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Business Briefs

Reported by Star-Bulletin staff & wire

Monday, February 21, 2000

Airlines backtrack on fare increase

CHICAGO -- UAL Corp.'s United Airlines, Delta Air Lines Inc. and other U.S. carriers retreated from last week's fare increases, which were designed to offset rising fuel costs, after Northwest Airlines Corp. refused to join.

Continental Airlines Inc. and US Airways Group Inc. also rolled back their increases, said Tom Parsons, editor of Best Fares magazine. Fifth-largest carrier Continental initiated the increase Friday, boosting U.S. round-trip fares as much as $30.

Airlines generally roll back any increases that rivals don't match to avoid getting caught at a competitive disadvantage. Northwest, the fourth-largest carrier and a frequent spoiler of fare increases, never joined. The plan would have been the second fare increase of the year and the sixth since the start of 1999. Airlines last month also tacked on a fuel surcharge on domestic tickets. Jet fuel prices more than doubled in the last 12 months as the price of crude oil climbed to nine-year highs.

Microsoft fight heads back to court

WASHINGTON -- Microsoft Corp.'s antitrust battle with the government returns to federal court as the two sides have failed to reach a settlement of the landmark case.

Opposing lawyers will present closing arguments tomorrow on whether the world's leading software company violated the law, setting the stage for a later ruling by U.S. District Judge Thomas Penfield Jackson. He declared the company a predatory monopoly on Nov. 5, stopping short of finding it acted illegally. Lawyers for the U.S. Justice Department and 19 states will urge Jackson to conclude Microsoft illegally protected its monopoly over personal computer operating systems. Microsoft will argue it competed hard -- and legally -- to remain the world's No. 1 software firm.

In other news . . .

TOKYO -- The benchmark Nikkei stock average shed 245.28 points, or 1.23 percent, to close at 19,543.75 points today. The dollar bought 110.58 yen in late Tokyo trading, down 0.16 yen from Friday.

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Of Mutual Concern

News for mutual fund investors

Merrill Lynch executive touts Internet stocks

PRINCETON, N.J. -- Internet stocks, which have more than doubled during the past year, will keep surging as many companies start to make profits, said Robert Zidar, co-manager of Merrill Lynch & Co.'s Internet Strategies Portfolio. Retailers and other Web sites are racking up losses now because they're spending on research and development, investments that will boost sales and lead to profitability, Zidar said. Shares of Web sites such as Yahoo! Inc. and Internet-gear makers like Cisco Systems Inc. aren't overvalued, he said. The rise in Internet stocks is not a speculative "bubble" that will soon burst, and investors ought to buy shares in companies with a plan to turn profitable, Zidar said. The value of his $1 billion fund has risen two-thirds since its November inception. The Bloomberg U.S. Internet Index has risen 39 percent in that period, gaining 123 percent in the past year.

Manager of hot fund branches out on his own

BOSTON -- The manager of Fidelity Investments' investor darling Aggressive Growth mutual fund has stepped down, the firm announced. Under Erin Sullivan's watch, the fund had a 103 percent return last year. It has $17.2 billion in assets. Sullivan, who plans to start her own hedge fund, will be replaced by Robert C. Bertelson, who had been manager of the Fidelity OTC Portfolio fund. Sullivan assumed control of the fund in 1997. She is a 1991 graduate of Harvard University. With $955 billion in assets under management, Fidelity is America's largest mutual fund company.

Fidelity shifts managers at four Select funds

BOSTON -- Fidelity Investments, the largest U.S. mutual fund company, said it named Nicholas Tiller to succeed Matthew Grech as manager of Fidelity Select Energy Service Portfolio. Grech is leaving Fidelity to pursue other opportunities. Tiller, whose new position was effective immediately, joined Fidelity's equity research group in 1998 as a restaurant industry analyst. He was an equity research intern following independent power producers in summer 1997. From 1991 to 1996, he worked in various positions within Fidelity's retail group.

Fidelity also named Jeffrey Feingold portfolio manager of Fidelity Select Transportation Portfolio and Fidelity Select Air Transportation Portfolio to be effective Friday. Feingold succeeds Christopher Zepf, who will continue as an equity research analyst with a new assignment in the technology sector covering optical components and systems. Feingold will continue to manage Fidelity Select Defense and Aerospace Portfolio, as he has since 1998. Pratima Abichandani will become portfolio manager of Fidelity Select Medical Delivery Portfolio on Friday. She succeeds Shep Perkins, who will continue as an equity research analyst.

SEC considers forcing funds to disclose more

WASHINGTON -- The Securities and Exchange Commission, spurred by Congress, may propose requiring mutual fund companies to disclose their after-tax performance to investors, SEC officials said. "The truth is, many investors lack a clear understanding of the impact taxes have on their mutual fund returns," SEC Chairman Arthur Levitt said in a speech last week. Fund returns aren't adjusted now to take into account the taxes paid by investors on dividends and capital gains. Taxes can be the single biggest cost associated with mutual funds for the average investor.

The SEC staff proposal next month will call for firms such as Fidelity Investments and Vanguard Group to disclose the average investor's returns following funds' payment of income and capital gains taxes, SEC investment management director Paul Roye said. The SEC will decide March 15 whether to issue the plan as a rule proposal for public comment. The five commissioners, led by Levitt, then will review the comments before deciding whether to approve the rule.