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Originally published Wednesday, January 17, 2007 at 12:00 AM

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Business Digest

Schultz discusses MP3 potential for Starbucks

Pacific Northwest When Starbucks pulled CD-burning machines out of most stores that were testing them last year, many wondered if the company...

Pacific Northwest

When Starbucks pulled CD-burning machines out of most stores that were testing them last year, many wondered if the company would replace those machines with technology for filling MP3 players. The chatter got even louder last fall, when Starbucks unveiled its own area on Apple Computer's iTunes Web site.

On Tuesday, Starbucks Chairman Howard Schultz dropped the word that, "Within 12 months, probably, you're going to be able to walk into a Starbucks and digitally be able to fill up your MP3 player with music.

"Over the next six to18 months you will see us look at it, perhaps test it," he said in a talk in New York presented by the Levin Institute, an independent graduate institute within the State University of New York, and Bloomberg News.


Top software exec at IBM is hired

Microsoft has hired a top software executive away from IBM.

Donald Ferguson, chief architect of the IBM software group, joined Microsoft as a technical fellow in platforms and strategy working under the company's chief technology officer. Only 15 people hold the technical fellow title at Microsoft.

Ferguson, an IBM employee since 1985, will focus on information technology in business, including trends and work on current and future Microsoft products.

Flow International


Financial results of '06 to be restated

Kent-based Flow International said Tuesday it would restate its fiscal 2006 financial results, adding about $2 million to its revenue and net profit.

The restatement comes after the maker of ultrahigh-pressure waterjet systems found that its Taiwan-based subsidiary, Flow Asia, had improperly recognized about $2 million in sales in the first quarter of fiscal 2007, which ended July 31, 2006, rather than in the fourth quarter of fiscal 2006, which ended April 30.

Three senior executives of Flow Asia responsible for the improper revenue recognition left the company in November. The investigation also uncovered other, unspecified accounting errors, the company said.

Flow, which has been delinquent in its required financial reports for several months during the review and is subject to being delisted from the Nasdaq, said it would file a revised report for fiscal 2006 and reports for the first and second quarters of fiscal 2007 by the end of this month.

Pacific Northwest

PW Eagle

N.J. firm buying PVC-pipe company

PW Eagle, the Eugene, Ore.-based manufacturer of PVC pipes and fittings, has agreed to be bought by J-M Manufacturing of Livingston, N.J.

Privately held J-M Manufacturing will purchase PW Eagle's outstanding stock for $33.50 in the deal valued at $400 million, the companies announced Monday.

The news pushed PW Eagle's stock up $3.06, or 10.2 percent, to $32.92 Tuesday. It had traded below $3 in early 2005 before a spike in demand for PVC pipe sent the price soaring.

The company had been under pressure from its two largest shareholders — Pirate Capital and Caxton Associates — to increase the value of investors' holdings.

Front Porch Classics

2 toy companies complete merger

Front Porch Classics, the Seattle company that makes handcrafted games, has merged with New York-based Sababa Toys. The combined company will operate under the Sababa name, although Front Porch Classics and Sababa Toys will remain distinct brands. Sababa produces licensed versions of toys like Rubik's Cube, Magic 8 Ball and Othello. Helen Rockey, who has been chief executive of Front Porch Classics, will become vice chairman of the combined company.

Nation and World

Safeco / Geico

Court indicates it may limit duties

U.S. Supreme Court justices signaled Tuesday that they may limit the duty of insurance companies to tell consumers about flaws in their credit histories, questioning a ruling that insurers say would open them to billions of dollars in damages.

More than half the court's nine members voiced support for arguments by Safeco and Geico, questioning whether Congress intended for the Fair Credit Reporting Act to require notification of every consumer who doesn't get the best rate.

The insurance companies are fighting class-action lawsuits by consumers who sought price quotes, weren't offered the lowest rates and now say they should have been told the insurer relied on their less-than-perfect credit histories. A federal appeals court let the case go forward.

"There will be tens of millions of these notices going out," Justice Stephen Breyer told Scott Shorr, the lawyer for the consumers. Breyer predicted the notices "will become meaningless" to consumers and most will go "right in the wastebasket."

The court is scheduled to rule by July in the cases.


Supreme Court won't hear appeal

The Supreme Court on Tuesday refused to consider an appeal brought by a group of IBM employees who accused the company of age discrimination when it altered its pension plan. The lawsuit could have cost the company $1.4 billion.

In the case, a former employee named Kathi Cooper served as the lead plaintiff in a class-action suit brought on behalf of 250,000 current and former IBM workers.

The suit argued that IBM's "cash balance" pension plan was discriminatory because it allowed younger workers to accrue benefits at a faster rate than older workers.

IBM switched to a cash balance plan in 1999. Such plans provide workers with individual accounts that can be cashed out when they leave the company and are intended to appeal to younger workers who are more likely to switch jobs.

The IBM case has been closely watched, as roughly 1,500 companies have adopted cash-balance plans. The company earlier agreed to settle the case for $1.4 billion if it lost in the courts.

But the Chicago-based 7th U.S. Circuit Court of Appeals sided with IBM in August, ruling that the "terms of IBM's plan are age-neutral."


Fourth-quarter profit down 39%

Intel's fourth-quarter profit plunged 39 percent as the world's largest chip maker endured a painful price war with much-smaller rival Advanced Micro Devices and continued to pay for a massive restructuring.

Still, Intel said Tuesday it sold record numbers of microprocessors and flash memory chips, and the company managed to beat analysts' tepid expectations.

Intel said net income for the period ended Dec. 30 was $1.5 billion, or 26 cents per share, versus $2.45 billion, or 40 cents per share, in the same period a year ago.

Revenue for the quarter was $9.7 billion, down 5 percent from $10.2 billion a year ago.

Excluding one-time charges, Intel said it earned $1.7 billion, or 30 cents per share, beating estimates.

Analysts were expecting the company to earn 25 cents per share on $9.44 billion in revenue for the quarter, according to a survey by Thomson Financial.

Wells Fargo

Bank boosts earnings 13%

Wells Fargo fattened its profit margins and pocketed more customer-service fees to boost its fourth-quarter earnings 13 percent, while U.S. Bancorp lowered its problem loans and expenses to eke out a more-modest improvement.

The results released Tuesday provided investors with their first look at how the nation's biggest banks fared during the final three months of 2006 — a period in which the U.S. economy continued to expand despite jitters over crumbling home sales and weakening property values in many parts of the country.

At Wells Fargo, the deepening real-estate slump pinched mortgage revenue, but the nation's fifth-largest bank overcame the slowdown by plumbing other financial pipelines to post a fourth-quarter profit of $2.18 billion, or 64 cents per share. That compared with net income of $1.93 billion, or 57 cents per share, a year earlier.

Wells Fargo shares climbed 72 cents, or 2 percent, to close at $36.23 on Tuesday.

Compiled from Seattle Times staff, The Associated Press, Bloomberg News

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