Imagine a world in which your computer never crashes, candy makes you healthy, and you don't have to pay electric bills.

It may seem far-fetched, but scientists are well on their way to changing life as we know it. An article in Technology Review highlights "10 Emerging Technologies That Will Change the World." Among them are injectable tissue engineering, which would substitute for joint-replacement surgery; polymer solar cells that could be spread like paint, thereby lessening our reliance on fossil fuels; a sugar that shuts down disease processes; and completely bug-free software (hard to believe, we know).

The FOOL 50, up almost 2% today, still thinks solar calculators are fancy.

In today's Motley Fool Take:

GM's Pension Tension

Aggressive pension plan accounting during the bull market may significantly harm many companies' future earnings.

General Motors (NYSE: GM) is a prime example. The world's largest auto maker said today it predicts pension expenses will triple in 2003 to about $3 billion. GM's U.S. retirement plans were underfunded by $9.1 billion at the end of 2001, and that total has now risen to about $19.2 billion.

The problem is that generally accepted accounting principles (GAAP) allow businesses to use expected returns for their pension plans when preparing financial statements. Most companies have used 9% or 10% per year; figures Warren Buffett and many others warned were too aggressive.

In November 2001, Buffett wrote the following in a Fortune magazine article: "I'm a sporting type, and I would love to make a large bet with the chief financial officer of [ExxonMobil(NYSE: XOM), GE(NYSE: GE), General Motors, and IBM(NYSE: IBM)], or with their actuaries or auditors, that over the next 15 years they will not average the rates they've postulated."

Thus far, they haven't, of course, as the bear market has eroded the value of virtually every traditional pension fund. And companies are now paying the price: GM, for example, has been using a 10% "asset earnings rate assumption," but is now lowering that to 9%. A spokesman told The Wall Street Journal that the move will cost the company about $700 million in increased expenses.

Quote of Note

"All my investment life, I have tried to invest at the most pessimistic time, or go against the herd mentality." -- Sir John Templeton

AOL Disses Investors

AOL Time Warner (NYSE: AOL) appears to be dissing investors -- even slapping them in the face -- by disclosing key information to analysts before sharing it publicly. This issue involves accounting for goodwill. We'll explain.

Goodwill is value that an acquiring company pays above the estimated value of the assets it acquires. When a company acquires or merges with another, and the stated value of the deal at the time is higher than the asset's estimated worth later, there is goodwill to write down. And now, after new 2002 rules, goodwill must be reappraised and written down annually, rather than amortized over many years.

AOL Time Warner wrote down $54 billion in goodwill last year. Today, The Washington Post reports it will write down at least another $10 billion (to be announced Jan. 29) based on the declining value of its online unit. Before investors flip out, realize that this figure is mainly an illusion. It isn't real money. It won't affect cash flow -- it's a non-cash, non-operating charge.

So, the much larger issue to highlight is this: The Post writes that AOL "has alerted Wall Street analysts" about this news. In fact, UBS Warburg analyst Christopher P. Dixon is paraphrased as saying, "AOL Time Warner officials have done a good job of warning analysts that a giant, non-cash charge to earnings is on the way."

That's just great. AOL Time Warner has done a good job of warning... analysts. Hey, AOL Time Warner, what about your thousands of investors? Have you already forgotten about Regulation Fair Disclosure (Reg FD)? Come on. Your investors learn about this stuff from a newspaper, while you're telling analysts over lunch? Plus, in the company's December press release to investors looking ahead to 2003, the writedown wasn't mentioned at all.

Reg FD is meant to prevent companies from treating material information with privilege. If a company is releasing material information, it must strive to do so in a fashion equitable to all. If it inadvertently releases material information to a select group, the company has a 24-hour "cure" time, during which it can issue a press release.

So, if AOL Time Warner has indeed been telling analysts this material information, it had better share it with investors now. Will it? A phone call to the company led to a dead end. Not surprising.

The sad thing is, AOL Time Warner could go far to ease inevitable investor concern by explaining this goodwill stuff in a well-written press release. Is that too much to ask from the world's largest media company? Well, fair disclosure isn't too much to ask. It's required.

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X Marks Microsoft's Spot

When Microsoft(Nasdaq: MSFT) announced it would enter the home video game market with the Xbox console system, investors had every right to get jittery. The company had already feasted on fat margins in its quest for market domination in the margin-friendly operating software space.

The Xbox had to whistle by the graves of forgotten platforms Atari, 3DO(Nasdaq: THDO), and even Sega to mark its launch, with no hope of taking over leader Sony(NYSE: SNE) in the near term. A foray into the PlayStation waters was the margin-rich cash cow for Sony, but it was the other way around for the leading software giant.

Microsoft knew all about the blades but little about the razors in a gaming realm where console makers realized losses in system sales in order to make them up in software royalties. But Microsoft had an ace up its sleeve to win back the fiscal purists: Xbox Live. For $49, diehard gamers could hook up their machines to high-speed DSL or cable modem connections and be thrust into a new world of online gaming.

Earlier this week, the company announced it has sold more than 250,000 Xbox Live starter kits since its mid-November debut. While one can argue the validity of Microsoft's claims that the tally doubled its internal expectations, it does force the market to reexamine what the Xbox will ultimately grow into for the company.

Sure, that's roughly only 5% of the established Xbox base, but it's a sum that will no doubt grow as more consumers enter the era of broadband and word of mouth spreads through high school halls and office break rooms.

The Xbox came standard with an Ethernet port for eventual online connection, but its biggest asset is a built-in hard drive. You can already feel the Electronic Arts(Nasdaq: ERTS) boardroom drooling over the possibility of delivering EA Sports roster updates to the Xbox Live crowd, while smaller software rivals such as Activision(Nasdaq: ATVI) map out low-cost upgrades to existing titles.

No inventory. Minimal overhead. It's a return to the plump margins that have spoiled Microsoft shareholders over the years.

Yes, those consoles are costing the company a pretty penny right now, but the future is coming into focus. Fat pipes. Fat margins. The nostalgic din of gluttony is starting to slowly come back into fashion at Microsoft.

Discussion Board of the Day: Video & PC

Do you have Xbox Live or PlayStation's Network Adapter? Who do you think will reap the fruits of online gaming more -- the console makers or the software houses? All this and more -- in the Video & PC discussion board. Only on

Quick Takes

Big pharma Merck(NYSE: MRK) will begin a tender offer for the 49% of Japan's Banyu Pharmaceuticals that it doesn't own. The $1.5 billion price tag is a 32% premium over the average close for Banyu over the last month. Merck is a rare player in the mergers and acquisitions game. It purchased genomics tool maker Rosetta Inpharmatics for $620 million in 2001, but is preparing to spin off its Merck-Medco unit in an IPO.

Shares of both optical components and metrology equipment maker Veeco Instruments(Nasdaq: VECO) and semiconductor equipment maker FEI(Nasdaq: FEIC) jumped over 14% on news today that they had called off their $1 billion merger announced in July. (Veeco's stock dropped 20% then.) The parties cited difficult markets.

Here's an industry individual investors don't necessarily think about much. U.S. Steel(NYSE: X) said it would buy the assets of bankrupt National Steel for $750 million and assume $200 million in debt. This will certainly keep Big Steel in the No. 1 spot, ahead of Nucor(NYSE: NUE) and up-and-comer International Steel Group.

Germany-based enterprise software maker SAP(NYSE: SAP) jumped over 7% today after surprising markets with news that its Q4 license revenue hit 950 million euro, down from last year's 1.03 billion euro but ahead of Street expectations of 800 million euro. The stock accelerated its year-long decline last fall to a 52-week low of $9.93, but has since recovered smartly to close yesterday at $22.49.

Missing Fool: Greg Milner

Attention, Western Fools: A member of our extended family has been missing since a holiday trip from Minnesota to Washington state. Community member StickleyFan6 is leading the search for her brother-in-law and needs help from Fools in Montana, Idaho, the Dakotas, or Washington. You can find more information as well as a printable missing-persons flyer here:

And Finally...

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