The Los Angeles Times from Los Angeles, California • Page 27

SMALL BUSINESS, C6-8 SECTION Cos Anfleles (Kmes WWW.LATIMES.COMBUSINESS WEDNESDAY JULY 19, 2000 NA HIGHLIGHTS Consumer Price Jump Revives Rate-Hike Talk Japan's NTT Agrees to Cut Its Network Access Rates DOW INDUSTRIALS JU 10,739.92 f.V SAP 600 i NASDAQ Composite mm fBONDYLD. 30-yr. U.S. v' Consumer Price Index Monthly percentage change, A.493.74- seasonally adjusted: i i 0.8 iunce 1.10 June: 0.6 I $283.10 21 rEURO 0.6 Unchanged pTEN i per dollar 0.14 i 108.26 A 'I in dollars wj. -IVV 1 $0,927 Nr 0.4 MARKETS Trade: The accord creates an opening for U.S.

and other foreign telecom firms to connect to its system to reach Japanese homes and businesses. ByPAULBASKEN BLOOMBERG NEWS TOKYO U.S. and Japanese negotiators reached an agreement Tuesday on reducing the fees Nippon Telegraph Telephone Corp. charges other phone companies to use its network, settling a major trade dispute days before a meeting of the world's top leaders. The accord creates an opening for U.S.

and other foreign telecom firms by cutting the rate for connecting to NTT's network by 50 over two years at the regional level, which is the system generally used by U.S. telecommunications firms such as Corp. and WorldCom U.S. Trade Representative Charlene Barshefsky said. It will cut connection rates by 20 over two years for connections to NTT's local networks, which are those used primarily by Japanese companies and consumers, Barshefsky said in a conference call with reporters from Tokyo.

Altogether, the agreement ensures average NTT rate cuts of 35 over two years and at least 40 over three years, as demanded by the U.S. in talks that began a week ago in Tokyo before this weekend's Group of Eight summit in Okinawa of the world's leading industrialized nations. The agreement "will level the playing field for America's cutting-edge technologies and increase the number of Japanese consumers connected to the Internet," President Clinton said in a written statement. "It's a win-win for the United States and Japan, and represents an important step as we prepare to discuss the impact of information technology on the global economy at the G7G8 summit," Clinton said. The cuts contained in the agreement Please see TELECOM, C8 Economy: The surprising 0.6 June increase could give Fed ideas, but core inflation rate excluding gas and food remains steady.

By ROBERTA. ROSENBLATT TIMES STAFF WRITER WASHINGTON Consumer prices jumped 0.6 during June, driven by sharply higher gasoline prices, the government reported Tuesday. But overall inflation appeared under control. The so-called core rate of inflation, which excludes the volatile elements of food and fuel, rose a modest 0.2 during the month. It has risen just 2.4 in the last 12-month period.

The latest consumer price index data provided evidence for both camps in weighing whether the Federal Reserve will boost interest rates again when it meets Aug. 22. Prior rate hikes appear to have slowed the economy as the Fed intended. The inflation hawks will point to Tuesday's report of the 0.6 gain, the biggest 0.2 STOCKS SLUMP: Nasdaq led the market lower, falling 2.3 as profit takers moved in. Bond yields were little changed.

C4 SAVVY CONFIDENTIAL: Johnson Johnson beat earnings expectations, but worries remain about its new drug pipeline. C4 JJASONDJFMAMJ 1999 2000 Source: Bureau of Labor Statistics Los Angeles Times jump since a rise of 0.7 during March. In the last 12 months, prices paid by urban consumers have climbed 3.7, high enough to raise fears of a new round of inflation. Please see PRICES, C4 SMALL BUSINESS II Aetna's Profit Warning Sends Its Stock Diving Health: Insurer blames higher HMO costs for its gloomy second-quarter forecast. Shares of others in industry also fall.

HEARD ON THE BEAT: The number of federal contracts going to small businesses has dropped more than 20 in recent years. C6 HELPING HAND: CHARO Community Development CEO tells about developments in its "incubator without walls" program. C7 vv i i i 1 4 ByJERRYHIRSCH TIMES STAFF WRITER A warning by Aetna the nation's largest health insurer, that second-quarter profit won't meet Wall Street's expectations sent the company's shares plunging Tuesday and sparked a broad sell-off in health-care providers' shares. Aetna, like many other insurers, had seen its stock rally sharply in recent months on optimism that rising health-care premiums TODAY'S NEWS INDUSTRY PLEDGE Facing the threat of U.S. reforms, health plans vowed to improve services.

Al GINAFERAZZI I Los Angeles Times California Steel President and CEO Lourenco Goncalves with steel rolls that are pressed in firm's Fontana plant. Yes, a Steel Mill Thrives in Southland would boost earnings significantly. But the company said that internal tracking data indicated that the cost of pro-. viding health care to about 10 million of its health maintenance organization members has risen 10 to 12 in the second quarter from a year ago. The Hartford, insurer said it.is paying for more emergency room visits and outpatient surgeries; for longer mater-Please see AETNA, C5 Not many business people know that a thriving steel company still operates in Fontana, where half of the old Kaiser Steel complex was torn down years ago.

Even fewer people know that California Steel Industries is one of the most profitable steel operations in 'NET MAKE-OVER: South Korea's embrace of the Internet is transforming its economy, allowing it to show up Japan, which has been far slower to adopt change. Al HEALTH-CARE VOW: Major health plans said they will make it easier for patients to choose doctors, go to the emergency room and understand the rules and benefits to which they are entitled. Al "PENALTY" ENDER: The U.S. Senate passed a Republican-backed bill to do away with the "marriage penalty," but President Clinton vowed to veto it. Al WIRELESS INTERNET: will launch its new wireless home phone and broadband Internet service in the coming moiiths in four cities, including Los Angeles and San Diego.

C2 MORTGAGE SCAM: A former Woodland Hills mortgage broker was sentenced to prison in connection with a mortgage swindling scam. C2 STOCK PRICE HIT: Stock of Coastcast plunged 21 after the maker of golf club heads and medical tools said it has refused several recent buyout offers. C2 GM PROFIT SOARS: General Motors reported record second-quarter earnings, propelled by the continuing strong sales of pickup trucks and sport-utility vehicles. C3 California Steel embodies the region's continuing strength in basic industry and the often unglamorous and overlooked role of ports, rails and highways in supporting its global eminence. shares to the public.

"We need to grow. I have plans but cannot talk about them now," says Lourenco Goncalves, company president and chief executive. The company has invested more than $250 million in new steel lines and related equipment in the last five years. Inside the age-worn walls of mile-long factory buildings on the 450-acre plant site (the California Motor Speedway occupies the other half of the old Kaiser property), California Steel has highly efficient machinery turning out 2 million tons of steel a year. The company is turning a very good profit, which it is sharing with its 955 employees, and it can take on broader horizons, Goncalves says.

California Steel's success is a reminder of how strong this region still is in basic industry, of how combinations of transportation, labor and finance make Southern California's economy such a deceptive giant. Auto manufacturing may have largely vanished and airplane building diminished in the Please see FLANIGAN, C8 ON SOUTHERN CALIFORNIA Microsoft Ends Quarter Up 10 Amid Tepid Sales Results: Investment profit bolsters period's earnings. Revenue from Windows for consumers offset sluggish Windows 2000 sales. the United States. But they're going to learn more about the company which last year sold almost $700 million worth of steel and earned $119 million before taxes, depreciation and interest because California Steel wants to step out and grow.

That could mean acquiring or merging with another firm or it could mean issuing Humming a Hopeful Tune at Napster The Biz By STANLEY HOLMES TIMES STAFF WRITER SEATTLE Microsoft Corp. said Tuesday that its fiscal fourth-quarter profit rose 10 despite sluggish sales, as profit from its investments helped the software Goliath top Wall Street's expectations. The company's chief financial officer, John Connors, said in a conference call with analysts that the world's largest soft-' ware company will probably reduce its use of investment profit in the upcoming fiscal first quarter. Connors said sales of Windows 2000 CHUCK PHILIPS Twenty million Napster fans can't be wrong. Or can they? A federal judge will decide next week whether Napster's song-swap technology is illegal and he could temporarily shut down the Web site until the matter is resolved in court later this year.

In their first interview, the 19- I i I -v Music 1 i MORE EARNINGS: C3-5 Web Times Services On the Web For business news, point your browser to http: www.latimes. com and click on Business. To go directly to free stock and mutual fund quotes and foreign exchange rates, go to http: www.latimes Financial Fax Receive information on daily activity on your stock portfolio and business news by fax with Los Angeles Times Financial Fax. Reprints, Research Research and copies of Times stories are available from Times on Demand by mail or fax. Call (800) 788-8804.

From $8. Or sign on to The Times Archives at http:www.latimes.comH0UE ARCHIVES; $1.50 per article or $4.95 for 10. year-old inventor of Napster, Shawn Fanning, and the company's chief executive, Hank Barry, took a break last week from testifying before Congress to talk about the battle they face and how a software so loved by music fans came to be so hated by record companies. The court action follows the filing of separate copyright infringement lawsuits against Napster by Dr. Dre, Metallica and the Recording Industry Assn.

of America, the trade group that represents the nation's largest record companies. The RIAA argues that San Mateo, More Online A special Times report with articles about the growth of music sharing on the Internet is at http:wm.latimes.com musicweb. should pick up by the end of the July-September period. So far, Microsoft has sold about 3 million copies of the operating system for businesses. For the three months ended June 30, Microsoft earned $2.41 billion, or 44 cents per share, compared with $2.2 billion, or 40 cents a share, a year earlier.

Sales rose 0.7 to $5.8 billion, from $5.76 billion a year ago. Wall Street analysts were looking for earnings of about 42 cents a share, accnrd- Please see MICROSOFT, C4 Associated Press Napster CEO Hank Barry, left, and Shawn Fanning, who invented the technology, chat in Washington recently. The Napster system gives users quick and easy access to hundreds of thousands of unauthorized recordings in virtually every musical genre from Louis Armstrong to Lyle Lovett. An estimated 20 million users have downloaded the software in the seven months since it has been in existence. Fanning and Barry, however, argue that online trading of MP3 Please see THE BIZ, C5 Napster is violating the law by providing users with a directory of pirated music that can be swapped, copied and downloaded for free..