TECHNOLOGY

Microsoft buys Rapt for ad biz

The software giant said it plans to buy Rapt, a software firm used by Web publishers to manage ad sales, for an undisclosed sum. Microsoft () said Rapt’s Web-based software will be bundled into its Atlas Publisher Suite, tools used by Web sites to manage ads. Rapt’s customers include News Corp’s () Dow Jones and the New York Times. () Microsoft projected the size of the online ad market as doubling to $80 bil by 2010. Microsoft fell 2.3% to 27.96.

Diodes, () which makes semiconductors, pared the top end of its Q1 sales forecast and is now projecting $95 mil-$97 mil in revenue, below analysts views of $99 mil. Shares tumbled 8.3% to 20.22.

SanDisk, () a memory chip maker, fell 3.7% to 22.15 after Oppenheimer said senior management offered a cautious outlook amid continuing U.S. weakness. Oppenhei-mer, after a meeting with SanDisk executives, also noted that management failed to comment on if electronics giant Samsung will renew a licensing agreement next year.

Micron Technology () slumped 5.4% to 6.14 after Bear Stearns () said that it did not see any near-term end to the DRAM memory-chip slump. Prices for DRAM chips, which are used in PCs and other electronic devices, have plunged because of global oversupply.

DEFENSE

L-3 ends protest, DynCorp up

Defense contractor L-3 Communications () has agreed to serve as a translation services subcontractor to Global Linguist Solutions, a joint venture that is majority-owned by rival DynCorp Int’l. () L-3 had protested the Army picking GLS for a $4.6 bil contract to provide translation services in Iraq. But L-3 said it’s withdrawn its protest with the government and now expects about $150 mil in annual revenue from the subcontract. DynCorp said the Army has allowed it to resume its work on the huge contract following the end of the protest. It fell 1.7% to 107.53.

TRANSPORTATION

Boeing upgraded, more orders in

The plane maker climbed 2.8% to 76.23 after it was upgraded by Morgan Stanley () to overweight, which contended its shares were overly beaten down by news of 787 production delays and failure to win a $40 bil Air Force tanker deal. It projected that Boeing () could win 600 aircraft orders in ‘08. Boeing listed orders for 85 more planes on its Web site in the past week, including for 35 more 787s that take it to 892 orders for the 787.

United, Continental raises fares

The nation’s 2nd-largest carrier, United Airlines, () hiked its ticket prices by as much as $50 round trip. The move quickly was matched by Continental. () The increase was the latest in a series done to offset rising fuel costs, but stood out because it was far larger than the $5-$10 fare hikes that previously were imposed. It was the fourth week in a row that carriers have raised ticket prices, and the second round of increases led by United in as many weeks, according to airline ticket-pricing Web site FareCompare.com. United slid 5.7% to 22.68. Continental fell 7.3% to 19.89.

Delta Air Lines () will announce a “comprehensive” restructuring this week that will include job cuts, the company said. It did not disclose details. Delta already has cut domestic flights, eliminated some routes and tried to conserve fuel as the price of oil has soared. It fell 8.8% to 9.60.

General Motors, () the No. 1 U.S. automaker, is recalling 207,542 Buick Regal and Pontiac Grand Prix sedans over a risk they could catch fire, and warned their owners not to park the cars in garages until they are fixed. It skid 5.4% to 19.22.

Southwest Airlines () won’t be downgraded due to its recent maintenance problems, the ratings agency S&P said. Regulators fined Southwest $10.2 mil for failing to inspect planes after an FAA order. Southwest was then forced to cancel flights last week after it had to ground about 40 jets to check for fuselage cracks. It fell 0.5% to 11.64.

FINANCE

Visa moves up offering by a day

JPMorgan () and Goldman Sachs () plan to move Visa’s IPO to Wednesday, according to published reports. The credit card’s public offering will be the largest in U.S. history. Visa is expected to price 406 mil shares at $37-$42 a share on Tuesday night and hopes to raise $16 bil, which would exceed the $11 bil IPO of AT&T Wireless. () JPMorgan and Goldman Sachs are underwriting the IPO.

Ambac exec seeks to quell fears

The bond insurer’s CEO said successful efforts to raise capital have given it more than $15 bil in claims-paying resources. Ambac Financial () CEO Michael Callen said the company was “secure,” and “never considered a bailout.” Ambac said its financial position is sufficient to retain its credit ratings, which are key to its survival. It fell 6.2% to 6.22.

NYSE Euronext () said it will buy the metals complex, including gold and silver futures and options, from the CME Group, () which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. This marks the Big Board’s first foray into the U.S. commodities exchange business. Terms weren’t disclosed. NYSE Euronext and CME fell 4% each.

Washington Mutual () plunged 12.7% to 10.59 after Moody’s cut the struggling savings and loan’s senior unsecured rating to “Baa3,” putting its bonds into “junk” territory. Moody’s cited the deterioration of the housing market and “uncertainty around the company’s ability to replenish capital.”

Aetna, () the No. 3 health insurer, backed its ‘08 EPS outlook of $4 vs. views of $4.04, soothing concerns after warnings by WellPoint () and Humana () hammered stocks. Aetna fell 2% to 43.72.

RETAIL

Ann Taylor misses, guides down

The women’s clothing retailer said its Q4 EPS fell to 38.7% to 19 cents ex items, missing views by a penny. Sales dropped 1.6% to $600.8 mil. Same-store sales fell 7.8%. Ann Taylor () said the weak economy hit customer traffic. Ann Taylor is closing underperforming stores and cutting jobs. It sees Q1 EPS of 35-40 cents, below views of 41 cents. A day earlier, rival women’s apparel retailer Liz Claiborne () reported a Q4 loss. Ann Taylor tumbled 8.2% to 21.95.

Darden Restaurants’ () corporate credit rating was cut by S&P, which cited “the deterioration in Darden’s core businesses, Red Lobster and Olive Garden, due to weak fundamentals in the casual-dining sector and rising commodity costs.” It dipped 0.5% to 29.28.

Wal-Mart caters to ethnic tastes

The world’s biggest retailer started featuring ethnic foods and goods customized to match communities it serves, as the retailer tries to change its cost-is-everything monolith. Wal-Mart’s () new store in Dearborn, Mich., carries 550 items geared toward Arab-American shoppers. The items include whole wheat cookies from the Middle East and Arabic music. The store also hired a local Arab-American educator, to teach the staff cultural sensitivity, and 35 Arabic speaking employees. It fell 1.5% to 49.82.

Ex-Wal-Mart () Vice Chairman Tom Coughlin, who is serving 27 months of house arrest for embezzling, left his Ark. residence to attend a party and previously left to attend 2 other gatherings, a paper reported. Federal prosecutor Robert Balfe said he was “stunned.” Prosecutors are appealing Coughlin’s sentence as being too light.

METALS

Agnico-Eagle up on prices, mines

The gold producer surged 3.6% to 80.05, a record high, on soaring gold prices and enthusiasm over a big production boost. RBC Financial raised its price target for Agnico-Eagle () by $11 to $82 a share, saying the company has a number of projects under construction that give it the potential to increase annual gold output fivefold. But RBC also said the new mines won’t boost production significantly until ‘09, so investors are paying up a bit early for these growth assets.

“Romance of the Three Kingdoms” is to China what “Morte d’Arthur” or “Antony and Cleopatra” is to the West: a centuries-old telling of an even more ancient history of kings, slaves, battles, betrayals, marriages and intrigue. The tale has adapted readily to the modern media age, spawning movies, TV shows, comic books and inevitably video games.

The latest entry comes from Perfect World, () a Chinese creator of massive multiplayer online role-playing games, or MMOPRGs. “Chi Bi,” named after a famous Three Kingdoms battle, was launched in open beta testing Jan. 25 and should be fully up and running by the end of this month. The timing is no accident since the game includes features of a big-budget John Woo movie about the battle due out this year.

Historical Setting

“Chi Bi” is Perfect World’s first game in a historical setting, but not its first shrewd tie-in. Right now, its most-played game is “Zhu Xian,” based on a popular Internet fantasy-adventure novel of the same name. Another popular game is “Legend of Martial Arts,” based on a TV series. All this followed on its flagship game, “Perfect World,” and its sequel “Perfect World 2.”

That’s a lot of games for a company that’s only two years old. Analysts say it can take other game developers that long just to cook up one game, much less five of them. The key is its technology platform Angelica 3D Game Engine, which Perfect World uses as a base for all its games. By not starting from scratch, it can turn out new variations fast and cheap.

“It creates a manufacturing flow, like a studio,” said Tian Hou, analyst with Pali Research. “Other companies put millions of dollars into their games, but Perfect World’s (research and development) costs half a million. After they finish, they do the promotion, spending about $1.5 million. They can make it all back in one month of operations.”

It helps that China and increasingly, the rest of the world seems to have a bottomless appetite for MMOPRGs. In the last month, Perfect World and its four rivals on the U.S. stock market The9, () Shanda Interactive, () Giant Interactive () and NetEase () all soundly beat analysts’ views for the fourth quarter.

Perfect World said it had an average of 624,000 users online at any one time, up 153% from the year-ago quarter. Revenue jumped even more, better than tripling the prior year at $35.4 million. Overall, 2007 was the firm’s first profitable year, racking up 92 cents a share.

Perfect World is still one of the smaller players in the MMOPRG business, but it plans to get bigger soon. The company has five other games in development and three more in the planning stages. Next behind “Chi Bi” is “Hot Dance Party,” which is just now finishing its closed beta testing phase.

“Hot Dance Party” is a departure for Perfect World, since it’s not an MMOPRG, but a casual game. MMOPRGs are long-term projects for their players, letting characters rise through life experiences like quests, battles, alliances and marriage. Casual games like “Hot Dance Party” are just for fun. Andrey Glukhov, an analyst with Brean Murray Carret, compares it with popular Western games such as “Guitar Hero” and “Rock Band.”

“Casual games are projected to grow faster (than MMOPRGs) going forward,” Glukhov said. “One of the strongest casual games in China right now is called ‘Addition,’ which is a dancing game.”

Perfect World’s management also said recently that they plan to move into the U.S. market. MMOPRGs such as “World of Warcraft” and “Second Life” have seen success here, but analysts see it as a less developed market than China.

Glukhov says Americans look to video games for entertainment, while in China it’s about socializing. He suggests that the firm might improve its chances by going into console games, and by hiring U.S. talent to develop content suited to the culture. As yet, however, the U.S. move is theoretical. Perfect World’s management was not available to comment for this article.

Meanwhile, Perfect World and other video-game companies have been under pressure back home. MMOPRGs have become so popular they’ve turned into a social problem as the largely young, largely male clientele has sometimes found the games as addictive as drugs.

In 2005 the Chinese government started requiring time limits to be built into the games. After three hours, a warning message pops up. If the user persists in playing, the game halves the amount of “experience” credit that gamers normally get as they go along.

By July of last year, this feature was required in every game. But as often happens with these restrictions, the technology already had moved on.

Rewards

Most MMOPRGs including all but the oldest of Perfect World’s now reward users not by time spent, but with more tangible objects. It no longer charges by the minute, but offers indefinite free play. Instead, it charges for accoutrements you’d like to acquire better weapons, better vehicles or new abilities.

This method of charging makes more economic sense than the old time-based model, analysts say. But Hou is concerned that since the new rule didn’t solve the problem, more restrictions are bound to come along.

“As long as we still have parents complaining, the policy will be modified,” she said. “I don’t know when, but it could be a potential downside.”

Right now, analysts are seeing no letup in Perfect World’s growth. Those polled by Thomson Financial expect profit to rise 78% this year to $1.66 a share, and gain 40% next year to $2.32.

The world’s most populous country will get an opportunity to join the international craze for BlackBerry handsets following approval for Research in Motion to sell its communication devices in China.

After eight years of lobbying, the Canadian group has won permission from China’s Ministry of Information Industry to launch its handheld emailing gadgets. The news sent RIM’s shares up by 3.9% to $216.02 in early trading on the hi-tech Nasdaq stock market.

In a conference call with analysts, RIM’s joint chief executive Jim Balsillie said initial customers were likely to be staff at foreign multinationals operating in big cities such Beijing, Shanghai and Guangzhou. The BlackBerry will cost about 330.

According to Canada’s Globe and Mail newspaper, Ontario-based RIM already has 5,000 advance orders and intends to have BlackBerrys in Chinese shops by the end of August.

In a short time, the device has attracted a devoted global following. In the three months to June, RIM’s sales leapt 76% to $1.08bn (537m) as the company added 1.2m subscribers, taking the total over the 9m mark.

The BlackBerry faces a new threat this month with the launch of Apple’s iPhone which boasts similar convenience and ease of access to the internet.

But RIM’s shares have barely been dented by the iPhone, with many commentators suggesting that Apple’s product will largely appeal to gadget-friendly consumers and is unlikely to make rapid inroads into the BlackBerry’s core business market.

Analysts at Credit Suisse recently forecast that the number of BlackBerry subscribers will rise to 19m by 2009. RIM has made it clear that it sees huge potential in emerging markets including Latin America, and central and eastern Europe.

The Chinese government has been slow to endorse the BlackBerry in part because of security issues. Some reports have suggested that the regime was concerned that the device’s encryption technology would prevent state agents from eavesdropping on suspicious communications.

Ontario’s premier, Dalton McGuinty, intervened in November 2005 by showing the device personally to China’s information industry minister, Wang Xudong, during a visit to east Asia.

The BlackBerry will face a local rival, China’s second largest mobile phone operator China Unicom markets a mobile email device cheekily called the RedBerry.

RIM signed a deal with China’s largest operator China Mobile, in which Vodafone has a small stake, three years ago and has since been waiting for government approval before it could launch. Analysts estimate that selling the device in China could boost RIM’s customer base by 25%.