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Internet Edition, June 12, 2002, Page 1


Omnicom's Porter Novelli International has picked up the PeopleSoft account because it was able to demonstrate the "strategic and tactical PR" solutions it plans to deliver to deal with the challenges faced by the $2.1 billion enterprise software company, said Steve Swasey, its director-corporate PR.

Gary Conway, PeopleSoft's corporate marketing VP, conducted the search for the Pleasanton, Calif.-based company. He met with 10 agencies and invited formal presentations from half of them.

Former PNI CEO David Copithorne, and San Francisco office/GM Rhonda Shantz led the pitch. Shantz will handle the account on a "day-to-day" basis, said Gary Stockman, PNI's Americas/CEO. Stockman will assist Shantz on "strategic counsel."

Swasey said while some of the firms pitching the account came across as "big thinkers," they didn't show how they planned to carry out their recommendations. PNI, in his view, scored on both.

PeopleSoft had used Phase II Strategies for PR for two years. The company split with Phase II because is wanted a more global presence.


N.Y. State Supreme Court Judge Ira Gammerman has delayed making a ruling on the May 3 lawsuit brought by Orbis Broadcast Group against PR Newswire and its new MultiVu subsidiary.

"After hearing about two seconds of arguments on May 21, the judge said he needed time to read the court papers before rendering a decision in the case," according to Mark Kalish, an attorney for Orbis.

Kalish said Gammerman gave no indication when he would make his ruling.

Phil Sheldon is out after a three-year stint as Hill and Knowlton/New York general manager due to a lackluster performance by the WPP Group's one-time flagship office. Diane Perry, who joined H&K in December from Weber Shandwick, is replacing S<heldon on an interim basis as MaryLee Sachs, H&K U.S. CEO, looks for a permanent replacement. Sheldon had headed Porter Novelli's healthcare practice.

The 2002 Edition of O'Dwyer's Directory of PR Firms rolls off the presses this week. Hundreds of firms have enhanced their entries with logos and agency statements, which also appear on Copies of the Directory, listing 2,900+ firms, are $175 from the O'Dwyer Co.


Roger Cardinal Mahony of Los Angeles is featured in full-page newspapers ads, reassuring the public that he is taking steps to prevent future abuse by priests in his archdiocese. Crisis counselor Sitrick & Co. handles the effort.

Written as an open letter to residents of Los Angeles and surrounding communities, Mahony states the Archdiocese's policies such as zero tolerance when it comes to priests that abuse children.

The ads also inform readers about the creation of a "Clergy Misconduct Oversight Board" that is headed by a retired judge.

USCCB Limits Access

Nearly 700 reporters have been credentialed, but promised 'limited access' at this week's U.S. Conference of Catholic Bishops meeting in Dallas. Clerics are to debate sex abuse policy. USCCB staff promises to kick out journalists found wandering Fairmont Hotel hallways, restaurants looking for interviews, according to its media advisory.


Omnicom's stock was in a virtual free fall last week, losing $14. It lost $2.83 on June 7 on volume of nine million shares, or six times normal volume, to close at $72 (vs. $93 in mid-May).

The stock had won back $4 of this as of mid-day, June 10.

Merrill Lynch had downgraded OMC and written negatively about the entire ad sector on May 30.

It backtracked on June 7, calling OMC an "intermediate-term strong buy."

Other factors impacting OMC were reports that the Wall Street Journal would write about certain "accounting issues at OMC"; the sudden resignation of the head of the audit committee, sparking rumors that financial irregularities might be involved; complaints about insider stock selling; ML's comment that insiders had just given themselves a "staggering" amount of options; OMC's $2.9 billion debt, and its refusal to identify acquisitions.

The steep decline last week on high volume indicated that some institutions were pulling out, said Wall Streeters.

S&P Issues Warning on Debt

Standard & Poor's on June 4 affirmed OMC's credit rating so it can boost its commercial paper

(continued on page 7)

Internet Edition, June 12, 2002, Page 2


The tobacco industry relied on aggressive PR "intelligence" by Fleishman-Hillard and Burson-Marsteller in the 1990s to "spy" on anti-tobacco groups, according to a report in the June American Journal of Public Health funded by the California Tobacco-Related Disease Research Program and the National Cancer Institute.

Citing public tobacco company memos released as a result of the Minnesota Tobacco Settlement and other legal cases, author Ruth Malone - a University of California RN and PhD - singles out F-H and B-M for acting as "public relations spies" on anti-tobacco groups.

The Journal says that F-H monitored Stop Teenage Addiction to Tobacco for R.J. Reynolds, sending regular intelligence reports to the tobacco company which included copies of STAT's Tobacco and Youth Reporter and information on conferences.

Martha Boudreau, GM of F-H's Washington, D.C., office, told this NL that the firm instituted a company-wide policy not to work for tobacco clients about 11 years ago because that work was "inconsistent" with its developing healthcare practice at the time.

B-M Targets INFACT

B-M was handling intelligence for its own client, Philip Morris, when STAT allied with INFACT, a corporate watchdog group which was new to the anti-tobacco fight, in 1993.

PM staffer Barry Holt said in documents that B-M could utilize third-party contacts with access to information on INFACT and its activities, Malone wrote. A five-page report concluded with plans for a third-party meeting with INFACT leadership "to assess the level and degree of resources and commitment to the campaign," the Journal said.

B-M referred calls to Philip Morris. PM spokesman Brendan Morris told Reuters it's important for PM to know what a wide range of stakeholders, including the public health groups, are saying about the company and its business practices. "If information was gathered under false pretenses in any way on our behalf, we agree that would be inappropriate," he said.


The White House is launching a global communications office headed by Tucker Eskew, media director. He will work closely with President Bush's counselor Karen Hughes, who is returning to her native Austin so her son can attend high school there.

Eskew has been involved with the London-based Coalition Information Center that was formed following 9/11 to respond to and refute misinformation put out by enemies in Bush's "war on terror." The new office is to make sure that the Administration speaks with one voice, which will entail close coordination with the Justice, State and Defense Depts.

Eskew's mentor was the late Lee Atwater, who was the first President Bush's political advisor. He will have a staff of about a dozen people.


Coca-Cola is paying $100 million to slap the "Minute Maid" name on Astros Field, in Houston, a baseball stadium that was known as Enron Field for the past three years. The 30-year deal provides "pouring rights" at Minute Maid Park for its orange juice unit, which owns brands such as Hi-C (fruit drinks), Fruitopia (fruit juices), and Odwalla (juices/ smoothies/spring water). MM is headquartered in Houston and employs about 2,200 workers there.

Tropicana, MM's archrival, has its name on the stadium of the Tampa Bay Devil Rays. It is a unit of PepsiCo.


Merrill Lynch is thinking about hiring former NYC Mayor Rudy Giuliani to help salvage its reputation that has been tarnished by a $100 million fine to settle a probe that it was too upbeat about the prospects of stocks, and a power struggle at the top.

The firm, according to The New York Times, is using pollster Penn Schoen, a WPP Group unit, to determine the public perception of Giuliani, who also was a top Justice Dept. prosecutor.


Omnicom's Fleishman-Hillard and Ketchum bagged a dozen Silver Anvils between them after being nominated in 22 categories. Those wins continue their dominance of PRSA's awards night. Kethum has won 51 Anvils in the last nine years, while F-H has picked up 39.

F-H won seven 2002 Anvils on behalf of California Dept. of Food & Agriculture (gov't/community relations); two prizes for New Jersey Dept. of Health and Senior Services (special events/observances and public service); SBC Communications (special events/observances for business services); Schering-Plough HealthCare Products (marketing consumer products/packaged goods); New Jersey Dept. of Health and Senior Services (marketing consumer services/healthcare), Zimmer Holdings (IR).

Ketchum, which won ten Anvils last year, claimed five during the June 6 ceremony at the Equitable Tower in New York.

Winning programs were for Orbitz (mktg. consumer svcs./travel tourism); Equifax (mktg. consumer svcs./ financial svcs.); Kikkoman Int'l (marketing B2B); Orkin (integrated comms./consumer services); J.R Simplot Co. (integrated comms./B2B).

Interpublic's Carmichael Lynch Spong won two Anvils for Select Comfort and one each for General Mills, and Department 56. WPP Group's Hill and Knowlton copped three for Compaq Computer, Motorola and Pacific Gas and Electric.

PRSA gave its 'best of" Silver Anvil Award to XM Satellite and its consultants Andrews Communications, PainePR, PR Consultants Group and Allyn & Co. for the national launch of the first-ever satellite radio service, a kick-off that had to be delayed due to the Sept. 11 terror attacks.

Internet Edition, June 12, 2002, Page 3


The 8th annual Technology Marketing magazine's top Media Influencers of 2002, which ranks technology media properties and journalists, selected Stephen Wildstrom of Business Week as the top writer in the field overall.

Wildstrom, who is a columnist, beat Walt Mossberg of The Wall Street Journal, who fell to No. 2 after being ranked as the No. 1 tech journalist for the past several years. Mossberg held his No. 1 ranking in the newspaper category.

Wildstrom also finished first in the ranking of tech writers who work for business magazines.

The rankings of the 30 most influential tech journalists, are based on a survey of PR pros and media buyers, plus the opinions of TM editors. The rankings are published in TM's June 2002 number.

Bob Evans, who is editor-in-chief of Information Week, was ranked as the third top tech journalist overall and No. 1 trade editor. Evans, who was ranked fifth last year, replaced David Kirkpatrick, senior editor of Fortune, who dropped to fourth place.

Jai Singh, editor-in-chief of, jumped from 8th place to fifth place.

Other top ranked editors included Michael Miller, editor-in-chief of PC magazine; Maria Bartiromo, anchor for CNBC's "Market Week," and Stephen Manes, contributing editor for Forbes/PC magazine.
Ranked as the "Hottest Tech Media" were: (1) The Wall Street Journal; (2) Business Week, (3) Information Week, (4) Fortune, (5) C/net, (6) USA Today, (7) New York Times, (8) Forbes, (9) CNBC, and (10) Red Herring.


Teen Vogue will begin publishing in 2003 with a Feb./March issue.

It will start with a circulation rate base of 450,000, according to Steven Florio, president/CEO of Conde Nast Publications. The magazine will publish six issues in 2003.

Amy Astley, currently beauty director of Vogue, will be the editor-in-chief of TV. She had been editor of the four test issues.

TV will be produced in the new Euro magazine size (6 3/4 inches by 9 inches). It will feature many of the same photographers who shoot regularly for Vogue, but it will be tailored to "sophisticated teen sensibilities," said Maurie Perl, SVP/corporate communications for Conde Nast.

The articles will address the full range of teenage interests, from celebrities, movies, music, and shopping to peer pressure, body image and self-identity. The magazine will also feature affordable fashions.

Inc. business magazine, published by Gruner + Jahr, is searching for a new editor-in-chief to succeed George Gendron, who is leaving on Sept. 1.


Kara Swisher, a columnist for The Wall Street Journal, who was artificially impregnated with sperm from an anonymous donor, has given birth to a son, Louis.

John Tierney, a twice-a-week columnist for the "Metro" section of The New York Times, is moving back to the paper's Washington, D.C., bureau, and Charles LeDuff, a reporter, is transferring to the Los Angeles bureau.

Vivian Schiller, 40, previously with CNN, is joining Discovery Civilization Channel in Bethesda, Md., where the channel is headquartered, as general manager. She will oversee all programming of the network, which is partially owned by The New York Times Co.

Arthur Kretchmer is stepping down as editorial director of Playboy after the magazine's 50th anniversary issue, which is due out in December 2003.

Brian Williams, 43, will replace Tom Brokaw, 62, as anchorman of NBC's "Nightly News" in 2004.

James Harding, who is media editor of The Financial Times, was named chief of the London-based newspaper's Washington, D.C., bureau, which he will join at the end of September. The new media editor, who was not named, is expected to be based in New York.

David Wighton, previously financial news editor in London for FT, was made New York-based financial news editor.

Ty Burr, 44, previously a writer-at-large for Entertainment Weekly, and Wesley Morris, formerly of The San Francisco Chronicle and The San Francisco Examiner, are joining The Boston Globe as film critics on June 17, succeeding Jay Carr, who retired last month after 18 years as the paper's film critic.

Andrea Thompson, the former "NYPD Blue" actress and former CNN Headline News anchor, has landed a part-time gig on Court TV.


The new-look Financial Mail magazine went back on newsstands in London on June 5.

Caroline Southey, who is editor of the weekly, said the "new FM will showcase the type of robust, relevant editorial content we know our readers want."

VDV World, which will make its debut with a September/October issue, will be devoted to the information needs of commercial Voice/Data electrical contractors. The magazine will be based in the Melville, N.Y., offices of Cygnus Business Media under the editorial direction of Arnold Blumenthal. 800/308-6397; fax: 631/845-2798.

(Media news continued on next page)

Internet Edition, June 12, 2002, Page 4


Howell Raines, who has made several staff changes since being named executive editor of The New York Times a few months ago, has changed his mind about getting a new business editor, according to Ken Auletta's New Yorker piece in the June 10 issue.

After taking over, Raines pressed Glenn Kramon to cut down on "soft features" and get more news on the front of the business section.

Auletta said Kramon, who has been business editor since 1997, recalled that Raines would badger him to move more quickly, not to wait until they nailed down every last detail of a story, a delay that could give competitors a chance to beat the Times.

Auletta said Raines was at first so exasperated by Kramon that he thought of replacing him.

"Raines wanted more news not just from Wall Street but from Hollywood, the fashion world, and the media," Auletta writes.

Saved by Enron

Auletta said the Enron scandal "crystallized what the newsroom admired about Raines, and also what it found alarming, as he pressed editors to produce page-one stories."

He wanted editors to "forget turf lines," Carolyn Lee, who is assistant managing editor, told Auletta. He wanted the Washington and the Houston bureaus, the national desk, and legal correspondents to get involved, as he asked for separate stories and also for long narratives that would give readers what Raines calls "one-stop-shopping pieces."

He told his business editors "The Enron story is going to be your World Trade Center story."

Auletta said others thought the coverage was excessive. People worried that "flooding the zone," could mean diverting resources from other stories.

In February, Raines held a lunch with Kramon and the business staff, and in his opening remarks talked only about Enron, mentioning none of the other stories they had produced, Auletta said.

The preoccupation with Enron sometimes overshadowed other business stories; for instance, in late January, Kramon argued that "the most important business story today" was not about Enron but how HMOs were curbing health coverage for the elderly, Auletta said.

"Nonetheless, Enron made page 1, and the sort of populist, people-getting-victimized story that Raines usually relishes-the type of story that, before the Enron scandal broke, would have produced an indignant editorial-appeared in the business section," said Auletta.

One reporter observed that under Raines the Times "is a more exciting place to work," but she worried that there was "a lot of reporting on the moment."

Auletta said Raines, "who has become a Kramon fan," defends himself from this sort of criticism.

"Enron is a huge story, and it's a story of as much sociological significance potentially as the great populist reaction to the abuses of the Gilded Age."


National Geographic World becomes National Geographic Kids beginning with the Oct. 2002 issue.

The Washington, D.C.-based magazine, which is aimed at 8 to 14-year-olds, will carry ads and be sold on newsstands for the first time. Melina Bellows will remain editor-in-chief.

Ziff Davis Media is shutting down Ziff Davis Smart Business, formerly called PC Computing. The last issue will appear in June.

The publisher plans to bring back the title in September as a newsletter, and will maintain its Smart Business website.

Cygnus Business Media, based in Westport, Conn., has acquired Melville, N.Y.-based Frozen Food Age and Food Logistics magazines from VNU Business Media.

The sale also includes the publications' websites and Editors and reporters will remain at both publications.

Veranda magazine, which was started 25 years ago as a local home-and-garden magazine for upscale residents of Atlanta, was acquired by Hearst Corp.

Lisa Newsom, founding editor, and a dozen fulltime staffers will continue to be based in Atlanta. The magazine, which is published six times a year, has a circulation of nearly 400,000.

USA Today has launched a travel website ( to provide 24-hour access to travel news, information and services.


Darmon Darlin, Susan Orenstein and Andy Raskin were hired as senior writers by Business 2.0 and will be based in the magazine's headquarters in San Francisco.

Alexander Jewett, former "Donahue" producer, was named executive producer of the NBC Enterprises' new "The John Walsh Show," a talk show scheduled to start this fall.

Elizabeth Mayhew, who was style/decorating editor for House Beautiful Magazine, was named Real Simple's style director.

Carole Hutton, 45, was promoted to executive editor of The Detroit Free Press, succeeding Robert McGruder, who died in April.

Lara Logan, 32, who has been a correspondent for a morning news program in London, has been hired as a contributing correspondent for "60 Minutes II," replacing Chicago-based Carol Marin.

Mike Cavender, news director, and Sue Stephens, assistant news director, have resigned from WGCL-TV, in Atlanta. No replacements were named.

Internet Edition, June 12, 2002, Page 7

(continued from page 1)

borrowings from $1 billion to $1.5B.

But S&P warned OMC that the credit rating allows "little capacity for earnings setbacks, additional share repurchases, or sizeable debt financed transactions."

One use of additional loans would be to help OMC pay back what it owes to investors in its $1.75B in 30-year zero coupon bonds if investors exercise this right. Such an option comes up this July and next February. The amount due back to investors at this point is a little over half the $1.75B face value.

The zero-coupon bonds give investors the right to buy OMC stock at prices of $143 and up. The $850M offering via Merrill Lynch in 2001 bumps the conversion price up 5% each quarter. It's now $165.

OMC spent $583M in cash in 1999-2001 buying its own stock. Many of the shares go to employees in the form of "restricted" shares (no cost to employees) and to cover employee options that are exercised.

OMC had little to say about the stock slide except to confirm that the WSJ was doing an article on the firm. OMC spokeswoman Pat Sloan said she knew of "no corporate development that accounts for the recent market activity of the stock."

Robert Callander, 71, chairman of the audit committee and a board member since 1992, resigned suddenly last week. The April 15 proxy statement had said he would remain on the board. The WSJ said reports were he was "unhappy with management's limited disclosure to the audit committee about the entity (Seneca) that holds many of OMC's former Internet assets" (such as Razorfish and

OMC owns PR firms handling about $800M+ in fees and employing more than 6,000 (Fleishman-Hillard, Ketchum, Porter Novelli, Gavin Anderson & Co. and Brodeur).

Hammered on Yahoo!

OMC was battered by negative comments on the Yahoo! bulletin board.

Fourteen postings urged "strong sell," two urged "sell," two urged "hold," and one advised "strong buy." Nineteen messages were posted June 6 and 42 on June 7 (vs. 3-6 messages on a normal day).

"What a laugh," commented one participant when ML reversed its downgrade after one week and replaced it with "intermediate-term strong buy."

Analyst Lauren Fine said OMC now presented "a rare buying opportunity" and that ML's price target remains about $100 a share. She believes there has been an "overreaction" to the news about the WSJ article and Callander's resignation.

A Yahoo! message posted by "omcmania" gave a 10-point analysis of OMC's current situation, noting S&P is allowing OMC "no room for error" in its earnings.

"Sales were by institutions, not little guys," said another message. Comparisons were made to the collapse of stocks such as Enron and Worldcom.

A lengthy debate took place over whether the WSJ had the guts to criticize an ad agency like OMC that buys so many ads in the WSJ.

One participant commented that if the WSJ feels its integrity is being challenged, "there will be dire consequences." It is the WSJ that could destroy OMC and not the reverse, said this message.

One poster said OMC is still within "its trading range" (of $60-$95).

An analyst said, "There has been a decisive breakdown on the technical side," and that on the "Japanese candlechart, OMC shows a bearish three dark crows over the past week, which means it has a downside target in the mid-$60's."

Insider Sales Hit

At least three Yahoo! participants complained of excessive sales of OMC by insiders.

The Yahoo! site, dating back to May 31, 2000, lists 89 insider transactions including 70 sales or planned sales; 12 exercises of options, six acquisitions via restricted stock, and one statement of ownership.

There are no instances of insiders buying the stock on the open market.

Alan Rosenshine, CEO of BBDO, sold 242,000 shares for $21,373,963. He acquired $17.1M of the shares by exercising options that cost him $1.8M. His price for acquiring the other $4.1M in stock is not given.

Keith Reinhard, CEO of DDB, sold 313,450 shares for $27.4 million in exercising options that cost him $6 million.

OMC fulfills these options with shares that it has acquired in the open market.

It spent $286M on purchase of treasury shares in 1999; $237M in 2000 and $60.1M in 2001, or a total of $583.3M.

The Yahoo! inside tally shows 15 individuals have sold 841,439 shares worth $71.9M since May 31, 2000. Average price is $85 a share. Not counted are some planned sales that have yet to go through. A total of 35,750 restricted shares that vest in the next few years were given to five individuals.

Stock options have grown from five to 15% of stock outstanding at major companies in the past ten years, said the New York Times June 6. Costs of grants are "masked under current accounting rules," said the story by Gretchen Morgenson. Shareholder groups want the costs deducted from revenues.

SUICIDE BOMBERS VS. TERRORISTS, a pro-Israel media watchdog group, is pressuring the worldwide media to "demonstrate moral leadership and journalistic integrity" and "label Palestinian suicide bombers as 'terrorists.'" More than 32,000 people have signed the "terror petition" that it plans to distribute to editors and reporters.

HR also has a one-page "Are you tired of terrorists getting away with murder?" information sheet.

The info sheet takes issue with media reference to Palestinian bombers as "militants," "activists," or "freedom fighters." According to HR, "the media says it doesn't want to make moral judgments, but these neutral words suggest some moral justification to the madness."

Internet Edition, June 12, 2002, Page 8



In response to a $14 slide in its stock price last week, Omnicom said it "knows of no corporate development that accounts for the recent market activity of its stock."

That's a disingenuous remark if ever we heard one.

A better remark would be: "There appears to be a general loss of confidence in just about anything we say or do."

That would capture the spirit of the 61 messages that deluged the bulletin board for OMC on Yahoo! in two days last week.

Before anyone can deride such postings, the fact is that any investor in Enron who followed that company's bulletin board on Yahoo! would have ditched the stock long before negative reports started to hit the press. Wild as some of the comments about OMC are, they're better than the near zero in explanations that emanate from the company.

This ad/PR conglomerate, which abjures PR for itself, may singlehandedly prove the necessity of having such a function.

OMC is far from alone in inviting disenchantment. The news columns are laden with reports of consumer and investor dismay over certain corporate practices.
Distrust of corporations "threatens our still-tentative recovery," wrote New York Times columnist Paul Krugman in a June 4 piece entitled, "Greed is Bad." He says evidence indicates that "many, perhaps most, large companies were fudging their numbers" in the past five years.

The evidence he cites is a "dramatic divergence between profits companies reported and other measures of profit growth" for that period. An NYT news column noted that "complex financial statements" befuddle the average investor and that option costs are often "masked under current accounting rules."

One thing that needs examining is the stock option plans of OMC, especially after Merrill Lynch said a "staggering" amount of options has been issued under the latest plan.

Our specific gripe is that OMC refuses to explain its zero-coupon convertible bonds, of which it has now issued $1.75 billion ($850M via Merrill Lynch and $900M via J.P. MorganChase).

Assembling our own literature on this subject, we find that the fees for underwriting such deals are "often four to five times as high as those for most ordinary bonds" (Wall Street Journal, 1/02/02); users may not be able to tap other forms of credit, and that, "If the stock plunges, potentially it's a death spiral" (NYT Floyd Norris column 4/27/01).

OMC, fearing investors may demand their money back within the next year, is expanding its lines of credit. But Standard & Poor's has put OMC on a short leash It has warned that OMC must adhere to its earnings promises, must stop buying its own stock (for options and other uses) and must not make any more "sizeable" debt financings.

Also in the dock here is Merrill Lynch, which handled the initial $850 million zero-coupon offering. An ML report May 30 by analyst Lauren Fine said investors should not worry about the offerings because of certain safeguards. But the report neglected to note that ML handled the initial $850M offering. Fine's report said that OMC had to be above $84 on Feb. 7, 2002 for investors not to demand their money back. Since OMC has now fallen as low as $72, we wonder what that means.

The ML PR dept. is either short-handed or ineffective or both. "Aides" and "temporaries" usually answer the phones, asking why reporters are calling. The PR pros appear to be overburdened with work and handling a variety of things at once.

None of them could produce an expert on LYONs who would discuss this complex debt vehicle with us. We recommend that a bullpen of 4-5 PR pros answer all press calls themselves and stop hiding behind the aides.

Oddly, we read in the June 3 Advertising Age that the ad account of ML at J. Walter Thompson of WPP is $118 million. One major job of the ad budget is countering all the bad publicity ML has received over its $100M settlement with New York State on charges of analyst bias. ML faces billions in lawsuits from disgruntled investors. Yet PR is being short-changed in this environment while umpteen millions are earmarked for ads.

ML on May 30 announced that starting in September its analysts will only be able to give one of three ratings: buy, neutral and sell. "Strong buy" has been eliminated. Also, under a new compensation system, analysts will be paid on how accurate they are and how their ratings benefit consumers. The New York Post on May 5 had tracked how ML ratings on 20 top stocks had actually fared. Writer Terry Keenan found that 18 of the 20 had gone down in the past year in spite of mostly "buy" or "neutral" ratings. EMC Corp. ("near-term neutral") was off 81%; General Electric ("near-term strong buy") was down 35%; Tyco ("long-term strong buy") was off 60%, and Lucent ("near-term neutral") was down 60%. Johnson & Johnson ("near term strong buy") was up 33%.

ML customers have lost $10.3 billion by relying on ML stock ratings, Rep. Michael Oxley (R-Ohio) said in a letter to The New York Times June 9.
--Jack O'Dwyer


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