martinez, director for AT&T's national retail
organization and consumer marketing, who hosted a TV party at her San Antonio home
in The Vineyard subdivision in May.
Time Warner Inc., AT&T's main cable rival in San Antonio, isn't impressed by such
efforts. The company says it has deep roots in the community and was involved in more
than 500 local events last year alone.
"They're playing catch-up on the television product and also playing catch-up on
marketing," said Keith Cocozza, a spokesman for Time Warner.
AT&T and other U.S. telephone companies are under tremendous pressure in their
competition with cable companies to offer consumers the most attractive packages of TV,
phone and high-speed Internet services.
Cable operators are leading this race so far because they have succeeded in rolling out
phone service much faster than telephone companies have launched TV. Cable operators
have more than five million phone subscribers and are adding hundreds of thousands of
new ones every quarter.
For AT&T, which is embarking on a merger with BellSouth Corp. to become the largest
telecom company in the world based on market capitalization, the race is particularly
important. To overtake cable and its sizable lead, AT&T recognizes that it must use
Internet technology to create a better television experience than cable offers.
Telecommunications companies throughout the world are viewing the Internet as a way
of breaking into the TV business. But the technology is tricky because it is essentially
delivering huge streams of video data bits over copper wires that were designed to handle
simple phone calls. While AT&T is stringing high-capacity fiber through some of its
network, the last stretch of wiring into homes is upgraded copper. It is more feasible in a
densely populated city like Hong Kong where homes aren't far from distribution points
than in suburban neighborhoods where millions of AT&T's customers live. (Cable
companies deliver their services over fat cables.)
AT&T is using unproven Microsoft Corp. software, which can allow instantaneous
channel changes, high-definition TV and an interactive "picture-in-picture" program
guide that lets viewers watch two channels at once. But the software also adds to the
complexity of the operation and adds to the demands on the thin copper wires. AT&T is
months late in launching, and the service being offered now in San Antonio doesn't make
high-definition possible though the company says it will add that feature soon as it rolls
out to 15 to 20 more markets by the end of the year.
There are, however, plenty of advantages to AT&T's approach. Rather than broadcast all
channels at once to a TV or set-top box as is the case with cable and satellite systems,
Internet protocol technology sends one stream at a time, similar to the way a Web page is
delivered to a computer. As a result, there technically is no limit to the number of
channels operators can offer, and on-demand streams will flow faster. These Internet
streams could allow AT&T to partner with a high school, for example, to offer live
football games on a channel with little effort. Someone would still have to film the event,
but the service would have plenty of room to air it.
To do the same thing with existing technology, cable companies would have to create a
new channel or bump a programmer from an existing one. "We'll have the Fiesta Day
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 31
parade and little Johnny in the marching band, and grandma will see him on TV," says
Randall Stephenson, AT&T's chief operating officer.
But cable operators aren't waiting for the parade. Major cable companies like Comcast
Corp. and Time Warner are pushing to add a wide range of new features and content to
their cable services, sometimes with the same Internet technology that AT&T is using.
For current AT&T subscribers, the system appears very similar to a regular cable TV
setup. An AT&T technician installs a set-top box and gives customers a remote control
that allows viewers to use specialized search functions to look for programs.
16. AT&T's local marketing teams are burrowing deep into communities to find
neighborhood leaders to pitch its new service. These people are referred to as:
a. “guides”
b. “directors”
c. “negotiators”
d. "navigators" Correct
Can Silk and Leather Tempt Shoppers Back to Old Navy?
By AMY MERRICK
June 30, 2006; Page B1
http://online.wsj.com/article/SB115163767257995109.html
Executives at Gap Inc.'s Old Navy chain knew they were in trouble last fall when they
went out to browse the competition. Target Corp. and other discounters were carrying
basic jeans and plain, long-sleeve T-shirts that looked as if they had just come out of Old
Navy.
Just as the executives feared, sales were terrible for the chain that season, and they
haven't picked up: Old Navy stores have posted flat or declining same-store sales every
month since November 2004. In its push to keep costs down, Old Navy, a brand founded
on fresh fashion at reasonable prices, has gone stale.
It was time for a change. Sheryl Clark, Old Navy's executive vice president of
merchandising, says last year she concluded that Old Navy had become "overly focused
on value." "There was nothing compelling about our product to make you drive to Old
Navy," she says.
For fall this year, Old Navy is testing the upper limits of what customers are willing to
spend, with new products and prices set to arrive July 15. The chain is stocking its most
expensive goods ever, including ruffled leather jackets for $129, silk tops for $29.50 and
sweater coats for $34.50. Old Navy says it will continue to carry its traditional under-$40
basics -- $29.50 khakis, $24.50 short-sleeve sweaters, $19.50 buttoned-down shirts -- but
this year the quality will be higher. To offset cost increases, it hopes to rely less on
discounts and sell more at full price.
To arrive at this point, Old Navy designers looked at jeans from high-end brands like
Seven for All Mankind and Citizens of Humanity, which sell for more than $100. They
took the garments apart, examined the stitching and fabrics, then asked Old Navy's
factories to create something similar. The result, called "special edition" denim, will sell
for $36.50 to $49.50, the priciest Old Navy jeans to date by $10.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 31
As for its basics, Old Navy has added details: shell buttons on long-sleeved Henley shirts;
a fancy metallic stamp in place of a humdrum sewn-in label. Stitching is improved, knits
are softer and jeans are hand-ground with a small tool instead of simply tossed in a
washing machine, Ms. Clark says. "We use Abercrombie as our internal gauge," says Ms.
Clark, citing Abercrombie & Fitch Co., the popular and pricey teen brand. "Whether you
like them or not, they execute beautiful product. The trim, detail, wash, label -everything is executed against a very high standard."
The changes come at an urgent time for Gap Inc., based in San Francisco. Sales also have
been sluggish at the Gap and Banana Republic divisions, intensifying pressure on Chief
Executive Paul Pressler to halt the slide. Although the company's board has expressed
support for Mr. Pressler, some analysts think he must produce a second-half turnaround
to retain directors' confidence.
17. According to Sheryl Clark, Old Navy's executive vice president of merchandising Old
Navy uses _______ as an internal gauge of the competition.
a. Walmart
b. Hollister
c. Abercrombie & Fitch Correct
d. Target
Questions 18 – 23 from Money & Investing
A Financial-Data Vault Online
By RON LIEBER
June 24, 2006; Page B1
http://online.wsj.com/article/SB115109033740289142.html
The shoebox in the closet -- the one that people use to stash years of dusty old financial
statements -- is facing some stiff new competition.
For years, software makers and financial institutions have been rolling out tools designed
to make it easier to track your money on your computer (Intuit's Quicken or Microsoft
Money) or to access account information online (any number of bank, brokerage and
credit card websites). But it has been tougher to find a single site or service that can store
a full history of every financial move you have ever made and give you 24/7 access to it
from any computer.
Next month a company called Yodlee Inc. plans to unveil just such a single, Web-based
vault. To get access to it, however, you are going to have to give its Web site all of your
usernames and passwords for your various financial accounts so it can retrieve
information and consolidate it. It is enough to give a good scare to even the most Webhardened.
So who or what is Yodlee? You might already use some of its software: It powers parts
of Bank of America, Fidelity and others' Web sites. Yodlee also makes its tools available
free via the yodlee.com1 home page; look at the bottom left for the link to "Log in to:
Yodlee OnCenter" to sign up.
Once you are set up, it presents a sort of dashboard: Your 401(k), your credit-card
balance, even your frequent-flier mile figures, are all in one place. It just takes a few
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 31
minutes to start, and if you have never seen your accounts splayed out in front of you on
one tidy page, it can be startling -- and enlightening. Starting in early July, Yodlee will
begin storing a record of every move in every tracked account forever (right now, it only
keeps 90 days of history).
It hasn't ever been easy to track the history of your money moves via the Web. If you
don't mind surfing around, you can get some historical data at sites for personal credit
cards (Citibank and American Express sites feature six months' worth, though you can
get more upon request), banks (anywhere from a few months to a few years of data
instantly available) and brokerage firms (data often go back many years).
Software programs like Quicken or Money keep this stuff all in one place, on your
computer, and the programs can even automatically update data without the need for
manual downloads. These programs also use your passwords to access your financial
institutions, though somehow Yodlee's keep-them-all-on-the-Web approach makes it
seem more vulnerable. Yodlee says it has never had a security breach and that its
encryption system keeps its own employees from seeing the magic words. It has a strong
incentive to be vigilant given that its corporate customers (like the banks that use it to
power their consumer-facing Web sites) might flee if there was security trouble.
This Web-centricity is also Yodlee's biggest asset, though. If you want to be able to get to
everything at any moment from anywhere, whether you are at home or at the office, it is
an excellent new option. For people worried about hurricanes or hard-drive crashes, it is
not a bad backup. And because it is free, the only cost to testing the tools is any
uneasiness over security.
18. Next month a company called _____ plans to unveil a Web-based data vault.
a. Apple
b. ProXV1 Inc.
c. Noodle Inc.
d. Yodlee Inc. Correct
Investors Pay More Attention To Profit 'Purity'
By PETER A. MCKAY
June 26, 2006; Page C1
http://online.wsj.com/article/SB115127447377790167.html
Corporate profits have risen steadily over the past few years. The better news for
investors may be that the quality of those earnings also has been improving.
Various market watchers define earnings quality differently, but the general idea is that
the best earnings are those that come from a company's main businesses firing on all
cylinders, rather than from ancillary factors often outside the company's control, such as a
change in accounting rules.
Michael Thompson, research director at Thomson Financial, says the earnings "purity" of
stocks in the Standard & Poor's 500-stock index has risen since 2002. He arrived at that
conclusion by taking the earnings figures presented by the companies and backing out
certain charges, fees and other figures that say nothing about whether the company is
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 31
selling more of its products or services. These days, Mr. Thompson is finding fewer items
to exclude; thus, he thinks the quality of earnings is higher.
Some investors seem to have cottoned to quality. One sign: The Dow Jones Industrial
Average, which is composed of 30 big names like Wal-Mart Stores and General Electric
that tend to have high-quality earnings according to S&P, has beaten more broad-based
indexes this year. The blue-chip average stands at 10989.09, up 271.59 points, or 2.5%,
for 2006, and it has fared better than other key indicators this month.
By comparison, the S&P 500 has just about broken even so far this year, down 0.3% or
3.79 points, at 1244.50. And the Nasdaq Composite Index is off 3.8%, or 83.85 points, to
2121.47, with more than half of that point loss registered this month.
How "good" can earnings get? Mr. Thompson and other analysts say the relatively low
prices now seen on many stocks leaves room for the shares to keep climbing, which
would suggest the quality probably will get a little better. The thinking: When a stock is
cheap relative to the company's earnings, it has more room to rise. That means executives
have less incentive to fiddle with earnings in order to try to boost the stock.
Once a stock gets expensive, it is less likely to keep climbing, and that is historically a
point at which companies have tried to eke out more gains on paper, according to Mr.
Thompson.
The companies in the S&P 500 trade at about 14 times the per-share-earnings estimate for
the next 12 months, compared with a historical valuation of about 18 times.
"At this point, companies don't need to do a lot of that engineering," Mr. Thompson says.
"We're getting to the point where earnings are really, really clean, which is good for the
market."
Especially as the broad economy shows signs of weakening, investors are best served by
searching for the handful of large companies with businesses that are most robust and
thus more likely to endure rough times, Wall Street pros say.
The stronger performance of stocks with purer earnings "really represents quite a shift
away from complacency" about riskier investments, says Robert E. Weissenstein,
managing director at Credit Suisse Securities LLC. "Investor behavior is changing, but
that's not something that happens instantly."
If anything, investors over the past several years have favored low-quality earnings by
piling into risky, small companies, says analyst Richard Tortoriello of S&P Equity
Research Services. He estimates the stocks of companies with lower-quality earnings are
still trading at price/earnings ratios that are 9% higher than those of high-quality earners.
But Mr. Tortoriello expects that gap to narrow, resulting in a more-traditional relationship
in which high-quality companies have the upper hand. In particular, Mr. Tortoriello says
rising interest rates favor investment in high-quality companies, because whenever it
becomes more expensive for investors to borrow money to trade, they tend to be more
selective about the stocks they buy.
Interest rates probably will rise again as soon as this week. Most analysts expect the
Federal Reserve's policy makers to raise their key interest-rate target a quarter percentage
point to 5.25% at the end of a two-day meeting that starts Wednesday.
"All the indicators are flashing red right now," Mr. Tortoriello says. "By moving your
assets toward higher-quality, less-risky issues, you can potentially save investment
money if the market goes into a downturn."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 22 of 31
Mr. Tortoriello says S&P assigns "quality rankings" to companies based not just on
earnings growth but also consistency and dividends paid over a 10-year period. By that
standard, giants like Johnson & Johnson, Home Depot and PepsiCo get A-plus ratings.
Except for Exxon Mobil, Mr. Tortoriello says most energy companies get so-so ratings,
including ConocoPhillips and Halliburton. Although such companies have racked up big
profits amid the past few years' surge in crude-oil prices, the companies haven't fared
nearly so well when prices have fallen, leading to the sort of volatility that hurts their
ratings.
19. Michael Thompson, research director at Thomson Financial, says the earnings
"purity" of stocks in the Standard & Poor's 500-stock index has _____ since 2002.
a. risen Correct
b. fallen
c. stayed neutral
d. fallen rapidly
Mixed Messages
By JUSTIN LAHART
June 27, 2006; Page C1
http://online.wsj.com/article/SB115137024409191387.html
The two measures of consumer attitudes investors watch closest are throwing off
conflicting signals.
One, the University of Michigan's consumer sentiment index, is in a deep funk. Its
preliminary reading for June of 82.4 was higher than May's 79.1, but still well below
March's 88.9. The index's final June reading comes out Friday.
The Conference Board's consumer-confidence index paints a rosier picture. Although it
slipped in May, dropping to 103.2 from April's 109.8, unlike the University of Michigan's
sentiment index, it remains well above levels of early 2003 when a jobs' slump, a stockmarket swoon and the prospect of war in Iraq weighed on people's minds. Economists
polled by Dow Jones Newswires and CNBC estimate that today's report on the
confidence index will show that the measure rose slightly, to 103.5, in June.
The different courses the two gauges have charted may come down to gasoline prices.
Many of the questions put to consumers for the University of Michigan's index focus on
finances, points out Lehman Brothers economist Ethan Harris. Because it's difficult for
people to quickly throttle back on how much gasoline they use, higher prices at the pump
cut into their ability to spend or save, and so cut into their assessment of their financial
situation.
For the confidence index, on the other hand, the Conference Board asks consumers about
current and expected business conditions, current and expected employment conditions,
and income expectations. Short-term pocketbook issues, like gasoline prices, therefore
exert a much smaller influence on its confidence index than on the Michigan sentiment
index.
Role-reversal may be coming. Gasoline prices have leveled off over the past month, and
should they hold, the University of Michigan's survey respondents could start sounding a
little less glum. At the same time, the housing market, which has been a major force in
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 23 of 31
job creation, is slowing. As housing-related jobs get harder to come by, the Conference
Board's confidence index could slip.
The truth probably lies somewhere between the two indexes. The time to really worry
would be if both suddenly dropped.
20. The two measures of consumer attitudes investors watch closest are throwing off
conflicting signals. The different courses the two gauges have charted may come down to
____ prices.
a. food
b. automobile
c. gasoline Correct
d. college
Prep Schooled
By GENE COLTER
June 28, 2006; Page C1
http://online.wsj.com/article/SB115145660035992564.html
Millard "Mickey" Drexler is chief executive of J. Crew Group Inc., and today he becomes
the boss of a public company again, thanks to an initial public offering by the preppy
retailer last night.
Mr. Drexler was the CEO at another listed retailer, Gap Inc., until 2002. The trials of that
job drove him out of the Gap and into the arms of Texas Pacific Group, the private-equity
firm whose bankers last night priced 18.8 million shares of J. Crew at $20 each to raise
$376 million. The New York company starts trading today on the Big Board under the
symbol JCG.
Its fortunes depend in large part on Mr. Drexler's staying power. The legendary designer,
61 years old, has expressed frustrations in the past about running a public company. But
there are reasons to believe he'll stick around in his current post. He's a big owner of J.
Crew: He held a 22% stake before the IPO and didn't sell any shares in the offering.
Industry observers say he's intent on securing a legacy after his final years at Gap.
Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail
consultant and investment bank, describes Mr. Drexler as a genius who converted Gap
from a Levi's emporium into a "private-branded miracle" before it faltered. At J. Crew,
he's overseen eight straight quarters of same-store sales growth.
Getting fashion wrong is inevitable, says Mr. Davidowitz, even for Mr. Drexler. At a
private clothing company, designers can catch their breaths when they stumble and try
again, as long as they have enough cash to keep running. At a public company, Wall
Street pushes for fast turnarounds.
Still, going public will always be fashionable with apparel chains, which, like most
companies, lust after capital. Therein lies another challenge for a newly public-company
chieftain: How to spend his money?
J. Crew plans to use its IPO proceeds primarily to redeem preferred stock owned by
Texas Pacific and to pay down debt. The company has talked of a "controlled growth"
strategy, which might help it avoid repeating the Gap's fate. Back in Mr. Drexler's days at
the Gap, the retailer expanded so much it seemed there was a store for every shareholder.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 24 of 31
21. As part of an IPO 18.8 million shares of J. Crew were offered at $____ per share.
a. 5
b. 10
c. 20 Correct
d. 40
Oddsmakers
By JUSTIN LAHART
June 29, 2006; Page C1
http://online.wsj.com/article/SB115154233220693750.html
With Federal Reserve policymakers looking set to raise their target interest rate by
another quarter point today, it is time to start discussing the "R" word.
The economy has a good head of steam going, so a recession seems unlikely now. But
each time the Fed raises its overnight target rate, making credit less accessible, the odds
of a recession go a bit higher -- reason enough to start considering scenarios.
Some observers have been on recession watch since late last year, when the yield on the
10-year Treasury note first slipped below the yield on the two-year Treasury. Because
investors usually demand higher returns to tie up money in longer-term instruments, such
yield inversions are rare. When they have occurred, economists have taken it as a signal
the economy could cool, forcing the Fed to cut short-term rates.
In a March speech, Fed Chairman Ben Bernanke played down such talk. The speech
referenced research by Fed economists Jonathan Wright and Don H. Kim, who have
developed a handy little tool to predict recessions, using 10-year yields, three-month
yields and the fed-funds rate. At the time Mr. Bernanke spoke, it put the odds of a
recession in the next 12 months at 27%.
The odds remained at 27% yesterday, but if the fed-funds rate is increased to 5.25%, as
the Fed is expected to do today, the odds rise to 30%. If the Fed raises its target rate again
in August, the possibility of a recession should go higher still.
Other economists are nudging up their recession odds. In a survey of 56 economists to be
released by The Wall Street Journal next week, the consensus puts the odds of a
downturn in the next 12 months at 20%. Not too high, but up from 15% when they were
asked the same question in May.
With the odds creeping higher, James Hamilton, an economist at the University of
California, San Diego, says it would make sense for the Fed to hold off on rate increases
in August.
Don't count on it. The futures markets now put the odds of an August rate increase at
more than 80%.
22. The “R” word referred to in the article Oddsmakers is
a. rate
b. recession Correct
c. regulate
d. reserve
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 25 of 31
Case Raises a Tough Query: When Do Traders Cross Line?
By ANN DAVIS
June 30, 2006; Page C1
http://online.wsj.com/article/SB115163341075595034.html
With BP PLC accused of artificially inflating the price of propane by withholding some
of its inventory from the market, government officials and energy traders are grappling
with a question: When does smart trading cross the line into market manipulation?
The shrewdest competitors in the energy-trading world these days deal heavily in
physical shipments of fuel, not just contracts for the future delivery of such commodities.
Owning actual oil, natural gas, propane and even electricity has two big advantages. It
provides detailed knowledge of regional supply and demand and the pricing power that
comes from holding large quantities of commodities.
Because big oil companies have legitimate reasons to hold or sell large quantities of fuel,
their power to move markets can be immense. While there is nothing inherently illegal
about keeping assets in storage or distributing them to trade more effectively, experts say,
traders must tread carefully, particularly in smaller markets like propane, where prices
can be manipulated more easily.
According to the Commodity Futures Trading Commission, which is working with the
Department of Justice on the BP investigation, it all boils down to the intent of the trader
and the power that trader has in the marketplace.
"When you squeeze a market, you're not letting fundamental factors influence the price,"
says Joan Manley, the CFTC's deputy enforcement director. "It's your own conduct that
influences the price."
BP denies engaging in market manipulation and is disputing charges brought by the
CFTC. It says it disciplined some traders charged by the CFTC "for failure to adhere to
BP policies governing trading activities."
An explosion in the number of participants in the energy-trading world has led to an
increase in so-called physical trading.
Dominant commodity traders such as Morgan Stanley and Goldman Sachs Group Inc.
long have had strategies to own or lease fuel-storage terminals, oil tankers and power
plants to give them more flexibility to hold onto inventory or sell it at opportune
moments.
More recently, those Wall Street firms have taken physical trading to new levels with
bids to buy, not lease, distribution facilities such as pipelines and production facilities
including refineries. Hedge funds also have gotten into the game of dealing in physical
energy and even metals assets.
Goldman Sachs last year bought a refinery with private-equity firm Kelso & Co. Morgan
Stanley this month agreed to buy petroleum-products distributor TransMontaigne Inc.
and is negotiating to buy the Heidmar Group of shipping and marine-logistics companies.
If the two deals go through, they would give Morgan Stanley access to storage terminals
and pipelines in the U.S. and tankers around the world.
23. BP PLC was accused of artificially inflating the price of ________ by withholding
some of its inventory from the market.
a. diamonds
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 26 of 31
b. copper
c. coal
d. propane Correct
Questions 24 – 26 from Personal Journal, Section D
Getting the Kids Hooked on Starbucks
By JANET ADAMY
June 27, 2006; Page D1
http://online.wsj.com/article/SB115137048688191395.html
To help launch a line of sweet, creamy banana Frappuccinos last month, Starbucks Corp.
sponsored a family-oriented community event -- a free day at the Phoenix Zoo.
For adults, there were samples of espresso-infused Banana Coconut Frappuccino. But the
coffee retailer also set out samples that the kids flocked to: tiny cups of Bananas &
Crème Frappuccinos made with banana puree and whipped cream, no coffee.
What made the promotion surprising is that Starbucks, the Seattle-based coffee retailer
with more than 11,000 stores, has a longstanding policy of avoiding marketing to kids.
The company says it isn't aiming its new noncoffee Frappuccinos at children. But the
promotion shows the challenge Starbucks faces in capitalizing on its growing popularity
among families without breaking its pledge. As Starbucks launches more drinks that
could appeal to kids, it's also raising concerns about the nutritional value of items on its
menu, as well as the high prices.
Food makers have become increasingly cautious about marketing to kids amid growing
concern about childhood obesity. Kraft Foods Inc. last year started limiting its marketing
to kids under 12 and in May soda companies agreed to halt sales of sugared sodas in
schools. Starbucks, for its part, says it hasn't changed its position on marketing toward
youth.
The coffee chain's written policy says its "overall marketing, advertising and event
sponsorship efforts are not directed at children or youth," although some "community
activities" end up reaching kids. The company reviews marketing materials to avoid
distributing ones that could be "inadvertently appealing to youth," the policy says.
But as Starbucks expands, it is attracting new demographics, from teens who hang out
after school to young mothers chilling out with their toddlers. So the chain is adding more
products that appeal to them. Last month Starbucks said it had signed an exclusive deal to
sell audio versions of the books "The Velveteen Rabbit" and "The Night Before
Christmas" read by actress Meryl Streep. Earlier this year, Starbucks started selling
DVDs of children's music performer Laurie Berkner.
"Starbucks itself is a gathering place," says Brad Stevens, Starbucks vice president of
U.S. marketing. "You can often go in and see a whole family."
Starbucks started selling Frappuccinos in 1995 after one of its Southern California stores
whipped up the drink while experimenting with a cold coffee beverage. Since then the
Frappuccino has become one of the chain's most popular drinks and has evolved to
include noncoffee varieties like Strawberries & Crème and Double Chocolate Chip. The
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 27 of 31
coffee chain is now adding more noncoffee flavors. Today it plans to roll out a new line
of pomegranate and tangerine juice Frappuccinos.
Plenty of adults drink Frappuccinos. But the sweetness of the drinks, and the fact that
they borrow characteristics from the milkshake and 7-Eleven's Slurpee, make them
particularly appealing to children. Nutrition experts have criticized coffee chains for
using sweetened coffee drinks as so-called starter beverages that get children hooked on
caffeine. The Center for Science in the Public Interest, a food-industry watchdog,
recently complained that Frappuccinos are among the most fat- and calorie-packed items
on the Starbucks menu. A 16 oz. grande-size Bananas & Crème has 550 calories and 15
grams of fat. By comparison, the same size chocolate shake at McDonald's has 580
calories and 14 grams of fat.
"A child, if it's a snack, does not need this number of calories," says Barbara Rolls, a
professor of nutritional sciences at Pennsylvania State University in State College, Pa.,
who is studying food-intake regulation in children.
Starbucks says that it offers lighter versions of many Frappuccinos and that the new juice
line contains no fat and fewer calories than its traditional Frappuccinos. Some have
caffeine because they contain tea, but they can be ordered without caffeine. The company
says that for further information on caffeine, it refers customers to medical experts
because that's not Starbucks' area of expertise.
24. Starbucks is expanding it’s demographics in the following ways
a. adding Metamucil for the elderly
b. expanding their variety of sweet, fruity drinks that appeal to kids
c. offering books on tape and music that are child orientated
d. Both b and c Correct
Laptop Lockdown
By M.P. MCQUEEN
June 28, 2006; Page D1
http://online.wsj.com/article/SB115145402822192505.html
The burden of lugging around laptop computers for work around the clock is getting
heavier as companies place more of the responsibility of guarding against theft and other
security lapses on their employees.
A number of companies, including Aetna Inc., Fidelity Investments and the U.S. unit of
ING Groep NV, are revising their policies about how employees should handle
confidential data stored on computers. Many employees are facing new restrictions on
who can take confidential records out of the office and are receiving special training on
how to keep data secure. Workers found violating security policies are being disciplined,
or even dismissed.
Boeing Co. now requires laptops to be physically locked with a cable to a stationary
object at all times, whether they are in offices, conference rooms or a car, so that no one
can walk away with them. The aerospace giant has stepped up enforcement of a rule that
confidential data must be accessed only on company servers, not stored on laptops.
Boeing officials have started conducting random audits of laptops to check for
unauthorized or unsecured files.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 28 of 31
Some companies, including Aetna, the big health insurer, have begun telling employees
that they can't use their own portable digital assistants such as Palm Pilots and
BlackBerrys on company computers without permission. Other companies are disabling
extra USB connections on workplace computers to make sure employees can't attach
those accessories. And some even ban MP3 players in the workplace, security experts
say. All these devices may lack encryption, and can be used to smuggle out confidential
data.
"Employees are the weakest link" in securing data, says Jon Oltsik, senior analyst for
information security at Enterprise Strategy Group, an information-technology industry
analysis firm.
Before traveling on business, Marian Mays, payroll operations manager in Boeing's
Seattle office, has started having her laptop examined by the company's security
personnel to make sure she doesn't have any sensitive data stored on it. Once she is on the
road, logging on to the company's server requires multiple passwords. "You just have to
deal with it," she says. "We get creative with the passwords."
The moves come amid several recent thefts of laptops containing sensitive information.
This month, credit bureau Equifax Inc. said a laptop containing employee names and
Social Security numbers was stolen from an employee traveling in England. In May, a
data analyst with the Department of Veterans Affairs had a laptop stolen from his
Maryland home that contained confidential information on 26.5 million veterans, military
personnel and their spouses. To date, no identity thefts have been traced to these laptop
thefts. But overall, more than 88 million Americans have been put at risk of identity theft
from data breaches since early 2005, according to the Privacy Rights Clearinghouse, a
nonprofit advocacy group.
Financial-services companies, with their abundance of client data, are especially sensitive
to security breaches. "Every firm has re-evaluated their policy on laptops," says Alan
Sorcher, associate general counsel at the Securities Industry Association, a brokerageindustry trade group. "They know that losing a laptop is a significant thing." The group
has convened an industry conference for November on data breaches and privacy law.
Companies have long taken pains to secure data, but these efforts mainly focused on
protecting computer networks from hackers and viruses. Only recently have laptops and
other portable devices come under scrutiny, and this poses thorny issues for both
employers and workers who routinely bring work home, says Philip S. Deming, president
of a human-resources at a security consulting firm near Philadelphia. "Virtual offices
make employees more productive because they work more than 40 hours a week, so how
do you balance that?" he says.
25. According to Jon Oltsik, senior analyst for information security at Enterprise Strategy
Group, ______ are the weakest link in securing data.
a. WiFi networks
b. MP3s
c. USB connections
d. employees Correct
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 29 of 31
Doing Well vs. Doing Good: Parents Struggle With Their New Grads' Idealism
By SUE SHELLENBARGER
June 29, 2006; Page D1
http://online.wsj.com/article/SB115153441487793521.html
Rachel Kreinces' parents thought she was bound for law school last year when the 2005
University of Pennsylvania graduate revealed a surprise: She wanted to join Teach for
America, spending two years in the classroom in a low-income New York school.
Her parents "said flat-out, 'No!'" Ms. Kreinces recalls. "They said, 'Get a job and work.'"
Her father, Gerald Kreinces, Commack, N.Y., says he saw the program as "a luxury,"
requiring financial support for Rachel to live in New York City on a starting teacher's
pay. He also feared she would abandon her law-school plans.
Now, after Rachel's first year teaching sixth-graders with emotional and learning
disabilities, her father is proud and "he loves to tell family and friends" stories from her
classroom, says Rachel, now 22. Dr. Kreinces, a dentist, says "it's been a great thing for
her ... a real growth experience." In addition to helping her pay the rent, he has purchased
a fan and a newspaper subscription for her classroom.
The pressure on young adults to earn a lot of money right out of college has seldom been
greater. Beyond soaring rent and fuel costs, college seniors are graduating with record
debt loads. Yet idealism springs eternal in the hearts of youth -- more strongly than ever,
by some measures. The number of people ages 16 through 24 who volunteer 100 or more
hours a year has risen nearly 18% since 2002, says a Census data analysis by the Points
of Light Foundation, Washington.
"For a lot of my friends from college and high school, the buzzword is finding your
passion," says Sean Smith, 24, a 2004 University of Notre Dame graduate and Peace
Corps volunteer in Thailand.
The result: tension for grads and their families, as young adults strive to do public service
while still paying the piper.
The strain can erupt in family conflict. After Veronika Hayes graduated this spring from
the University of Illinois with $25,000 in debt, her family expected her to head for law
school. "You can make so much money. You can be rich," Ms. Hayes, 21, says her aunt
told her. But she surprised the family by signing on with Teach for America instead. "I
struggled" to explain the choice to them, saying, "This is my life. This is my decision.
These are my dreams," Ms. Hayes says.
Her mother, Cheryl Hayes of Chicago, who helps her daughter with her bills now and
then, says she has faith in Veronika, though she fears her daughter will "get sidetracked"
from law school. As a hospital lab assistant working nights, Cheryl says, she told
Veronika, "You don't want to end up like me."
Although no one tracks parent-child tension over career choices, Darrell Anthony Luzzo,
an executive of the career-education organization Junior Achievement and president-elect
of the National Career Development Association, believes it's rising. Today's young
adults, who came of age post-Sept. 11, tend to profess greater altruism than the previous
generation, who focused more on individual achievement and attainment, he believes.
Also, dozens of states have enacted laws in the past decade allowing or encouraging
"service learning." Several grads I interviewed said doing public service in school shaped
their decision-making, and parents echoed that belief.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 30 of 31
Public-service work helps many young adults find themselves. After graduating from
college, Angelica Cox deferred her dream of joining the Peace Corps to start repaying
$28,000 in student loans. Feeling directionless, she worked a series of part-time jobs,
"barely getting by," she says. After two years, she signed on with the Peace Corps in
Costa Rica, deferring the loans. There, helping coffee growers double their income by
marketing beans directly to consumers, she found her passion: a career in international
development.
The Peace Corps allows grads to defer student-loan payments and may forgive 15% of a
student's federal Perkins loans for each year of service. AmeriCorps, a federal
community-service initiative, allows loan deferment and a $4,725 education award;
Teach for America, an AmeriCorps program, also pays a beginning teacher's salary.
But once the deferrals end, 23% of public-college grads and 38% of private-college grads
have too much debt to manage on a starting teacher's pay, says an April study by the
State Public Interest Research Groups, a nonprofit collaboration. And 37% of publiccollege grads and 55% of private-college grads owe too much to manage on a social
worker's pay.
For parents who worry about grads' long-term financial outlook, Dr. Luzzo advises
"striking a good balance between providing information on one hand, and supporting a
child in their career aspirations on the other." If debt and living costs loom large, neither
ignore nor overemphasize them. Just give your child the facts.
Some parents are coining new approaches. In raising their daughter Katie, Carolann
Morykwas and her husband steered her "toward her true interests," Ms. Morykwas says.
At 19, Katie "took us up on that" and majored in family and community service at
Michigan State University, a path to social work or early-childhood services.
But Carolann, a Detroit-area bank executive, worries that while she and her husband got
along fine for a while after college on low-paying jobs, living costs today make that path
more perilous. Katie, too, says she worries about "how I'll survive financially." For now,
she and her parents have reached a quiet understanding: She can't live at home after
graduating, but they'll subsidize her living on her own. "We'll no doubt keep negotiating
this," Carolann says.
26. The number of people ages 16 through 24 who volunteer 100 or more hours a year
has risen nearly ___ since 2002, says a Census data analysis by the Points of Light
Foundation, Washington.
a. 10%
b. 15%
c. 18% Correct
d. 25%
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 31 of 31