publishes selected emails received by the publication and its staff members. To send an email intended for publication in this section, write to and include your full name and city. Letters may be edited for length, style, clarity and accuracy.

Spherix's 12-Point Jab at Toothy Story


Spherix's Toothy Smile

To the editor:

This letter is in response to your article titled

Spherix's Toothy Smile

in which Matthew Goldstein offered his peculiar take on what was behind last week's rise in the company's stock price.

What the movement of the stock price showed is that the market has a genuine interest in Naturlose as a potential diabetes treatment. What scientific research has shown, and what the FDA has accepted, is that there is enough solid evidence to warrant a Phase 3 clinical trial. What Spherix has shown, and will continue to show, is that it has the will and resourcefulness to pursue that potential. We have the funds, the protocol and the plans to see a Phase 3 trial through to its conclusion, and we are committed to doing so.

As for

and Mr. Goldstein, we ask only for a fair shake and greater accuracy. The story focused on what it deemed to be "cavities" without balancing that view with any insight into the upside for Spherix and its investors should the Phase 3 trial return positive results for Naturlose as a diabetes treatment. There are numerous factual errors in the article (please see the list below) that raise concerns about the reliability of

as a source of information for investors.

The article is also weakened by a patchwork of snide comments, trite segues and innuendo that deprives readers of an objective assessment of Spherix in general and Naturlose in particular. The investing public deserves better.

The following is a list of errors and mischaracterizations in the article, starting at the top:


You write that Spherix "bills itself as a science concern, but just about all of its $22 million in annual revenue comes from a tourist-reservation business." In fact, we do not "bill ourselves" as something we're not. In our published annual report, our


reports, our press releases, our Web site, and various public statements, we have been clear and honest about what this company is and does.


You write: "So far, Spherix has found few takers for its sugar substitute, which it has been trying to market for the past nine years under the brand name Naturlose." In fact, Spherix trademarked the name Naturlose in 2002. Prior to that, we were not marketing any product under that name.


You write: "Arla Foods, a Dutch company with the exclusive license to manufacture and sell Naturlose. ... " In fact, Arla is a Danish cooperative whose license is not for Naturlose. Please check the widely available sources.


You write: "Spherix also has made little from its attempt to market the milk byproduct as a sweetener for use in toothpaste, mouthwash and over-the-counter drugs." In fact, we have only made prototypes of these products, and have not "attempted to market" any of them.


You write: "There seems to be little demand for Naturlose as a food additive." In fact, Naturlose is not meant to be a food additive. You confuse Naturlose and Gaio-tagatose. Please check the widely available sources.


You write that Spherix "remains a long way from getting FDA approval for the use of Naturlose as a drug." The fact that Naturlose is already recognized as safe by the FDA can greatly shorten the route to approval. Most new drug applicants spend many years proving safety.


You write: "Indeed, the initial clinical trials using Naturlose as a diabetes treatment were 'small' studies.'" True, but this is not unusual for Phase 1 and Phase 2 studies. The important point is that the FDA has accepted them, which is favorable news that readers of


should know.


You write that Gil Levin "turned over day-to-day control of the company earlier this year to his nephew Richard." In fact, Richard Levin was elected to the post of president and CEO by Spherix's Board of Directors.


You write that NASA officials "reject" the claim that Gil Levin's labeled release experiment found signs of life on Mars during the Viking mission, saying there was a problem with the results. In fact, NASA found no problem with the experiment, and has consistently praised it. The interpretation of the data has been debated. In recent years, scientists in and out of NASA have become more favorably inclined toward Levin's conclusion; some accept it and many others call for a review of the data. The main problem with the statement is that it has no conceivable place in an article about Spherix's stock movement last week.


You write, quoting our own publication, that clinical trials at the University of Maryland School of Dentistry didn't find any benefit from Naturlose in fighting plaque. In fact, the researchers made certain corrective suggestions that we will follow in our next set of anti-plaque trials. This was reported publicly.


You write that Spherix "says it's facing the imminent loss of its contract to provide tourist reservation services for the National Park Service. Earlier this year, the Park Service awarded the contract to a competitor. Spherix is protesting the decision." In fact, Spherix has already protested and won -- twice. We and our competitors are waiting for the Forest Service (not the Park Service) to decide what to do with its solicitation.


Finally, you state that "the flood of new stock is bad for current stockholders," and you support that with our own quote that "common stock price may decrease due to the additional shares in the market." Our quote is a typical risk statement in all SEC filings. More importantly, there has been no "flood" of new stock through the SEDA. Comparing our current stock price to the price when we signed the SEDA shows it did not cause any harm to our current stockholders.


Jeff Lowe, Vice President, Corporate Communications Spherix Incorporated (Received Dec. 15, 2005)

Positives on the Flip Side of the Reverse Mortgage Story


Rethinking Reverse Mortgages

To the editor:

Regarding your rather myopic and quite negative article, I must point out the myriad positives a reverse mortgage offers to senior homeowners. First, let me make clear the fact that I am a reverse mortgage specialist, with more than five years of extensive experience in this arena exclusively.

1) Reverse mortgages are intended as a potential


for senior homeowners, who -- in 87% of the cases -- wish to remain in their homes for life.

2) A reverse mortgage was never intended to be, and should never be, used for risky investment ideas, or the purchase of second homes.

3) Any loan officer who suggests a reverse mortgage for any purpose other than the above-referenced one, should be banned from discussing, suggesting, or in any shape, manner or form engaging in a reverse-mortgage transaction with seniors.

4) In marked difference to Wall Street promoters -- who tend to play fast and loose with a client's funds, often irrespective of that client's age and/or financial position -- reverse mortgage specialists are formally restricted by a whole host of FHA/HUD regulations and HUD-required disclosure documents. Hence, the governance problem so glaringly evident with numerous financial institutions is


a problem in the reverse-mortgage industry. To the contrary, both the U.S. government (FHA/HUD) and the National Reverse Mortgage Lenders Association, or NRMLA, have more than ensured the protection of the reverse-mortgage borrower.

5) The integrity of the reverse-mortgage program is above reproach. Can you make this claim for Wall Street?

6) The counseling requirement for any borrower to obtain a reverse mortgage again ensures the integrity of the intended transaction. Without a formal counseling certificate in the borrower's hand, no portion of the loan processing may go forward. Again, the protection of the senior borrower is paramount.

7) Since you write from a more than "jaded" Wall Street perspective, perhaps you should spend some time with seniors out here in the hinterlands. With every essential cost rising -- i.e., medical, pharmaceuticals, oil, gas, food, electricity, you name it -- set against the paltry 1% recent increase in Social Security benefits (after the Medicare give-back), how would you suppose most seniors keep up? Any suggestions? I don't think so!

8) Devoting the majority of my time to helping seniors in the minority communities, I can emphatically tell you that a reverse mortgage many times will bail out a senior who has been victimized by predatory lenders. At the very least, the FHA mortgage rates are "real" and not skewed by some minority community lender that preys upon these very communities, as you can well imagine.

9) As for your comment on "high fees," both the origination fee and the government insurance fee (2% in each case) were set by the FHA/HUD agencies. In light of the very substantial fact that the borrower is receiving funds for which he or she does not have to meet any income qualifications, the lender has no idea what that borrower's property may be worth years down the road, the loan is fully non-recourse and the borrower can never owe more than the value of the home, just what sort of percentage might you suggest would be realistic vis-a-vis all these unknown quantities?

10) The Financial Freedom Cash Account, to which you alluded, is a marvelous proprietary product offered as a way of obtaining a higher credit line than would be the case with a Home Equity Conversion Mortgage, or HECM. Would you not agree that this higher credit line, again vis-a-vis the unknown variables cited just above, may well warrant a higher fee than the standard HECM loan? Simply put, it is a "risk-to-reward" metric -- more than fair to the borrower and economically sensible to the lender.

I hope you spent time carefully considering my response to your article. I can tell you from a number of very many personal experiences over the years, the reverse mortgage is often looked at as a God-send to senior borrowers. And, those of us who exclusively deal with reverse mortgages regard this vehicleas a religion, and not an investment tool.

Thank you,

Gary Gruen, reverse mortgage specialist, New York, NY (Received July 18, 2005)

Cracking Down on Corporate/Auditor Skullduggery


The Big Four: Can't Touch This?

To the editor:

As a former auditor with a national firm, I find all of this discussionabout "bad" accounting firms amusing, when much -- admittedly not all -- of the


problem is corporate ethics. The audit firm is often just the messenger.

My experience in the business taught me that, if there was skullduggery going on, when the auditor's probe became too painful for management (or the board), the audit firm got fired and replaced with a firm that wouldn't look so closely. In the industry, that's called "opinion shopping." So much for the idea that more competition would solve the problem. If you force overcapacity, someone will always be willing to compromise for a fee in order to survive.

Granted, accounting firms aren't total angels. Certainly there have been audit partners who ignored problem issues to protect their relationship with the client (and the associated revenue) -- and they should be dealt with. Greed will always be a part of the human experience. But even in the case of honest auditors, skimping on audit procedures or overlooking material issues by audit firms can inevitably be traced to money. The audit firm is a business -- it must make a profit. And lengthy investigations of questionable issues are costly -- usually a cost that must be born by the firm.

In my opinion, the problem lies within the basics of the relationship -- money and independence constitutes a contradiction in terms. I believe the audit function for publicly owned companies should operate similarly to the way commercial banks (

not savings institutions

) do to insure themselves.

Public firms should be assessed an audit fee by an independent entity based upon the size and complexity of their business, and the audit firm should be appointed by the assessing body --


by the board or the shareholders. Oversight of the work done and payment might then be more impartial. And the audit firm should be rotated every three years -- no exceptions. Only then does the focus of the engagement have a chance of becoming the quality of the work rather than the profit made on both sides of the equation.

Unfortunately, the sad plight of investors, besides the normal issues of business, has more and more to do with a general decline in moral character and a system that gives too much opportunity for greed.


Mike Scott, San Antonio, Texas (Received July 12, 2005)

A Much Different Story


Zimmer, Peers Brace for Pricing Storm

To the editor:

Once again Melissa Davis has scoured the globe to come up with a collection of sources who have offered comments that lead to the conclusion that the orthopaedic industry is not the value-added, societally useful business that it is.

Rather than go into a litany of corrections and clarifications (as we did, to little apparent avail, in reference to her

May 12 column on orthopaedics), we will only marvel at how she manages to complete an entire column on orthopaedic innovation without quoting orthopaedic surgeons, the people who actually use the products and can evaluate their impact on patient quality of life.

Instead she relies on a series of opinions from financial analysts and isolated data points to lead to her conclusion that not much useful has come from the orthopaedic industry in recent history.

We think the record with actual surgeons and patients tells a much different story, and that story doesn't come across in her columns. For instance, we have hundreds of patients going home the same day and back to a normal life quickly after a total hip or knee replacement. That didn't exist a few years ago and wouldn't without Zimmer and the surgeons who use our techniques. We can choose to differ on our opinions, but let's do so based upon a balanced disclosure of facts.


Ray Elliott, chairman, president and CEO, Zimmer Holdings Inc.(Received July 13)

Infinity 'Formation Water' Is Misinformation


Drilling for Unconventional Gains

To the editor:

The following excerpt from your article is erroneous and misleading:

"Still, no drilling (or investment) is foolproof. Infinity (IFNY:Nasdaq), for example, drilled four wells in the Barnett Shale area in Texas that had massive amounts of formation water that made them 'uneconomic.'"

We never said that we had "massive amounts of formation water," and the formation water we have encountered, while not desirable, was no shock or major disappointment. In fact, the latter two wells -- which are more important, since they were completed in 2005 and not 2004 as the first two wells were -- contain very modest amounts of formation water and are considered successfully above expectations by Infinity. In other words, we scaled the learning curve from the first two wells to the last two wells.

The water in the first two wells, some of which is frac fluids, which Infinity injected into the formation to frac it, will be removed, as disclosed, once the water-disposal well is drilled and final pumps are put on the wells. At that stage, we expect production to increase and the wells to increase to possible economic status.

Overall, we already consider the pilot a success -- in line with or better than others in the vicinity (compare it to the "successful" pilots of

Quicksilver Resources

discussed in February 2005 and

EOG Resources

discussed in April 2005). Actually, the positive preliminary results of the final two wells compelled us to put out the update in the first place, not the issues with the first two wells.


Jim Dean, VP, Strategic and Corporate Development, Infinity, Inc. (Received June 28, 2005)

Buffett's Track Record Speaks For Itself


How Buffett Tripped Over The Dollar

To the editor:

Why is it that Wall Street -- and much of the mainstream media -- maintains such a short time horizon for success or failure? Jon Markman's recent article portrays Warren Buffett as a "sourpuss" who has denigrated the U.S. dollar because of recent comments and a substantial foreign currency investment within

Berkshire Hathaway


Mr. Markman states that Warren Buffett made his investment based on "unsustainable twin deficits," yet Mr. Buffett clearly indicates in his 2004 Annual Letter that his thesis is based on far more:

A further source of confusion is that the current account deficit (the sum of three items, the most important by far being the trade deficit) and our national budget deficit are often lumped as "twins." They are anything but. They have different causes and different consequences.

Mr. Markman mentions that Berkshire's earnings in the first quarter of 2005 were hurt by the foreign currency bet. This is true. Berkshire lost $307 million pretax in the first quarter of 2005, from a strengthening U.S. dollar. What he fails to mention is that Berkshire made $825 million and $1.839 billion pretax in 2003 and 2004, respectively, from that same foreign currency investment.

I find it very difficult to understand how a strengthening U.S. dollar in the first six months of 2005 proves anything over the long term. Yet, Mr. Markman goes on the record and scolds one of the brightest and most ethical investment minds of the last century. Perhaps in the end, Mr. Markman will be vindicated and Mr. Buffett's judgment will be proven incorrect. For those eager to chastise Mr. Buffett, I would just remind them that they've been on the losing end of that stick for the last 40 years.


Sanjeev Parsad, Burnaby, B.C. (Received June 17, 2005)

Antigenics Responds to Column


Antigenics' Pipeline Looks Like a No-Go

To the editor:

After reading your June 13 article,

Antigenics' Pipeline Looks Like a No-Go, I thought it would be appropriate to introduce myself and address the opinions outlined in your article.

Let me say from the outset that I am very disappointed


(AGEN:Nasdaq) was not contacted for comment. Going forward, I hope the company will have an opportunity to address questions posed by


There are several points in the story that I feel compelled to address:

"The best chances for acceptance are in Europe, where Oncophage faces competition in a fragmented market."

Renal cell carcinoma (RCC) affects approximately 60,000 patients in the U.S. and Europe. The American Cancer Society estimates that there will be approximately 36,000 new cases of kidney cancer in the U.S. in 2005, and about 12,660 people will die from the disease this year. As you may know, RCC accounts for about 85% of all kidney-related tumors.

Physicians and patients in the U.S. and Europe face limited options. The current standard of care for patients with non-metastatic RCC consists of a nephrectomy, meaning the surgical removal of the kidney, followed by observation. Once the kidney is removed, if the disease returns, there are no treatment options left for the patient.

Your assumption about the market being fragmented is incorrect. In fact, the patient pathways are well defined; we have identified the key centers across the globe; the value of the U.S. market alone is approximately $500 million; and there is a high unmet medical need in the adjuvant setting.

Unfortunately, you do not provide any reasons behind why Europe offers Antigenics a better chance for approval. To obtain regulatory approval in the U.S. or Europe, our Phase 3 RCC trial must be carefully controlled, well designed and demonstrate that Oncophage is safe and effective. Our current trial is designed to show that patients being treated with Oncophage have a statistically significant benefit in recurrence-free survival over patients in the observation arm. We expect to announce top-line results from this trial by year-end.

"I do not see a viable future business for Antigenics with its current late-stage product pipeline."

As you know, Oncophage is in Phase 3 clinical trials in both RCC and melanoma. Oncophage has been granted FDA fast track and orphan drug designations in both indications. The RCC trial, taking place at 132 centers worldwide and involving more than 800 patients, is the most extensive study of adjuvant therapy in patients with RCC to date, as well as the largest clinical trial of any patient-specific treatment tested.

In Phase 2, AG-858 (referenced in the article as HSC-858) is a personalized therapeutic cancer vaccine for the treatment of chronic myelogenous leukemia (CML). The current standard of care for CML is treatment with Gleevec, a product with sales in excess of $1 billion.

In addition to our ongoing clinical trials, this year we will be filing a new IND for AG-707 (genital herpes) and a new protocol to initiate a Phase 1 study of Aroplatin (advanced solid malignancies). The incidence rate for genital herpes in the U.S. is 45 million with approximately 400,000 new cases per year. With limited treatment options -- four marketed products that treat symptoms only -- the market is valued at $2 billion in US sales.

Aroplatin is a third-generation platinum chemotherapeutic structurally similar to oxaliplatin, a


product that is projected to sell in excess of $1 billion this year. In our laboratory studies comparing Aroplatin to oxaliplatin, we showed that Aroplatin suppressed tumor growth, caused a reduction in tumor size, and provided a 50% increase in survival as compared to control animals. This data represents a five-fold improvement to results seen from the oxaliplatin arm of the study.

Oncophage has also been studied in other cancers, including colorectal cancer, non-Hodgkin's lymphoma, pancreatic cancer and gastric cancer. Data from these trials have been published in peer-review journals and presented at oncology conferences around the world.

I believe the article fails to consider the true value behind our pipeline. The applicability of our core technology is transferable across many disease settings including oncology, infectious diseases and autoimmune disorders such as multiple sclerosis and Type 1 diabetes. Adding to our blockbuster potential with Oncophage, we believe that Aroplatin has advantages for the treatment of certain cancers when compared with current platinum-based chemotherapeutics.

"While this sounds like a great idea, it may not be, for several reasons -- not the least of which is that product processing logistics are challenging, margins lower and distribution channels nonstandard. As a result, securing a commercialization alliance with a major pharma company, a move that is usually accomplished by phase II clinical trials for other therapeutics, is difficult."

In this paragraph, I feel you have potentially misled readers on how Oncophage will be manufactured and distributed. There are a finite number of medical centers in the U.S. and Europe that perform nephrectomies. After the physician removes the kidney, the tumor material is frozen and sent to our facility in Lexington, Mass. for processing, using a well-established delivery service.

The assertion on lower margins is incorrect. We have published our costs, which are similar to or below the costs of most biologics.

In conclusion, I understand the comments made in your article are opinions. But as a result of not contacting Antigenics for comment, your story is regrettably flawed on several key points.


Sunny Uberoi, vice president of corporate communications, Antigenics, New York. (Received June 17, 2005)

Individualized Research Needed Before Kudos


Genentech on a Roll

To the editor:

In regard to Robert Steyer's April 11, 2005 article,

"Genentech on a Roll," one of the main problems in providing effective chemotherapy is the fact that every patient is unique. Tumors grow and spread in different ways and their response to treatment depends on these unique characteristics. The amount of chemotherapy that each patient can tolerate varies considerably from patient to patient. Therapeutic protocols currently in use are limited in their effectiveness, because they are based on the results of clinical trials conducted on a general patient population -- yet no two patients are alike.

The cancer "investigator" culture prizes itself on the exhaustive examination of trivial hypotheses, while eschewing support of cancer "discoverer"-type research, attempting to create entirely new paradigms of cancer treatment. A dysfunctional cancer culture: a group-think that pushes tens of thousands of physicians and scientists toward the goal of finding the tiniest improvements in treatment rather than genuine breakthroughs that reward academic achievement and publication over all else.

Cancer "investigators" rely on models that are consistently lousy at predicting success, to the point where hundreds of cancer drugs are thrust into the pipeline. Many of them are approved by the FDA, even though their proven "activity" has little to do with curing cancer.

The article states that "Avastin patients had a median survival rate of 12.5 months compared with 10.2 months for chemotherapy-only patients. The difference is statistically significant." The Jan. 10, 2002 issue of the

New England Journal of Medicine

stated that "20 years of clinical trials using chemotherapy on advanced lung cancer have yielded survival improvement of only two months." What is so statistically significant?

Clearly, more effective therapies are desperately needed, and after 30 years of investigation aimed at intensified multi-agent chemotherapy, we should look for other avenues of study. In an era of ever-increasing numbers of partially effective cancer therapeutics, there is an obvious need for technologies to better match treatment to each patient. It requires individualized treatment based on testing the individual properties of each patient's cancer.

There are 60-80 different therapeutic drug regimens out there. Any one or combination of them can help cancer patients. The system is overloaded with drugs and under loaded with wisdom and expertise for using them. What is needed is to make extensive use of chemo-sensitivity testing in treatment decisions.


Gregory D. Pawelski, Wernersville, Pa. (Received April 15, 2005)

Toll Brothers CEO Answers Doug Kass


Toll Insider Actions Don't Match Words

Dear Doug,

I read with interest your recent column on


entitled "Toll Insider Actions Don't Match Their Words." First, thank you for pointing out that we, at Toll Brothers, have been giving of our time and information.

I do not believe, however, that your characterization of the public homebuilding companies as "homewreckers" is appropriate. I can assure you that the reason for our press release on March 8, 2005, headed "Toll Brothers Reiterates Continued Strong Demand for Luxury Homes" was to allow us to speak freely, without concern about being out of compliance with Regulation FD, at an investor conference the next day: a presentation March 9, 2005, which was Webcast over the Internet, at a Smith Barney Citigroup Conference in New York City. At these conferences we historically have discussed current demand trends, whether in our presentation or in response to questions from the audience, and wanted to be able to do so in this venue while remaining in compliance with Reg FD. Many homebuilding and other companies, including Toll Brothers, issue such releases prior to discussing these matters at major investor conference presentations.

My stock sales and those through my children's GRATs

grantor retained annuity trusts, during two days in late February, were not due to any concern over the expectation and guidance regarding Toll Brothers' continued growth that we have given to the public, but, rather, were a continuation of the diversification of my assets, which continue to be heavily concentrated in Toll Brothers' stock.

As of March 14, 2005, between my shares and my children's GRATs, our holdings included over 10 million shares of Toll Brothers stock. I have options for over 5 million additional shares as well, so our personal financial conditions are very much tied to the performance of Toll Brothers Inc. I share your bewilderment at the predictability of the price of homebuilding stocks -- all of my previous share sales, in diversification of my family's assets, were at prices well below the current stock price of Toll Brothers.

Regarding my comments on


in response to Joe Kernen's question about the fact that 19% of the company's float was short, I responded that, "The shorts are going to be crushed..." These off-the-cuff comments were based on having observed the significant short position in Toll Brothers over the past several years. Two years ago, on March 14, 2003, when our stock price was approximately $18.98, the short position was (according to


) 10.9% of our float. One year ago, on March 15, 2004, when our stock price was approximately $46.32, the short position was 11.8%, and increased to 18.3% on Jan. 14, 2005, when our stock price was approximately $74.38. The short interest then came down to 14.8%, but was still quite high, when our stock price was approximately $82.70 on Feb. 15, 2005.

In fiscal year 2004, Toll Brothers' net income increased over 50%, and we have given guidance to the public that we believe fiscal year 2005 net income will increase approximately 60%. (I read in


that you predict our earnings per share will drop 9% to $4.55 per share in fiscal year 2005 from fiscal year 2004.) Further, based on our current backlog (which already contains some hopes for fiscal year 2006 delivery) and the pace of current demand, we believe net income will grow approximately 20% in fiscal year 2006.

When you consider that our company has grown revenue and net income at a compound average annual rate of at least 20% over the past one, three, five, seven and 10 years and since going public 18 years ago, and that we have given strong growth guidance for fiscal year 2005 and 2006 based on lots under our control and the backlog we have in place, the size of the short position seemed to be illogical to me.

I offer this background information so you understand the context in which I responded to Joe Kernen's question about the high short position in our stock. Since I believe that Toll Brothers is well positioned to capitalize on the demographic trends in the luxury new-home market and since we own or control approximately 63,000 lots in attractive locations -- a five- to six-year supply based on our historic pace of growth -- I believe the company can continue to grow earnings in the future.


Robert Toll, Chairman and CEO, Toll Brothers, Horsham, Pa. (Received March 21, 2005)

Markman's Critique of the S&P 500 Index Lacks Due Diligence


With S&P, You Get What You Pay For

To the editor:

I want to express

Standard & Poor's

concerns with Jon Markman's article,

"With S&P, You Get What You Pay For."

Once again, Mr. Markman has misconstrued the purpose of the

S&P 500

Index and the market it is designed to represent.

First, for the record, Standard & Poor's twice returned Mr. Markman's call, but did not receive a follow-up from him.

The objective of Standard & Poor's March 8 press release was to point out that 75% of the non-technology issues within the S&P 500 have recovered from March 2000 lows. Implicit in this recognition is the fact that in February of 2000, technology stocks represented 35% of the S&P 500, which is -- and which is meant to be -- a reflection of the broad market. Ironically, and contrary to Mr. Markman's insinuations, throughout the period in question, S&P was criticized for not including more technology stocks in the S&P 500.

Chief among the criteria for inclusion in the index is market representation. S&P monitors the equity markets daily to determine the actual market representation of each sector and industry. It then represents these groups within the index. Technology's market representation grew in the late 1990s, and with it, their representation in the index. As the technology market fell, so did its representation within the index. This is the purpose of the index. It is not set up to do better or worse than the market, but to emulate it. The selected issues represent the market for good and bad. This is why more than $1 trillion dollars are linked to the index, because it so closely emulates the market.

We would hope that in the future Mr. Markman considers all the relevant facts and information about his subject before going to print with misleading information, and that his articles be given the same level of scrutiny he feels compelled to give Standard & Poor's.


David R. Guarino, Manager of Communications, Standard & Poor's, New York, NY (Received March 14, 2005)

Kudos to Boeing in Its Search for Excellence


Boeing, Boeing, Gone

To the editor:

Regarding your recent article on the removal of


CEO becauseof the company's jumpiness about any new perceptions of scandal, I was disturbed by the hint of a very poor underlying attitude. You wrote, Boeing's "sensitivity to anything that even looks ethically questionable could make the CEO search difficult." Why should any company be bound by that?

Have we regressed so far that there is not a large number of potential CEOs out there whose personal integrity is unquestionable and beyond reproach? You can reach pretty far, but in the end, there is absolutely no good reason that any company cannot find someone to be the top executive who is not well-balanced between being a hard driver for making an efficient, profitable enterprise andexhibiting rock-solid personal ethics. Should a company seek any less-competent, less-responsible leadership, then someone doing the choosing is atfault!


Norman Baton, Mt. Shasta, Calif. (Received March 9, 2005)

Corporate America Rewards Failure


The Five Dumbest Things on Wall Street This Week

To the editor:

Regarding you comments on Carly Fiorina's severance pay, the inability to write good employment contracts is, I fear, endemic in corporate America.

Corporate America is very good at writing employment contracts that reward success (some would say excessively), but fails miserably to penalize failure. The result, which I think many executives would acknowledge, is well-known: simply, if a person gets a corporate job at the executive level in most corporations, there will be great rewards regardless of the success or failure of the individual in their job performance.


Frederick D. Clements, Washington, D.C. (Received Feb. 18, 2005)

Handicapping Where Carly Fiorina Went Wrong


Lessons of Carly Fiorina's Fall

To the editor:

I think the causes of Carly Fiorina's downfallare a bit more complicated than many are suggesting. I know Carly and someof her senior execs, and have some familiarity with how


works, althoughI have never been an H-P employee.

1. To say that the stock has fallen by half since she took over fails tonote that most tech companies' stocks have fallen by at least that from 1999to today. Regardless of the underlying financial performance of H-P.

2. The


merger -- not a terrible idea -- greatly complicated the execution challenges that H-P faced, at a time when their execution of thebasic task of building quality PCs and servers was far less efficient than


. The volume (in PCs and servers) that Compaq provided certainlyhelped with creating leverage on suppliers, but the integration processprobably added as least as much intermediate-term costs as H-P anticipatedin the business case.

They did extract a lot of cost synergies, but did not continue nearlyfar enough in creating a hyper-efficient operation to take advantage of thevolumes that the merger provided. I think the Compaq leaders -- who may havebeen able to provide the leadership -- left the company, and H-P did not have a greatreputation for having a large number of "operationally excellent"leaders and the necessary relentless process in place.

3. Regarding the portfolio, there were some individually excellent products, but also a lot of unremarkable products that could have been jettisoned sooner. However, such aggressive pruning of products goes against the more methodical"H-P way."

4. I think that one of the reasons, although not articulated publicly, for theCompaq merger was to add the more-developed computer services business ofCompaq to H-P's. I believe that Carly wanted to escape the full impact of directcompetition with Dell by building a version of


Global Services. Doingso would allow H-P another "channel" to corporate customers, new additionalrevenue sources and some air cover for price/cost deficiencies in the basicproduct categories.

The problem is that, while H-P services business isgrowing, it hasn't grown nearly fast enough. There were a number ofopportunities to create additional managed-services "businesses" inconjunction with other companies that either have taken too long to becomematerial or were never begun. I think their strategy was clear at a high level, but not as aggressively pursued as it had to be, for services to becomemore a part of H-P solution, financially speaking.

5. So to me, Carly is counting her severance for three key reasons:

A) She needed an "Attila the Hun"-type leader to drive efficiencies throughthe PC /server and volume product-manufacturing business (much quicker decisions, much fasterimplementations), and she didn't have it, nor did she or apparently the board see theneed for such a leader. (Who, by the way, in order to be effective would havehad to trample all over the "H-P way.")

B) She needed a broader and more differentiated plan for the servicesbusiness. Services leadership is hard enough by itself, but in a product companywhere innovation is as valued as in H-P, services innovation is probably far less a part of H-P's DNA than it needs to be.

C) Carly chose to put herself out front, for ego and personality reasons.She might have, and probably should have, visibly andrealistically shared responsibility with a strong team to pull off what H-Pplus Compaq needed -- to compete effectively enough with Dell, etc. on aproduct basis, and to take their fair share of the services opportunity, asIBM Global Services has done.


L. Scott Perry, Managing Partner, Cobblers Hill Group, Weston, CT (Received Feb. 18, 2005)

In Defense of Capital One


Capital One, Little Credit

To the editor:

I thought this story was truly bunk. It was also littered with very cheap journalistic tricks that are included to suggest something significant but are really meaningless. The most egregious of that ilk is your comment that the stock fell $1.22 to $77, etc.: "Capital One did not respond to a call requesting comment." Big deal! Why should they comment? Why is their comment, or lack thereof, significant when the only thing you wanted comment on was a change in the stock price. The stock is now back up to $78.50, or MORE than $1.22 above where it was at $77. Should they have commented on that? Maybe said something like, "We are now commenting on the fact that the previous drop of $1.22 was no more significant than the ensuing rise of approximately $1.50."

Basically, this article says, "I've been wrong about this stock for the past two years, but I'm still unconvinced." That's OK to say, but it's not much of an apology for such a giant error in stock-picking (130%!!). And, please, save us from those things they warned against in Journalism 101. And when, as I suspect, you are wrong about CapOne for the next two years, please make as public

an acknowledgement of that as you have of your suspicions about the company.

Mike Schewel, Secretary of Commerce and Trade, Commonwealth of Virginia (Received Feb. 15, 2005)

Remembering the Great Institution AT&T Once Was


The Five Dumbest Thingson Wall Street This Week

To the editor:

Mr. Mannes,

I would respectfully like to comment on your "The Five Dumbest Thingson Wall Street This Week" column from Feb. 4. In the second section, "BeingSold a Bell of Goods", you made some criticisms of


as possibleexplanations of American apathy concerning its possible purchase. While you did say that AT&T played a respected and glorious role in this most recent century, I think that some of your criticisms were misleading.

You implied that AT&T's "reign" was a result of antagonistic businesspractices (and indeed the Hushaphone example you gave is likely one ofthose). Isn't it more correct to say that AT&T was a common carrier and, as such, a regulated monopoly? The U.S. government was the barrierto market entry -- not the company itself -- until the breakup (whenthe government reversed its position and shattered the communicationsgiant). The lack of competition can hardly be blamed on AT&T.

Also, I believe that during AT&T's time as a regulated monopoly, itslong-distance rates were mandated by the state. In this same vein,technology has improved quite substantially in the past 10 years, andthe costs of providing telecommunications services dropped in tandem withthis improvement. I'm sure you remember a day when cell phone planscharged closer to $1 per minute than $1 per day -- this improvement ismore a result of technological progress than a policy change.

Last, AT&T has provided the world with unfathomably valuableproducts and technologies on which the majority of the modern economyis built. Chief among the long list of its inventions are thetransistor, UNIX, C and C++. The transistor is the cornerstone ofnearly every modern computational device on the planet (and by modern,I mean "since computers were built from vacuum tubes"). UNIX is atremendously popular and reliable class of operating systems that isalmost certainly driving

as well as


Mail, which I am using to write this reply. The application you used to compose andspell-check your article was almost certainly written in C++, and theoperating system of every computer you use was written in C. I cansay this without knowing which operating system(s) you use simplybecause they are all written in C (and are also all based on UNIX).

I hope this helps convey the magnitude of AT&T's contributions tosociety; contributions from which it was not allowed to profitbecause of its regulated status under the law. I'm sure I do notneed to belabor the amazing number of corporations who have been ableto profit quite generously from the transistor, UNIX, C and C++.

Perhaps AT&T's depressed financial situation is the result of decadesof overly restrictive legislation. Perhaps if it had been allowedto profit from its inventiveness and creativity, it would be thecorporate pillar it once was. Perhaps an article should be writtenthat mentions the trillions of dollars that have been produced byAT&T's industriousness and reaped by others; that mentions how theunderlying technology of the products that hundreds of millions ofAmericans take for granted was generated by a great corporation thatis now nearing the end of its life.

I am not suggesting that AT&T should be preserved for sentimentality's sake -- or even that it should be preserved at all if it decides with


that a merger is warranted. I'm merely suggesting that perhaps there should be an article that helps Americans recognize a truly great institution for what it once was.

I enjoyed your article as a whole, and I hope my comments have beenconstructive. Thanks for your time.


Eric Davidson, Atlanta (Received Feb. 4, 2005)

Poor Marketing Led to Voom's Downfall


The Five Dumbest Things on Wall Street This Week

To the editor:

Some of what you state in your article about


Voom is correct. However, any upstart in the already-saturated satellite/cable market isn't going to have an easy road to follow. I am a Voom subscriber. I subscribed to Voom for the simple fact that it has the most HDTV content available anywhere. I suppose we could argue about whether or not there is good HDTV content on Voom. However, there are some notable exceptions.

For example, RushHD is a great channel with extremely interesting documentaries on extreme sports. I have no doubt that as the Voom service picked up steam, more content would have become available to play on some of these channels, which in many cases are currently functioning as "placeholders".

However, I think the problem with Voom stems from marketing. When I tell people I have Voom as my satellite provider, they typically ask, "Who?" I am then asked to explain what Voom is all about. Voom initially entered the market in an exclusive agreement with


to market its service. So if you wanted Voom, you either had to go to Sears or order it off Voom's Web site. I don't know about you, but I don't typically buy my electronic gear from Sears. I order from

Best Buy


Circuit City


J&R Electronics

. This agreement was an exclusive that lasted for a year or a year and a half. However,


reason is the downfall of Voom. It can be summed up in one simple statement: "Potential customers didn't know who Voom was."


Rusty Wyatt, Chester, Va. (Received Feb. 4, 2005)

Starbucks Still Growing Strong


Starbucks Losing Steam

To the editor:

I welcome anyone who doubts


domestic growth opportunity to come and visit my town of Greenfield, Ind. About 20 miles east of Indianapolis,this is not a suburban area, but a genuine small farming town and county seat. We benefit from an exit on I70 as well.

Our Starbucks is about a year old and packs 'em in all day long. Locals line up to pay top prices and the highway attracts a huge following as well.

Where others worry about saturation in major markets, think about howmany Greenfield, Indiana's there are dotting America. Most don't yet havetheir own Starbucks.


Chris Baggott, Greenfield, Ind. (Received Jan. 27, 2005)


PC Games Have Fruitful Life Ahead


PC Games Face Own 'Doom'

To the editor:

Of course, PC game sales were down in 2004 compared to 2003. There werevery few releases worth buying until late in the year, so comparing the twoyears is misleading. I think 2005 will be a much better year for PC game sales because: new games will provide a gaming experiencethat cannot be achieved on a console, and PC hardware will be improving tosupport the increased performance requirements of the games.

The simple fact is that you will not have the same gaming experience on aconsole as on a PC. Anyone who has played

Half-Life 2

on a high-endgaming PC knows the direction this is going.

My suggestion to you analysts: play

Half-Life 2

on a high-end gaming PCand then play some hokey console game. Only then will you be able toactually form an educated opinion that is not based on historical numbers, which are misleading, at best.


Bruce A. Reidelberger, PC Systems Specialist, Decatur, Ill. (Received Jan. 21, 2005)

How Many of These Merck Lawsuits Are Valid?


The Five Dumbest Things on Wall Street This Week

To the editor:

Interesting comments about


Vioxx situation. Even more interesting, as of Oct. 31, Merck reported that 375 Vioxx lawsuits were pending. The number is probably higher by now, but, considering the widespread use of Vioxx, and reporting of its withdrawal, one would have expected far more lawsuits if the cases had reasonable validity -- and it is doubtful any (maybe a couple) have validity.

I'm a Merck shareholder (and have been one for the past 12 years), and I am a lawyer, but my practice is strictly limited to patent and trademark law. The "tort" bar has "plaintiffs," but no case, and it knows it! Virtually no one can establish causation in the Vioxx litigation, i.e., that Vioxx was the "proximate cause" of a particular person's heart attack or stroke.

There are simply too many contributing factors involved and there is no unique "marker" tied to damage which may have been caused by Vioxx, and any "damage" would have been reversed shortly after Vioxx use was discontinued. This is in sharp contrast to Phen-Fen, which caused a very specific and permanent heart valve damage.

The "trial bar," those such as John Edwards, make their money by "suing-and-settling" and taking a portion of the settlement as part of a contingency fee agreement. These lawyers rarely litigate cases, and cannot afford to litigate more than the very, very few that they already do! Settlements encourage more lawsuits, with these lawyers operating on a volume basis, bringing many suits and settling each quickly for relatively small amounts.

Merck has indicated that it will not settle any of the Vioxx cases and will force all plaintiffs to litigation. Since causation is nearly impossible to establish, only the very few cases that involve very young and healthy plaintiffs will be pursued, and still causation might not be proven.

Merck hasn't not literally said that causation is next to impossible to prove, but the very few lawsuits brought against Merck, as of the end of October (Merck announced Vioxx was withdrawn on Sept. 30), supports this view. For sheer reasons of publicity, and Merck does not need any more bad P.R., Merck will not literally come out and say that its liability is virtually zero (Merck has $650 million in product liability insurance to cover Vioxx), but there are simply very few cases that would be, could be, provable, and it is quite likely that Merck's out-of- pocket litigation costs (as opposed to product costs necessitated by the withdrawal) will not exceed its insurance coverage.

We might, even now, see the beginnings of a slowdown in tort-bar lawyer advertising for Vioxx clients, because while the "clients" exist, the liability exists in theory only.



shares, and track the number of radio and daily newspapers advertisements seeking Vioxx clients; it's already dropping off as lawyers conclude that liability (i.e., causation) is simply too difficult to establish and not worth the effort, if Merck cannot be forced into a multitude of settlements.

One last point, just a hunch, but Merck has, thus far, refused to take a reserve for Vioxx litigation costs, perhaps, because Merck does not want to concede that it "expects" to pay out "any," or "any particular amount" to Vioxx litigants. Further, a large reserve would "attract" the tort bar and a small reverse would likely be pointless and an admission that some claims might be valid and provable.


Ed Schindler, Huntington, N.Y. (Received Dec. 10, 2004


Perhaps Goldman's Noto Finally Gets It Right With Google Nod


Google Fans Keep Pointing Above $200

To the editor:

I found George Mannes' article quite balanced. As with many reports, the article refers to Goldman analyst Anthony Noto, who is extremely bullishon


. He would do a good service to his readers to point out Mr. Noto's prior stock-research record. In late 1999 and 2000, Notowas bullish on companies like






. Where arethese companies today? Maybe he will havebetter luck with his forecast this time.


Emil Tzanov, Atlanta (Received Nov. 30, 2004)

Oracle Really Just Taking Out Competition


The Five Dumbest Things on Wall Street This Week

To the editor:

Let's not forget that the


buyout of


is not about corporategovernance. It is about the elimination ofa strong competitor of Oracle in amarketplace where Oracle lags behind



One single federal districtcourt judge decided on his own thatantitrust would not be violated, and he wasclearly mistaken, based on comments byOracle executives early in the process lastyear.

Oracle's intent is to buyPeopleSoft's customer base and eliminatetheir product line, to be replaced withOracle products. Not exactly a fair dealfor American corporations looking for thebest software products to run theirenterprise.

It's amazing how many of youeditors are ignorant to what is really goingon with this deal, or you just don't seem tohave a problem with blatant corporatecannibalism.


Rick Baker, Atlanta (Received Nov. 24, 2004)

Reading Too Much Into Citidel's Google Options Play


Citadel Storms Into Google

To the Editor:

George Mannes' article is amazingly misleading and could give your readership a false sense of security about the safety of


, especially in the short run. Buying options doesn't necessarily mean that Citidel will eventually, or will ever, own Google stock. It is merely a short-term play on the price rise in the stock and adds zero upward buying-pressure on the stock and its pricing.

I hope George does a follow-up article if (and when) Citidel (or others) closes its call-option positions and moves into Google puts with the coming price drop, due to a massive unlocking.

Please be more careful in explaining market instruments to your readers. With this article, they will be armed with only half of the story.


Dale Bassett, Phoenix (Received Nov. 15, 2004)

Miller's 'Value Investing' Distorts Stocks' True Value


Legg Mason Takes a Large Google Stake

To the Editor:

I always enjoy reading George's columns. However, I must express some reservation in accepting Bill Miller as a "value" investor, despite the deceptive name of his fund. In my opinion, he is mostly a mo-mo guy masquerading as a value investor.

His hot streak in the '90s has given him a cult following that he hardly deserves. That helps to create self-fulfilling moves in stocks he takes big positions in -- the Buffet phenomenon, if you will. Just like


ran to ludicrous heights because Warren Buffet owned a big chunk, so have stocks like

, which jumped to crazy levels vis-a-vis its true business prospects, because Bill Miller likes it.

Maybe a good subject for a future column might be analyzing just how well some of these names have done after being dumped by Legg Mason. I think you would find that they approach true value after the pump-and-dump strategy has run its course.

Bill Miller is way overrated, in my opinion, and it bothers me to see his type sucking in investors. It is no surprise that he is buying


, and loudly advertising the fact to get others to come along for the ride -- that's his MO.


Bill Herbert, Dallas (Received Oct. 6, 2004)

Ryanair Replies


Ryanair Reaching on Web Crackdown, Sept. 9.

To the Editor:

Peter Eavis's

most recent piece is again factually inaccurate and misleading.

He claims that Ryanair "Didn't immediately comment when asked why it acted to remove the thread." This is untrue. We received his first email enquiry at 17.22 hours, we replied within 20 minutes at 17.40 hours and we received a clarifying reply from him at 17.57 hours which is after our close of business. His second message was therefore not received until the next morning and has been replied to same day. It is both unfair and disreputable for Mr. Eavis to pen such an article without affording Ryanair the opportunity to comment on his inaccurate and erroneous comments.

Ryanair hasn't underestimated the harshness of competition in the European airline sector. We have been the only airline to consistently warn of continuing fare wars this winter, a "blood-bath," and we remain the only airline recording a 20% after-tax margin. Our most recent first-quarter results demonstrate record traffic, record revenues and record profits, all of which have been ignored by Mr. Eavis.

There is absolutely no basis whatsoever for Mr. Eavis's claim that our wheelchair levy is "generating criticism, both among customers and in the marke." We have received no complaint letter from any passenger in the six months since this levy was introduced, as there is a widespread understanding in the market here that this levy was introduced against our will as a result of a High Court decision in London which is currently being appealed. Mr. Eavis loosely refers to the increase in operating profits in our June quarter, but fails to explain why these operating profits have increased if, as he claims, we have "underestimated the competition," or that "the fares have slumped," or that Ryanair "flies to many cheap out of the way airports," or that "there is insufficient demand for these cheap fares." Our profit growth by contrast continues to highlight the error of these inaccurate assumptions.

Mr. Eavis omits to mention that the recent cost reductions were introduced at a time of a companywide pay increase of 3%, which is by some considerable distance the biggest pay increase among the European short-haul or low-cost airlines. The pay increase exceeded the value of the cost cuts, with the result that all of our pilots are now doing better.

Mr. Eavis refers to the possibility that "cost cutting might cause a company's best employees to leave!!" Again he provides no evidence whatsoever for this speculation, which is totally unfounded. We are suffering no pilot turnover or dissatisfaction. Ryanair continues to grow rapidly and is recruiting staff from many other European airlines where they are being either made redundant or suffering pay cuts.

Mr. Eavis then claims that "discontent does seem to be growing," with no basis whatsoever for this claim. His only source is an anonymous Internet chat room and this does not form a credible or reliable basis for such claims, or for research/analysis published under the name of


Finally, as we confirmed in our response, the PPRuNe thread that was taken down contained untrue and false claims about Ryanair's safety standards and our safety record. No airline can allow unfounded and inaccurate claims about its safety to be promulgated in any forum, even if it is an anonymous Internet chat room where there is no restriction on subscribers and where there is no basis for his claim that it contains -- either "informed insights" or "raucous comments." As we have also confirmed, there are numerous other threads on this Web site and we have taken no steps whatsoever to prevent this free speech, even if it is unreliable, unverifiable and unidentifiable in its sources.

It is our policy wherever there is inaccurate or untrue commentary in the media to write to the relevant people concerned pointing out the accurate position. We are again obliged to do so in the case of Peter Eavis's latest inaccurate and misleading coverage of Ryanair in

and we request firstly that these corrections be published and secondly that we be allowed a reasonable opportunity to respond to any further enquiries he may wish to make, so that he is not in a position to falsely claim that Ryanair "didn't immediately comment."

Naturally should you require any further information or assistance in this, please don't hesitate to call me.


Paul Fitzsimmons, head of communications, Ryanair

(Received Sept. 13)

Google IPO Shows Benefits of Controlled Dutch Auction Process


Google Is Small Change for Wall Street

To the Editor:

I think Matthew Goldstein is well aware that


executed its goal for the IPO perfectly! The company used the Dutch auction process precisely the way it intended to, which was to reward the small and large investor alike for taking a chance in investing in them, and create the initial wealth needed to fend off potential rivals. Only the puppet writers spin this as a failure. And only because they're somehow tied to interested parties in a dying business model. Any new company with public brand and a desire to build a solid company must now consider the great benefits of a controlled Dutch auction that Google laid an important brick for.


Brian Knoerle, St. Louis (Received Aug. 24, 2004)

Consumers' Service Complaints Aren't All Companies' Fault


The Companies You Hate

To the Editor:

No question service levels have decreased. I have to say that some of thecomplaints you printed were probably due to user error, lack of patienceand/or the inability to communicate. I am currently on the phone holdingfor a customer service rep with, or

Advanced PCS

, and have been on hold for 13 minutes. Hopefully by the time I finish this email, I will have had the opportunity to speak with a human being. While I am waiting, Ithought I would speak to some of the companies (PCS, 14 minutes ... I typeslow) you mentioned in your column.

We, as consumers, require good, fast and cheap. In my experience, you getto pick two or varying degrees of all three. So, in the case of


, you get a pretty darn good product, fast and at competitive prices. Unfortunately, the good part also includes service, which unfortunately fails due to the pick two rule of thumb for the good, fast and cheap logic.

If you want fast and cheap, think about the service level or productquality you should expect. You want good (product and service) and fast,you should pay a higher price (PCS, 18 minutes -- I am composing, give me abreak). I believe if you go to

Home Depot

instead of the boutique hardware store (PCS, 19:15, got a person), your service levels will be lower, but your prices will be as well (PCS, questions answered in less than 5minutes -- off the phone).

In 1993, I purchased a Gateway computer. It was top of the line. I paidover $3,000 for it. It's a boat anchor now. Part of that price was asoftware package called Microsoft Office Pro, which represented, I believe,around $400 of the full price. It was a great package (at the time) for$400. The comparable package, which is now (11 years later) much more robustand full of a lot more capabilities, sells for under $300. While


is the monster everyone loves to hate, it has made its product better over time and has charged less for it. We love to bash the largest company in the world because we wish we had purchased the stock back in 1980. However, it has, year after year, provided more for less.

Regarding my experience with Advanced PCS, it took 19:15 minutes to get ahuman being. For many, this is unacceptable. However, I get theprescription delivered to my door for a reasonable price. The toll-freeservice for getting a human may be slow, but in most cases I do not need tospeak with a human being. I go online or order via the automated phoneservice and the product arrives in a couple of days. I get varying degrees ofgood, fast and cheap, and it is acceptable.

In summary, we need to have reasonable expectations. As far as I amconcerned, it is all about me, me, me; I deserve it all --


. Youwant it all, pay for it. Home Depot,


, Microsoft and even


are low-cost producers and retailers, respectively. If you want service, go somewhere else. Good, fast and cheap: Pick two and think about it when you complain about your next purchase or one that you have already made.


Todd Collins, Denver (Received Aug. 23, 2004)

Abiotic Oil Can't Save Us


Another View on Oil

To the Editor:

Interesting that you bring up the theory of abiotic oil. It is a fringe theory to which I don't personally subscribe. However, I was forced to concede long ago that I will never know everything about oil, so I will concede it is possible. Unfortunately, the method of oil creation/generation is not particularly relevant to the issue of current supply. Regardless of how oil is generated in the earth, it must migrate into a suitable trap before we can find it and extract it.

As an industry, we are already drilling in 10,000 feet of water looking for geologic structures that we believe could be trapping hydrocarbons. Exploration success rates worldwide are falling off in spite of new seismic imaging technologies, and many of the targets are getting volumetrically smaller. There would be some new structures brought into play using an abiotic sourcing mechanism, but it would not add up to a huge opportunity of new structures we could bring into our plans. Even if abiotic oil is still migrating into the old-established fields, it isn't happening fast enough to offset the 12% -- 15% annual declines most mature fields exhibit.

Don't count the industry out yet; we tend to be a creative bunch. However, don't count on abiotic oil having any impact. If the theory holds, then a goodly portion of the worldwide reserves base is already abiotic, and deliverability still seems to be peaking.


Jim Zack, Operations and HSE Manager, ChevronTexaco, Rio de Janeiro, Brazil (Received Aug. 4, 2004)

Stocks and Politics Just Don't Mix


Is Bush to Blame for This Market?

To the Editor:

I listen to James Cramer on my ride home every day on WELI/AM radio 960. I have made some money using Mr. Cramer's tips while listening to his show over the past two years. Today's opening remarks concerning President Bush are just plain wrong. First, you mention drug stocks margins decreasing under Liberal Kerry. If that is the case, why should we vote for him? Secondly, Kerry has said over and over that the tax-relief package that was passed by the Senate should be repealed. I'm not rich, but to go after a particular tax-paying class is again wrong.

I believe your political views are crossing over to your economic views. Kerry is the most liberal senator in the senate and his running mate is No. 4. To attack President Bush's cabinet as incompetent is shocking. Do you really believe Colin Powell, Condolezza Rice, Dick Cheney are intellectually challenged?


Ron Masiello, East Haven, Conn., (Received July 14, 2004)

Wall Street Scandals Will Be the Ruination of the Market




Wrong With the Market

To the Editor:

I'm a

Real Money


Action Alerts


Stocks Under $10

subscriber. I've listened to Mr. Cramer for about 15 months, and rarely miss the radio show. I have learned a ton and made money applying what I've learned. I enjoy his insights and honest perspective. His commentaries on the market's troubles are interesting, but the nature of the troubles themselves may be some of the problem.

Certainly, government spending remains out of control, and the current administration has not shown the ability -- or maybe even the desire -- to rein it in. The


threat is also an influence, but that was as much an issue last year during the market's move up as it is now. These items certainly influence the market and it's always easier to assign blame to issues outside of our control than to fix those things we do control.

A significant, continuing problem is the perceived character and integrity of the market, financial institutions and corporate leaders. Every week there is another bunch of corporate, financial institution or market officers who have stuffed -- or are suspected of stuffing -- their own pockets at the expense of investors. This has continued to drag and nag the market since Enronimploded over two years ago. The list seems to never end:

New York Stock Exchange Board

Several Mutual Fund Companies



Cardinal Health

Tenet Health

Enron and a host of energy-trading companies, and the list goes on and on and on.

I can do my homework and carefully invest, but if the company officers lied about the fundamentals, kiss the money goodbye. If the company is prominent or a Wall Street "sweetheart," kiss the whole sector goodbye. Every week another good company led by good people melts down due to greed.

It's nice to think that the New York Attorney General and/or the


will clean-up this never-ending mess, but Wall Street needs to clean-up itself. Until it does, long-term confidence in the market won't occur. If the politicians in D.C. change and terrorist threats fade, the market may rally. However, if the market and institutions aren't cleaned up, it will be short-lived.

I know the market is a risk, but any more of this and the smarter investment may be picking tomorrow's numbers in the state lottery. Seriously, I remain invested in the market but cannot shake feeling: another day, another scandal.

It's time to do homework on tomorrow's market. There is still money to be made, but this year it has been tough.


Mike Kuhlmann,Lakewood, Wash. (Received July 14, 2004)

Uncertainty Is Causing the Market's Malaise


Is Bush to Blame for This Market?

To the Editor:

Who is right on the market's malaise? Both make good points, as usual, but I think that the overall cause of the malaise, if there is one cause, is uncertainty.

Iraq is the issue for the markets and the fall election. There is now great uncertainty about the reason for going to war; there is serious uncertainty about the ultimate success of the new government there; and there's more uncertainty about how all this relates to terrorism both there and at home.

One certainty appears to be the fact that our "experts" say that a serious terrorist attack can be expected before the elections in the fall -- at any time before the elections. Such an attack would surely, suddenly and sharply drive the markets down, and who knows how long they would stay down? Perhaps just a few days, until attack number two drives them down further?

As both James Cramer and the Rev Shark have pointed out so well over the past few years, it's tough to make money in the markets with the "usual" uncertainties. This terrorism stuff creates a whole new ball game and makes me reluctant to make substantial commitments to the market.

I don't speak for others on this matter, but it seems to me that more than a few others are also reluctant to commit.


Ken Heinzel, Santa Rosa, Calif., (Received July 13, 2004)

A Democratic Win Will Hurt the Market


Is Bush to Blame for This Market?

To the Editor:

I voted for James "Rev Shark" DePorre's view, but I do think that a Bush loss will hurt the market more than a typical change of presidents.

Unlike Jim Cramer, I am not very enamored with the old Democratic team that allowed a good economy to boil up into a bubble before collapsing. I am concerned with the current Democratic team and its likely tax, control and spend philosophy.

If the Democrats do win, I think the marketplace and businesses will suffer. I know I will be hedged on U.S. holdings or in cash, gold and non-U.S. assets if a Democratic win appears likely. I think September will be the telling month.

Best Regards,

Rick Lindsay, Brentwood, Tenn. (Received July 13, 2004)

Cramer Should Get Off His Political Soapbox




Wrong With the Market

To the Editor:

James Cramer's

Action Alerts


are two of the best subscriptions I've ever owned. However, his political commentary is now crossing the line and it makes me angry. We already know he wrote speeches for Al Gore and thinks "this president is good for the market." Why not leave it at that? That's fine.

I loved Cramer yesterday. Today he ticks me off as he pounds his investment-advice pulpit with a hard-line political agenda. I can't take much more of it.


Scott Taylor, Spokane, Wash., (Received July 13, 2004)

Senator John Edwards' Background Is a Plus


Tech Tanks as Earnings Jitters Spread

To the Editor:

Numerous pundits, including some contributors to

, haveshown concern about John Edwards' background as a trial lawyer. Thatfear appears to me to be baseless.

First of all, corporations that are playing by the rules have nothing to fear.

Second, the role of the vice president is not to go witch hunting for corporate misdeeds.

Third, if fear of Mr. Edwards does bring about more compliance to the law, investors will be the better off for it.


David Storm, Everett, Wash., (Received July 12, 2004)

FASB's Proposal Solves Little


Options Expensing Ripe for Abuse

To the Editor:

Troy Wolverton's article quotes heavily from accountants pointing accusatory fingers atthe "spotty track record" of corporate America, especially high tech.

My biggest problem with the entire Financial Accounting Standards Board options expensing issue is that it is like putting the foxes in charge of the chicken farm. The




fiascos were not perpetrated by CEOs alone, but with the activeparticipation of their accountant CFOs and their negligent/complicit(Arthur Anderson) auditors.

Now, for the core issue of expensing options, from my perspective as astock investor: I prefer the present system of footnoting. Yes, companiestoday are all over the map with regards to how they


their options in their footnotes. But this point only highlights why the FASB's proposal is moronic accounting poppycock! By forcing


into earnings calculations, the new, proposed rule will only obfuscate the earnings numbers at which this simple-headed investor looks.

The article focuses exclusively upon how tech companies under-reportoptions expenses today. Of course, this popular scenario is always used tojustify the need for expensing of options to "properly" adjust earnings.However, what is painfully neglected is the reverse case (of the past fewyears), when a tumbling stock market renders billions of dollars of optionsto expire worthless. Under the FASB proposal, these previouslycost-expensed options must now be

added back

to earnings. So, even thougha company's


earnings may be getting worse, a tumbling stock price willallow a company to report less-bad earnings that are artificiallyinflated by the FASB-mandated "stock options expensing." As a simple stockinvestor, I can't even imagine trying to de-convolute these "earnings"reports to discover the real health of a company.

Lastly, although the article didn't even address my discussed concerns,the title jumped out at me that "options expensing is ripe for abuse" (byaccountants)! Now for some positive feedback, perhaps the FASB should tryto enforce uniform guidelines on how to properly expense options infootnotes,


they thrust their mandates on completely rewritingearnings reports (and rendering them useless to common investors such asmyself).


James Chen, Palo Alto, Calif., (Received June 29, 2004)

The Carly Fiorina Attack Is Not Fact-Based


The Nation's Worst CEOs

To the Editor:

Jon Markman's recent column excoriating


Carly Fiorina as one of America's worst CEOs brings to mind the old wisdom that, "It ain't so much the things we don't know that get us in trouble. It's the things that we know that ain't so."

Mr. Markman bases his case around six facts he uses to make his argument. Each is pithy. Each is quotable. Each is completely


Let's take them in turn.

First, Mr. Markman contends that Hewlett-Packard's merger with


has "utterly failed to deliver on its promise." Not true. The promise of the merger was to put H-P back in a leadership position at the very center of the industry.

Today, H-P is now No. 1 or No. 2 in virtually every market, customer segment and region in which we compete, and proving Jack Welch's old axiom that only businesses that are No. 1 or No. 2 create sustainable revenue and profit growth.

We delivered $3.5 billion in merger-related cost savings, $1 billion more than planned, one year ahead of schedule. And we have now returned to strong top-line performance, growing 9% and 12% year-over-year respectively in Q1 and Q2 of FY04.

Indeed, we are on course today to close FY04 with $7 billion in organic growth ... in other words, our organic growth this year will create a company larger in revenue than



Second, Mr. Markman contends that H-P is not profitable in personal computers. Not true. In FY03 (our last fiscal year), we were one of the only two major PC vendors to make a profit in PCs, and we did this while checking


share gains and swapping the No. 1 share position back and forth. In the last three quarters, we have outgrown Dell in PCs and notebooks, while posting a 19% year-over-year revenue growth, while doubling our profits. Compare that to


PC business, which went from a profit of $47 million to a loss of $118 million in the same period.

Third, Mr. Markman contends that HP is not profitable in mainframe computers. Not true. Actually, we don't have mainframes. But our high-end servers are profitable, and have been for three quarters in a row, and in many cases, lead the market.

Fourth, Mr. Markman contends that HP is not profitable in services. Not true. Our services business is turning a profit, recently landed what one magazine called "the richest prize in technology" --

Proctor & Gamble's

huge $3 billion IT contract -- and just this month, was named in a study of 12,000 IT managers and professionals as No. 1 in customer satisfaction.

Fifth, Mr. Markman contends that our printer business is being "hollowed out" by Dell. Not true - in fact, slightly delusional. H-P ships more printers in one month -- more than one million -- than Dell ships in one year, and that number is increasing. In fact, in 2004, consumers are buying H-P printers at a rate of more than one per second. Studies show that Dell's gains are actually coming at the expense of other competitors -- primarily Lexmark -- and not H-P. In fact, our Imaging and Printing business is going from strength to strength, as evidenced by our ability to further improve the profitability of the business. For example, in FY01, H-P's last year asa standalone company, the Imaging and Printing business had operating margins of 10.1%. In FY03, our last fiscal year, operating profits in the business increased to 16.4% of revenue ... far in excess of our competitors.

Sixth, Mr. Markman then contends that despite being "hollowed out," H-P's printer business still brings in the majority of the entire entity's earnings. We are proud of the printing franchise we have built and the best-in-class financials this business drives. However, despite the fact thatthe business is more profitable than ever before, H-P is less dependent on the profits from Imaging and Printing, as the rest of our businesses returned to profitability and have begun contributing to earnings. In fact, each of our major lines of business has now been profitable for three quarters in a row -- validating the success of the merger.

In FY01, again, H-P's last year as a standalone company, the Imaging and Printing business accounted for 138% of segment operating profit. In FY02, this number was 107% and in FY03, this number was 79%. So, while the Imaging and Printing business is clearly the profit driver of the company, the progress we have made in the other businesses has made us less dependent on Imaging and Printing operating profit.

By contrast, Mr. Markman correctly points out that many other analysts are giving Carly Fiorina credit for improving results and turning H-P around. We think there is good reason for that: five years ago, when Carly took over as CEO, H-P had grown bloated and unfocused, growing in the low-single digits in the middle of the biggest technology boom in history, while missing nine quarters in a row. She began a reinvention -- consolidating 87 separate product divisions down to four, optimizing 26 supply chains down to five -- culminating in the Compaq merger (which, again, ultimately produced more than $3.5 billion in savings, $1 billion more than predicted, a year ahead of plan.

Today, what most people see is a Fortune 11 company with an $80 million annual run rate; with an accelerating rate of patent innovation (11 new patents a day, fifth in the world); with $15 billion in cash on hand; leading nearly every market in which it competes; growing profits in every business with better balance across our portfolio; generating revenues 9% YOY in Q104 and 12% YOY in Q204, beating Street expectations by $800 million; and leveraging the depth of its portfolio to lead the creation of new categories such as digital photography and digital entertainment, through new relationships with media and entertainment companies including

Disney, DreamWorks, Time Warner,Avid, Universal Music Group, Starbucks,



.That is one of the reasons why Gartner, Forrester and Meta post-merger are now recognizing H-P as a market- and thought-leader in several key growth categories including utility computing, management, blades, managed services and our overall adaptive enterprise strategy.

Frankly, we were surprised that Mr. Markman's list of worst CEOs didn't include the leadership of companies like




, who took millions from their companies while leaving so many investors and shareowners penniless. His disagreements with Ms. Fiorina, while not based on fact, seem more to do with disagreements over strategy and direction -- strategic choices, might I add, that have been informed by a deep understanding of customer requirements, market dynamics, the competitive landscape, H-P capabilities, shareowner interests and employee ambitions.

But remember, we are a company that believes that everything is possible. If he is willing, we cordially extend an invitation to Mr. Markman to come out to Palo Alto and see what so many others have seen -- that H-P is a company built for the future and poised for growth. To suggest anything different just ain't so.


Allison Johnson, SVP, Corporate Marketing, Hewlett-Packard, (Received June 28, 2004)

Avoiding 'Mangled Packages'


Net Phone Threat May Ring Hollow for Bells

Dear Mr. Moritz:

I am a VoIP professional.

To avoid the "mangled packets" your article discusses, cable companies willhave to invest in the infrastructure (




) that creates the equivalent of "high-occupancy vehicle" lanes in their plants. The only alternative is reducing the end-to-end delay substantially.

Vonage, Net-to-phone, et al, have no way to do that as long as they must use RBOC gateways to reach non-VoIP users and rely on servers to associate calling endpoints with each other. The RBOCs are best-positioned for VoIP, as they install fiber to the home. They will make a profit, not the cable companies.

Skype (from the makers of Kazaa) is a long-term "fly in the ointment." I use it with others who have downloaded the free software. It behaves much like Instant Messenger for voice, and the quality is extraordinary. Technically, it reduces the delay by peer-to-peer networking (no servers to divert the path and add delay). Skype is developing a community that will use its service similar to the community developed by music sharers. However, oncethey have to use gateways to call non-Skype users, they're back into the server mode. It's hard to imagine how it will make money charging for the gateway use, because it compromises its peer-to-peer advantage and can't be much better than Vonage.


Chet Seligman; Point Reyes Station, Calif., (Received June 25, 2004)

The Market Tunes Out Radio Commercials


Wall Street Sounds Off on Radio Daze

Dear Mr. Mannes:

Those Wall Street analysts you quoted forgot one thing: Satellite radio. Just last year those guys were saying that no one would pay for something they can get for free. Now




have 2.5 million subscribers between them.

What's one of the main points in their advertising? No commercials! Two-and-a-half million listeners are willing to pay to get away from annoying commercials, while getting better radio. This, coupled with overall declining levels of listeners for broadcasters, means advertisers are wasting their money on broadcast radio. No one listens anymore.

Clear Channel

et al supply nothing more than background noise. The real listeners are moving to satellite. Investors in broadcast radio can look forward to long, slow fade.

Investors and analysts have a very good example of what's going to happen with broadcast/satellite radio in cable/broadcast TV. I expect radio to follow the same path, though it may not take as long for satellite to overtake broadcast as it took cable to overtake broadcast TV, since consumers are now used to paying for programming as opposed to cable in the 1970s, when you had to be an "idiot" to pay for TV.


Philip Gribosky, Norwalk, Conn., (Received June 21, 2004)

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