The Los Angeles Times from Los Angeles, California • Page 22

2002:05:19:21:13:23 MONDAY, BUSINESS SECTION ORANGE COUNTY EDITION CCOC By JERRY HIRSCH TIMES STAFF WRITER A battle over accounting industry reform is building in the Senate Banking Committee, which on Tuesday will consider a Democratic plan that restricts consulting work by accounting firms and a rival Republicanmeasure that is backed by the industry. Critics of the accounting industry, which has suffered from a series of scandals after Enron bankruptcy last year, are backing legislation by Sen. Paul S. Sar- banes chairman of the Senate panel. bill calls for creation of a Public Company Accounting Oversight Board that would report to the Securities and Exchange Commission and oversee auditors of public companies.

The measure would restrict consulting work by accounting firms to eliminate a perceived conflict of interest. Sarbanes and others fear that lucrative consulting fees make accountants reluctant to challenge clients over questionable financial maneuvers. The Sarbanes proposal also would penalize chief executives and chief financial officers if a company reissues financial statements because it failed to comply with securities laws. These corporate officers would be forced to forfeit profit and bonuses earned in the year before any restatement. Additionally, the Sarbanes measure calls for rotating lead partners on audits every five years to help preserve the independence of the relationship.

It also makes companies wait at least a year from the completion of their audit before hiring one of their outside accountants for a company job. bill result in serious, harmful consequences for capital markets and American said the American Institute of Certified Public Accountants, the industry lobbying group. draft legislation would add unnecessary and nonproductive costs to businesses and impose a duplicative regulatory The group claimed last week that legislation result in a de facto government takeover of the accounting and urged members to contact their senators to oppose it. Sarbanes and the other Democrats have a one-vote majority on the 21-member committee. The accountants group noted that Senate Banking members Mike Enzi (R-Wyo.) and Phil Gramm (R-Texas) have offered an alternative plan, which, cur- Senators to Battle Over Accounting Reform: Industry is backing a GOP proposal for consideration by banking committee, while critics are behind a measure by Democrats seeking tougher changes.

Please see REFORM, C5 By RICHARD VERRIER TIMES STAFF WRITER Barry Diller, in one of his first strategic moves since taking the helm of Vivendi Universal Entertainment this month, has green- lighted an unexpected expansion of the theme park business. Despite a severe downturn in tourism and theme park attendance after Sept. 11, Universal Studios soon will announce plans to develop three major new attractions at its theme parks in Hollywood and Orlando, Fla. The attractions, representing an investment of more than $60 million, will be based on the hit animated movies and Neutron: Boy Diller also has given the theme park group the go-ahead to aggressively scout for new locales for additional theme parks overseas, including possible sites in Germany and mainland China. The developments reflect a vote of confidence in Vivendi Universal theme parks, which have bounced back sooner than expected from a slump that acceler- ated after Sept.

11 and sparked layoffs and cutbacks. Universal Studios Hollywood reported record attendance in this first quarter, driven mostly by a popular discount on annual passes. Its two parks in Studios and Islands of running at last levels, executives said. Rival Walt Disney Co. also has seen significant gains in attendance in recent months, though its theme parks have been more af- Please see PARKS, C6 Universal Studios Set for U.S., Overseas Expansion Theme parks: Parent firm Vivendi is confident after business rebounds sooner than expected.

Xerox Confirms Chief Met With Pitt Appearance of conflict of interest may fuel calls for the commission resignation. C2 Miramax, TF1 to Join in Film Venture Collaboration could spark more movie marriages across Europe. C2 Digital Government A truly electronic government is a long way off, says the National Science Lawrence Brandt. C4 INSIDE By JON HEALEY TIMES STAFF WRITER Capitalizing on the burgeoning phenomenon of online piracy, a group of upstarts is trying to sell copyright owners the opportunity to compete against their own pirated material. The first of these services, from Altnet makes its debut today by piggybacking on Kazaa, a powerful online network that lets consumers make unauthorized copies of music, movies and software freely from one computers.

The service already has drawn flak from Kazaa users, who installed Altnet software with the Kazaa program without realizing what it could users the chance to pay for authorized copies of material they almost certainly could download for free. feel that, fundamentally, users of any of these networks are honest said Kevin Bermeister, chief executive of Brilliant Digital Entertainment the Woodland Hills animation company that owns of Altnet. want secure content; Please see ALTNET, C6 Offering the High Road for File Sharing RELATED STORY Commercial break-in: New campaign targets TiVo viewers who shun TV ads. C4 By JOSH FRIEDMAN TIMES STAFF WRITER With technology stocks down for a third straight year, many investors may be pondering whether the sector cheap. Yet despite their slump over the last two months, many tech shares remain pricey based on basic valuation measures such as price-to- earnings ratios.

Microsoft for example, trades for 29 times the next fiscal per-share earnings estimate and Cisco Systems Inc. commands 33 times its 2003 fiscal-year consensus estimate, based on a survey of analysts by Thomson IBES. By contrast, the blue-chip Standard 500 index is priced at about 20 times next estimated operating earnings. Still, some portfolio managers say leading tech stocks are poised to benefit if the economy continues to recover this year and next, and could reward patient investors. demand tech has to pick up as the economy improves, and getting closer and closer to that said Fritz Reynolds, manager of Reynolds Blue Chip Growth fund in San Francisco.

He believes the drubbing of the last two years minimizes the risk of further downside. The tech-heavy Nasdaq composite index bolstered investor spirits last week by surging 8.8% to 1,741.39, its best weekly gain in more than a year. But it remains down 10.7% in 2002 and down almost two-thirds from its all-time peak in March 2000. Looking ahead, earnings estimates for many high-quality tech companies could be too low, just as they were too high before the economy fizzled two years ago, Reynolds said. Typically when earnings are depressed, as they are now, stock valuations appear to be daunting.

more, jittery analysts and company managers scarred by two years of pain could be reluctant to express optimism in their outlooks, he added, and so they may be keeping the earnings bar low. Reynolds cautioned that even with big-name tech firms there is a risk of danger that befell Digital Equipment, Data General, Wang Labs and many others over the years. He recommends holding a basket of 10 or so, such as Microsoft, Tech Drives a Hard Bargain Wall Despite the slump, many shares carry a high price tag. Analysts say they are finding better buys in other companies. Please see TECH, C5 By ALEX PHAM TIMES STAFF WRITER The signature brown boots, bobby socks and pistols of Lara Croft have inspired fans to write thousands of letters, build Web sites in her honor, write books about her, tattoo her image on their bodies and even propose marriage to her.

the star of five video games, a comic book series and an eponymous Hollywood film. In all, products bearing her name have generated close to $1.2 billion in revenue over the last six years. Croft, of course, just a character in a video game. But she has become such a real-world star that today she will become the first virtual female actress to be represented by a major Hollywood talent agency, Creative Artists Agency, which also represents Jennifer Aniston, Beyonce Knowles, Carrie Fisher, Geena Davis and Sally Field. In many eyes, the move marks emer- gence as the preeminent female action heroine, even if she is only a digital illusion.

It will be up to CAA to exploit that title by spreading the Croft name to toys, product endorsements and new movies. The bulk of the Croft franchise is through game sales, which have generated $700 million since the 1996 debut in the classic video game for Sony original PlayStation console. Her movie last year, Croft: Tomb starring Angelina Jolie, has brought in an additional $300mil- lion. But most celebrities would love to break into the lucrative advertising and action figure markets, both of which have yielded a relatively paltry $15 million for British game publisher Eidos talking about everything from TV to live events and experiences that Lara fans can participate in, even getting into things like adventure said Elie Dekel, a CAA agent. The emergence of a virtual star has been long Los Angeles Times Photo: Eidos Interactive The Billion-Dollar Woman Name: Lara Croft Date of birth: Feb.

14, 1968 Hair: Brunet Eyes: Brown Height: 5 feet 9 Marital status: Single Education: Gordonstoun Boarding School Nationality: British Occupation: Archeologist Hobbies: Scaling pyramids, dodging dart traps, battling henchmen, outwitting bad guys Since her debut in 1996, video game character Lara Croft has become a global franchise, encompassing movies, advertising, toys and, of course, video games. Revenue, in millions Games (28 million games sold) Movie box-office sales DVD sales and rentals Merchandise $700 300 175 10 5 Source: Eidos Interactive Vital Stats Talent agency CAA has picked up Lara Croft, a virtual heroine who is a real revenue generator Please see CROFT, C8 Deal Seals Power By ALEX PHAM TIMES STAFF WRITER Once a garish sideshow for video game nerds, the Electronic Entertainment Expo has turned into an annual party for one of the few technology sectors yet to flash Attendance and booth space at E3, which begins Wednesday at the Los Angeles Convention Center, are expected to rise this year, a sign that mainstream interest in games is growing as Wall Street and Hollywood search for solid investments. But as the financial and entertainment elite converge on video games as the answer to their woes, the game industry is becoming more like Hollywood with ballooning budgets, a reliance on sequels to fuel sales and a focus on blockbuster titles at the expense of fledgling franchises. The result: Less hype about new state-of-the-art hardware than last year and more emphasis on finding the a game so irresistible that it can launch a franchise such as Lara Croft. focus is shifting back to going to have the great product for the said Shawn C.

Milne, a game industry analyst with Soundview Technology Group in San Francisco. Last year, sales of new consoles drove industry growth, according to NPD Group Inc. It credited the launch of Microsoft Xbox, Nintendo GameCube and GameBoy Advance and the strong momentum of Sony Play- Station 2 (introduced in 2000) for much of the growth last year to $9.4 of which came from hardware sales. Hollywood box office receipts, by comparison, were $8.4 billion last year. Although console sales probably will be brisk this year, the star of the show will be software.

E3 was about who was going to win the console said John of Electronic Arts Inc. in Redwood City, Calif. done. unequivocal. Sony won, and it seem like the tide is going to turn.

going to define the remainder of this generation is content. good for companies such as EA, Activision THQ Sega Corp. and Take-Two Interactive Software which put out last sleeper hit Theft Auto Shares of Activision have jumped this year; shares have risen stock has gained and is up is the first of the harvest said Activision Chief Executive Robert forecast that software sales will grow to this year. With prices the same at $199.99 for the PS2 and Xbox, analysts say Software Comes Back in Play as Game Industry Seeks New Winners Tech: At the Electronic Entertainment Expo this week in Los Angeles, companies will be in search of the Game Sales Growth Los Angeles Times After a slight dip in revenue in 2000, video game sales are climbing again, sparked by the introduction of new game consoles by Nintendo, Sony and Microsoft. U.S.

entertainment software sales, in billions Source: Interactive Digital Software Assn. 0 2 4 6 $8 2001: $6.35 billion Please see EXPO, C8 RELATED STORY move: The video game maker is dropping the price of its GameCube console. C8.