The Urge to Merge

Microsoft, the dominant producer of desktop software, revealed it had held merger talks with Germany's SAP, the leading producer of the software used to run big companies. The talks broke off earlier this year. With $56 billion in cash, Microsoft has been looking for acquisitions that might give it a foothold in enterprise software at a time when growth of its base business is slowing. But the combination would have surely met opposition from antitrust officials and competitors on both sides of the Atlantic.

Up, Up and Away?

Federal Reserve officials shifted gears, sending clear signals they are prepared to raise interest rates further and faster to ensure that an inflationary cycle does not get started. In separate speeches, Fed Chairman Alan Greenspan and three presidents of regional Fed banks acknowledged that price increases are not as modest and temporary as they had anticipated and could require something more vigorous than just a "measured" response. One big worry: For the first time in years, wages are rising faster than productivity.

Happy Babies

The Bush administration handed a decisive victory to regional phone companies in their bitter legal battle against long-distance companies and upstart providers of local phone service. The Justice Department declined to join an appeal of a lower court ruling denying rivals access to the Baby Bells' local phone network at discounted prices, as mandated by the Federal Communications Commission. The FCC concurred, while the Bells promised increases in wholesale rates would be modest and delayed till after the election.

A Tightrope to Reform

Under intense pressure from business groups, the administration and shareholder advocates, SEC Chairman William Donaldson sought to broker a compromise on a proposed new rule that would allow shareholders to nominate directors to run against those proposed by the current board. Donaldson will be the swing vote on the issue, but reformers don't like one idea being floated: giving the board the chance at the next annual meeting to propose alternatives to any director who fails to win a majority vote of shareholders.

Paying for Their 'Sins'

Clear Channel Communications, the nation's largest radio network, agreed to pay a record $1.75 million to settle all outstanding indecency charges related to salty comments by program hosts Howard Stern, Elliot Segal and Todd ("Bubba the Love Sponge") Clem. Despite the network's repeated violations, the FCC took no steps to put any licenses in jeopardy. Democrats on the FCC voted against the settlement while critics noted the large contributions made by Clear Channel executives to Republican candidates.