The Wall Street Journal Education Program
Weekly Review & Quiz
Covering front-page articles from Oct 7-13, 2006
Professor Guide with Summaries Fall 2006
Developed by: Scott R. Homan Ph.D., Purdue University
Questions 1 – 12 from The First Section, Section A
Road Warriors
GM Tensions Erupt
As Kerkorian Ally
Quits as Director
By MONICA LANGLEY, NEAL E. BOUDETTE and JOSEPH B. WHITE
October 7, 2006; Page A1
http://online.wsj.com/article/SB116014960978584912.html
Billionaire investor Kirk Kerkorian broke into open warfare with General Motors Corp.,
as his representative on the GM board quit after a failed push to get the company to ally
with Renault SA and Nissan Motor Co.
At the same time, Mr. Kerkorian indicated he is reviewing whether to retain his 9.9%
investment in GM.
Mr. Kerkorian's designate on the GM board, former Chrysler Corp. and IBM Corp.
turnaround specialist Jerome York, delivered a blistering critique as he abruptly left after
eight often-contentious months. He acknowledged the auto giant had made progress that
reduced its risk of filing for bankruptcy but said he had "grave reservations concerning
the ability of the company's current business model to successfully compete in the
marketplace with those of the Asian producers."
He assailed the independence of GM's board. In particular, he took it to task for failing to
order its own review of a possible overseas alliance rather than rely on management's
assessment.
The future of Mr. Kerkorian's big GM stake was cast into doubt as his investment
vehicle, Tracinda Corp., said in a filing with the Securities and Exchange Commission
that it was reviewing its options. It said it wouldn't buy additional shares. Only last week,
Mr. Kerkorian had indicated he might try to raise his interest to 12%. That was before the
collapse Wednesday of the talks between GM Chief Executive Richard Wagoner and the
head of Renault and Nissan, Carlos Ghosn.
While Mr. York didn't say what he and Mr. Kerkorian will do next, in their last big foray
into Detroit, the two showed a willingness to conduct a sustained assault on management.
That instance involved Chrysler in the mid-1990s. Ultimately, Mr. Kerkorian reaped
about $3 billion when Chrysler agreed to merge with Daimler-Benz AG.
Mr. York has a big financial incentive to see that GM's shares rise. His deal with Mr.
Kerkorian provides that Mr. York will receive about $2.2 million for each point GM
shares go up, as measured in mid-2009.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 37
1. Billionaire investor Kirk Kerkorian broke into open warfare with General Motors as
his representative on the GM board quit after a failed push to get the company to ally
with ________.
a. Renault and Nissan Correct
b. Toyota and Nissan
c. Saab and Nissan
d. Hyundai and Nissan
2. Billionaire investor Kirk Kerkorian has a _____ % investment in GM.
a. 5.9
b. 7.9
c. 9.9 Correct
d. 19.9
Target, a Big DVD Seller,
Warns Studios Over
Download Pricing
By SARAH MCBRIDE and MERISSA MARR
October 9, 2006; Page A1
http://online.wsj.com/article/SB116035902475586468.html
As Hollywood struggles to adapt to the digital era, a powerful constituency is making the
transition tougher: major retailers who sell DVDs don't want to see new moviedownloading services gain an advantage in the eyes of consumers.
The latest sign of tension came in a letter Target Corp. sent to the major movie studios
late last month. The big discounter expressed concern that new movie-downloading
services will get a better deal from the studios on electronic copies of movies than Target
gets on DVDs.
Target, which accounts for about 15% of the big studios' DVD sales in the U.S., said in
the letter that it didn't object to competition but wanted "a level playing field." It went on
to say that if it didn't receive what it considers to be equitable pricing from the studios it
would reconsider its investment in the DVD business, suggesting the retailer might cut
back on shelf space, promotional programs, signage and other aspects of marketing discs.
The sharply worded letter from Target President Gregg Steinhafel said that the chain had
become aware that "some movie studios have made new-release movies available to
download service providers at lower cost" than DVDs, allowing the downloaded movies
to be sold to the public at lower prices.
A spokeswoman for Target said the company is trying to ensure that its business "is not
put at a disadvantage."
The letter followed similar complaints from Wal-Mart Stores Inc. and comes just weeks
after Apple Computer Inc. announced a deal with Walt Disney Co. to sell electronic
copies of Disney movies online via Apple's iTunes Store for as little as $12.99 apiece for
new titles, several dollars less than comparable DVD prices. Most of the retailers'
concerns have been directed at Apple because other new entrants in movie downloading,
like Amazon.com Inc., pay wholesale prices that are comparable to what DVD retailers
pay.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 37
Until now, most download services also have sold movies at prices in line with, or even
slightly higher than, DVDs, posing little threat to conventional retailers. But Apple's cutrate pricing, along with its considerable marketing clout, has alarmed those retailers, even
as some of them contemplate launching download services of their own.
Relations with Target and other DVD retailers are likely to affect how quickly the big
studios move to digital downloading, and at what price. If the big chains succeed in
winning lower wholesale prices for DVDs, consumer prices could drop somewhat,
although the studios are reluctant to give much ground in this area.
Consumers could suffer, however, if Target and its rivals become unhappy enough to
scale back their DVD orders, possibly leading to shortages of some titles. Such action
wouldn't be unprecedented. Angry at Disney's deal late last year to sell TV programming
through iTunes, Wal-Mart temporarily refused to carry DVDs of the Disney Channel
movie "High School Musical," a best seller.
Wal-Mart -- the nation's biggest DVD retailer, with as much as 40% of the market for
big-studio DVDs -- sent a top executive to Hollywood to convey its misgiving, say
people familiar with the situation. However, Wal-Mart, a big seller of Apple's iPod
digital media player, softened its stance after Apple Chief Executive Steve Jobs
complained in a telephone call to Wal-Mart Chief Executive Lee Scott about what he
considered to be Wal-Mart's anticompetitive behavior, say people with knowledge of the
talks. Fearful of possible legal ramifications, Wal-Mart executives called studio
executives and told them Wal-Mart recognized the studios could pursue whatever sales
channels they wished, these people say.
"Our concern is to provide customers with the very best value," said a Wal-Mart
spokeswoman, who declined to comment on specific conversations. "We are
continuously looking at new ways to do that."
The studios, people familiar with the situation say, are eager to put off any escalation of
the pricing battle until after the important holiday sales season for DVDs. People familiar
with the situation say that Apple, too, believes it probably will have to wait until after the
holiday season to bring other studios behind Disney into the iTunes fold.
The tensions underscore the tightrope studios must walk to avoid alienating the retailers
that are crucial to their DVD business as they experiment with undeveloped, but
promising, distribution channels. While DVDs remain a major revenue generator, sales
have plateaued, and they face diminishing growth. Adams Media Research, Carmel,
Calif., projects U.S. DVD sales this year at $16.4 billion.
Retailers like Target and Wal-Mart typically pay $17 or $18 wholesale for new-release
DVDs. They typically sell them to the public at $16 to $19, often pricing them below cost
to attract consumers into their stores. Retailers worry that consumers will quickly lose
interest in DVDs if cheaper online versions of movies become widely available.
That's yet to happen in any major way, but Apple's iTunes, which movie executives say
has been negotiating with the major studios for months, appears to have made a big step
in that direction. Under its recent deal with Disney, electronic copies of new Disney
movies cost consumers $12.99 if preordered or purchased in the first week of release, or
$14.99 after the first week of release. People familiar with the matter say Apple pays
Disney a wholesale price of about $14.50 per movie.
The online store, which began selling Disney movies last month, has reported strong
sales of Disney movie titles -- 125,000 in the first week alone. The studios are wary of
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 37
letting iTunes achieve the same dominance in digital movie sales as it has in digital music
sales.
Concerned about its DVD business, Wal-Mart swung into action as soon as it got wind of
Apple's negotiations with the movie studios. Wal-Mart executives warned them that if
iTunes won low wholesale prices for digital movies, Wal-Mart wanted a break on
wholesale prices too, according to people familiar with the situation.
The prospect of angering Wal-Mart partly explains why only one studio, Disney, is so far
offering movies via iTunes. Mr. Jobs, Apple's CEO, is Disney's largest individual
shareholder and he became a member of the company's board after selling Pixar
Animation Studios to the media giant earlier this year.
The movie studios themselves are equally wary of undercutting the DVD business.
Lowering wholesale prices for DVDs would hit studio revenue hard, and studios don't
want to go that route. At the same time, they have high hopes for online distribution
because of its low costs. The studios worry that, at the wholesale prices Apple has asked
for, most of that benefit would disappear.
Studios have reminded Wal-Mart that it stands to benefit from online movie distribution
considerably through rising sales of video iPods and other similar portable video players
in its stores. And Wal-Mart is planning its own digital movie store, which it will likely
roll out in coming weeks, people familiar with the situation say.
Target, however, isn't ready to roll out an online movie store, and so has little interest in
encouraging the studios to expand digital distribution. To try to smooth Target's ruffled
feathers, Bob Chapek, Disney's president of home entertainment, and Pat Fitzgerald,
executive vice president of sales, flew to Minneapolis to meet with Target executives last
week.
The duo reiterated that digital distribution was a very small part of the movie business
that didn't yet appeal to mainstream consumers, according to a person familiar with the
conversation. They also stressed that TV titles sold on iTunes, including "Lost" and
"Desperate Housewives," remain among the top-selling DVD titles, indicating that online
sales currently expand the overall market rather than cut into DVD sales.
Cultivating a new distribution platform "is always risky, because you don't know if the
new one is worth the pursuit of it, upsetting your relationship with the great customers of
today," says Tom Adams, president of Adams Media Research. But studios have
managed it before, he says, for example, embracing videocassettes in the 1980s despite
resistance from pay-television businesses.
In fact, the current transition to digital may be easier in many ways, because many of the
traditional retailers that are balking are also planning to open their digital download
services eventually, giving them a stake in a successful outcome. However, Mr. Adams
expects the shift to digital will be slow, projecting that even five years from now digital
sales will still amount to less than 10% of physical DVD sales.
3. Target accounts for about _____ of the big studios' DVD sales in the U.S.
a. 5%
b. 10%
c. 15% Correct
d. 20%
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 37
4. The nation's biggest DVD retailer _________ with as much as 40% of the market for
big-studio DVDs sent a top executive to Hollywood to convey its misgiving, say people
familiar with the situation.
a. Best Buy
b. K-Mart
c. Dell
d. Wal-Mart Correct
Bomb Fallout
Explosion by North Koreans
Imperils Nuclear-Control Effort
By EVAN RAMSTAD in Seoul, South Korea, JAY SOLOMON in Washington and
GORDON FAIRCLOUGH in Shanghai
October 10, 2006 12:23 p.m.; Page A1
http://online.wsj.com/article/SB116036942831986615.html
North Korea's claim that it successfully exploded a nuclear device signals a major failure
of U.S. and Chinese diplomacy and threatens to unravel the international treaty system
that has worked to contain the spread of nuclear bombs for nearly 40 years.
The blast, which took place near the northeastern town of Kilju, was apparently small by
nuclear standards, suggesting the test may not have been entirely successful, or may have
been made with conventional explosives. South Korean geologists estimate the explosion
had less than 4% of the force of the atomic bomb dropped by U.S. pilots over Hiroshima
61 years ago.
Although the U.S. and its allies already suspected that North Korea had produced a small
number of nuclear weapons, a publicly announced test is frightening because it represents
such a brazen flouting of the system for controlling the spread of nuclear arms. North
Korea's action might encourage other states -- Iran, Japan, Taiwan, or even Saudi Arabia
and Egypt -- to go nuclear.
"The biggest threat is not North Korean missiles hitting Hollywood," said Robert
Alvarez, a former U.S. Energy Department adviser who worked on shutting down North
Korea's nuclear program in the 1990s. "The real risk is the unraveling of the
nonproliferation regime. That is not something we should take lightly."
U.S. diplomats are hoping to turn the announcement into a plus for American policy by
bringing together nations that have previously hesitated to take a hard line on North
Korea -- in particular China and South Korea. U.S. officials want the United Nations to
back measures that would effectively cut off North Korea's interaction with the global
financial system and its ability to import or export materials for weapons of mass
destruction. Washington wants to ratchet up the pressure by having the U.N. authorize
military force to back up sanctions. That could include a threat to inspect any vessel
leaving or entering North Korea.
While the U.N. Security Council unanimously condemned the reported North Korean
nuclear test, it is unclear whether the Security Council is ready to endorse the U.S. ideas - which are precariously close to declaring war on North Korea. Until now, South Korea
and China, which provide much of North Korea's food and energy, have favored
negotiations over sanctions. Some Bush administration officials would like to see
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 37
economic pressures topple the North Korean regime, but that is what China and South
Korea -- which share borders with the country -- fear most.
Japan, which has taken the lead in calling for sanctions against North Korea, may now
push harder to strengthen its military. "The test opens Pandora's box in Northeast Asia,"
said Han Seung Soo, a former South Korean ambassador to the U.S. and U.N. and former
president of the U.N. General Assembly. "The strategic position of every country just
took a dramatic change for the worse."
Another concern is that North Korea, a big exporter of missiles to Iran, Syria and
Pakistan, could also sell nuclear weapons to other countries, or use its smuggling
networks to provide weapons technologies to al Qaeda and other terrorist groups.
North Korea is the first state to withdraw from the Nuclear Nonproliferation Treaty and
then follow up by declaring itself a nuclear power and claiming to test a weapon. Security
Council members are also pressing Iran to halt sensitive nuclear activities that could
produce fuel for nuclear weapons and were set to discuss possible actions against Tehran
this week.
China's position on sanctions will be critical. Beijing fears losing a buffer zone against
U.S. troops in South Korea and wants to avoid a North Korean collapse, which could
send millions of impoverished refugees fleeing into China. The tradition of close ties
between China and North Korea dates to the 1950-53 Korean War when China fought on
North Korea's side against U.S.-led U.N. forces.
China's Foreign Ministry condemned the North Korean test but also called for a "peaceful
resolution through consultation and dialogue" and said the response should be "coolheaded."
Some Chinese analysts said Beijing may be ready to take a tougher line against
Pyongyang in the wake of the failure of six-party talks spearheaded by Beijing. The talks
bringing together the two Koreas, the U.S., China, Japan and Russia have been held off
and on since 2003.
"Chinese leaders have lost all hope in North Korea," said Chu Shulong, a professor at
Tsinghua University in Beijing. "The soft approach didn't work, so they have to take a
harder stance." Mr. Chu said China may back U.N. sanctions and could cut off its exports
of oil, electricity and fertilizer to North Korea, although it would probably continue
sending food and medicine on humanitarian grounds. In July, China voted in favor of
limited sanctions after North Korea test-fired a long-range missile and six military
rockets into the waters between the Korean peninsula and Japan.
China had set itself up as a mediator to work for a nuclear-free Korean peninsula,
reflecting its ambitions in global diplomacy. Chinese leaders took great pride in the sixparty talks, which were hosted in Beijing, the only place where North Korean negotiators
felt comfortable.
Mei Renyi, director of the U.S. Studies Center of Beijing Foreign Studies University, said
North Korea's announcement puts China in a difficult spot because it took a "leadership
position" in the talks. "For a long time, all the countries in the Asia-Pacific region
tolerated North Korea's nuclear threat, but its nuclear test today puts it in total isolation,"
he said.
For the Bush administration, the claim of a nuclear test represents a failure for its goal of
blocking the spread of weapons of mass destruction. For more than five years, the Bush
administration has been split internally over how to handle North Korea. Betraying that
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 37
lack of consensus, it has engaged in off-and-on multilateral negotiations with Pyongyang
while pursuing limited pressure tactics aimed at discomfiting the regime there. The
approach delivered neither a diplomatic breakthrough nor a breakdown of the regime of
North Korean leader Kim Jong Il, as advocated by U.S. hard-liners.
5. One of the main issues with North Korea’s announcement that it had successfully
exploded a nuclear device is
a. Hollywood is first on its hit list
b. the unraveling of the nonproliferation regime Correct
c. it might discourage other states to go nuclear
d. Both b and c
6. A tradition of close ties between China and North Korea dates to the _____ when
China fought with North Korea against U.S.-led U.N. forces.
a. 1950-53 Korean War Correct
b. 1960-63 Korean War
c. 1950-53 Asian War
d. 1918-23 World War
Amid Rising Costs and Criticism,
Some Colleges Cut Back Merit Aid
By ROBERT TOMSHO
October 11, 2006; Page A1
http://online.wsj.com/article/SB116052998822488903.html
As colleges and universities consider whether to join Harvard and Princeton in
abandoning early-admissions programs, some are also trying to roll back another popular
recruiting tool: merit aid.
Colleges offer merit aid, which is typically awarded on the basis of grades, class rank and
test scores, to students who ordinarily wouldn't qualify for financial help. Because merit
aid can be a deciding factor in these students' choice of schools, it has become a major
weapon in the bidding wars among colleges for high achievers who can help boost their
national rankings.
The National Association of Student Financial Aid Administrators says merit awards
accounted for $7.3 billion, or 16%, of all college financial-aid grants in the U.S. for the
2003-2004 academic year, the latest for which data are available. That's up sharply from
$1.2 billion, or 6% of the total, in 1993-1994.
But the cost of such programs has mounted as their use has expanded and tuition has
risen. Meanwhile, criticism has grown that they disproportionately benefit students from
wealthier communities with better school systems, siphoning resources away from lowerincome students with greater financial need. In some cases, students who qualify for
neither need- nor merit-based aid end up paying even more to cover a college's costs. As
a result, a small but growing number of schools and university systems are trying to
reduce their merit offerings.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 37
The University of Florida recently slashed the value of its four-year scholarships for instate scholars who qualified under the National Merit program by 79% to a total of
$5,000.
Last year, Illinois eliminated funding for a statewide merit program. Since 2004, the state
of Maryland has been phasing out one merit program and flat-funding another while
nearly doubling need-based college aid, to about $83.3 million a year.
Many highly selective private schools like Harvard and Stanford universities don't offer
merit aid, but some colleges that do are paring back sharply.
Allegheny College, in Meadville, Pa., where annual tuition and fees total about $28,300,
gave its $15,000-a-year merit scholarships to 15% of this year's freshmen, down from
about 33% three years ago. To free up funding for more need-based aid, Rhode Island's
Providence College scuttled its smaller merit scholarships and raised the eligibility
requirements for its larger ones: A grade-point average of about 3.7 on a 4.0 scale used to
be good enough; now it takes around a 3.83. Providence's merit scholarships can run as
high as full tuition, which is $26,780 this year.
Private-college associations in Pennsylvania and Minnesota are also taking early steps
that could lead to broader cutbacks. They have been gathering data and weighing whether
to ask the Justice Department for an antitrust exemption so their members can discuss
joint action to reduce merit aid. With many colleges fearful that unilateral cuts will drive
talented applicants into the hands of competitors, "it's going to take a group effort," says
David Laird, president of the Minnesota Private College Council.
But many college administrators fear that even discussing collective action will trigger an
expensive repeat of 1991, when the Justice Department sued the Massachusetts Institute
of Technology and eight Ivy League schools, charging them with antitrust violations for
agreeing to adjust their financial aid offers so that a family's out-of-pocket price would be
the same at every school. The suit was eventually settled, and a subsequent federal law
permits 28 elite universities to agree on standards for granting financial aid but bars them
from trading data on individuals.
Efforts to cut back on merit aid also risk setting off a backlash from middle- and upperincome families who don't qualify for need-based aid but are finding the rising cost of a
college to be a daunting stretch. "Family income isn't keeping pace with the things
driving higher-education costs," says Jim Scannell, a partner at Scannell & Kurz Inc., a
Pittsford, N.Y., consulting firm that works with colleges on enrollment issues.
7. Colleges offer merit aid, which is typically awarded on the basis of ______to students
who ordinarily wouldn't qualify for financial help.
a. grades
b. class rank
c. test scores
d. All of the above Correct
8. The National Association of Student Financial Aid Administrators says merit awards
accounted for ______ %, of all college financial-aid grants in the U.S. for the 2003-2004
academic year.
a. 6
b. 16 Correct
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 37
c. 26
d. 36
Rising Son
For Chinese Tycoon,
Solar Power Fuels
Overnight Wealth
By ANDREW BATSON
October 12, 2006; Page A1
http://online.wsj.com/article/SB116058795104289563.html
WUXI, China -- When he arrived in Australia 18 years ago as a physics student, Shi
Zhengrong scraped by on a meager stipend from the Chinese government that he
supplemented by working at a restaurant.
A doctorate, several patents, two solar-power companies and a $455 million initial public
offering later, Dr. Shi is now one of the richest people in China.
Suntech Power Holdings Co., the company he founded in 2001 in the flat, green lands of
the Yangtze River Delta, has quickly become one of the world's largest producers of
photovoltaic equipment, which converts sunlight into electricity. The company's
combination of first-world technology and developing-world prices has helped it gain
market share from more-established, and expensive, producers.
Mr. Shi's wealth, made up almost entirely of his holdings of Suntech stock, has fluctuated
in value along with company's volatile share price, from a low of about $1.3 billion to a
peak of just over $3 billion; his stake currently is valued at around $1.7 billion. It is, by
some estimates, the largest private fortune of anyone living in mainland China.
The story of his journey from China to Australia and back shows how important China's
growing openness has become to its people. Nearly three decades after market reforms
began, the network of personal, educational and financial ties between China and the rest
of the world is reaching a new level. And the Chinese government's willingness to
underwrite both advanced education abroad and technology startups at home is starting to
pay dividends.
Close to 800,000 Chinese students have gone abroad since the government first started
sponsoring them for overseas study in 1978. Drawn by job opportunities overseas, less
than a third have come back so far, but the rate at which they are arriving is accelerating.
Last year, about 35,000 students returned, three times the amount in 2000, according to
official statistics that almost surely underestimate the real number.
Many of those returnees, armed with cutting-edge technical and managerial skills, have
helped kick-start new technology businesses. At the same time, foreign venture capitalists
are flooding the country with unprecedented amounts of money, and Chinese companies
are finding they can raise money from stock offerings abroad. Combined with the heady
opportunities from an economy expanding at 10% annually, the result has been the
creation of private wealth on an unprecedented scale.
There are now probably 320,000 U.S.-dollar millionaires in China, according to estimates
by Merrill Lynch and CapGemini, and many of them are newly minted. On a list of the
500 richest people in China, compiled by the Chinese-language New Fortune magazine,
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 37
nearly one-quarter appeared on the list for first time this year -- including Dr. Shi. He
debuted this year at No. 1.
Good Timing
A small, intense man with a round face, Dr. Shi admits to having no real hobbies and
speaks often of the importance of focus and hard work. Yet he credits good timing for
many of the changes that have brought him so far from his childhood on a Chinese farm.
"I got into the solar industry, in the beginning, by accident," says Dr. Shi. The 43-yearold came of age in China at a time when the government controlled where people worked
and lived. "In our generation we didn't have the freedom to choose. We just accept
whatever we are given. So it's hard to plan," he says.
Yet Dr. Shi has also shown a knack for challenging the status quo. His plan to start a
solar-power company in China drew skepticism from colleagues, but he managed to
obtain government funding. Though trained as a scientist, he put aside technical
perfection to find cheaper manufacturing techniques. Despite many years of absence from
China, he has shown surprising savvy in local politics, convincing his original
government backers to sell out before the IPO that made him a rich man.
Suntech's success has come from its ability to tap into the global boom in solar power,
not from the Chinese market, which remains small. Industry executives estimate that
about 90% of the solar equipment produced in China is sold elsewhere, usually to
countries such as Germany and Japan that offer generous incentives for solar use.
Suntech faces competition from deep-pocketed large firms such as Japan's Sharp Corp.
and Kyocera Corp., and the solar division of oil-and-gas giant BP PLC. Suntech is
bulking up quickly to try to ride out any industry consolidation, and building global
connections.
Dr. Shi, who switches easily between Chinese and English, keeps close ties to Australia.
He sits on the international advisory board of the New York Stock Exchange, where
Suntech's stock trades.
He is living once again in his birth province of Jiangsu, on China's prosperous eastern
seaboard. His home, and Suntech's base, is not far from his birthplace on an island in the
Yangtze River called Yangzhong. As the oldest of four children, Dr. Shi was the focus of
his parents' hopes for a better life through education. Though mainly agricultural,
Yangzhong was blessed with a good school system.
He headed to college in 1979, shortly after the universities had reopened after the chaos
of the Cultural Revolution, and as a new leader named Deng Xiaoping had begun to
break down China's isolation. His high scores in math and physics got him slotted into
the optical-science department at Jilin University, in China's chilly northeast.
He found working in a lab preferable to working in the fields. He focused on improving
his English so he could read scientific materials. He would study while standing in line at
the school cafeteria, memorizing vocabulary scribbled in a notebook.
After graduating in 1983, he entered a master's program at the Shanghai Institute of
Optics and Fine Mechanics. The institute had access to a small quota of coveted
government-sponsored spots for overseas study. Although he was told he could go to the
U.S., that turned out to be a bureaucratic mix-up. He wound up in Australia instead. In
1988 he enrolled in the physics department of the University of New South Wales, in
Sydney.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 37
At the end of his one-year program, Dr. Shi realized he didn't want to return to China.
The year 1989 was a dark time, as the Chinese government brutally put down the
demonstrations in Beijing's Tiananmen Square. A classmate suggested he head to the
engineering department, where Martin Green, a prize-winning specialist in solar power,
was looking for students with a background in optics.
Though he had no experience in solar-cell research, Dr. Shi talked his way into getting
funding to do a doctorate under Dr. Green. And in his first six months, Dr. Shi made
some breakthroughs, often working alone well into the night. Finishing his Ph.D. in 1992,
he ultimately became research director in a company founded to market some of the lab's
technologies. He gained citizenship and bought three houses with savings from a
generous salary. Mr. Shi, his Chinese wife and his two Australia-born sons settled into a
comfortable life -- but he felt he could do more.
9. Close to _______ Chinese students have gone abroad since the government first started
sponsoring them for overseas study in 1978.
a. 350,000
b. 500,000
c. 800,000 Correct
d. 1,000,000
10. There are now probably 320,000 ______ in China, according to estimates by Merrill
Lynch and CapGemini, and many of them are newly minted.
a. MBA’s
b. entrepreneurs
c. US-dollar billionaires
d. US-dollar millionaires Correct
At Office Retreats,
Tales of Adversity
Fire Up the Staff
By GEORGE ANDERS
October 13, 2006; Page A1
http://online.wsj.com/article/SB116070526962791503.html
CORONADO, Calif. -- At their annual retreat last month, 300 finance managers for
Cisco Systems Inc. began the week with strategy meetings, followed by team sand-castle
building and water-balloon launching. Then came the visit from a blind man.
He was Erik Weihenmayer, a slim, athletic 38-year-old. In an after-lunch speech, he
recounted his bitterness as a teenager over losing his sight. He explained how he
channeled his anger into rock climbing and dreamed of climbing Mount Everest. "People
said I'd kill myself or my team members if I tried," he said. "But they didn't know
anything about me."
Employees of the computer-networking company watched in awe as giant video screens
showed Mr. Weihenmayer in 2001, picking his way past deep crevasses until he reached
the top of Everest. "You don't just deal with adversity," he said. "You use it to propel you
forward." Attendees gave him a standing ovation.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 37
Mr. Weihenmayer makes nearly $1 million each year from such appearances, making
him one of the top earners in an unusual business -- inspirational speakers whose
accounts of personal struggle and triumph are sweeping through the corporate conference
circuit. Companies such as Goldman Sachs & Co. and Wal-Mart Stores Inc. are booking
speakers who have survived farm accidents, muggings or other tragedies, often paying
$15,000 or more per engagement.
Years of scandals and strategic zigzagging have soured business audiences on pep talks
from well-paid executives with fancy titles. But the skepticism softens when a speaker
with a seeing-eye dog or a wheelchair speaks about unshakeable persistence, even if the
orators aren't business experts. Bosses hope these speakers can cut through a fog of
cynicism and complacency, getting people fired up about their jobs.
At Exxon Mobil Corp., procurement chief Jean Baderschneider says she used to book
celebrities or management gurus as speakers. No more. They were too glib to connect
with her teams, and in some cases she can't even remember their names. Now she invites
gritty survivors to tell their stories at major staff events. "You need to build passion," Ms.
Baderschneider says. "These speakers get people's juices flowing. They make us realize
that our challenges are nothing compared with what they have done."
Corporations, universities and other organizations spend hundreds of millions a year on
speakers. Top business and political leaders still command the highest fees, with former
president Bill Clinton averaging $175,000 per speech. But Mr. Weihenmayer and a few
similar orators with brave stories -- and a knack for tying their achievements to business
themes -- compile enough well-paying dates to earn well into six figures themselves.
Hundreds of others try to make a living as inspirational speakers, with mixed results.
Some do passably, collecting $5,000 or more a speech. Others discover to their dismay
that the world isn't eager to hear their woes. Data compiled by the 4,000-member
National Speakers Association indicate that the typical member earns $2,000 to $5,000
per talk. Many go for weeks without bookings.
When Trisha Meili was assaulted and left for dead in New York City in 1989, few people
knew her name. Media accounts identified her only as the Central Park jogger. Then in
2003 she published her memoirs and began looking for audiences interested in how she
recovered from tragedy.
One of the first people to book her was Roger Saillant, the chief executive officer of Plug
Power Inc. His alternative-energy company was a highflier in 2000, with a stock that
briefly traded as high as $150 a share. Three years later, the company's shares had
plunged to single-digit levels. Losses were mounting and cash was scarce.
Plug Power spent $5,000 to bring Ms. Meili for a two-day visit to its headquarters in
Latham, N.Y. There, she shared stories about learning to walk again after spending
months in a coma. She urged people to "live totally in the present," instead of obsessing
about a wonderful past that might be gone for good.
Mr. Saillant says she struck a chord. "We wanted to know how her experience could be a
metaphor for what was happening at Plug Power," he says. "She had been in a near-death
state but was able to pull herself out of it, thanks to the support of others and her own will
not to give in. We constantly needed to raise money to keep going. There were
similarities."
Since then, Ms. Meili has tripled her speaking fee, to $15,000, and expects to earn about
$100,000 this year. She recently addressed managers at DuPont Co., which has been
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 37
buffeted by restructuring plans the past few years. Ms. Meili remembers one of the
chemical company's lawyers coming up to her and saying: "I've got this huge stack of
papers on my desk. I've been too nervous about our future to get any work done on it.
After hearing you, I'm ready to go back and dive into things right now."
Like many inspirational speakers, Ms. Meili says she tries to take her audience on an
emotional journey. Rapt silence accompanies her opening stories. Partway through she
often hears suppressed sobs. And at the end, there's an outburst of applause and even
hugs from attendees. If all three parts come together, she says, "I know I've really
connected with people."
One of the hardest-working inspirational speakers is Chad Hymas, a Utah real-estate
investor and part-time elk rancher. Mr. Hymas nearly died in 2001, when a massive hay
bale tumbled off a forklift truck on his ranch and crushed three vertebrae in his neck. The
accident left his legs paralyzed and his arms barely mobile. He was despondent. Within a
year, though, he was addressing church groups about his family's efforts to help him
recover.
One attendee liked his talk so much that he arranged for Mr. Hymas to address a
contractors' convention in Las Vegas. That speech went well. Soon Mr. Hymas was
getting bookings from the likes of Wells Fargo Corp. Last year, Mr. Hymas delivered 160
speeches, ranging from small-scale local events to big corporate audiences that paid as
much as $10,000 apiece, for total income of more than $500,000. This year, Mr. Hymas
is on track to deliver 190 speeches, his best year ever.
Mr. Hymas says his core material hasn't changed since his first speech. He routinely
recounts the early days after his accident, when he was hospitalized and struggling to
raise his arms parallel to the floor. His 4-year-old son, Christian, came into the room and
said: "Look, Daddy, you're flying!" Mr. Hymas now closes many of his speeches with the
line: "Who needs legs when you have wings?"
A decade ago, orators such as Mr. Hymas might have been confined to low-paying
church, school and hospital engagements. Big companies didn't want to traffic in pathos.
Then Oprah Winfrey, the Lifetime Channel and Hollywood kept making heroes out of
people who had been hammered by life's bad breaks and bounced back.
As these stories found mass audiences, scandals such as Enron Corp. left the public far
more cynical about big business and reluctant to take advice from captains of industry.
An annual Gallup Poll shows that business executives currently win favorable ratings
from just 16% of the public, the lowest level since the savings-and-loan scandals of the
1980s.
Speakers' bureaus took note and started booking a new breed of lecturers. Leading
Authorities Inc. of Washington, D.C., now lists 234 "inspirational and motivational
speakers" on its Web site, its largest category. Many are traditional experts on leadership
or politics who want to be cross-listed in a popular category, says Mark French, Leading
Authorities' president. His inspirational roster also includes a survivor of 30 cancer
surgeries and man who recovered after he was hit by a New York City bus.
"Companies want someone fresh who has beaten the odds," says Marc Reede, president
of Nationwide Speakers Bureau, a lecture agency in Beverly Hills, Calif. Lots of speakers
may enjoy only a year or two on the circuit before their appeal wanes. "But that's not a
problem for us," he says. "We'll find the next ones."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 37
At times, it takes only a hint of a business analogy to succeed with corporate audiences.
Adventurer John Amatt survived a climb 20 years ago in which an avalanche killed three
of his teammates. He made it to the top only by radically changing his route and tactics.
Businesses love that story, he says, and they apply it in ways he never expected. In the
medical-equipment industry, for example, Kinetic Concepts Inc., hired Mr. Amatt earlier
this year to address its 1,500-person sales force, which was dispirited by Medicare cuts.
"We couldn't conceive of another way to do things," says Cyndi Erb, a KCI executive.
"He told us how sometimes you have to rethink your path. We thought he would have to
customize his talk for us, but actually we found out that wasn't necessary. Our
salespeople took what he said and applied it to their everyday life."
The market for sports speakers also is being realigned. Speakers' bureaus aren't just
competing to offer in-person appearances by superstars. Some are doing brisk business as
well in promoting disabled athletes or the brave benchwarmer with a plucky story of how
he or she made it to the big time. Sports speakers who have gained visibility in the past
few years include one-armed basketball player Ron Gustafson; baseball pitcher Jim
Morris, who didn't make the majors until age 35; and wrestler Kyle Maynard, who was
born with stunted arms.
A favorite this year is Vince Papale, who won a walk-on spot with the Philadelphia
Eagles in the 1970s, at age 30, despite never having played college football. He caught
just one pass during his three-year pro career but made some thrilling tackles on the kickreturn unit. Mr. Papale had been doing small-scale talks in the Philadelphia area since his
playing days. In 2005, speakers' bureaus started positioning him as a much bigger draw.
It helped that a movie about Mr. Papale's life, "Invincible" was due out this year. But the
speakers' bureaus figured his can-do attitude would rub off on sales forces. They guessed
right. American International Group Inc. tried him with a group of annuity salesmen and
liked the results so much that it booked him for five more talks, at $10,000 apiece.
"We had a tough year in 2005," recalls Michael Loftus, an annuity sales chief for AIG.
"We really liked his lust for achievement. His message was that any dream can come true
with hard work."
"Invincible" was a surprise hit this summer, so Mr. Papale has boosted his speaking fee to
$20,000 to $30,000. Speaking agents are encouraging him to make the most of the
opportunity. "He is looking at a two-year window," says Andy Roth, head of Roth Talent
Associates, Encino, Calif. "It makes sense for him to maximize his speaking efforts
during that time."
11. Many inspirational speakers try to take their audience on _____ journey.
a. a long winded
b. an unrealistic
c. an emotional Correct
d. a business case
12. Inspirational speakers whose accounts of _______ are sweeping through the corporate
conference circuit.
a. personal struggle and triumph Correct
b. entrepreneur success
c. getting rich
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 37
d. international travel
Questions 13 – 17 from Marketplace
Managing by the (Good) Book
By PHRED DVORAK
October 9, 2006; Page B1
http://online.wsj.com/article/SB116035608126386426.html
TAMPA, FLA. -- When Mark Dillon has a management problem, he heads straight to the
Bible.
The president of closely held Tampa Bay Steel Corp. changed how the metals distributor
pays its bills with help from the Book of Proverbs. He turned to the Book of Matthew for
advice on dealing with a delinquent customer. Agonizing over a pre-Christmas layoff, he
took comfort from Jesus' admonition to "do to others what you would have them do to
you."
"I thought: 'Do unto others,' ”recalls Mr. Dillon. "If I was going to be laid off, I'd rather
know before I spent all that money on Christmas presents."
Mr. Dillon is one of a number of top executives using religion -- especially evangelical
Christianity -- to guide decisions he makes each day at the office. The chief executive of
staffing firm Kforce Inc. says Biblical principles led his finance chief to choose a pricier
software vendor over a cheaper but less scrupulous one. The chairman of poultry
producer Pilgrim's Pride Corp. says he rejected a bank's cost-cutting plan because it didn't
show enough compassion. Kforce and Pilgrim's Pride are publicly traded.
Experts say U.S. workplaces have become more religiously diverse, forcing companies to
rethink everything from vacation policies to the cafeteria menu. And though managers of
all faiths are bringing a spiritual touch to the corner office, in the U.S., evangelical
Christians are the most active.
Christian titles such as "Jesus, CEO" and "Joy at Work" appear on business best-seller
lists. Christian publisher Thomas Nelson three years ago started a unit devoted to
business books; in the year ended March 31, that division had $9.5 million in sales, 73%
more than the year before. The business school of Regent University, which advertises on
its Web site that it "supercharges students for success in God's eyes," saw enrollment rise
44% last year. And C12 Group -- a network of executives, like Mr. Dillon, who meet
monthly to discuss management trends and the tricky intersections of religion and
commerce -- has grown from three sets of 12 Christian business executives in 1992 to
nearly 550 members today.
Christian managers say there's no inherent contradiction between running a company -even a public one with its commitment to maximize shareholder value -- and behaving
spiritually. And lawyers say it's generally not a problem to run a public company on
faith-based principles, as long as the executives make those principles clear to
shareholders, and make sure they don't follow faith to the exclusion of investor interests.
Skeptics say religion in the executive suite can alienate people with other beliefs. Federal
law prohibits discrimination in hiring or promotion on the basis of religion. Employers
may express religious views as long as staffers of different faiths don't feel pressured or
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 37
unwelcome. "It's pretty much a balancing act," says Dianna Johnston, assistant legal
counsel for the U.S. Equal Employment Opportunity Commission.
That leaves a lot open to interpretation. Complaints to the EEOC of workplace religious
discrimination -- mostly claims that employers didn't accommodate religious requests -rose to 2,340 in the fiscal year ended Sept. 30, 2005, from 1,581 in 1995. In contrast,
complaints to the EEOC about workplace discrimination on the basis of race and sex each
declined by more than 10% during the same period.
At a recent meeting of Mr. Dillon's C12 chapter recently, an executive raised a question
that shows how difficult it can get. Whom should he choose as operations chief, the
executive asked, the devout Christian who's less apt at the business, or the strong
manager who's not very religious?
The room exploded in discussion. Can the devout manager be trained? Can the other be
coached spiritually? If the executive explained his concerns honestly to the less religious
supervisor, would that constitute discrimination? (Yes, say lawyers.) The executive who
asked the question says he hasn't yet made a choice.
Mr. Dillon and others say executives can't and shouldn't separate their religious beliefs
from their work. They say honesty, integrity and respect for family make good business
sense and are core Christian principles. Mr. Dillon says at the office he stays away from
hot-button issues like abortion.
Others say moral values transcend belief in a specific faith, or in God at all. "It's not just a
Christian thing," explains Tampa Bay Steel purchasing manager Cordreanne Richardson,
who says she believes in God but doesn't share Mr. Dillon's beliefs.
Michael Ratzker -- an observant Jew who closes his company on Jewish holidays and
invites rabbis to lead study sessions at lunch -- says he runs Midland Metals International,
one of Tampa Bay Steel's biggest suppliers, along the same principles Mr. Dillon uses.
Rather than Jesus, he cites a Talmudic story in which a rabbi challenged to teach the
Torah while standing on one foot replies, "Do not do unto others what you hate being
done to yourself."
Last year, the two men traveled to Asia together on business. Mr. Ratzker didn't want to
drive on the Jewish Sabbath so Mr. Dillon ate with him at their hotel. On Saturdays, Mr.
Ratzker went to synagogue; on Sundays, Mr. Dillon found the local church.
Mr. Dillon was more hesitant about mixing religion with work in 1984 when he joined
Tampa Bay Steel, now a $65 million company with 120 employees considered a midsize
metals distributor. The 51-year-old accountant says he was a corporate go-getter who
worked 70-hour weeks and fumed when owner and chief executive C. A. "Buck"
McInnis left early to watch his daughters' softball games.
Mr. Dillon had begun his own religious transformation a few years earlier, after
accompanying his wife to her boss's church as she sought a promotion. (She didn't get it.)
Then, a few years after joining Tampa Bay Steel, Mr. Dillon became uncomfortable with
the company's habit of paying its bills a few weeks late, even as it pushed customers to
pay on time. He felt this violated a passage in the Book of Proverbs enjoining merchants
to keep "honest scales." He convinced Mr. McInnis, a Christian who says he's less "bold"
about his faith than Mr. Dillon, to approve borrowing $500,000 to pay overdue bills.
In 1996, Mr. Dillon joined C12. Each month, members assign themselves spiritual and
secular tasks. Following C12 advice, the man who once got angry at his boss for going to
a child's ballgame cut his work hours, literally penciling time with God and his family
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 37
onto his calendar. He donned a hard hat with a cross decal, prayed more publicly and
sponsored Christian activities at work. Each year, the executives grade their companies
on financial performance, as well as on spiritual matters like "saving souls" through
evangelism at work. Last year, Mr. Dillon reported 21 people saved, 115 exposed to
Christian teachings and $152,000 donated by Tampa Bay Steel, largely to Christian
causes.
13. Though managers of all faiths are bringing a spiritual touch to the corner office, in the
US, ________are the most active.
a. evangelical Christians Correct
b. devout Muslims
c. Catholics
d. Buddhists
Giants of the Sea
By DANIEL MACHALABA and BRUCE STANLEY
October 10, 2006; Page B1
http://online.wsj.com/article/SB116044743245587716.html
When the container ship Hugo pulled into Long Beach, Calif., last month after a transPacific crossing, its docking was about as easy as parallel parking a Greyhound bus in a
phone booth.
Bigger than the Titanic and nearly as long as the Queen Mary 2, the 1,095-foot-long
Hugo required two harbor pilots and three tugboats to guide it through a narrow shipping
channel to the dock. Crew members had to fold down a radar mast to clear the 157-foothigh Gerald Desmond Bridge -- and made it with only five feet to spare. Then the ship
made a 90-degree turn, its stern narrowly avoiding a concrete structure known as the "can
opener."
Big as it is, the Hugo is just one in a new generation of container ships so massive that
they dwarf ships made just a decade ago. Often longer than three football fields and wider
than the Panama Canal, the $100 million ships are jammed with Asian-made merchandise
that will fill shopping lists and stores throughout the U.S. before the holiday rush. Like
Santa's supersize sleigh, the Hugo was loaded with toys, electronic goods and clothes.
The ship's maximum load of 8,200 20-foot-long cargo containers could fill a train
stretching more than 23 miles.
Spurred by the flood of goods from Asia, growing by about 10% a year, container-ship
lines have put about 90 of these huge ships to work plying the high seas, estimates Paul
Bingham, a principal at the global trade and transportation practice at consulting firm
Global Insight Inc. About 150 additional ships with room for at least 8,000 20-foot-long
cargo containers are being built or on order through 2010, creating $16 billion to $18
billion in work for shipyards throughout the world.
The shipbuilding spree "is the biggest boom ever seen in container shipping," says Neil
Davidson, research director at Drewry Shipping Consultants Ltd. in London.
"We're pushing the limits with these ships," says John Strong, a vice president of
Jacobsen Pilot Service Inc., whose pilots have been steering ships in and out of the Long
Beach port since 1922. "There's no room for error."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 37
But the floating giants are helping to ease some of the stress on the global transportation
system that has worsened as trade volumes increase. In Los Angeles and Long Beach, the
two busiest U.S. container ports, the peak season that began in August and runs through
the end of this month has been smooth despite record shipment levels. Both ports were
snarled by backups and delays three times in the past decade, but the situation has
improved because of more big ships, new cranes, thousands of extra dockworkers and
keeping the ports open at night and on weekends. When the Hugo arrived in Long Beach,
two other massive container ships already were parked there and a third was leaving.
All of the megaships work routes between Asia and the West Coast or Asia and Europe,
where cargo volumes are the strongest and ports most likely to be able to accommodate
them. By spreading crew and fuel costs over more than twice as many containers as ships
built 10 years ago, the new giants can shrink the cost of moving containers over the ocean
by as much as 30%, says Eivind Kolding, chief executive of the container business of
A.P. Moller-Maersk Group of Copenhagen.
The shipping lines say that freight rates have fallen about 10% over the past year, but
some customers complain that the lines aren't passing along much of their savings. Willy
Lin, managing director of Milo's Knitwear International Ltd., a Hong Kong garment
producer, says he has seen little net reduction in his freight rates since the big ships began
sailing, due partly to a complex system of surcharges that shipping lines impose for fuel
and other costs. It costs $1,800 to $1,900 to ship a 40-foot cargo container to Long Beach
from Shanghai.
While not yet as large as supertankers built in the 1970s and 1980s to haul crude oil from
abroad to the U.S., the biggest container ships can store thousands of containers in their
hulls and nearly as many above deck. Ship operators often pile cargo six or seven stories
tall. "The temptation is to pile it like a hay wagon," says Charles Cushing, a marine
architect in New York.
14. The new generation of container ships
a. are bigger than the Titanic
b. work routes between Asia and the West Coast or Asia and Europe, where cargo
volumes are the strongest and ports most likely to be able to accommodate them
c. can shrink the cost of moving containers over the ocean by as much as 30%
d. All of the above Correct
Google's Free Web Services
Will Vie With Microsoft Office
By KEVIN J. DELANEY and ROBERT A. GUTH
October 11, 2006; Page B1
http://online.wsj.com/article/SB116052883714688829.html
Just as Microsoft Corp. is about to roll out the latest version of its cash-cow Office
applications, Google Inc. is beefing up efforts that could win away some of the customers
Microsoft is targeting.
Google's latest move, expected to be announced today, is a plan to bundle its existing
word-processing and spreadsheet offerings -- online applications that people can use
through their Web browsers -- under the name Google Docs & Spreadsheets and more
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 37
tightly weave them together. The services, which are available free, offer more-limited
functions than Microsoft's word processor and spreadsheet programs, which people use
the old-fashioned way on their personal computers.
Google Chief Executive Eric Schmidt told reporters last week that Microsoft's hold on
customers who aren't "professional users" of its core Office product "may be vulnerable."
The Web search giant is targeting average consumer users and organizations such as
universities as it continues to expand email, calendar, spreadsheet and word-processing
services that overlap with Microsoft offerings.
Google's push comes as Microsoft puts the finishing touches on Office 2007, the latest
version of its ubiquitous set of business programs, due by the end of the year. The
programs, taken together, are Microsoft's largest generator of revenue and profit after its
Windows operating system. They are also deeply entrenched in the world's large and
small businesses around the world.
Free equivalents of Office have existed for years and failed to crack Microsoft's market
share, But over the past two years, a growing number of Internet companies, including
Google, have started to make concerted efforts to pick away at the business, which
accounted for $11.8 billion in revenue for Microsoft in the year ended June 30.
Working in favor of these Internet interlopers is a continuing shift by businesses and
consumers to software used over the Internet. For decades, most computing tasks were
handled with software that was installed on computers. Microsoft defined that era with its
Windows operating system and its Office suite of applications.
In recent years, though, as high-speed broadband Internet connections have spread to
homes and offices, an increasing number of computer users have begun experimenting
with software applications hosted over the Web. With just a Web browser, they can use
software over the Internet that's free or available by subscription.
Kyle McNabb, an analyst at Forrester Research Inc., says that Google's moves are less
about grabbing market share today than about changing behavior and getting consumers
accustomed to free online software that they now buy from Microsoft. "Google is helping
set the expectations that you don't have to go buy these things," he says. "This is going to
have an impact over five to 10 years."
Microsoft Vice President Antoine Leblond says that Microsoft doesn't have plans to roll
out an online version of Office. Instead, he says, the company is building online services
designed to work with Office, a strategy that would tap the benefits of online programs
without cannibalizing Office. "The future of software is going to be the combination of
client applications [like Office] and [online] services," Mr. Leblond says. "It's not going
to be one or the other -- the black or white approach."
Mr. Schmidt said last week that Google was "not in the business of building Office,"
which he said was well suited for "professional users." But the comments by Mr.
Schmidt, who has long played down any competition with Microsoft, make much clearer
Google's likely core target market: users at home, in educational settings, and at smalland medium-size businesses. It could also include professional users who rely on Google
for personal applications. Mr. Schmidt said Google's calendar application is better than
Microsoft's for family members sharing their schedules, primarily because it is free and
allows such sharing to take place easily online.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 37
Google has rolled out a range of free online services. Some of them carry advertisements,
and it hopes others will entice people to use its ad-supported services more. In contrast,
Microsoft licenses Office to businesses and sells it to consumers for about $400.
Microsoft plays down the potential threat to Office from Google, arguing that online
software can't have the same full features that computer users demand. It can also be
slow, and many businesses are loath to entrust core business functions and data to outside
companies.
Microsoft's Mr. Leblond says that Google will also find it increasingly difficult to add
new features to its programs, in part because the programs rely on browser software for
many of their functions. So for instance, printing is much more limited than printing from
an Office program, he says. "The technology they are using has some inherent limits," he
says. "They are going to hit up against these limits."
But Google says it isn't trying to match all the features of traditional productivity
software. "We believe that 90% of users don't necessarily need 90% of the functions that
are in there," says Jonathan Rochelle, a product manager for Google Docs &
Spreadsheets.
With the Google products, a user can save any documents on Google's servers, accessing
them from anywhere that can connect to the Internet. Other key differences with
Microsoft: Besides being free, Google services make it easier for users to share files and
work on them simultaneously, Google executives say. One important similarity: The
Google services can generally save and open files in Microsoft-compatible formats.
"We're building a different way of dealing with complex, powerful information that is
online all the time, on every device, and fully shared," explained Mr. Schmidt.
Google is now trying to drive a shift toward this sort of consumer usage. The Mountain
View, Calif., company earlier this year bought Writely, a Web-based word-processing
service, and rolled out its own spreadsheet product. In August, it began offering Google
Apps for Your Domain, a package that allows organizations to tap email, calendar,
instant-messaging and Web-page creation services that run on Google's computers.
Google executives had said that word-processing and spreadsheets were "good
candidates" to be added to that offering, which is geared toward organizations and small
businesses.
Google's Gmail email service had 9.7 million U.S. visitors in September, and its Calendar
service had 896,000, according to comScore Networks Inc. The research firm didn't have
usage statistics for Google's word-processing or spreadsheet services.
Rick Sherlund, an analyst at Goldman Sachs, thinks that Microsoft will need to respond
more directly to Google's moves. He predicts -- despite Microsoft's denials -- that the
company will offer a lower-end version of Office over the next year that's aimed at
consumers and small businesses.
"I think that they are leaving the door wide open for Google to deliver a broader solution
on their online platform," Mr. Sherlund says. Microsoft needs "to be serious about trying
to shut that door on Google."
15. Google is beefing up efforts that could win away some of the customers _______ is
targeting with its plan to bundle its existing word-processing and spreadsheet offering
called Google Docs & Spreadsheets.
a. Yahoo
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 37
b. Microsoft Correct
c. Dell
d. IBM
The New Sony Reader
For Books Performs
Like a Good First Draft
By WALTER S. MOSSBERG
October 12, 2006; Page B1
http://online.wsj.com/article/SB116059982533389758.html
The electronic book reader, a hand-held gadget that would store a whole collection of
digital books and other material, has always seemed like a good idea. But nobody has
been able to pull it off. The last serious contenders, launched in 1998, failed due to lousy
battery life, poor screens, high prices and a weak selection of titles.
But this month, Sony is taking a new whack at the problem with a sleek, attractive $350
device called the Sony Reader. The Reader tries to take advantage of two developments
since 1998: cutting-edge technology for improving screens and battery life, and the
example of Apple Computer's iPod and iTunes, which showed how a great gadget with
strong software and abundant titles can create an end-to-end digital content solution that
consumers will embrace.
The Reader can hold about 75 books at one time in its internal memory and can accept
add-on memory cards to expand its capacity. In addition to books, the Reader can also
store and display Microsoft Word documents, text files and Adobe PDF files, so you can
take personal or work documents with you. It even works with music files and photos.
I've been testing a Sony Reader for about a week and have been evaluating not just the
hardware itself, but the whole system. That includes the PC software that downloads and
organizes the material and transfers it to the reader; and Sony's new online electronic
bookstore, where you can buy books for the reader.
My verdict is mixed. The Reader is a handsome device with a stunning black-and-white
screen and terrific battery life. But it has some serious limitations. The software, called
the Connect Reader, is simple and plain, but effective. The online bookstore, called the
Connect eBook store, has only a modest selection compared with a physical bookstore
and is hard to use.
The Reader itself is small, slim and light -- about the length and width of a large
paperback book, just a half-inch thick and about nine ounces in weight. It's cloaked in a
flexible black cover that folds back to reveal the screen and a handful of easy-to-use
buttons.
The key feature of the Reader is its high-contrast, but low-power, six-inch screen, which
is quite different from the screens on laptops. Unlike those power-hungry displays, the
Reader uses a new technology called Electronic Paper from a Massachusetts company
called E Ink. This screen needs no backlighting and consumes no power until you change
what's being displayed by electronically "turning a page."
The contrast between the black text and the light-gray background isn't as good as on a
paper book, but it's easy on the eyes and makes the Reader usable even in bright sunlight.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 37
You can select from three text sizes for books and switch the screen between vertical or
horizontal orientations.
Because it uses so little power, the Reader has strong battery life. Sony says the Reader
can perform 7,500 "page turns" on a single battery charge. Most people could go days,
even weeks, without having to recharge, unless they play a lot of music or view a lot of
photos.
The Reader's screen can't display color and is only fair at graphics because it has just four
levels of gray. So photos appear in gray, and titles that make heavy use of charts and
graphics don't display well. Also, it's too easy to accidentally press buttons and land far
from the page you were reading.
The electronic books cost less than print or audio versions. I bought Bob Woodward's
"State of Denial" from Sony for $13.59. Amazon.com charges $17 for the print and audio
editions. In at least one of the books, George Orwell's "1984," which comes free on every
Reader, I found typos that were inexcusable.
In my tests, Word documents looked OK, if not perfectly faithful to their layouts. But the
Reader's claim to display PDF documents proved hollow. In every PDF document I tried,
the text was nearly unreadable and the text-resizing feature of the Reader didn't help.
Sony concedes that PDF documents work well on the Reader only if they are created for
the Reader's screen size and resolution. But it includes no conversion software to make
them fit.
Another big disappointment: The Reader lacks a bunch of features that would enhance
the reading experience. You can't enter notes, search inside books or documents, or look
up words in a built-in dictionary. And while you can bookmark pages for later retrieval,
you can't highlight passages. Sony says it's working on a future version of the Reader that
can perform these tasks.
The Reader software was fine at organizing and transferring books, and at importing your
own documents, music and photos to your PC, then transferring them to the device. But it
doesn't automatically synchronize material. The online bookstore is poorly organized and
has an awful search function. Its 10,000 titles are only about 10% of what you'd find in a
typical big bookstore.
Overall, I'd call the Sony Reader a good start -- impressive in some ways, but clearly a
work in progress. I enjoyed using it, but would advise all but hard-core ebook fans to wait
for an improved version.
16. The Sony Reader is an improvement over other contenders in electronic books
because
a. it has a long battery life
b. it has a weak selection of titles
c. it has a stunning black and white screen
d. Both a and c Correct
The Coming Crunch
By JUNE KRONHOLZ
October 13, 2006; Page B1
http://online.wsj.com/article/SB116070539099291514.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 22 of 37
The U.S. population will hit 300 million at 7:46 on Tuesday morning, says the Census
Bureau. But it's the 400 million milestone, which the U.S. will reach in about 35 years,
that has demographers and economists really talking.
Those additional 100 million people, many of them immigrants, will replace aging baby
boomers in the work force, fill the Social Security coffers and, in all likelihood, keep the
economy vital and life interesting. But they also will further crowd cities and highways,
put new strains on natural resources, end the majority status of whites, and probably
widen the gulf between society's haves and have-nots.
"It's not that we're going to be running out of this and that," says Princeton University
professor Charles Westoff, who headed a 1972 presidential commission that called for
stabilizing the population. "But how many more people do we want?"
With about 86 people per square mile nationwide now, the U.S. would seem to have
plenty of room for more. Even after the next 100 million people are added, the U.S. still
will have one-sixth the density of Germany, whose population is expected to stop
growing within a few years.
But those averages hide disparities that could prove worrying. Even as it grows, the
population is increasingly concentrating in just a dozen or so states. North Dakota is
losing population, Ohio is adding a mere 20,000 people a year and heartland states like
Kansas and Nebraska average fewer than 14 households per square mile.
The Center for Environment and Population, a nonpartisan research group in New
Canaan, Conn., calculates that more than half the population lives within 50 miles of the
coasts. In the next decade, an additional 25 million people -- half the total population
increase -- will join them there.
That concentration of population is likely to result in megacities of 25 million or more as
people head to them for jobs, demographers predict, raising new worries about the spread
of infectious diseases and of terrorism in such dense areas. At the same time, population
growth is accelerating sprawl and consumption, the byproducts of an increasingly
affluent and older middle class.
The U.S. Census Bureau has been recording the steady march to the 300 million mark
with an online population clock that adds one person every 11 seconds. The bureau
calculates that one person is born every seven seconds, one dies every 13 seconds and
one immigrates every 31 seconds.
Most demographers and economists agree that the economy probably can handle the
growth -- and may even need it. The U.S. population has grown 50% since 1967 when it
hit 200 million. But the size of the economy, as measured by the production of goods and
services, is up 217%.
Baby boomers are reaching age 60 at the rate of 8,000 a day and are leaving the labor
force even faster. That retirement-age population will grow 120% over the next 35 years,
while the working-age population that will be available to replace them is expected to
increase just 20%.
But households are smaller than they used to be -- 2½ people compared with three in
1970 -- while houses are getting bigger as households get richer. That has sent people out
to low-density suburbs and exurbs in search of land, and shopping centers, office parks
and schools have followed.
Americans are driving more to get around those suburbs and to their jobs -- 79% more
miles than they did in 1982, even while miles of roadways were up only 3%. The result:
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 23 of 37
"We live in gridlock," says Roy Beck, executive director of NumbersUSA, a Washington
group that advocates reduced immigration.
17. At 7:46 AM on Tuesday October 17, 2006 the US population will hit _____, says the
Census Bureau.
a. 200 million
b. 300 million Correct
c. 400 million
d. 800 million
Questions 18 – 23 from Money & Investing
Ratan Tata Builds
Indian Behemoth
Into Global Player
By PETER WONACOTT in New Delhi and JASON SINGER in London
October 7, 2006; Page B1
http://online.wsj.com/article/SB116018616173585754.html
As Indian companies increasingly look for purchases overseas, they have an unlikely
pioneer and champion: Ratan Tata.
The 68-year-old chairman of India's Tata Group and scion of one of India's wealthiest
and oldest business dynasties, Mr. Tata was among the first Indian entrepreneurs to see
the potential in making foreign purchases to boost growth. Even his senior managers
admit that when he first issued a "clarion call" in 1999 to push outside India with
acquisitions and exports, "we didn't know what to do, to be honest," says R.
Gopalakrishnan, an executive director at Tata.
Mr. Tata today controls everything from Eight O'Clock Coffee Co. in the U.S. to the
ultraluxe Taj Group of hotels world-wide -- which last year took over management of the
Pierre landmark hotel on Central Park in New York City. Now he may be on the verge of
his biggest deal yet and the largest ever for an Indian company overseas: The company's
Tata Steel unit is expected to bid for Corus Group PLC, a British steelmaker.
The bid, expected to be valued at about $10 billion, could come as early as this coming
week, according to people familiar with the matter. Mr. Tata has been closely overseeing
the Corus project, people close to him say. And if the deal happens, "Tata establishes
itself as a real player in global steel," says Robert Miller, an investment banker at Miller
Mathis in New York who is a steel-industry expert.
Mr. Tata's company already is a player in many other industries, both inside and outside
India. In all, Tata has 96 companies stretching from Tata Consultancy Services, the
world's biggest outsourcing company, to Tetley, one of Britain's best known brands of
tea. Some 32 of the companies are publicly traded; the size of the family's stakes in the
units varies.
Based in Mumbai, the company is India's largest private employer, with 222,000
employees. Last year, it had estimated revenue of $22 billion, equivalent to 2.8% of
India's gross domestic product.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 24 of 37
During his 15 years as chairman, Mr. Tata has quietly, but boldly, revamped and
expanded the group, which last year made foreign acquisitions valued at $1 billion.
He has done so in his trademark unassuming manner. A regular visitor to London, where
Corus is based, Mr. Tata cuts a low profile there, say people who do business with him.
He speaks with a hushed voice and is known more for listening than for giving orders
while commanding an empire that spans from cars to steel.
That style contrasts with another Indian-born billionaire. Steel tycoon Lakshmi Mittal,
who ranks as Britain's richest man, lives in London's most expensive home and is driven
around town in a $600,000 DaimlerChrysler Maybach limousine. Mr. Tata stays in a
hotel and is driven in nondescript sedans. Mr. Mittal recently added to his steel empire
when his family-controlled Mittal Steel Co., based in the Netherlands, bought Arcelor SA
of Luxembourg for about $34 billion.
Something he does share in common with Mr. Mittal: ambition. "Think big," Mr. Tata in
July told graduates of the Indian Institute of Technology in Madras, one of the university
breeding grounds for the nation's elite. "Act boldly -- this will move India differently."
Mr. Tata's ancestors, who are traced back to Iran and are among the tiny number of
adherents to the obscure Zoroastrian faith, have indeed moved modern India. Starting
from the 1860s, the Tatas built the company like proud nationalists building a nation.
They created the biggest steel plant of the British colonial era; opened the first luxury
hotel in what was then called Bombay; and launched Air India, the country's flagship
carrier.
Mr. Tata left India to study architecture at Cornell University in the U.S. But he returned
to the family business, scaling up a company ladder in an era when critics derided Tata as
a sleepy giant. Through the 1960s and '70s, India's socialist-style economy indeed tied
Tata down. The lack of imports created material shortages and reams of bureaucracystymied investment.
But Mr. Tata's ascent coincided with India's momentous economic change. In 1991, the
year a shortage of foreign exchange forced India's financial officials to open the doors to
foreign investors, Mr. Tata assumed the chairmanship of Tata Sons Ltd., the group's
parent.
Mr. Tata set about altering the face of the family enterprise. He shed mediocre divisions
and invested in industries of the future, such as information technology. His company,
Tata Motors Ltd., has ridden India's economic boom by making cars for a burgeoning but
still price-sensitive middle class.
As part of that business, Mr. Tata has made it a personal mission to develop a car that
will sell for 100,000 rupees, or roughly $2,200. "This is not impossible," Mr. Tata said in
July at a business conference in Washington, D.C.
Just what Mr. Tata regards as possible has taken many aback. While Mr. Tata is revered
at home for his humility and espousing of business ethics, even his fans are stunned by
how quickly he has created a stable of industry leaders in India and overseas.
"He has surprised us all," says Gurcharan Das, former chief executive for Procter &
Gamble Co. in India. "His companies have become hugely competitive globally."
While there have been stumbles, such as an ill-fated tie-up with Britain's MG Rover,
which later went bankrupt, Tata companies have figured things out quickly. Starting with
the takeover of Tetley tea in 2000, Tata has acquired 27 other companies.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 25 of 37
Part of the learning curve has involved an unusual approach to many Western
multinationals. Instead of focusing on cost-cutting after acquisitions, Tata companies are
encouraged to learn from the acquired.
When Tata executives came calling this spring at newly acquired Brunner Mond Group, a
United Kingdom soda maker, senior managers at the British company were on edge.
Some wondered whether jobs were about to go following Tata's $120 million acquisition
of the company last December, according to Mr. Gopalakrishnan, the Tata executive
director, who was present at the meeting.
18. Ratan Tata the 68-year-old chairman of the Tata Group was among the first ______
entrepreneurs to see the potential in making foreign purchases to boost growth.
a. South African
b. Hawaiian
c. Mexican
d. Indian Correct
Futures Shock
By JUSTIN LAHART
October 9, 2006; Page C1
http://online.wsj.com/article/SB116035776683786362.html
Think the housing market is a mess, now? Take a look at what home-price futures say is
coming down Main Street.
In May, futures contracts based on home prices began trading on the Chicago Mercantile
Exchange. You buy a contract for, say, $50,000. If prices go up or down by 10%, it's
worth $5,000 more or less. Investors buy or sell such contracts based on where they think
prices are going.
The contracts suggest price drops by next summer for average single-family homes will
range from 5.9% in the Chicago area to 8.5% in San Diego and Miami areas. A contract
based on 10 regions suggests a 7.2% decline.
Because they represent the best guesses of informed people with skin in the game, futures
markets are often pretty good at predicting, well, the future. Washington types have
closely followed the political futures market run by the University of Iowa ever since it
called the 1992 presidential tally more accurately than major polls.
But given that housing-price declines usually take awhile to unfold, even housing
skeptics are surprised by the futures' predictions. "I would have expected slower
[declines] than that," says Yale University professor Robert Shiller, a well-known
housing bear who created the market's underlying home-price indexes with Wellesley
College professor Karl Case.
The market currently has about 1,500 outstanding contracts. Mr. Shiller thinks it's
possible that there are so few traders that investors are unwilling to buy the illiquid
contracts unless they get a substantial discount -- a discount that translates into a
prediction of lower prices.
At the same time, sellers may be hedging rather than betting on where they really think
home prices are going. A Florida homebuilder with a big development in the works might
sell the Miami-area contract as protection.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 26 of 37
Too many such sellers would drive down prices. Futures markets driven by one-sided
hedging lose predictive value, says University of Iowa finance professor Thomas Rietz,
one of the brains behind the political futures on Iowa Electronic Markets. For now, these
futures are as uncertain as the future. If they catch on, however, they could become more
important to watch than the reams of housing data that economists spew out each month.
19. Futures contracts based on home prices suggest _______ by next summer for average
single-family homes.
a. price increases
b. price drops Correct
c. price stabilization
d. price increases of 10 percent
Oil Rush Lures Small Investors
By STEVE LEVINE
October 10, 2006; Page C1
http://online.wsj.com/article/SB116044432009387649.html
DALLAS -- In 1930, thousands of investors earned windfalls when a smooth-talking
wildcat driller named Columbus "Dad" Joiner discovered the enormous East Texas oil
field. Enticed by family lore, Mr. Joiner's great-granddaughter, Cindy Skeeters, recently
invested about $80,000 in wildcat wells.
Today, Mrs. Skeeters and husband Bill own production rights to small shares in some
seven dozen oil and natural-gas wells in Texas, Louisiana and Oklahoma. They bought
their stakes from Oil2 Holdings Inc., run by Charles Couch, 57 years old, and his son
Robert, 33.
Whether the Skeeters will profit is far from certain. Royalty checks have plunged along
with oil and natural-gas prices since summer, and it could take six years just to recover
their investment. Even if they do earn a real return, the amount could be much reduced by
high expenses and by the steep production declines typical in the energy industry.
Millions of Americans, Europeans, Australians and others are trying to get in on the
current version of the 1930s oil boom, this one driven by high prices. Most invest in big
companies like Exxon Mobil Corp. or energy-focused mutual funds. But others buy
stakes in actual wells through much riskier partnerships.
Regulators say fraud in such partnerships is rife. Some firms offer talk of certain
production, but many investors have lost 90% or more of their money. Many partnerships
don't register as brokers, even though regulators say they are selling securities and should
be licensed and required to abide by securities laws. According to a Dallas federal civil
court complaint filed in June, the Securities and Exchange Commission accused Larry
Stiles of Carrollton, Texas, of spending a quarter of $1.1 million collected from 52 oilwell investors on personal expenses. Mr. Stiles's lawyer couldn't be reached.
It's a global problem that's only now coming to the surface because of a lag time between
the sale and when an investor "realizes he's got a problem," says Bill McDonald, a former
California regulator who now testifies as an expert in oil-fraud cases.
The Couches both are former football players, the father in a semi-pro league and the son
in preseason stints with the Atlanta Falcons and St. Louis Rams.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 27 of 37
The senior Mr. Couch started their Dallas-based firm in the early 1990s after three
decades of personally investing in wells. Then called Couch Oil & Gas, it found clients
via sales seminars, telephone solicitations and word of mouth. It wasn't licensed as a
securities broker and, the Couches now acknowledge, essentially skirted the law.
Between 1999 and last year, Pennsylvania and Wisconsin regulators ordered the elder
Mr. Couch and his firm to cease-and-desist selling shares in wells in those states without
a license. In 2001, his son Robert joined the firm with an eye toward licensing the
company.
"It freaked me out," Robert Couch says. "I didn't want to do my career if we were
breaking security laws."
He persuaded his father to spend hundreds of thousands of dollars on lawyer fees to
register with the National Association of Securities Dealers as a broker-dealer. He then
set up Oil2 Holdings to take over sales, leaving his father to find oil prospects.
Robert Couch soon realized that many of the firm's investors were losing money, mainly
because they had invested in a limited number of fields. A bet on only, say, two
exploratory wells can be a big loser if both end up being dry holes. The Couches now
counsel clients to put a little money in a lot of wells -- at least 20 a year -- and warn them
that profit is not guaranteed.
"What differentiates us from everyone else is the effort to be transparent, our integrity,"
says Robert Couch.
Still, the senior Mr. Couch acknowledges that the lure of hitting a big strike hasn't
changed since the 19th century. "They're going to exercise their riverboat gambler gene,"
he says.
Others say such partnerships remain a questionable investment. Glen Jarboe is one such
skeptic. A retired marketing professor at the University of Texas in Arlington, Mr. Jarboe
compiled production statistics on the Couches' wells for their Web site until a few months
ago and invested in their partnerships himself. Mr. Jarboe says the deck is stacked against
people who buy into such deals.
As is typical in the industry, Oil2 Holdings charges a fee of 30% for each dollar invested,
reducing how much is spent on exploration and production. Companies actually drilling
wells for Oil2's partnerships usually take 25% of each well's output -- also standard.
Moreover, production in Texas natural-gas wells falls to about 15% of their original
output on average after four years, says Gary Swindell, a Dallas-based energy expert. Oil
depletion is more difficult to track.
Robert Couch disagrees with Mr. Jarboe. He says tax benefits for oil investments juice
returns. He adds that Mr. Jarboe himself has earned about $16,000 annually on his
$100,000 investment, or about 16% a year for two years.
Mr. Jarboe says oil field production is too erratic to judge returns based on early
performance. "In six years, every well could be dry," he says. Though initially hopeful,
he now doubts he'll earn money in the end.
Mr. and Mrs. Skeeters decided to invest last November. Driving home from a 75th
anniversary celebration of Mrs. Skeeters's great-grandfather's big find in Kilgore, east of
Dallas, Mr. Skeeters said he wanted to start investing their own money in wells. "Don't
lose it," Mrs. Skeeters recalls responding.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 28 of 37
A friend recommended the Couches, who sell mostly natural-gas wells. Following the
firm's advice, the couple so far has paid about $30,000 for 20 exploratory oil and naturalgas wells, plus $50,000 for a package of 63 mostly active wells.
They received their first royalties on the 63 wells in May -- $1,036.38. The four monthly
checks since then have averaged about $660, as natural-gas prices plummeted. At that
rate, it would take almost six years for the couple to earn back their $50,000.
There's no way of knowing how much the Skeeters will make from the 20 exploratory
wells. A look at the decline rates on their 63 wells -- published on Oil2's Web site -shows why it could be hard to turn a profit. Some of the wells have been steady producers
this year, and output from a few rose after upgrading. But production from most has
dropped. One well declined to 103 barrels of oil and 19,940 thousand cubic feet of gas a
day in August, from 203 barrels and 24,765 thousand cubic feet in January.
Mr. Skeeters says he sees the wells as a 20-year investment and isn't put off by the
results. "I don't look at it as sexy, romantic or exotic. I've covered most of the other
bases" with other investments, he says. "These aren't home runs."
20. In 1930, thousands of investors earned windfalls when a smooth-talking wildcat
driller named Columbus "Dad" Joiner discovered the enormous ______ oil field.
a. Oklahoma
b. East Texas Correct
c. West Texas
d. Arabian Basin
Lower Fuel Costs
Lift Airline Hopes,
Trump Terror Fear
By MELANIE TROTTMAN
October 11, 2006; Page C1
http://online.wsj.com/article/SB116053224511888945.html
As airlines have scrambled to slash costs and raise fares over the past few years, rising
fuel prices have masked much of their progress. Now, fuel is acting as a white knight for
the industry -- falling in price just as airlines are coping with slowing revenue growth.
Airline stock prices have been inching up in recent weeks despite carriers' warnings that
business suffered after English police in August busted up a suspected plot to bomb
airplanes over the Atlantic. Even though some travelers are being scared away, investors
have concluded that any decline in fliers is more than overcome by the drop in fuel
prices.
Yesterday, oil futures for November delivery slid $1.44 to $58.52 on the New York
Mercantile Exchange. Oil prices have retreated from highs in the $70s and are now 8%
lower than a year ago and down 4% for the year.
Fuel accounts for 20% to 30% of the operating costs for an airline, so price declines have
an immediate effect on the bottom line. In the case of AMR Corp.'s American Airlines,
the world's biggest airline by passenger miles flown, each $1 drop in the price of a barrel
of oil saves about $80 million in annual operating costs.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 29 of 37
American recently disclosed that fallout from the alleged terrorist plot hurt its revenue by
more than $50 million in August and September. But its stock has been rising anyway. In
4 p.m. composite trading on the New York Stock Exchange, AMR shares were at $25.17,
up 3.5% for the day and 34% from a low of $18.83 in August.
The falling price of oil "is much more positive than the terror warning is negative" for the
industry, said Standard & Poor's airline analyst Jim Corridore. AMR recently lowered its
projected jet-fuel costs for this year to $2.03 a gallon from $2.18, a difference that should
save the airline about $475 million in the second half of the year.
Other airline stocks are also gaining. Consider the American Stock Exchange Airline
Index, which consists of 10 airline stocks. After hitting a low of 44.65 on Aug. 11, the
day after the alleged terror plot was foiled, the index rose to 49.13 on Sept. 13. During
that same time frame, oil fell to just under $64 a barrel from $74.35 a barrel. The index
has made further gains in recent weeks as oil continued declining and has given back
some of those gains when oil rebounded.
Some airlines stand to gain more than others from lower fuel prices. The biggest winners
will be those that consume the most fuel and those that don't have major hedges in place,
because hedges are likely to have already locked in prices higher than the current ones.
UAL Corp.'s United, for example, the second-largest U.S. carrier, had locked in 28% of
its third-quarter fuel needs at a price equivalent to $69.84 per barrel of oil. That seemed
like a good price when oil was soaring above $70, but with recent price drops to $60,
United is losing money on at least some of those hedges. Still, those losses are "dwarfed"
by the benefit of the recently lower fuel costs, said a spokesman for United, who said the
airline cuts $63 million from annual expenses each time a barrel of oil drops $1. In 4 p.m.
Nasdaq Stock Market trading yesterday, UAL shares were at $30.49, up 37% from an
Aug. 11 low of $22.33 a share.
Other carriers likely to lose money on at least some of their hedges include Northwest
Airlines, US Airways, JetBlue Airways, Continental Airlines, American and Delta Air
Lines.
For Southwest Airlines, which has long been one of the most aggressively hedged
airlines, the fuel-price drop is a mixed blessing. Southwest had locked in 73% of its fuel
needs for the second half of this year at an unusually low price equivalent to $36 a barrel
of crude oil. So unlike Delta and United, its hedges still look like winners. On the other
hand, because Southwest is largely hedged, it gets less of a benefit from lower fuel prices
than airlines largely without hedges. Southwest shares were at $16.46 in 4 p.m. Big
Board trading, up slightly from their Aug. 11 low of $16.31. Scott Topping, Southwest's
finance vice president and treasurer, said aggressive hedging has already allowed it to
claim the financial benefits that some of its lesser-hedged competitors are starting to gain
now as fuel prices drop.
For the month of August, several carriers -- including Continental, Southwest, JetBlue,
AirTran and US Airways -- fell short of expectations in a key indicator: the year-overyear growth in the revenue they collect per seat per mile. Continental said last month that
its mainline advanced ticket bookings for the next six weeks were running slightly behind
those of a year earlier.
What remains unclear is the degree to which the recent slowdown is due to the British
terror plot. Economic softness and recently raised fares could also be keeping would-be
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 30 of 37
travelers at home, analysts say, and those factors would likely have a longer-term effect
on airline revenue, profits and share prices.
Analysts expect more clarity when airlines report financial results for the just-ended third
quarter.
The true benefits of lower fuel prices will start to show in the fourth quarter, said US
Airways Chief Financial Officer Derek Kerr. US Airways and many other carriers had
already bought their fuel for the third quarter by the time prices began to drop, he said.
21. Fuel accounts for _______ of the operating costs for an airline.
a. 10 to 20 %
b. 20 to 30 % Correct
c. 30 to 40 %
d. 40 to 50 %
Antitrust Law's Delicate Dance
By NATHAN KOPPEL
October 12, 2006; Page C1
http://online.wsj.com/article/SB116061821643590105.html
When does an alliance that is legal cross the line to become a collusion that is illegal?
It is a standard antitrust law question that is now being asked by lawyers who follow the
private-equity industry, in the wake of news that the Justice Department is pursuing an
inquiry into how private-equity firms conduct their bidding for control of public
companies. Antitrust cases are often tough to make. The Justice Department, for instance,
battled with Microsoft Corp. for years before reaching a settlement with the software
giant in 2002. On Wall Street, these cases can be even tougher, as U.S. officials have
discovered more than once.
Unlike some industries dominated by one or two players, Wall Street is a highly
competitive arena, says Keith Shugarman, an antitrust lawyer with Goodwin Procter LLP.
Private equity represents only one pool of capital competing for company shares. "There
is so much money out there that there is almost unlimited potential competition," says
Steven Newborn, a partner at law firm Weil, Gotshal & Manges LLP. "There are so many
alternative bidders" for attractive investment targets that it is hard to artificially depress
prices, he says.
In the late 1990s, the Justice Department launched an investigation into whether Wall
Street firms conspired to fix their commissions at 7% as part of their "underwriting"
business -- the lucrative process of helping corporations issue new stock. The
investigation followed a 1998 study by University of Florida professors Jay Ritter and
Hsuan-Chi Chen, who found that many midmarket companies issuing stock in the mid1990s paid the exact same fees to banks that underwrote the offerings and that those fees
seemed to move in unison. By 2001, however, the Justice Department closed an
investigation into whether the Wall Street firms had conspired to fix their commission
and no charges were brought. "They were looking for a smoking gun, and they weren't
able to find it," says Mr. Ritter.
In the mid-1990s, the government investigated securities firms, including Merrill Lynch
& Co. and Goldman Sachs Group Inc., for allegedly conspiring to fix trading costs on
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 31 of 37
Nasdaq Stock Market shares. The Justice Department reached a settlement with the
securities firms prohibiting them from colluding in the future, but the firms weren't
forced to pay fines and didn't admit or deny wrongdoing. (There was also private
litigation and damages were paid.)
In the 1950s, U.S. officials alleged that 17 Wall Street firms monopolized the securitiesunderwriting business. The case was thrown out of federal court. Federal antitrust law
typically involves a delicate dance of identifying when free-market arrangements hamper
the market itself. Companies are allowed to band together for business purposes -- moves
they ostensibly make to stay competitive. But issues arise when the agreements are seen
as stifling competition.
The private-equity inquiry, run by the Justice Department's antitrust unit in New York, is
preliminary and like other such matters, may eventually lead in a different direction or
nowhere at all. Private-equity firms generally are pools of capital collected usually from
wealthy investors and institutions, and used to bid for control of companies. People
familiar with the matter say the Justice Department has asked relatively generic questions
of a few private-equity firms about how they bid for control of the companies they
pursue.
Regulators could have questions about whether private-equity firms' practices when they
team up to make bids to take companies private cross the antitrust-law line. Such deals
are known in the industry as "club deals." A legal issue would be whether, absent the
creation of such teams, there would have been more competition that would have pushed
the price of pursued companies higher.
The theory is "a company's shareholders are hurt if they don't have the full panoply of
competition" in corporate auctions, says Mr. Newborn, of Weil Gotshal. The Justice
Department declines to comment.
22. In the late 1990s, the Justice Department launched an investigation into whether Wall
Street firms conspired to fix their commissions at _____ % as part of their "underwriting"
business, the lucrative process of helping corporations issue new stock.
a. 7 Correct
b. 10
c. 15
d. 20
Imagine That
By JUSTIN LAHART
October 13, 2006; Page C1
http://online.wsj.com/article/SB116069916427891389.html
The days when General Electric's quarterly results were big news on Wall Street are a
distant memory.
In the late 1990s GE earnings often set the tone for the entire stock market. Lately, it
hasn't been that kind of bellwether, in part because investors are much more interested in
smaller stocks.
The small stocks had a mediocre run in the 1990s, but investors have flocked to them the
past few years for a variety of reasons: They're riskier and thus expected to earn higher
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 32 of 37
returns; hedge funds think they can find undiscovered value among the pipsqueaks; and
they're easier targets for cash rich takeover funds.
Over the past five years, the Dow Jones Industrial Average -- comprising big companies - has risen 28% while the small-cap Russell 2000 has gained 76%.
An analysis by Merrill Lynch strategist Michael Kantrowitz of the holdings of 399 largecap mutual funds found that money managers had relatively light holdings in eight of the
10 biggest stocks in the S&P 500 index. The biggest stocks might have a 20% combined
weight in the index, but they accounted for a much smaller percentage of the S&P 500
holdings in these funds.
Lately, investors have been carping that the run in small stocks is overdone and that big
stocks are a comparative bargain. The S&P 500 trades at 18 times the past year's
earnings, while the Russell 2000 trades at a much more expensive 35 times earnings.
General Electric, which reports today, trades at nearly 23 times earnings.
Ironically, GE might be a better bellwether for business than it was in the '90s. It's
become more exposed to growth outside the U.S. since then and also has become more
transparent about earnings.
Now, investors might be turning the lights back on for the company. Over the past two
months, shares of GE have outpaced the overall market. What's more, with the Dow
hitting record highs for the first time since 2000 (something the Russell did back in
2004), the idea that you can actually make money owning large-cap stocks is catching on
again.
23. During the past five years, the Dow Jones Industrial Average comprising big
companies has risen 28% while the small-cap Russell 2000 has gained ____.
a. 26%
b. 27%
c. 76% Correct
d. 96%
Questions 24 – 26 from Personal Journal, Section D
More Fliers Forced
To Give Up Seats
October 10, 2006; Page D1
http://online.wsj.com/article/SB116043869972187538.html
Airline flights are getting bumpier -- before they even leave the gate.
The number of people involuntarily bumped off flights bounced up more than 40% to
16,323 in the second quarter, compared with the same period in 2005, according to
government data. It was the highest number in any second quarter since 2000, a
particularly bad year for getting bumped, when business was booming and fares were
high. Also, the number of passengers enticed to voluntarily give up seats on overbooked
flights rose more than 10% in the second quarter over last year.
Under financial pressure from high oil prices, airlines have trimmed flight schedules this
year and jammed more people onto remaining trips. That's led to more-crowded flights -some of them overcrowded.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 33 of 37
Regional airlines Comair, Mesa, SkyWest and Atlantic Southeast overbooked the most in
the second quarter, according to the Department of Transportation. Among big carriers,
Northwest Airlines had the highest rate of people with tickets who were denied boarding,
voluntarily and involuntarily combined. Lowest: JetBlue Airways.
The increase raises several questions about the long-held airline practice of selling more
tickets for a flight than there are seats on the plane. For one: The DOT requires that
airlines compensate passengers for bumping them off flights, but the maximum amount
of $400 was set in 1978 and hasn't changed.
Had the maximum amount been adjusted for inflation, it would be more than $1,200
today. And some argue that since the last tickets sold are usually the most expensive,
airlines have too much incentive to sell $1,000 tickets when no seats are available if the
penalty is only $400 to bump a cheaper-fare passenger.
"I don't like the practice, but if it's going to be there, we have to have stricter penalties,"
says Al Anolik, a San Francisco attorney who specializes in travel law.
The DOT, which sets the cap, says it "has not made any decisions about whether to
pursue revisions to the bumping-compensation rules."
Even the practice of overbooking itself raises questions, since many other businesses
aren't allowed to sell the same product to two different customers, or bait them with one
deal then switch them to something else. Why are airlines different?
The answer dates back nearly 40 years to 1967, when the Civil Aeronautics Board, which
regulated the airline industry at the time, decided to allow airlines to overbook to cover
no-shows. The board figured that extra revenue allowed airlines to offer lower fares, and
that overbooking benefited consumers who otherwise couldn't buy a ticket, only to have
the flight leave with empty seats.
The rules got tested in court 30 years ago when Allegheny Airlines, now US Airways,
bumped consumer crusader Ralph Nader from a flight and Mr. Nader sued. The U.S.
Supreme Court ruled in 1976 that the federal government could allow airline bumping,
but airlines had to offer compensation to volunteers first, essentially setting up an auction
system. That's why you hear gate agents asking for volunteers to give up seats in
exchange for free tickets or travel vouchers.
24. The number of people involuntarily bumped off flights bounced up more than _____
to 16,323 in the second quarter, compared with the same period in 2005, according to
government data.
a. 20%
b. 30%
c. 40% Correct
d. 50%
Bank of America
To Offer Free Trading
By VALERIE BAUERLEIN
October 11, 2006; Page D1
http://online.wsj.com/article/SB116053311961588958.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 34 of 37
Bank of America Corp., escalating a raging price war as banks and brokerage firms battle
for online stock-trading customers, plans to offer as many as 30 free trades a month to
millions of customers with at least $25,000 in deposits.
The move, to be announced today, is effective immediately in New York City, Boston
and other areas in the Northeast where Bank of America -- which is based in Charlotte,
N.C. -- is a relative newcomer but has been pushing hard to challenge Citigroup Inc., J.P.
Morgan Chase & Co. and other financial giants on their home turf. Bank of America
officials are likely to extend free stock trades to the rest of the U.S. by February.
As many as a third of Bank of America's 50 million individual consumer-banking
customers are ultimately expected to qualify for free online trades. By comparison,
Charles Schwab Corp., a leading online brokerage, has about 6.8 million active accounts.
To be eligible, Bank of America customers must have $25,000 or more in any
combination of checking, savings and other deposit-related bank accounts.
By eliminating stock-trading fees previously ranging from $5 to $10, Bank of America is
trying to leverage its 5,700 branches in 29 states -- and its leading market share of 10% of
all U.S. bank deposits -- to vault the bank's brokerage unit from also-ran status. Bank
officials expect the free stock trades to generate growth in mortgages, checking accounts,
certificates of deposit and other lines of business, while helping Bank of America fend
off an increasing invasion by brokerage firms that are trying to win business from
traditional banks.
Consumers will likely see further price cuts on online trades as other banks and brokerage
houses feel the pressure from Bank of America. The $25,000 threshold is substantially
lower than the balances typically required for free stock trades. Schwab, based in San
Francisco, offers $9.95 trades for households with $1 million in assets. Wells Fargo &
Co., also of San Francisco, gives 50 free trades a year to customers with at least $250,000
who link their brokerage account to a specific group of bank products. Last week Zecco
Holdings Inc.'s Zecco.com started offering free trades to build traffic to its Web site,
which aims to become a social-networking hub for traders.
Other companies have tried offering free trades and failed, hurt by rising regulatory costs
and other factors. Yet no bank has made as big a play as Bank of America, with its broad
strategy of using free trades as a perk for a dedicated relationship, echoing frequent-flier
and other reward programs.
Unlike pure brokerages, Bank of America's motive isn't getting a customer's trading
business per se. Instead, the company wants people to centralize their assets in one place,
in keeping with its long-held tenet that customers are most happy and profitable when
doing business with one financial-services company. So far, some consumers have
resisted the financial-supermarket model, but Bank of America says its research shows
that more people are warming to the idea.
Bank of America's move is "an industry changer" and a "fundamental change of business
models," says Liam McGee, president of consumer and small-business banking at the
company. The bank is keeping its 2,000-person army of brokers, who will still charge for
advice and stock trades not made online.
25. Bank of America Corp plans to offer ______ to millions of customers with at least
$25,000 in deposits.
a. free business class airline tickets
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 35 of 37
b. free deluxe checks
c. 30 free stock trades Correct
d. free happy meals at McDonalds
Young Workers With Dyslexia, ADD Find
Office Less Accommodating Than School
By SUE SHELLENBARGER
October 12, 2006; Page D1
http://online.wsj.com/article/SB116061655167690067.html
John Brennan, who has dyslexia and attention deficit disorder, was a hard-working
student in high school, earning B's and C's with the help of special accommodations, such
as extra assistance reading his test questions.
But entering the workplace after graduation was a shock. Mr. Brennan says he enrolled in
a training program to service luxury cars, but he was criticized for "holding the class
back" and dismissed. Then he joined an auto-repair shop that promised him training, but
says the shop sidetracked him instead into a dead-end job. Fed up with trying to work for
other people, Mr. Brennan says he has enrolled in junior college near his Acton, Mass.,
home, with plans to start his own business.
Amid rapid growth in diagnoses of learning disabilities and special-education programs
to address them, more young adults are entering the workplace with known learning
differences and a history of receiving accommodations. But few employers have adapted
training or job expectations for workers with learning disabilities. The lack of special
accommodations has meant a rude awakening for many young workers, fueling on-thejob tensions and a rising tide of discrimination complaints.
While the 1990 Americans With Disabilities Act entitles some workers with disabilities
to job accommodations such as a quieter workspace, it doesn't require employers to offer
the same broad services schools must provide learning-disabled pupils under federal law.
Under the ADA, employers aren't required to make accommodations if it would inflict
"undue hardship" on the business. Employers don't have to eliminate essential job duties
or create new jobs. The law provides no protection if an employee is deemed unqualified,
a definition that varies based on the job.
"The boss-employee relationship is very different from the teacher-student relationship,"
says Dale S. Brown, an author and advocate for people with learning disabilities.
To be sure, many employers aren't aware of employees' learning disabilities or don't
know how to accommodate them. Also, some employees have an undue sense of
entitlement. Attorney Patricia H. Latham of Washington, D.C., tells of a client with ADD
who kept arriving at work late. "They're angry with me, and I don't think they should be,
because that's part of my problem," the woman said and asked Ms. Latham to write her
bosses a letter. Ms. Latham refused, telling the woman, "your employer doesn't have to
put up with your being late to work." Instead, she suggested making a habit of arriving
early, leaving a margin for error.
Such tensions are fueling discrimination complaints. Claims to the Equal Employment
Opportunity Commission and state and local agencies that cite "learning disability" as
one basis for alleged discrimination rose 74% from 1993 to 2003, according to an
analysis of EEOC data by Cornell University's Employment and Disability Institute.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 36 of 37
Also, unemployment among people with learning disabilities remains stubbornly high. A
2006 federal study of 11,000 youth who received special-education services in school
shows only 40% are employed a year or two after high-school graduation, compared with
63% of same-age young adults in the general population.
While no reliable data on learning disabilities in the work force exist, about 4.4%, or 7.5
million, of adults ages 21 through 64 have lasting mental disabilities of some kind that
impair learning, remembering or concentrating, says a Cornell University analysis of
Census data.
In the past, many learning disabilities such as ADD, dyslexia, mild autistic conditions,
memory disorders and other problems went undiagnosed. Workers typically hid their
impairments, avoided jobs that exposed them or suffered from misperceptions that they
were lazy or stupid. But now that more people are recognizing that they have learning
disabilities, says Susanne Bruyere, director of the Employment and Disability Institute at
Cornell University, many are "also more confident" in asking for accommodations.
The fact that learning disabilities often can't be seen tends to make employers less
sympathetic than they might be to someone with an obvious impairment. "We think it's
heroic when a person with one leg climbs a mountain. But when a dyslexic works 70
hours a week to do a 40-hour-a-week job," co-workers think he's inefficient, Ms. Brown
says.
If a learning disability starts to interfere with your job, Ms. Latham recommends acting
promptly. "Don't allow a period of poor performance," she says and advises explaining
your disability with confidence, providing documentation and requesting the
accommodations you need. Most accommodations, such as providing written
instructions, cost employers little or nothing.
The best solution is to find a job where a learning disability doesn't hurt your
performance -- or even enhances it. Jaime Gomez, a Texas customer-service worker, says
he hasn't told his current supervisors about his ADD, because "you don't know what kind
of reaction you'll get." But his position is such a good fit that it doesn't matter. After
several job changes, he found a post that requires only a few hours a day of desk work,
with the rest spent traveling to see an ever-changing list of regional customers. He loves
the work, he says.
26. Under the ADA, employers aren't required to make accommodations if it would
inflict ______ on the business.
a. extra cost
b. undue hardship Correct
c. undue requirements
d. lower costs
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 37 of 37