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Opening Bell: 5.23.06

Euronext Backs Merger Proposal By NYSE Group (WSJ)
The courtship of Euronext won't be as smooth as the NYSE would like. The Deutsche Börse anow has a bid in (as we predicted yesterday), which they claim will be superior for Euronext shareholders. One disadvantage that faces the Deutsche Börse is that they can't offer the possibility of being a trans-Atlantic exchange, the way NYSE can. At the moment Euronext still favors the NYSE, but it would be unfathomable for The Deutsche Börse to not make another offer. And it wouldn't be a surprise to see a third get into the mix.
And Now For The Vonage IPO (GigaOM)
The market is bracing for the IPO of Vonage, the first good old-fashioned unprofitable tech and consumer giant we've had in years Like Google, lots of people including the non tech-savvy have heard of them. Unlike Google, they're not pulling in mountains of cash. If there's a parallel from the .com years, perhaps it was the IPO of Louis Borders' WebVan, which promised to delivery the groceries. Eventually, some companies have fulfilled its vision, but at the time the company had spent too much on distribution centers around the country, without much hope of profitability. Now with all of the cable and telecom giants offering cheap IP phone calls, not too mention free phone calls from more exotic offerings like Skype, Vonage faces the same profitability questions.
Large-Cap Internet Courtships: Do They Make Sense? (PaidContent)
The answer is probably no, they don't make sense. JP Morgan is out with the report exploring the possibilities for some of the large internet players (MSN, eBay, Google, Yahoo) to tie the knot with one another. Take one that gets bandied about from time to time, MSN-Yahoo. There's some idea that if the two of them teamed together, they could possibly take on Google in search. But let's ask a practical question: How do you merge two search engines? Do you make a page with two searchboxes? Do you just redirect MSN visitors to Do you just merger their databases and server farms? Do you just tell MSN users to try Yahoo now? It can't be done, unless we're really missing something. The same phenomenon would be true to a lesser extent in some of the other tie-ups, though perhaps eBay is unique enough to complement another player. Should prompt some chatter today.
Stock options probe extends to Seattle company (Seattle Times)
Depending on your perspective, the widening net of the stock options investigations will either demonstrate the need for even tougher regulations like Sarbanes-Oxley, or prove that they're a useless albatross that doesn't really make shareholders any safer. Arguably, not only don't regulations protect shareholders (much), but they make the situation worse, as companies find more exotic ways to disguise payments. The problem is not the payments themselves, but rather the difficulty shareholders have in measuring the operations of a company. The idea that financial trickery can be outlawed and then stopped is a flawed one, but there's no doubt that the continued escalation in regulation and compliance costs will continue to burden many legitimate operations.

Gas Prices Legitimate, Study Says (NYT)
Get ready for a shocker; those high prices at the pump are actually a reflection of increased oil prices. Other factors included supply disruptions from Hurricane Katrina -- you know, that thing on TV. Interestingly, the FTC report found 15 instances of so-called "gouging" by refineries, which they defined as price increase not necessarily attributable to cost increases. This sounds like a screwy definition, one likely to play on people's ignorance, as opposed to actual economics. Fact is, cost increase at a given location won't always explain price increases. The obvious example is when there are cost increases at all of your competitors, and you have to raise prices to avoid a shortage. Most people won't get this, and it seems the FTC was confused as well. Still, the report should provide some cover for big oil.
Your wireless future (Business2.0)
Why should you get to know what's going in wireless technology? Because any list of upcoming IPOs includes several in the space, whether in mobile content or technology. And VCs are pouring money into wireless startups at a breakneck pace, which means that they're priming the pump for more IPOs and mergers in the coming years. This article starts off with a compelling statement, that cell phone-based services and multimedia are right now what the internet was back in 1998. There's a lot of promise, but still too slow and expensive. Definitely worth reading, and familiarizing yourself with some of the names.
Toyota Rolls Out First Made-In-China Camry in Bid to Catch Up With Rivals (AP)
Aha, so Toyota understands that China is necessarily the best place to do industrial manufacturing. Oh wait, the cars they're building there are specifically for the Chinese market. They're just going where the buyers are, which is a critical part to their strategy. It's time for Wall Streeters to look at the Toyota strategy and question some assumptions about manufacturing, location, and the viability of the US as an important place for it. The assumption that the US can't compete anymore in that area is a result of lazy thinking, even if it can be eloquently defended by an MBA.
Alaska Senate Approves New Profits Tax (AP)
It's a well-known phenomenon that when oil prices are high, countries exert leverage over producers to grab a greater share of the profits. The goings on in Venezuela and Ecuador show that this is holding again in this cycle. But apparently it's also true when it comes to individual states. The Alaska Senate approved new taxes on oil profits made from in-state production, slightly increasing their take, as compared to the previous code. Alaska has always had a reputation for being quite friendly to the important oil industry base, but such friendship can turn into testy rivalry when there's money on the table. Now will Texas do the same thing?
Intel Pushes Chip Production Deep Into China's Hinterlands (WSJ)
It would be nice if American manufacturers could just show up in China, hire 1,000 engineering graduates, and start pumping out the product. Recent scandals involving university researchers and other doubts about the quality of their graduates (yes, even those millions of engineers who are eating our lunch) have shown it's still difficult to set up technical operations in the country. So when Intel built a new plant in China, they had to go through quite a process in order to bring employees up to speed. This included sending them away to special colleges, where they could be retrained from start. They were also aided by local educational programs, which prepared students for the US style of business. In this case, the plant is deep into the Chinese heartland, far away from the relatively prosperous coastal cities like Shanghai. But in spite of the promise, there does seem to be a treadmill aspect to manufacturing. Constantly running away from higher labor costs leads to special colleges and training problems for the people in the less educated poorer parts of the country. Should be interesting to see how successful these plants are for the chipmaker.
Dusting Off All The Housing Market Cliches (Matrix)
We live in strange times when, as real estate analyst Jonathan miller points out, the chief economist for the National Association of Realtors David Lereah is one of the most polarizing figures around. But a perfect storm of economic events (housing related) and cultural events (the rise of the Freakonomics guys who have a beef with the NAR) has made it so. Now he's regularly making the rounds, spinning on behalf of houses everywhere, telling people that everything is ok. In this instance, Miller simply points out how many cliches Lereah cites in one recent BusinessWeek article. All this stuff about soft landings, the economy being healthy, and how people live in their homes so they can't crash is not really befitting of a chief economist.