OECD Chief Economist Pier Carlo Padoan warned the eurozone economy could contract by as much as 2% this year, a figure that the Paris-based think tank had laid out as its worst-case scenario in November.

In its twice-yearly global economic outlook, the OECD — which comprises the world's most developed economies — said its average forecast was for the eurozone economy to shrink 0.1% this year and grow a mere 0.9% in 2013.

"Today we see the situation in the euro area close to the possible downside scenario" in the OECD's November report, "which if materializing could lead to a severe recession in the euro area and with spillovers in the rest of the world," Padoan told reporters before the report's release.

The report forecasts Europe falling further behind other countries, particularly the United States, whose economy is expected to grow 2.4% this year and 2.6% next.

"There is now a diverging trend between the euro area and the U.S., where the U.S. is picking up more strongly while the euro area is lagging behind," Padoan said.

Europe itself is increasingly split between a wealthier north continuing to grow and a southern rim that is sliding deeper into recession, the OECD figures show.

Germany, Europe's largest economy, will accelerate to 2% growth next year after 1.2% growth in 2012, while France, the eurozone's second-largest economy, will expand 1.2% next year after 0.6% growth this year, the OECD said.

Italy's economy, by contrast, will shrink 1.7% this year and 0.4% in 2013, the OECD forecast. Spain is also set to remain mired in recession, with contraction of 1.6% this year and 0.8% next.

Padoan called on eurozone leaders to adopt a "growth compact" to promote growth even while reducing deficits. French President Francois Hollande has made securing such a pact the focus of his European diplomacy in the first weeks of his administration.

So-called eurobonds — debt issued jointly by countries in the currency bloc — could be used to recapitalize banks, Padoan said. He also reiterated his call of six months ago for the ECB to do more to stem Europe's crisis.

The ECB has an "essential" role to play in solving Europe's crisis, Padoan said, both by using its balance sheet firepower to shore up banks and by lowering interest rates. The ECB should also consider renewing the "unconventional measures" it used last year such as buying up government bonds, "if there is need to cope with contagion problems," Padoan said.
Asian economies will also do better than Europe, the OECD predicted. Japan is forecast to grow 2% this year and slow down to 1.5% in 2013, while China is expected to accelerate from 8.2% to 9.3%.

Despite their growth downgrades for Europe, the OECD's figures are more optimistic than those of the International Monetary Fund. Last month the IMF predicted Europe's economy would shrink 0.3% this year, with the U.S. expanding 2.1%.

NASHVILLE, Tenn. (AP) — Department store owner Dillard's is laying off 125 workers in Nashville as it moves online fulfillment to a central Arkansas center.

WPLN radio (http://bit.ly/K8es0b ) reported the Little Rock, Ark,-based retailer notified the state it will end the local jobs by the end of summer.

Dillard's spokeswoman Julie Bull said the newest fulfillment center is bigger and closer to company headquarters. The company has operated a fulfillment center in Nashville since it bought Castner Knott in 1998.

Tennessee Department of Labor and Workforce Development spokesman Jeff Hentschel said the department has scheduled a meeting with affected workers and will help them look for new jobs.

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“It is, in fact, a war on all fossil fuels. ... Coal just happens to be the first one in a long list,” U.S. Rep. Morgan Griffith, R-Va., told more than 100 conference attendees at the MeadowView Marriott. “Coal is taking the brunt of the hit right now from the current administration and its (EPA) administrator, Lisa Jackson.”

U.S. Chamber of Commerce Senior Vice President Bill Kovacs said there are now 154,538 pages of EPA regulations.
“If the agency wants to get you, they can get you,” Kovacs said.

Since March 2010, 350 energy projects with a $570 billion economic impact and 1.9 million jobs haven’t been able to get EPA permits, according to Kovacs.

The Sierra Club, said Kovacs, has taken credit for retiring more than 100 coal-fired power plants and preventing another 150 from being built.

“The regulatory process has become so out of whack in the last several years. ... The regulations are so broad and so sweeping and Congress literally has no ability to control it,” Kovacs added. “No one is getting out of this alive. If we want jobs, we have to get control of the regulatory system.”

The Obama administration, according to Kovacs, has pursued a “sue-and-settle” strategy by engaging environmental groups to sue the EPA to get the agency to enforce new regulations.

Griffith cited a 2008 newspaper interview with Obama, who was quoted as saying he intends to cap greenhouse gases and make coal-fired power plants too expensive to build.

West Virginia Democratic primary voters last May were so upset with Obama that a Texas jail inmate got on the ballot and received 40 percent of the vote, Griffith said.

“When you hear the president talk about energy, the word ‘coal’ does not appear...” Griffith said. “When the (presidential) election is over and should they still be in office ... they will feel more flexible when things are over. ... They will take those regulations that apply to future (coal-fired power) plants and say ‘Those regs are really good regs and we ought to apply them to all plants and give them three years to comply.’ ”

U.S. Sen. Bob Corker, R-Tenn., said the Obama administration shoots for clean energy standards.

“(The Obama administration says) coal is not going to be part of our equation in this nation by the year 2035,” said Corker. “They agree that to meet the clean energy standard, we will be using no coal. They want to create jobs in clean energy. They want to be the leaders in the world in the development of clean energies. ... I want to be the leader in the world in every category.”

Corker noted Congress could limit EPA regulations with legislative moves, but those moves would need two-thirds majority support to override an Obama veto.

U.S. Rep. Shelley Moore Capito, R-W.Va., said the GOPcontrolled House passed legislation late last year to make major regulations contingent on congressional approval, but the bill has never come up for a vote in the Democratic-controlled Senate.

Capito, who advocated continued congressional oversight of the EPA, said she challenged Jackson to visit communities impacted by EPA regulations.

“She said ‘That’s not my job. My job is to keep the water clean,’ ” Capito quoted Jackson as saying.

Still, Capito predicted Obama will flip-flop and back the Keystone oil pipeline project if his presidential race with GOP challenger Mitt Romney gets tight this fall.

NASHVILLE, Tenn. (AP) — Pet food company Mars Petcare is breaking ground on an $87 million regional innovation center in Williamson County.

The ground breaking ceremony on Tuesday in Thompson's Station will mark the beginning of construction on the four-building campus where Mars and the Nutro Company will create new pet food innovations for the North American market.

The new center will employ about 144 people and is expected to be finished by the end of 2013.

Mars makes pet food brands Pedigree, Whiskas, Cesar, Temptations, Nutro and Greenies and is headquartered in Williamson County, just south of Nashville.

NASHVILLE, Tenn. (AP) — Plastics recycler The Highlands Group is putting a new facility in Elizabethton.

Tennessee Department of Economic and Community Development Commissioner Bill Hagerty said the state is working toward making Tennessee the top location in the Southeast for high-quality jobs.

The new recycling center will have 34 manufacturing jobs.

The Highland Group is based in Winston-Salem, N.C., and also has a production facility in Johnson City.

The SpaceX company made history as its Falcon 9 rocket rose from its seaside launch pad and pierced the pre-dawn sky, aiming for a rendezvous later this week with the space station. The rocket carried into orbit a capsule named Dragon that is packed with 1,000 pounds of space station provisions.

It is the first time a private company has launched a vessel to the space station. That's something only major governments have done — until the present test flight. Launch controllers applauded when the Dragon reached orbit 9 minutes into the flight.

This time, the Falcon's nine engines kept firing all the way through liftoff. On Saturday, flight computers aborted the launch with a half-second remaining in the countdown; a bad engine valve was replaced.

The real test comes Thursday when the Dragon reaches the vicinity of the space station. It will undergo practice maneuvers from more than a mile out. If all goes well, the docking will occur Friday.

The space station was zooming over the North Atlantic, just east of Newfoundland, when the Falcon took flight.

NASA is looking to the private sector to take over orbital trips in this post-shuttle period; several U.S. companies are vying for the opportunity. The goal is to get American astronauts launching again from U.S. soil. SpaceX officials say that could happen in as little as three years, possibly four.

Until their retirement last summer, NASA's shuttles provided the bulk of space station equipment and even the occasional crew member. American astronauts are stuck riding Russian rockets to orbit until SpaceX or one of its competitors takes over the job. Russia also is making periodic cargo hauls, along with Europe and Japan.

SpaceX — or Space Exploration Technologies Corp. — is based in Southern California. That's where the company's Mission Control is located for this flight and where billionaire founder Elon Musk positioned himself for Tuesday's launch.

Musk, a co-creator of PayPal, founded SpaceX a decade ago. He's poured millions of his own money into the company, and NASA has contributed $381 million as seed money. In all, the company has spent more than $1 billion on the effort.

Hundreds of SpaceX and NASA guests poured into the launching area in the wee hours of Tuesday, eager to see firsthand the start of this new commercial era. The company had a single second to get its rocket flying, and that's all it needed.

Everyone, it seemed, was rooting for a successful flight. "Good luck SpaceX Dragon," read a hotel sign in nearby Cocoa Beach.

The six space station astronauts were especially enthusiastic; the crew beamed down a picture on the eve of the launch, showing the two who will use a robot arm to snare the Dragon.

In December 2010, SpaceX became the first private company to launch a spacecraft into orbit and retrieve it. That test flight of a Dragon capsule paved the way for this mission, which also is meant to culminate with a splashdown of the capsule in the Pacific.

This newest capsule is supposed to remain at the space station for a week before bringing back experiments and equipment. None of the other types of current cargo ships can return safely; they burn up on the way down.

SpaceX and NASA officials stress this is a demonstration flight and that even if something goes wrong, much can be learned.

"Whatever happens today, we could not have done it without (at)NASA, but errors are ours alone and me most of all," Musk said via Twitter right before Saturday's launch abort. The company will try again no matter what; two more Dragon supply missions, in fact, are planned this year.

Musk, 40, is the chief executive officer and chief designer for SpaceX. He also runs Tesla Motors, his electric car company.

NASA retired its space shuttle fleet last summer. The three remaining shuttles — Discovery, Endeavour and Atlantis — are now relegated to museums.

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After the social network’s stock fizzled on Friday in its long-awaited debut, its stock fell 11 percent on Monday, even as the rest of the stock market rallied.

The downward spiral has left some people sitting on big losses, and others scratching their heads. After all, nothing fundamental has changed at Facebook in the last week since the much-hyped company came to the stock market — Facebook still has more than 900 million users, its 28-year-old founder Mark Zuckerberg controls the company, and it is still one of the few profitable Internet companies to go public.

Facebook’s IPO —like Netscape’s in 1995 and Google’s in 2004— was billed as a milestone moment. Netscape’s offering ushered in the era of the Internet browser. The company’s stock more than doubled in its first day of trading. Google’s IPO heralded the age of search. It posted an 18 percent gain in its stock market debut. Facebook was supposed to offer proof that social media is a viable business and more than a passing fad.

But investors don’t seem convinced. Facebook’s stock closed Monday at $34.03, down 11 percent from Friday’s closing price of $38.23. The investment banks that arranged Facebook’s offering set a price of $38 on Thursday. Although many investors had hoped for a big first-day pop, Facebook’s stock opened Friday at $42.05 and fluctuated between $45 and $38 throughout the day.

For a host reasons, Facebook’s falling share price shouldn’t have been a surprise.

• It’s IPO occurred the same week that the markets posted their worse performance so far in 2012. The S&P 500 index fell 4 percent.

• Meanwhile, Europe was trying to avert financial disaster.

• At the same time, the American public’s love affair with the stock market continued to wane. People have yanked over $400 billion from U.S. stock mutual funds since 2008.

• Banks are being cautious too. All this is happening in the backdrop where banks are under pressure from regulators to become more conservative after the financial crisis. “Regulators want banks to take less risk,” said Larry Tabb, founder and CEO of Tabb Group, a markets research firm. “To support a $100 billion offering can be challenging in this environment.”

• Investors were also spooked by the trading glitches at the Nasdaq stock market on Friday. Some people weren’t sure if their trades had been executed and trading of the stock was delayed by a half hour.

“It was like trying to get a jumbo jet to take off in turbulent weather,” said Kathleen Shelton Smith, principal Renaissance Capital, IPO research. “It’s going to be a bumpy ride.”

With all of these factors in place on the day of Facebook’s IPO, some people may wonder why Facebook’s stock didn’t do worse. The answer is: Facebook had some help. On Friday, Facebook only got as low as mere pennies above the offering price of $38 per share but never fell below. The banks that underwrote the IPO, like Morgan Stanley and others, put in enough “buy” orders at $38 to keep the price from dropping below that level. It’s a customary gesture from underwriters to support the company they helped bring to market, explains Jay Ritter, a finance professor at the University of Florida. It’s a way to save face and show that the company and the bankers gauged an appropriate level of demand from investors and valued the company correctly.

Pulling off a successful IPO means properly gauging supply and demand. The investment banks arranging the transaction, the deal’s underwriters, work with the company to decide how much stock to sell and at what price. Facebook sold 421 million shares. That was a lot of stock to sell. It is one of the largest IPOs on record.

Investors and the technology industry are closely tracking the Menlo Park, Calif.-based company’s shares. In the same way that Netscape ushered in a new era for Internet darlings in 1995, Facebook may have done the opposite for similar companies waiting to go public today. There are 168 companies in the pipeline trying to raise $41 billion through IPOs in the U.S.

“Facebook has raised cost of capital for all the companies that come with an IPO in its wake,” said Smith.

Facebook’s falling share price may be a sign that investors are taking a rational look at company’s financial performance in comparison to its peers.

Though there are many ways to judge if a stock’s price is too high or too low, one popular method is to compare it to earnings. The so-called price earnings ratio, divides a company’s stock price by the company’s annual earnings per share. A higher ratio suggests a stock is expensive because, in a sense, it takes more years of earnings for investors to get back they paid for it. A lower ratio suggests it is cheap.

By this logic, Facebook looks expensive compared to some companies. It is trading at 74 times its earnings in the past year, according to FactSet, a research firm. That compares with Apple at 13.7 times and Google at 18.6 times. The Nasdaq index of technology stocks trades at 20.8 times.

“There must have been some sober second thoughts about this,” said Brian Wieser, an analyst at Pivotal Research Group who was first to come out with a “Sell” rating on Facebook’s stock on Friday.

It’s not that he thinks the world’s largest online social network is a bad investment. But at $38 per share, it’s just too expensive considering the risks associated with Facebook’s brief history and unproven advertising model, he says. His fair price, or “target price,” is $30.

Alper Aydinoglu, a student at DePaul University in Chicago sold all 50 shares that he got via Etrade at $38. He racked up an 11 percent loss.

“I’m not willing to stick through the volatility,” said Aydinoglu.

Wedbush analyst Michael Pachter, who came out with an “Outperform” rating on Facebook before its IPO, said he thinks the investment banks that arranged the offering overestimated demand for the company’s stock. Last week, the bankers, led by Morgan Stanley, increased the offering price range. On Wednesday, Facebook’s early investors and other stockholders increased the number of shares they planned to sell in the IPO. Both moves appeared to signal strong demand for the shares.

“The late addition of 84 million shares to the offering overwhelmed demand, limiting the first day price,” Pachter said in a note to investors.

Shares of some related social media companies also declined Monday. Zynga Inc., which makes FarmVille, CityVille and Mafia Wars, and gets the bulk of its revenue from Facebook users, fell about 1 percent to $7.07. The stock hit as low as $6.36, its lowest level since the San Francisco company’s December IPO. LinkedIn Corp., a network for professionals, dropped 1 percent to $97.99.

The proxy advisory firms ISS and Glass Lewis & Co Inc. recommended in separate reports that their clients not support CEO Mike Duke and former CEO Lee Scott, among others, for seats on the board.

“We believe that these directors, in their current or former positions as executives with direct responsibilities relating to the matters, should have been aware of the credible threat of widespread bribery involving the company’s Mexican subsidiary and acted more proactively to full investigate and resolve the claims,” Glass Lewis & Co. said Friday.

ISS said Saturday that it found The New York Times report “troubling.” ISS’s 1,700 clients include mostly asset management firms and pension funds.

Wal-Mart, with a market value of $214.4 billion and annual revenue of $443.8 billion, is the largest retailer in the world.

Early this month, New York City Comptroller John C. Liu said the five city pension funds he advises will vote against five board members. His office said in a statement then that it asked Wal-Mart in 2005 and 2006 to investigate concerns of legal and regulatory non-compliance.

The latest advice comes four weeks after The New York Times reported that Wal-Mart allegedly failed to notify law enforcement after its own investigators found evidence that $24 million in bribes were funneled through its Mexican unit in exchange for speedier building permits and other favors.

U.S. law forbids American companies from bribing foreign officials.

Glass Lewis’s 900 clients include mainly institutional investors. It recommended they vote against seven out of more than a dozen board members up for re-election, including Christopher Williams, chairman and CEO of The Williams Capital Group and head of Wal-Mart’s audit committee.

In addition to Williams, Duke and Scott, ISS is advising its clients not support Robson Walton, chairman of the board and a member of Wal-Mart’s founding family. Descendants of Sam Walton own 49.5 percent of the company.

The New York pension funds advised by Liu own 5.6 million Wal-Mart shares, according to a statement Monday. That stake is worth about $353.1 million.

Since the initial report from The New York Times, investors have sued top Wal-Mart executives, and federal authorities in the U.S. and Mexico have announced investigations.

CEO Duke said Thursday in a pre-recorded statement that “integrity is the essence of our corporate culture.” He reiterated that the company takes compliance with the U.S. Foreign Corrupt Practices Act seriously.

“The investigation is ongoing, and we are working aggressively to determine what happened, and we will take appropriate action if violations of the law or our policies occurred,” he said.

Shareholder votes are to be tallied at the company’s annual meeting June 1 in Bentonville, Ark., where the company is based.

By sharing confidential information with his close friend, Rajat Gupta “threw away his duties, threw away his responsibilities and broke the law,” Assistant U.S. Attorney Reed Brodsky told jurors in opening statements at Gupta’s highly anticipated insider trading trial in federal court in Manhattan.

Broadsky recounted how former billionaire Raj Rajaratnam earned close to $1 million after Gupta told him in a phone call that Goldman had received an offer from Warren Buffett’s Berkshire Hathaway to invest $5 billion in the banking giant in 2008.

“That was trading on secrets coming from someone who actually knew what was happening in the confines of the board room,” Broadsky said. “That’s called insider trading and that’s a serious crime.”

The 63-year-old Gupta is also a former board member at Procter & Gamble Co., one of the 30 companies that make up the Dow Jones industrial average and the owner of many well-known brands, including Bounty, Tide and Pringles.

A not-guilty plea by Gupta “tells you these charges are false,” defense attorney Gary P. Naftalis told jurors. “He never defrauded anybody. He never cheated anybody.”

The Westport, Connecticut, resident is charged with one count of conspiracy to commit securities fraud and five counts of securities fraud stemming from his communications with Rajaratnam.

A key to the case could be a July 29, 2008, phone call between Gupta and Rajaratnam that began with the old friends exchanging mild pleasantries, but then quickly turned serious and — by the government’s account — criminal. Rajaratnam asked about a rumor that Goldman Sachs “might look to buy a commercial bank.” On the other end of the phone, Gupta told him there was a “big discussion” on the subject at a recent meeting.

Brodsky said the call provided “a clear window into how these two men spoke to each other and helped each other out.”

Naftalis countered that the call harms rather than helps the government’s case because no unusual trading occurred around that time, and the men were discussing information already reported by analysts and journalists.

Prosecutors will try to convince the jury that the intercepted call and other evidence show that Gupta was providing inside tips that gave Rajaratnam an illegal edge in massive stock maneuvers. The tips from Gupta were like “getting tomorrow’s business news today,” Brodsky said Monday.

As a Goldman board member, Gupta had intimate knowledge of the confidentiality standards, the prosecutor added.

“He broke the very same rules he put in place,” he said.

Naftalis said prosecutors had taken “a series of innocent, unconnected acts and put them together and put a bad spin on otherwise innocent facts.”

He noted that Gupta was not accused of making any trades or receiving any secret payoffs or payments in what was “a very, strange insider trading case.”

The government alleges Gupta benefited because he made investments with Rajaratnam that grew at least temporarily while the Galleon Group hedge fund founder presided over $7 billion in funds. But the defense claims Gupta lost $10 million on those investments, and that there’s no evidence of kickbacks or any other quid quo pro.

Gupta “did no insider trading,” his lawyer said. The case, he added, “is based on guesswork. It’s based on suspicion. ... He spoke to someone on the phone and it turned out that person did something wrong.”

Rajaratnam, who was born in Sri Lanka, has been the biggest catch so far in a wide-ranging insider-trading investigation by U.S. Attorney Preet Bharara that’s resulted in more than two dozen prosecutions of white-collar defendants. But based on Gupta’s standing in the world of finance, his trial could draw more attention, and a potential conviction could resonate farther.

Aside from his role at Goldman Sachs, the Indian-born Gupta is the former chief of McKinsey & Co., a highly regarded global consulting firm that zealously guards its reputation for discretion and integrity.

Prosecutors in effect previewed their case against Gupta at the Rajaratnam trial. Rajaratnam was convicted last year and is serving an 11-year prison sentence, the longest insider trading sentence in history.

Jurors in that case heard testimony that at an Oct. 23, 2008, Goldman board meeting, members were told that the investment bank was facing a quarterly loss for the first time since it had gone public in 1999.

Prosecutors produced phone records that they said show Gupta called Rajaratnam 23 seconds after the meeting ended, causing Rajaratnam to sell his entire position in Goldman the next morning, saving millions of dollars. Also played at trial was the tape of the hedge fund manager grilling Gupta about whether the Goldman Sachs board had discussed acquiring Wachovia or an insurance company.

Prosecutors sought to maximize the impact of the Gupta tape by calling Goldman Sachs chairman Lloyd Blankfein to testify that the phone call violated the investment bank’s confidentiality policies. Prosecutors say Blankfein will return to the stand at Gupta’s trial.

Yahoo is selling half of its roughly 40 percent stake in Alibaba Group Holding Ltd., one of the most successful companies in China’s rapidly growing Internet market. The $7.1 billion price ensures that Yahoo will get a hefty return from its $1 billion investment in Alibaba in 2005.

The deal, coming a week after Yahoo’s CEO abruptly resigned over misstatements in his official biography, will provide more financial firepower for the latest regime trying to turn around the long-struggling Internet company. It came after more than two years of negotiations on how Yahoo will sell the stake.

Alibaba started out in 1999 as a business-to-business website linking factories in China to buyers around the world. It grew into a company that’s larger than Yahoo, with more than 25,000 employees working at a wide range of websites and online services.

Alibaba’s portfolio includes Taobao.com, China’s version of eBay, and TMall, which brand owners can use to sell directly to consumers. Alibaba also runs a search engine for shoppers and an online payment service.

Things have been going so well at Alibaba that it now accounts for a large portion of Yahoo’s earnings.

While Yahoo has profited from the Alibaba investment, Yahoo’s stock price has plunged by more than 55 percent since the company invested in Alibaba.

Yahoo’s revenue has been steadily shrinking as rivals Google Inc. and Facebook Inc. developed more products to grab the attention of Web surfers and attract more online advertising.

Alibaba is buying back its stock from Yahoo to gain more control of its own destiny, something that CEO Jack Ma wanted, especially as Yahoo became mired in its own internal disarray in recent years.

“The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future,” Ma said in announcing the deal with Yahoo late Sunday.

The deal calls for Alibaba to raise the money needed to buy Yahoo’s stake within the next six months. Yahoo will get $6.3 billion in cash and $800 million in a new class of preferred stock in Alibaba, a privately held company.

Yahoo also will license its brand and some of its technology to Alibaba during the next four years as part of an arrangement that will include an upfront payment of $550 million.

After taxes, Yahoo estimates it will receive $4.2 billion just from the upcoming sale of half its Alibaba stake. Yahoo had been trying to work out a tax-free deal, but it wound up too complicated to pull off.

In a conference call Monday with analysts, Yahoo Chief Financial Officer Tim Morse hailed the outcome as a “home run” for Yahoo’s shareholders.

Yahoo will sell another quarter of its original investment as part of Alibaba’s initial public offering of stock, expected by the end of 2015. Yahoo will then have the option of selling its remaining holdings on the open stock market.

By staggering the sale of its stake over several years, Yahoo conceivably will make even more money if Alibaba is as successful as it has been in recent years. Alibaba is now worth an estimated $35 billion, up from $2.5 billion seven years ago.

Both Alibaba and Yahoo said they may collaborate on other joint ventures in the future, despite the increasingly strained relations between the companies that contributed to more than two years of sometimes-prickly negotiations.

Yahoo intends to distribute most of the proceeds from its initial Alibaba sale to Yahoo shareholders, although its recently reshuffled board of directors hasn’t decided yet how the money will be paid out. For now, the company is adding $5 billion to its pool of funds for buying back its stock, raising its total commitment to $5.5 billion over an unspecified time frame.

The Alibaba windfall provides a measure of comfort to Yahoo’s long-suffering shareholders, many of whom still lamenting the company’s squandered opportunity to sell itself to Microsoft Corp. for $47.5 billion, or $33 per share, in May 2008.

Yahoo’s stock was at $34.14 when Yahoo announced the Alibaba investment in August 2005. It fell to $19.18 before Microsoft made its initial bid, in January 2008. Yahoo’s stock is now trading at less than $16.

The Alibaba announcement couldn’t have come at a better time for Yahoo. A week ago, newly hired CEO Scott Thompson left after just four months because of fallout from a bogus college degree listed on his official biography. As part of the shake-up, the company appointed a disgruntled shareholder, hedge fund manager Daniel Loeb, along with two of his allies to the board of directors, while accelerating the exit of five other directors.

Morse described the timing of the Alibaba deal as coincidental, but that didn’t stop analysts from theorizing that the company is operating with a new sense of urgency and direction under the new board and interim CEO Ross Levinsohn. His background is more deeply rooted in Internet content and advertising than Thompson’s was.

Citigroup analyst Mark Mahaney called the Alibaba deal as a “meaningful win” for Yahoo, while BGC Financial Partners analyst Colin Gillis is so encouraged by the recent developments that he believes Yahoo’s stock price can hit $20 within the next year, up from its previous target of $18. Yahoo’s stock hasn’t touched $20 since September 2008 when the company was still run by co-founder Jerry Yang. Levinsohn is the fifth person to run Yahoo since then, counting an interim CEO stint by Morse.

Having been burned by the company so many times, investors were less enthusiastic about the Alibaba breakthrough than most analysts. The company’s shares gained just 16 cents, or 1 percent, to close Monday at $15.58.

“I am not sure people could have reasonably expected a lot more than what they got out of this deal,” said Standard & Poor’s Capital IQ analyst Scott Kessler. “There are far too many people who are too cynical about the Yahoo story at this point.”

J.P. Morgan analyst Douglas Anmuth believes investors are worried about Alibaba’s ability to raise the money needed to pay Yahoo. He says they are also disappointed by the lack of clarity about when Yahoo will be buying back its stock.

“This feels like the market’s just not willing to give Yahoo much credit until a deal is officially done,” Anmuth wrote in a Monday research note.

Wedge Partners analyst Martin Pyykkonen believes most investors realize the Alibaba windfall won’t solve the problems that have been eroding Yahoo’s revenue, especially because the money will be funneled to shareholders instead of invested in acquisitions or content-licensing deals that might help the business.

“This is really just a short-term fix,” Pyykkonen said of the Alibaba sale.

Yahoo faces its biggest challenge in the online advertising market, where it has been losing market share to Google and Facebook as advertisers shift more of their budgets to the Internet.

Investors also want Yahoo to sell its 35 percent stake in Yahoo Japan so it can reel in even more cash on sharpen its focus on its U.S. business. But Yahoo has said it isn’t close to agreeing on an acceptable price with Softbank, the controlling owner of Yahoo Japan.

The Alibaba deal still represents one of the few times in recent years when Yahoo has outshined Google in an area of business. While Google has been able to dominate Internet search and advertising, some of the company’s high-profile investments outside its specialty have proven to be busts. Google lost most of its money on a $1 billion investment made in AOL Inc. in 2006 and a $500 million investment in wireless service provider Clearwire Corp. in 2008.

When it trims its Alibaba stake, Yahoo will also be shaving its profits. Yahoo’s earnings from its investments totaled $172 million during the first quarter, with most of that flowing from Alibaba.

Gillis expects Yahoo to offset the reduced earnings from Alibaba by buying back about 277 million shares under its expanded repurchase program. With less stock outstanding, Yahoo’s earnings per share should rise by about 9 cents per share next year, even after accounting for the decreased income from Alibaba.

Airlines are reserving a growing number of window and aisle seats for passengers willing to pay extra. That’s helping to boost revenue but also making it harder for friends and family members who don’t pay this fee to sit next to each other. At the peak of the summer travel season, it might be nearly impossible.

Buying tickets two or more months in advance makes things a little easier. But passengers are increasingly finding that the only way to sit next to a spouse, child or friend is to shell out $25 or more, each way.

With base fares on the rise — the average roundtrip ticket this summer is forecast by Kayak.com to be $431, or 3 percent higher than last year — some families are reluctant to cough up more money.

“Who wants to fly like this?” says Khampha Bouaphanh, a photographer from Fort Worth, Texas. “It gets more ridiculous every year.”

Bouaphanh balked at paying an extra $114 roundtrip in fees to reserve three adjacent seats for him, his wife and their four-year-old daughter on an upcoming trip to Disney World. “I’m hoping that when we can get to the counter, they can accommodate us for free,” he says.

Airlines say their gate agents try to help family members without adjacent seats sit together, especially people flying with small children. Yet there is no guarantee things will work out.

Not everyone is complaining.

Frequent business travelers used to get stuck with middle seats even though their last-minute fares were two or three times higher than the average. Now, airlines are setting aside more window and aisle seats for their most frequent fliers at no extra cost.

“The customers that are more loyal, who fly more often, we want to make sure they have the best travel experience,” says Eduardo Marcos, American Airline’s manager of merchandising strategy.

For everybody else, choosing seats on airline websites has become more of a guessing game.

To travelers who haven’t earned “elite” status in a frequent flier program, flights often appear full even though they are not. These casual travelers end up paying extra for an aisle or window seat believing they have no other option.

But as flights get closer many of the seats airlines had set aside for those willing to pay a premium do become available — at no extra cost.

“Airlines are holding these seats hostage,” says George Hobica, founder of travel site AirfareWatchdog. “The seat selection process isn’t as fair as it used to be.”

Airlines are searching for more ways to raise revenue to offset rising fuel costs. In the last five years, they have added fees for checked baggage, watching TV, skipping security lines and boarding early.

Now they are turning to seats.

Since last summer, American, Delta Air Lines, Frontier Airlines and United Airlines have increased the percentage of coach seats requiring an extra fee. Some — like those on Delta, JetBlue Airways and United — come with more legroom. Others, including those on American and US Airways, are just as cramped but are window and aisle seats near the front.

Allegiant Air and Spirit Airlines go one step further, charging extra for any advanced seat assignment. On Spirit, passengers who aren’t willing to pay the extra $5 to $15 per flight, are assigned a seat at check-in. The computer doesn’t make any effort to keep families together.

“It gets really difficult, unfortunately, because all you end up with is a lot of onesies and twosies,” says Barry Biffle, Spirit’s chief marketing officer. “If you want to sit together, we would highly encourage you to get seat assignments in advance.”

Delta just launched a discounted “Basic Economy” fare on certain routes where it competes with Spirit that doesn’t include advance seat assignments.

“Airlines have to be careful. They can only push this so far before they risk incurring the wrath of customers or the government,” says Henry Harteveldt, co-founder of Atmosphere Research Group.

Summer brings passengers traveling in larger groups and fewer empty seats. Last July and August, a record 86.4 percent of seats were filled by paying customers. Planes will be “slightly fuller this year,” says John P. Heimlich, chief economist at the industry’s trade group, Airlines for America. Add in seats occupied by off-duty airline staff and passengers who redeemed frequent-flier miles, and on many flights there won’t be a spare seat.

On a July flight from Dallas to San Francisco on American, a recent search showed only 28 of 144 coach seats available for passengers unwilling to pay extra. Of those, 21 were middle seats. There were five spots where a couple could sit together; groups of three or more were out of luck.

It was dramatically different for elite frequent fliers. They could pick from 75 seats including nine rows with four or more seats together.

Another flight — New York to Los Angeles on Delta — offered its most loyal fliers almost twice as many seats for free: 111 versus 60.

Booking through sites such as Expedia, Orbitz and Travelocity can add complications. If somebody inadvertently selects an elite seat or one requiring a fee, airline reservation systems won’t hold a seat for him. Passengers should confirm selections with the airline.

For those unable to find two or more adjacent seats, new seat assignments can be snagged for free starting five days before departure as some elite fliers are upgraded to first class. Another block of seats is released 24 hours in advance when online check-in starts. Finally, gate agents can sometimes put families in seats set aside for disabled passengers or ask others to move.

If a young child is separated from his or her parent, “we just have to get it done” says Frontier spokeswoman Lindsey Carpenter. “Usually, people are pretty accommodating.”

If all else fails, see if nearby passengers are willing to switch. There might actually be some chivalry left on planes. If not, offer to buy them a drink.

Investors and technology industry watchers are closely tracking the Menlo Park, Calif.-based company's shares. The world's largest online social network was one of the most anticipated initial public stock offerings ever, and now serves as a bellwether for other social media companies.

Facebook's market debut Friday suffered some hiccups, with trading on the Nasdaq delayed for a half hour and issues with traders' orders. The stock closed Friday just a few cents above where it priced Thursday night, when many investors had hoped for a big first-day pop. The shares opened Friday at $42.05, and fluctuated throughout the day before closing at $38.23.
Wedbush analyst Michael Pachter, who came out with an "Outperform" rating on Facebook before its IPO, said he thinks the underwriters overestimated demand for the company's stock. Last week, the underwriters, led by Morgan Stanley, increased the offering price range. On Wednesday, Facebook's early investors and other stockholders increased the number of shares they were selling in the IPO. Both had seemingly been signals that there was strong demand for shares.
"The late addition of 84 million shares to the offering overwhelmed demand, limiting the first day price," Pachter said in a note to investors.

On Monday, Facebook Inc.'s stock fell $4.22, or 11%, to $34.01 in late morning trading. Shares dropped as low as $33 earlier.

Persistent political divisions — neatly bridged by a Group of Eight summit statement that advocates a mix of austerity and growth promotion — and lack of money stand in the way of a comprehensive European growth strategy. Analysts said markets were likely to look past the verbal deal, with news about Greece’s struggle to stay in the eurozone and an informal European Union summit Thursday in Brussels more likely to set the tone.

At Saturday’s G-8 summit, German Chancellor Angela Merkel — under urging from U.S. President Barack Obama and French President Francois Hollande — signed onto a statement that called for mixing painful cutbacks with growth-promoting measures to deal with a crisis that threatens the global economy.

The leaders warned that budget deficits have to come down. But they also acknowledged that an approach that’s based mostly on austerity and longer-term reforms can’t help countries out of recessions this year or next. That’s the approach that has dominated the continent’s German-led attack on the crisis since it erupted in late 2009, when Greece admitted its finances were broken.

“Our imperative is to promote growth and jobs,” leaders said in their final declaration after Saturday’s summit. While they “commit to fiscal responsibility,” the leaders also supported spending on education and public works. They also said heavily indebted countries should have the chance to fix their budgets in ways that take into account how well their economies are doing at the moment and support “confidence and economic recovery.”

They said little about specific steps and left exactly what to do up to individual countries, saying they recognize “the right measures are not the same for all of us.”

The statement comes as markets look ahead to an informal European summit meeting Thursday, and to a June 17 election in Greece. An indecisive poll May 6 left no Greek party with enough votes to govern. A new government that rejects the austerity required under bankrupt Greece’s €130 billion bailout from other eurozone countries could lead to it leaving the euro and spreading financial chaos.

Cornell University economist Eswar Prasad said the statement splits the difference among the leaders positions and said Merkel, a chief advocate of austerity, had not altered her stance. The language “is cautious and guarded and leaves much room for difference of opinion so that each of the G-8 leaders can go back and say they got the other leaders to agree.”

“Market expectations for the summit were quite low and those expectations have been met,” he said. “I don’t think this is going to make much difference for markets.”

At the summit, Merkel openly rejected any sense that a pro-growth stance meant stimulus spending. It’s a stance fed by annoyance among voters at home that Germany, which backs the biggest share of the European bailout fund, is helping rescue countries that were not careful with their finances. Germany faces national elections next year.

So where will growth come from?

In their summit fudge, European leaders were in effect recognizing limited steps that are already taking place in a modest and informal growth program. It’s clear that the slack economy in Spain, for instance, means the country will not reach its target deficit of 3 percent of gross domestic product by next year, in effect taking more time to meet EU budget rules.

The slipping target underlines the austerity trap: To keep borrowing money by selling bonds to investors, Spain must show it is reducing its deficit, which was 8.9 percent of GDP last year. So it is severely cutting back spending. That removes stimulus from the economy. Partly as a result, the economy sank into recession. And as companies and people make less money, they pay less in taxes. The cutbacks make balancing the budget even harder.

In addition to letting deficit targets slip, European officials have talked about adding money to the European Investment Bank, a development bank that loans money for public projects, and finding ways to make quicker use of unspent EU aid funds that are typically used for things like roads, water treatment plants and ports to help poorer EU members catch up.

Prasad said such spending of EU funds could be “potentially useful if they can be packaged in a way that is politically acceptable in Germany.”

Another trend happening in the background is larger wage settlements in Germany. Germany dominates as an exporter because it kept labor costs down with reforms in 2004. Some think less restraint on pay could boost consumption and spending on imports at home and even out trade imbalances within the eurozone. The top industrial union, IG Metall, won a deal for a 4.3 percent raise over 13 months in a key region in southwestern Germany over the weekend.

It’s a trend that officials can bless, but it doesn’t require action on their part.

Yet economists say that emerging measures such as slower deficit reduction and more EU infrastructure spending, while helpful, will not enough. Not enough money is involved.

A bolder growth strategy could include movement toward some form of group borrowing among all 17 eurozone countries to pay for public works projects, said Marc Ostwald, strategist at Monument Securities in London. That could be a prelude to eurobonds — collective borrowing and central control of budget spending. “The thing they absolutely have to decide is how they’re going to move toward fiscal union,” said Ostwald. “Germany may not want eurobonds right now, but there are going to be eurobonds.”

Ostwald and other economists say dealing with Europe’s banking system, on shaky ground for several years, would be one of the strongest measures Europe could take now.

An EU-wide guarantee for bank deposits could shore up depositors’ confidence their money is safe no matter what happens at the national level. An EU-wide banking regulator with the power to force banks to restructure would improve the flow of credit and boost confidence. Europe’s shakier banks are heavily dependent on emergency credit from the European Central Bank, a situation that has persisted for several years, starting with the onset of the global financial crisis.

“We have had a damaged financial system since 2007 and 2008 but it has never been addressed,” said Nicolas Veron, senior fellow at economic think tank Bruegel in Brussels. He advocates a task force to restructure troubled banks along the lines of the one that led a restructuring of the U.S. automobile industry, in which General Motors and Chrysler shed debt and reshaped their businesses under bankruptcy court protection.

“As long as we have a sick financial system, it will be very tough to get investment and consumption back to levels compatible with robust growth in the eurozone,” Veron said.

Yet all those more decisive solutions face obstacles. Germany is against collective borrowing to help more indebted countries, fearing it will pay the freight as the biggest eurozone member. National governments are reluctant to give up control over banks, wanting to promote their own financial industries. Letting countries slow down deficit reduction will only roil markets unless it is seen as part of a genuine effort to fix finances in the long term.

“There is no miracle,” said Veron. “It is going to be a long hard slog in the best of scenarios.”

Geisinger Health Systems is looking for more facts on the debate.

“Our concern is getting reliable data so we know what to do for our patients,” said David Carey, director of Geisinger’s Weis Center for Research in Danville, Pa.

Geisinger serves many patients who live in areas that have seen a recent boom in Marcellus Shale gas drilling. The gas-rich formation thousands of feet underground has generated jobs, billions of dollars and concerns about possible environmental and public health impacts from thousands of new wells.

“There’s a real need for reliable information for policymakers,” Carey said, yet some of the debate on the issue has been more emotion-driven than science-driven.

“Lack of data has not led to a lack of opinion,” Carey noted.

But with state and federal budgets under intense pressure, there hasn’t been much money available for serious medical research. Then over the last year, executives at Geisinger realized they had a big head start.

“We have a very long history of caring for patients in this region,” Carey said, noting the company serves 2.6 million patients and operates hospitals, clinics, and an insurance program in 44 north central and north eastern counties. That means they have vast troves of health care data, concerning everything from cancer to car accidents to asthma attacks.

“We can map the clinical data in both space and in time,” Carey said, meaning they can compare health in areas with gas drilling to similar areas where it isn’t happening.

Carey said the company isn’t presuming anything about the issue, though it is aware of both concerns and the economic value of the shale boom.

“Our position is, let’s collect the data and find out,” he said.

It may fall to private companies to do some of the work.

Until a few months ago, Pennsylvania public health officials had expected to get a share of the revenue being generated by the state’s new Marcellus Shale law, which is projected to provide about $180 million to state and local governments in the first year.

But representatives from Republican Gov. Tom Corbett’s office and the state Senate cut the health appropriation to zero during final negotiations, so now the state Department of Health is left with a new workload but no funding to examine whether gas drilling impacts health.

Many federal and state regulators say hydraulic fracturing is safe when done properly, and that thousands of wells have been drilled with few complaints of pollution. But environmental groups and some doctors assert regulations still aren’t tough enough and that the practice can pollute groundwater and air.

The claims and counterclaims have been so extreme that some health experts feel the fear and confusion that’s been generated among the public is a problem by itself. Bernard Goldstein, a professor emeritus at the University of Pittsburgh School of Public Health, said experience has shown that patient trust is a key component in health care.

Goldstein said Pitt is also looking at ways to use health care data to answer questions about gas drilling and possible public health impacts.

Despite all the controversy over the issue, Carey hopes Geisinger can stay above the fray.

“To the extent possible, we’re trying to stay clear of any political land mines,” he said.

“We see this unfolding in phases. I could see a batch of early studies that might focus on some diseases. Asthma is a good example,” he said, since people with that disease would be very sensitive to possible changes in air quality due to gas drilling.

Geisinger hopes to issue some preliminary results of its data analysis within the next year, Carey said, while other aspects of the research will unfold over five, 10 or 15 years.

Hedge fund manager Raj Rajaratnam asked about a rumor that Goldman Sachs “might look to buy a commercial bank.” On the other end of the phone, then-widely respected Goldman board member Rajat Gupta confided there was a “big discussion” on the subject at a recent meeting.

Prosecutors will try to convince a jury that the intercepted call shows Gupta was providing inside tips that gave Rajaratnam an illegal edge in massive stock maneuvers. Defense lawyers say they’ll argue Gupta was a straight-shooter who only shared public information with the billionaire hedge fund boss, as devoted to raising money for charity as to Goldman’s bottom line.

Jury selection is scheduled to begin Monday in federal court in Manhattan. The trial is scheduled to last up to four weeks.

The same 24-minute phone call that’s central to the Gupta case helped convict Rajaratnam — a former multibillionaire born in Sri Lanka — last year in the same courthouse. The Galleon founder is serving an 11-year prison sentence, the longest ever given in an insider trading case.

Rajaratnam has been the biggest catch so far in a wide-ranging insider-trading investigation by U.S. Attorney Preet Bharara that’s resulted in more than two dozen prosecutions of white collar defendants. But based on Gupta’s standing in the world of finance, his trial could draw more attention — and a potential conviction could resonate farther.

Aside from his role at Goldman Sachs, the Indian-born Gupta is the former chief of McKinsey & Co., a highly regarded global consulting firm that zealously guards its reputation for discretion and integrity.

Gupta, 63, is also a former director of the huge consumer products company Procter & Gamble Co., a pillar of American industry and one of the 30 companies that make up the Dow Jones industrial average. P&G owns many well-known brands including Bounty paper towels, Tide laundry detergent and Pringles chips.

The Westport, Connecticut, resident has pleaded not guilty to one count of conspiracy to commit securities fraud and five counts of securities fraud, charges that carry a potential penalty of 105 years in prison. He remains free on $10 million bail.

Prosecutors in effect previewed their case against Gupta at the Rajaratnam trial.

Jurors heard testimony that at an Oct. 23, 2008, Goldman board meeting, members were told that the investment bank was facing a quarterly loss for the first time since it had gone public in 1999.

Prosecutors produced phone records that they said show Gupta called Rajaratnam 23 seconds after the meeting ended, causing Rajaratnam to sell his entire position in Goldman the next morning and save millions of dollars.

Rajaratnam also earned close to $1 million when Gupta told him that Goldman had received an offer from Warren Buffett’s Berkshire Hathaway to invest $5 billion in the banking giant, prosecutors said.

Also played at trial was the tape of Rajaratnam grilling Gupta about whether the Goldman Sachs board had discussed acquiring the Wachovia bank or an insurance company.

“Have you heard anything along that line?” Rajaratnam asked Gupta.

“Yeah,” Gupta responded. “This was a big discussion at the board meeting.”

Prosecutors sought to maximize the impact of the Gupta tape by calling Goldman Sachs chairman Lloyd Blankfein to testify that the phone call violated the investment bank’s confidentiality policies. Prosecutors say Blankfein will return to the stand at Gupta’s trial.

At a recent hearing, Gupta’s lawyers argued that the jury would need to hear more about their client’s life story to give the allegations context.

“He’s done all these wonderful things. And they would say that one day out of a clear blue sky in the seventh decade of his life, he decides to become a criminal,” said attorney Gary Naftalis.

The judge ruled that Gupta’s charitable works could be referenced, but only if he testified. Naftalis refused to divulge whether he will.

Gupta’s reputation for giving wasn’t lost on Rajaratnam. Near the close of their recorded phone call, the crooked hedge fund manager remarked, “You’ve been spending a fair amount of time doing charity.”

“Yeah,” was Gupta’s only response.

PRESS THE ‘LIKE’ BUTTON, SOON

By MICHAEL LIEDTKE

AP Technology Writer

SAN FRANCISCO — I doubted Mark Zuckerberg when I met him more than five years ago, shortly after he rebuffed several chances to sell Facebook for what was a fortune even then.

He seemed confident to the point of being cocky about his ability to turn what started as an online hangout for college students into a digital commune for the entire world. Facebook had about 20 million users at the time.

While listening to Zuckerberg pontificate on Facebook’s potential to become a more important communication channel than long-established media outlets, I wondered whether this then-22-year-old kid was deluded.

Had he screwed up by not accepting one of those buyout bids ranging from $800 million to $1.5 billion that were dangled before him during 2005 and 2006?

Clearly not. Now I think investors who don’t buy some Facebook stock within the next month will regret it in five years, when the Internet’s largest social network will have more users than the population of China.

As it is, Facebook has more than 900 million users and will have an initial market value of $104 billion — more than twice the combined value of two former suitors, Yahoo and Viacom.

Zuckerberg, who turned 28 on Monday, pulled off the initial public offering just eight years after starting Facebook in his Harvard dorm room. Just imagine what he might be able to accomplish by the time he turns 35, now that Facebook has raised $6.8 billion in its IPO.

But don’t wait too long to find out. At some point in the next few days or weeks, seize on the IPO as a rare opportunity to prosper from the ingenuity of a headstrong visionary in the mold of Apple’s Steve Jobs, Microsoft’s Bill Gates and Google’s Larry Page and Sergey Brin.

There is one difference: None of them was named Time magazine’s person of the year in his mid-20s, as Zuckerberg was in 2010.

Apple, Microsoft and Google, of course, all changed the world with their innovations and built steadily growing businesses that enriched investors. Collectively, the three technology titans have created more than $1 trillion in shareholder wealth since their respective IPOs.

The returns on a post-IPO investment in Facebook aren’t likely to be as big because the company is starting with such a lofty valuation. Apple debuted with a market value of less than $2 billion in 1980, while Microsoft took its bow in 1986 with a market value of less than $1 billion.

More recently, Google had a market value of nearly $25 billion in 2004 when mainstream investors got their first chance to buy stock in the Internet search leader.

Just because Facebook’s upside isn’t as great doesn’t mean it can’t be a great investment. The chances of Facebook’s stock doubling or tripling during the next five years look promising, given that the company is sitting on a gold mine of personal data prized by advertisers looking to sell products and services to the people most likely to buy them.

It’s an advantage that Google also enjoyed as it figured out how to match ads with the preferences signaled by Internet search requests. Google’s market value surpassed $200 billion less than 3.5 years after its IPO, and Facebook knows even more about its users’ preferences because it doesn’t have to make educated guesses about them. Facebook users explicitly tell the company by pressing “like” buttons all over the Web and sharing revealing details about their lives in status updates.

The trickiest part about Facebook’s IPO is deciding when to buy some shares. Consider what happened after last year’s IPO of LinkedIn, an online professional networking service that is probably the closest thing Wall Street has seen to Facebook’s social network.

LinkedIn’s shares rocketed from $45 in its IPO pricing to $122.70 within the first few hours of trading. A year later, the stock hasn’t touched that price again. But a month after the IPO, patient investors were able to snap up LinkedIn’s shares for under $64. The stock has bounced back above $100, now that LinkedIn has proved it can be more profitable than analysts anticipated.

Skeptics believe LinkedIn is grossly overvalued, just as the doubters are harrumphing about Facebook.

Both companies are expensive by traditional benchmarks. LinkedIn has a market value of about 12 times its projected revenue this year, while Facebook went public with a market value of about 20 its projected 2012 revenue. Google, by comparison, has a market value of about six times its projected revenue for this year.

But Facebook hasn’t been as aggressive as it could have been about selling ads or finding other ways to make money where its visitors, on average, dwell for an average of 6.5 hours per month, according to comScore Inc. Instead of ramping up revenue, Facebook has concentrated on attracting users — an emphasis that is bound to pay off.

One of the main reasons Facebook is likely to figure this all out is that Zuckerberg hired Sheryl Sandberg as the company’s chief operating officer in 2008. Sandberg played a key role in expanding Google’s advertising system during its first few years as a publicly held company, a period when the company’s stock hit its peak so far. Sandberg brought not only her own expertise to Facebook but also hundreds of other former Google employees who defected to the social network in search of the next big thing.

They found it, and it’s still not too late to get a piece of the action.

———

STEER CLEAR OF THE HYPE

By BERNARD CONDON

AP Business Writer

NEW YORK — First, forget the numbers and go with your gut: Given the breathless press coverage, the ubiquity of its product, the Oscar-winning film about its unlikely success and the rock-star status of its 28-year-old founder, do you really believe the smart folks on Wall Street coming up with a stock price for Facebook resisted the temptation to wring every cent out of buyers?

In investing, hype is the enemy. I was skeptical from the start.

The company listed a range of possible prices for its initial public offering of stock, then raised it, then told us that insiders and early investors would be selling even more of their shares in the offering than they had planned. Now I’m convinced: Don’t touch this stock.

The banks helping take Facebook public want us to value this 8-year-old upstart at $104 billion, more than Disney or Kraft Foods, though those companies earn three and four times more. That top valuation is also more than 100 times Facebook’s earnings last year, versus 13 times for the average company.

At such a high price, it will take years for this so-called earnings multiple to fall to a more reasonable level, and that’s assuming the company can maintain its torrid earnings growth.

To make money in Facebook, you’re betting that other buyers will be just as willing as you to hold their nose at the valuation, and keep doing so for years.

Facebook grew its earnings 65 percent last year, faster than at most companies, so you should pay more for it than you would the typical company. But how much more? Profits at Apple grew 85 percent last year. Its stock is trading at 13 times earnings per share.

And while the big profit growth for Facebook is impressive, it’s slowing, and has been for three years. Last quarter, the growth turned negative, meaning it fell — down 12 percent from the first three months a year earlier.

I think Facebook is one of the best things to happen in America in years. It’s an unlikely, brazen success that makes you believe that the nation’s best days may still be ahead. A college kid starts an online bulletin board for his classmates in 2004, and now one-seventh of the world’s population is using it.

And the company is not just profitable, but incredibly so. Whereas most big, publicly-traded companies have to content themselves with pulling 13 cents of earnings out of every dollar of sales before paying taxes, Facebook gets to keep a seemingly impossible 46 cents.

And therein lies another problem: No company can sustain margins that high for long. If you believe America is a place that gives rise to destructive, capitalistic forces like Mark Zuckerberg, you know those margins are going to collapse, and fast. They are too high not to attract competitors.

What Facebook did to MySpace, a rival yet unknown can do to it. Or a rival suddenly known, like Pinterest.

Not familiar with that company? I wasn’t until earlier this year. A sort of online scrapbook, Pinterest now has 10 million monthly visitors, even though its site was launched just in 2009. That early growth is faster than even Facebook’s was, according to comScore, a tracker of Internet traffic.

The fact is, the social media industry is too open to competition for comfort. It lacks what Warren Buffett calls a “deep moat” protecting it from rivals. Scoff if you want, but how many college kids can build a rival to Burlington Northern Santa Fe railroad, a Buffett holding? Where would they get the steel for the lines, much less the men to lay them?

Another problem with Facebook is that the very qualities that made it so successful as a private firm could sink it as a public one.

Facebook says in its IPO papers that it’s not about to rein in the sort of rebel culture at the company that has encouraged “innovation” just to deliver “short-term” profits that please Wall Street investors.

If only “short-term” profits were the only demand. When you go public, you are promising investors that your profits will not only rise, but do so consistently, quarter after quarter, in predictable increments. It’s a fiction. The nature of many businesses is such that profits come in messy lumps. But companies exploit loose accounting rules, as Wall Street expects them to do, to make their profits seem smoother than they really are.

Is Facebook not going play this game, either? That would be admirable. And disastrous for investors.

I suspect what’s got people in a lather about Facebook is that they think it could become the next Google or Amazon. Those stocks went public at high earnings multiples, and still managed to reward investors handsomely.

But the bulls forget the big role played by happenstance and luck in business success, and how difficult it is to separate winners from clunkers ahead of time. And there have been a lot of clunkers: ICG, Priceline.com, Pets.com, Netscape and, more recently, Pandora Media, Demand Media and Groupon. The stocks of those latter three are down more than a third from their IPOs last year.

Maybe this is just a matter of taste. I prefer the dowdy and obscure over the hot and well-known.

But I think there’s another distinction here. Facebook is a gamble, a fun fling, like buying a lottery ticket. The valuation is just too high, the unknowns too many, to call it an investment. If you’re going to sink money into the company, recognize that much at least.

House Speaker John Boehner, R-Ohio, and Senate Minority Leader Mitch McConnell, R-Ky., both said Sunday that when Congress is asked to raise the nation’s borrowing cap after the election, they’ll insist on spending cuts to offset the increase. Democratic leaders countered that the GOP stance was irresponsible, given that the partisan showdown over the debt ceiling last year caused a downgrading of the U.S. government’s credit rating.

“If the president is going to ask us to raise the debt ceiling, and he will early next year, we do need to have another serious discussion about trying to do something significant about the deficit and the debt,” McConnell said on CBS’ “Face the Nation.”

Both sides showed they had little appetite for compromise last week, when Boehner insisted at a meeting with President Barack Obama on Wednesday that he would seek spending cuts to offset an increase in the nation’s borrowing limit. Obama warned he wouldn’t accept more cuts without also extracting tax increases on the wealthiest Americans.

House Democratic Leader Nancy Pelosi of California, speaking on ABC’s “This Week,” said that Boehner “wants to go over the edge.”

“My response to what the speaker said is, ‘Here we go again.’ This is not a responsible, mature, sensible place for us to go,” Pelosi said. “There has to be more reductions but we have to have revenue and have to have growth.”

The most obvious showdown will happen soon after the Nov. 6 election. Unless a lame-duck Congress can strike a deal, the economy will suffer a double whammy of large tax increases and spending cuts starting Jan. 1. The tax increases would hit virtually every working American and the spending cuts would affect both military and domestic programs.

On top of that, perhaps by late January or so, Congress and the president — be it Obama or Republican Mitt Romney — will again confront the need to raise the country’s borrowing limit or else trigger a first-ever government failure to pay its debts.

Boehner, on ABC’s “This Week,” said Congress should begin tackling those issues now.

“Why do we wanna wait and rush this through at the end of the year, after the election?” Boehner said.

“There’s now an emerging consensus that more must be done to promote growth and job creation right now,” Obama proclaimed after hosting unprecedented economic talks at Camp David, his secluded and highly secure mountaintop retreat. Seeking a second term amid hard economic times, Obama hailed a debate heading in the direction he likes, with nations now talking of ways to spark their economies instead of just slashing spending.

Yet there were no bold prescriptions at hand. Instead, leaders seemed intent on trying to inspire confidence by agreeing on a broad strategy no matter their differences. With all of them facing their own difficult political realities, they built some sovereign wiggle room into their pledge to take all necessary steps, saying “the right measures are not the same for each of us.”

Obama played international host as Europe’s debt crisis threatens to drag down the U.S. recovery and his own political future, underscoring the stakes for him in getting allies abroad to rally around some answers.

Much of the new emphasis on government-led growth seemed aimed at German Chancellor Angela Merkel, who came to the summit as the European leader who had demanded austerity as the most important step toward easing the eurozone’s debt crisis. But the election of Socialist Francois Hollande as president of France, and Greek elections that created political chaos in the country were clear rejections of the belt-tightening Merkel represented.

Coping with shaky oil markets, the leaders set the stage for a united release of world oil reserves to balance any disruption in world markets when tough new sanctions are imposed on Iran’s exports because of its disputed nuclear program. The leaders said they were ready to take “appropriate action” to meet any shortages.

The mere preparation to release oil reserves could help calm markets and ensure that oil prices, which have been dropping, don’t climb again and anger consumers as U.S. elections approach.

The Group of Eight summit includes leaders of the United States, Japan, Britain, Germany, France, Italy, Canada and Russia.

A joint summit statement reflected how urgently the countries must contain a financial crisis that could spread from the eurozone to the United States and infect the rest of the global economy. They declared unanimity in ensuring that Greece, which is crippled in debt and politically gridlocked, remains as part of the 17-member euro currency union.

“The leaders here understand the stakes,” Obama said in summing up a packed, unusually intimate day of world talks. “They know the magnitude of the choices they have to make and the enormous political and economic and social costs if they don’t.”

Merkel said growth and deficit-cutting reinforced each other and that everyone around the table agreed. “That is great progress,” she said. As for promoting growth, she said investments under consideration include research and development, Internet networks and infrastructure. But she said “this doesn’t mean stimulus in the usual sense.”

U.S. officials agreed, saying growth measures that the Europeans might pursue don’t all require outright public spending, and could be in the form of public-private partnerships or in initiatives designed to loosen credit. And the leaders stayed away entirely from the world “stimulus,” which has taken on an unpopular political connotation, including in the United States.

“The global economic recovery shows signs of promise, but significant headwinds persist,” said G-8 leaders said.

The tension between austerity and growth — whether to slash debt by cutting budgets or use public money and other means to help spur economic growth — was the backdrop as Obama welcomed an emerging push for a balance between the two.

He seized the opportunity to cast the debate in terms favorable to his own re-election, closing the summit with the steps he took to right the U.S. economy and his economic vision for a second term. He said he was confident Europe could get on a path to recovery as has the United States.

“We know it is possible in part based on our own experience here,” he said. “In my earliest days in office, we took decisive steps to confront our own financial crisis.”

Obama chose Camp David in part to encourage a freewheeling discussion out of sight of most media and potential protests, allowing the leaders to sit around a cabin table to negotiate terms, or stroll through the leafy paths for chats that seemed a world away from the typical summit convention-hall setting.

It all came before Obama was to lead a much larger NATO summit in Chicago on Sunday and Monday that will be heavily focused on the Afghanistan war.

The drag of a eurozone crisis comes as joblessness and doubts about a life of better opportunities are already the chief concerns for American voters.

In their united view, the leaders conceded some points about Merkel’s push for austerity, saying budget deficits must close.

But their joint statement added that budget cutting should “take into account countries’ evolving economic conditions and underpin confidence and economic recovery.” That suggested a willingness to let indebted countries take more time to reduce their deficits in line with eurozone rules in order to lessen the deadening impact of cuts on the economy.

It also called for “investments in education and in modern infrastructure,” which would involve more government spending. That approach also meshes exactly with Obama’s campaign-year strategy for accelerated economic growth, which is to keep spending money on core priorities while taking on the debt through cuts and higher taxes.

The statement of support for Greece remaining in the euro underlines the unpredictable damage to the global financial system that could come from a Greece departure. It follows a week of increasing speculation that Greece might not be able to stay the course, and in which a top European Union official said officials were working on emergency plans in case of a Greek exit. That country is facing the most acute financial crisis of the eurozone and is set to hold elections June 17 to end political deadlock.

At issue is whether Greece abandons the euro to escape austerity measures. Meanwhile, Europe’s woes have given shudders to Wall Street.

The Fitch ratings agency dropped Greece to the lowest possible grade for a country not in default Thursday. Fitch said Greece’s departure from the euro “would be probable” if elections next month do not reverse political trends there, which have brought in politicians opposed to the terms of Europe’s bailout.

The latest Democratic complaint came after House Speaker John Boehner said Tuesday that when Congress raises the nation’s borrowing cap in early 2013, he will again insist on big spending cuts to offset the increase. Boehner, R-Ohio, continues to reject higher tax rates, which Democrats demand from the wealthy.

That led Sen. Chuck Schumer, D-N.Y., to say Boehner is virtually assuring another debt-ceiling crisis as bad or worse than the one that shook financial markets nine months ago.

“The last thing the country needs is a rerun of last summer’s debacle that nearly brought down our economy,” Schumer said in a statement. In an interview, Schumer added: “I hope that the speaker is not doing this because he doesn’t want to see the economy improve, because what he said will certainly rattle the markets.”

Boehner responded in a statement: “Republicans have passed nearly 30 bills that would help small businesses create jobs and we are waiting on Senate Democrats to vote on these common-sense measures. The failure to act on these jobs bills, as well as our crushing debt burden, is undermining economic growth and job creation.”

Democrats say Republicans loaded their jobs bills with provisions certain to doom them in the Senate, such as restrictions on unions and on regulatory agencies such as the Environmental Protection Agency.

Regardless of whether Schumer’s suspicions are right, there’s evidence that unceasing partisan gridlock and the prospect of big tax increases and spending cuts in January are causing some companies to postpone expansions. Even small economic slowdowns are bad news for Obama, who is seeking re-election amid high unemployment.

The Washington Post this past week compiled a list of military contractors, hospitals and universities that are delaying hires and bracing for cuts, partly because of fears that Washington’s partisan divisions will not abate.

The most obvious showdown will happen soon after the Nov. 6 election. Unless a lame-duck Congress can make deals, the economy will suffer a double whammy of large tax increases and spending cuts, starting Jan. 1. The tax increases would hit virtually every working American and the spending cuts would affect military and domestic programs.

Economists say that what Federal Reserve chairman Ben Bernanke calls a “fiscal cliff” could possibly lead to another severe recession.

On top of that, perhaps by late January or so, Congress and the president — be it Obama or Republican Mitt Romney — will again confront the need to raise the country’s borrowing limit or else trigger a first-ever government failure to pay its debts. A partisan showdown over this issue last summer led to a downgrade in the nation’s credit worthiness and a sharp stock market drop.

These crucial decisions will occur after the presidential election. But investors, planners and business owners make decisions about hiring, expansion and investments months in advance. The more they worry about a serious economic downturn in nine months or so, the more reluctant they are to expand operations and hire workers now.

“All that uncertainty has us cautious, and we’re scaling back our hiring expectations,” said Eric Remington, vice president of Kaman Corp., which recently canceled plans to hire 200 new workers at a defense aerospace plant in Jacksonville, Fla.

“The law is, the automatic cuts will take effect on Jan. 1,” he said. “Everyone says, ‘Don’t worry, that won’t happen.’ But we’ve got a business to run, and we’ve got to plan.”

Schumer and other top Democrats have said for months that GOP lawmakers may be trying to strangle the economic recovery for political reasons.

“Their strategy is to suffocate the economy for the sake of what they think will be a political victory,” Obama’s campaign manager, Jim Messina, wrote in an email to supporters last October, when Congress was debating a jobs bill.

Senate Majority Leader Harry Reid, D-Nev., said his Republican counterpart was not cooperating on that legislation “in hopes that he can get my job, perhaps.”

Maryland Gov. Martin O’Malley, chairman of the Democratic Governors Association, told The Associated Press last year that some GOP lawmakers, “through their intransigence, cleverly set up a situation for America’s economy to fail, either by needlessly driving us to default, or needlessly driving us into massive public-sector layoffs.”

Federal, state and local government layoffs have been under way for months. They may be necessary to reduce deficits and survive recessions. But they increase unemployment, a problem for any president seeking a second term.

Since February 2010, when the economy began consistently adding jobs, the private sector has gained 4.2 million positions. But federal, state and local governments during that time have cut more than 500,000 jobs.

House Democratic leader Nancy Pelosi of California did not ascribe partisan motives to Boehner’s latest warnings about the next debt ceiling showdown. But she said he may be unnecessarily hurting the economy. “It already can be damaging, just the fact that it’s brought up,” Pelosi told reporters Thursday.

Republicans say it’s absurd to make such an accusation. They point to bipartisan efforts to pass jobs-creation bills, trade pacts and, after some arguments, an extension of the payroll tax cut that Obama originally had proposed for only one year.

GOP lawmakers want Congress to act this year to ensure that none of the Bush-era income tax cuts will expire, as scheduled, on Jan. 1. Such assurance, they say, could lead investors and business owners to start expanding and hiring now.

Democrats say the move, by itself, would increase the deficit dramatically. They want to end the tax cuts for the wealthiest and they note that the economy boomed during Bill Clinton’s presidency, before the big tax cuts of 2001 and 2003 were enacted.

Boehner’s aides say the speaker supports tax law changes, including eliminating some loopholes and exemptions, that could result in greater revenue even if rates remain the same or are reduced.

As for the debt limit, “allowing America to default would be irresponsible,” Boehner said Tuesday at an economic forum. “But it would be more irresponsible to raise the debt ceiling without taking dramatic steps to reduce spending and reform the budget process.”

Democrats say that’s precisely the type of economic saber-rattling that can frighten investors and employers, and damage Obama’s re-election hopes. Boehner disagrees.

“I said that we should not wait until the 11th hour to address these issues,” Boehner told reporters Thursday. “The only ones who are talking about drama or brinksmanship are my Democrat colleagues.”

The danger of another credit-rating downgrade “comes from continued inaction on the deficit, and our piling debt,” he said, not from “calls for action.”