Arizona Republic from Phoenix, Arizona • Page 17

THE ARIZONA REPUBLIC Nl THURSDAY FEBRUARY 16, 1995 Editor, Marian Frank 238-4438 1 Prices rise, but inflation fears stay low CONSUMER PRICES Percentage change in Consumer Price Index, adjusted for seasonal variations. Dow nears 4,000 0.6 DOW JONES INDUSTRIALS 27.92 A 0.4 0.3 Llll II Stocks climbed to record highs Wednesday amid mounting consensus that the economy can grow at a steady rate without inflation. The Dow Jones industrial average gained 27.92, to a record 3,986.17. Story and chart, Page C3. January price spike as an aberration and not a signal of inflationary pressures.

They also took encouragement from a slowdown in industrial output shown in the factory report. The rally came on a day when the Labor Department reported that the Consumer Price Index rose 0.3 percent in January, its biggest increase in five months, and the so-called core rate of inflation, excluding volatile food and energy costs, jumped 0.4 percent, its biggest jump since October 1992. Most economists, however, blamed the increases on an unfortunate combination of one-time price increases, saying they weren't a signal that inflation was getting out of control. "I refuse to let these numbers panic me," said Robert Dederick, an economic consultant at Northern Trust Co. in Chicago.

"There is nothing fundamental here to suggest that inflation is getting out of hand." However, Eugene Sherman, an economist at M.A. Schapiro Co. in New York, disagrees with the prevailing view that January's price numbers were an aberration. "My own view is that this is the beginning of higher inflation rates," he said. "Even though growth is slowing, the economy still has a lot of momentum." A number of analysts said they look for the Federal Reserve to raise interest rates one more time, possibly in May.

Although factories' capacity-utilization rate was up, the 0.1 percent- By Martin Crutsinger The Associated Press Consumer prices staged an across-the-board surge in January, with the underlying inflation rate climbing at its fastest pace in more than two years. The government also reported Wednesday that U.S. factories, mines and utilities operated at 85.5 percent of capacity last month, the highest level in more than 15 years. Both reports normally would raise inflation concerns, but Wall Street rallied on the news. The Dow Jones industrial average gained 27.92 points, to 3,986.17, beating its previous record of 3,978.36, set Jan.

31, 1994. Investors tended to see the age point increase was much smaller than the gains in previous months. Industrial output, which had risen 1 percent in both November and December, advanced only 0.3 percent in January. In Honolulu, Federal Reserve Chairman Alan Greenspan told a banking conference that although the evidence still was mixed, a number of reports suggest the economy was slowing from its torrid pace of late 1994. Such a slowdown, Greenspan said, "would be welcome." Despite last year's strong growth, consumer prices rose just 2.7 percent for all of 1994, the third straight year inflation was lower than 3 percent, a fact that Greenspan noted in his speech.

0.2 Fl II HE El -n 9 1-MAMJJAbUNU "94 '95 Source: Bureau of Labor Statistics The Arizona Republic Travel agency sues airlines A large travel agency sued six major U.S. airlines on Wednesday, asking a federal court to bar the carriers from imposing recently announced limits on the commissions they pay travel agents. Travel Network which has 350 offices nationwide, including one in Phoenix, sued American Airlines, Continental, Delta, Northwest, United and USAir in Minneapo riin 2 law practices snapped Putting 'smart' in gadgets puts chips in firm's pocket Both takers seek broader base she can't recall any acquisitions in a year or two. "The recession had a lot to do with the lull," Hawkins said. "The acquiring group wants more business, and firms didn't have it.

But the economy is back up, and business is booming." The acquisition of Kimball Curry boosts the 17-year-old Gallagher Kennedy firm's attorney base to 81 and broadens its expertise in environmental work, said Michael Gallagher, a Gallagher Kennedy director. Over the past three years, Kimball Curry, which has 12 lawyers, has had offers from 10 to 12 national law firms that wanted to use it as a Phoenix office, David Kimball said. But Kimball said he resisted because he didn't want to lose control of the business or have the hourly rates increase. Kimball said his firm's rates are as much as See 2 VALLEY, page C4 By Barbara Deters The Arizona Republic The number of Valley law firms is about to shrink by two. The firms of Kimball Curry, and Scult, Lazarus, French, Zwillin-ger Smock are being acquired in deals expected to close March 1.

Gallagher Kennedy, the Valley's sixth-largest firm, is acquiring Kimball Curry, which specializes in environmental and natural-resources law. Both are Phoenix-based firms that have national reputations. Morrison Hecker of Kansas City, will add the law firm of Scult, Lazarus to its Phoenix office. The acquisition gives Morrison Hecker 33 lawyers, making it the largest Phoenix law office of a national firm. All four firms said the moves allow them to provide a broader base of services to their clients.

Although the joining of practices by law firms isn't unusual, Phoenix legal recruiter Phyllis Hawkins said By Margaret D. Williams Bloomberg Business News In an average household, there are about 100 tiny "microcontrollers," semiconductor devices that do everything from programming a compact-disk player to helping a couch potato surf through cable-TV channels. That may seem like a lot, but Steve Sanghi of Microchip Technology Inc. says the number will increase to 225 by the end of the century, and he is confident that the Chandler-based company will see continued revenue growth from this market. "We don't think supply and demand will be in balance in the near term," said Sanghi, chairman and chief executive of Microchip.

That will help keep prices up and allow Microchip to invest in adding more manufacturing facilities, he said. In fact, Microchip bought a chip-fabrication facility in Tempe from Digital Equipment Corp. for $6 million in October 1993 a fraction of the estimated $1 billion price tag attached to a new plant. Analysts estimate that the company invested an additional $20 million or $30 million in the site. Sanghi said the plant eventually will be capable of generating about $500 million in revenue, although it is currently putting out only about half that amount.

The site just began full production about 90 days ago, Sanghi said. Microchip currently has 1,400 employees worldwide, with about 900 in Chandler and Tempe. "We think for a number of years Microchip will have a very, very low cost structure," Sanghi said. "We could increase dramatically the capacity in that or fabrication facility. Part of the Microchip story has been one of a low-cost structure that has enabled the company to enjoy a high gross margin.

In the second quarter, its gross margin was 5 1.2 percent. Microchip was spun off from General Instrument Corp. in 1989 and was one of the hottest initial public 1 iKlV.fl)h 1 lis federal court. U.S. airlines have long paid commissions equal to 10 percent of the cost of the ticket, but the new policy caps commissions to a maximum of $50 for any domestic ticket over $500.

Microsoft update Both the Justice Department and Microsoft Corp. spent Wednesday reviewing their options after a federal judge's rejection of a proposed antitrust settlement. Tuesday's decision by U.S. District Judge Stanley Sporkin throws into disarray the government's four-year legal battle with the software giant and the agreement which would regulate licensing of Microsoft's MS-DOS operating software. Sporkin criticized the agreement as too narrow and set a hearing for March 16.

Microsoft's stock fell to $60.75 a share on the Nasdaq Stock Market. Acquisition by Bell Sports Bell Sports a Scottsdale-based maker of bicycle helmets, said Wednesday it will acquire American Recreation Co. Holdings Inc. in a stock swap valued at about $88.3 million. American Recreation, of Commack, N.Y., makes bicycles, helmsts and accessories.

The two companies had combined sales of about $270 million for the last 12 months, according to Bell Sports. The deal is expected to close by the middle of this year. Delta service changes May 1 Delta Air Lines said Wednesday it will add new Arizona service and drop one route on May 1. A new nonstop flight from Phoenix to New York's Kennedy Airport will give Arizona passengers Delta connections to 20 international destinations. The airline also will add a new nonstop flight between Phoenix and San Diego and discontinue nonstop service to Los Angeles.

From Tucson, Delta will introduce new nonstop service with one flight daily to Cincinnati. Also, Delta affiliate SkyWest will introduce 50-passenger jet service from Tucson to Salt Lake City. U.S.-China talks resume The latest round of U.S.-Chinese trade talks began Wednesday amid media reports that Chinese authorities have confiscated more than 350,000 pirated CDs, laser discs and computer-software items. The two nations have threatened a trade war over U.S. demands that China improve protection of copyrights, trademarks and patents.

Unless Beijing takes action by Feb. 26, Washington plans to impose punitive tariffs on more than $1 billion of Chinese exports. China has said it will retaliate. At a glance Piper Jaffray a major mutuafaund and brokerage firm, agreed Wednesday to pay $70 million to settle a large lawsuit resulting from a bond fund's failed investment in mortgage derivatives. RJR Nabisco Holdings Corp.

approved a dividend of 7.5 cents a share, as well as a reverse stock split of l-for-5. Making Arizona 'film friendly' The Arizona Republic Steve Sanghi, chairman and chief executive, of Chandler-based Microchip Technology is counting on growing demand for specialized microchips. MICROCHIP TECHNOLOGY INC. Closing stock prices since going public in 1993. $35 1 1 on I March 1993: 1 I I $3.12 i 111, 15 I February 15, 1995: 1 10 I and television companies to qualify for an existing 50 percent sales-tax rebate.

"It's very realistic none of it is pie in the sky," Linda Peterson Warren, Arizona film commissioner, said of the recommendations she helped draft. "It's very doable." Arizona ranks among the nation's top 10 states in terms of film revenues, offering a variety of locales from deserts, mountains and moonscapes to Western towns and big-city skylines. A privately built sound-stage complex would enable film and TV companies to stay in Arizona to do interior and other shots, instead of packing up and going back to Los Angeles for that work, Warren said. A variety of sound stages also could lure permanent television productions to Arizona to shoot See PANEL, page C4 By Ken Western The Arizona Republic The Grand Canyon State wants to be known as "film friendly." Filmmakers pumped an estimated $79 million into the Arizona economy in 1993, but the state wants to attract more business by offering incentives and other help to film-and television-production companies. A 16-member governor's task force headed by Department of Commerce Director Sara Goertzen Dial has recommended: Studying the feasibility of developing a sound-stage complex, which according to some estimates could cost $20 million.

Creating a two-year program in animation at a community college to train students for work with Fox Animation Inc. in Phoenix and with other studios. Broadening the eligibility of film offerings of 1993. Buying used facilities and spending only "pennies to the dollar" in capital investment for the amount of capacity it gets in return will "help Microchip keep costs down but still keep up with demands Sanghi said. The market or microcontrollers is growing at a rate of 44 percent a year, he said, and he expects that growth to continue through 1996.

Also, the $4 billion market for chips 0i Apr. Jun Dec. Feb 1995 Jun. Aug. 1994 1993 Source: Bloomberg Business News Michael NovackThe Arizona Republic See Iff THE CHIPS, page C4 West-ASU internships emphasize high-tech Compiled by Robert Ogle from reports by The Associated Press, The Arizona Republic, Dow Jones News Service and Bloomberg Business News.

BUSINESS DATABANK Wednesday's prices in New York trading as of 4 p.m. EST. ONE U.S. DOLLAR EQUALS German marks 1.5090 Up from 1.5087. Canadian dollars 1.4042 Up from 1.4011.

Japanese yen 98.35 Down from 98.52. NAAMAN NiCKELL Republic Columnist new ammunition in their battle to attract new companies. Major manufacturing prospects often are heavy users of electric power, and so a few cents' differential in rates can have a substantial impact on the bottom line. And it might mean a company would locate in SRP's service area rather than in some other state or even some other part of Arizona. The timing of the announcement seems particularly propitious, because economic-development officials say that several large manufacturing prospects are considering the Phoenix area, among others, as a site for expansion.

The lower rates also could be attractive to companies already in the SRP service area that might be considering expanding somewhere else. Naaman Nickell may be reached at nnickellrepublic.pnl.com via e-mail. His column appears on Sunday, Monday and Thursday. International Management in Glcndale, a leader in global business," the magazine says. "While Thunderbird has focused on this for close to 50 years, many other B-schools are adding international content to their programs." The latest listing, based on a survey of leading corporate recruiters, follows an earlier announcement of the magazine's Top 20 business schools.

Thunderbird officials have long argued that the school hasn't gotten the recognition it deserves, but this seems to be changing as the globalization of the economy picks up momentum. Business-friendly SRP The Salt River Project's announcement last week that it will propose lower rates for some of its largest commercial and industrial customers could give economic-development organizations some advocate for the development of small business in Arizona, and this is a productive way to work with the academic community to support that segment of the economy," said Jim Smith, vice president and general manager for the West Small Business Group, which is headquartered in Phoenix. Businesses interested in the program may contact Filley at 965-0903. International acclaim Maybe it really is true that the American Graduate School of International Management is better known elsewhere in the world than it is in the Valley. The latest international publicity comes in the current issue of BusinessWeek magazine's listing of 20 up-and-coming business schools, which were listed in alphabetical order.

"Corporate recruiters consider the American Graduate School of Arizona State University and West are teaming up again to provide skilled technical resources for some small-and medium-size businesses around the state. The West Entrepreneurial Fellows Program, in its fourth year, is designed to give smaller businesses access to graduate students in engineering and computer science. The students work as interns for two years while completing studies for a master's degree at ASU. "Smaller businesses often have limited resources to recruit and train the kind of talent that can provide valuable assistance in high-tech areas," said Dick Filley, director of the ASU Corporate Leaders Program. "The West program solves that dilemma by attracting the best students nationwide and connecting them with small businesses in Arizona." Students chosen for the program GOLD $376.60 4uV SILVER $4.727 a troy ounce Down from $4,755.

a troy ounce 11 Up trom $376.40. OIL $18.42 a barrel of light, sweet crude for March delivery. Up from $18.30. work 20 hours a week for the sponsoring business and full-time during their summer break. The West Foundation provides some funding to help participating businesses and students with salaries, insurance, tuition and books.

Filley says he sees the program as a "genuine bargain" for small businesses. West has long been an FEDERAL FUNDS MKT. RATE: 6.25 The Arizona Republic.