www.natcath.com By BART JONES

Their names were synonymous with the U.S. “dirty wars” in Central America in the 1980s and the Iran-contra scandal. Today, Otto Reich, Elliot Abrams and John Negroponte have resurfaced and are helping run U.S. policy toward Latin America again.

The re-emergence of the Reagan-era hardliners is causing dismay among human rights activists and some Latin America experts who fear the United States is returning to the Cold War days when it backed brutal dictatorships, covertly supported coups and sabotaged leftist movements. “There isn’t a single democratic leader in Latin America that doesn’t reject and deplore the role that our government played in Central America during the 1980s,” said Robert White, a former U.S. ambassador to El Salvador. “To choose men like Elliot Abrams and Otto Reich is an insult.”

Said Larry Birns of the Council on Hemispheric Affairs, a left-of-center think tank in Washington: “We seem to have learned very little from an extremely bloody past. ... This is probably the most ideological and least talented Latin America team either in Republican or Democratic administrations that I have witnessed in monitoring this scene for 35 years.”

The return of Reich, Abrams and Negroponte comes as a wave of leftists rises to power across Latin America, largely riding a backlash against U.S.-prescribed free-market economic policies known as the “Washington Consensus” that some economists blame for exacerbating mass poverty.

Leftists now occupy the presidencies of Brazil, Venezuela, Ecuador and Haiti. A left-of-center politician may also win next March’s election in Argentina, which would put two-thirds of Latin America’s population under leftist rule.

Since assuming their posts a year or so ago, the Bush team has come under fire for allegedly supporting a coup against Venezuela President Hugo Chavez, blocking economic aid for the government of one-time radical priest Jean-Bertrand Aristide in Haiti, and trying to undermine the campaigns of leftist presidential candidates in Bolivia and Nicaragua.

Administration officials say they are promoting democracy in Latin America, encouraging free trade and waging a war on drugs. They defend the record of Reich, 57, a right-wing Cuban-American and ardent foe of Fidel Castro who until Nov. 22 was assistant secretary of state for the Bureau of Western Hemisphere Affairs. He is now special envoy to Latin America.

“His performance as assistant secretary of state since January was exemplary,” State Department spokesman Robert Zimmerman said. “He has the complete confidence of the secretary of state and of the president and of the state department senior leadership.”

Zimmerman added: “Given his substantial expertise, his knowledge of the region, he has been asked to be the secretary’s special envoy for Western Hemisphere Affairs.”

Abrams, 54, who was assistant secretary of state for Western Hemisphere Affairs during the Reagan administration, served until early December as the National Security Council’s senior director for democracy, human rights and international operations. President Bush recently appointed him director of Middle Eastern Affairs at the White House.

Negroponte, 63, U.S. ambassador to Honduras in the early 1980s, now is U.S. ambassador to the United Nations.

Another Iran-contra figure, John M. Poindexter, who served as national security adviser under Reagan, today is director of the Information Awareness Office at the Pentagon.

The Bush team has provoked controversy on a number of fronts in Latin America. In April it tacitly backed an attempted coup against Chavez, pledging to work with an interim government that lasted two days and abolished the constitution, the su-preme court and the Congress. A high-level State Department official called allegations that the United States supported the overthrow of Venezuela’s democratically elected president “absolutely false” and said the administration was cleared in a probe by the State Department’s inspector general.

“We investigated fully, and there was absolutely no winking or green light,” the official said.

Two months later, U.S. ambassador Manuel Rocha warned Bolivians that electing indigenous leader Evo Morales could result in a cut-off of U.S. aid. The State Department official said Rocha was responding to provocative comments by Morales calling for the Drug Enforcement Administration to be thrown out of Bolivia and for the U.S. Embassy to be closed.

Morales, a Marxist, came soaring out of fourth place in polls after the comments and lost the election by 1.5 percent. Last year, U.S. officials made similar comments about former Sandinista leader Daniel Ortega during Nicaragua’s presidential election. “It was a direct attempt to say we’re going to make you starve if you elect Ortega. And it worked,” Birns said. Ortega lost.

U.S. officials deny they meddled in the election.

The United States also is helping to block $500 million in international aid for Haiti, an effort, critics say, to strangle the economy and force Aristide out. U.S. officials contend Aristide has mismanaged Haiti and ruled in an autocratic way.

Not everyone thinks the United States is returning to an interventionist policy aimed at crushing leftists in Latin America, or that Reich has mishandled his post.

Steve Johnson, an analyst with the conservative Heritage Foundation think tank in Washington, said that after a rough start, Reich recently has established good relations with Brazil’s new president, Luiz Inacio Lula da Silva, and put the United States on record as opposing any more coups in Venezuela. “I think he’s done fairly well,” Johnson said.

A so-called “recess appointment” in-stalled as assistant secretary of state for a year without congressional approval, Reich automatically lost his post when the most recent congressional session ended. Bush then named him special envoy, which does not require congressional approval. Officials say he will still play a key role in policy toward Latin America. Bush could nominate him to serve again as assistant secretary of state, but even conservative analysts such as Johnson say he would not automatically win approval from the Republican-controlled Congress.

“I don’t think Republicans are monolithic in their support” for Reich, Johnson said. He believes there is a tug-of-war in the administration on Latin America policy between hardliners such as Reich and moderates led by Secretary of State Colin Powell. Powell visited Colombia Dec. 3 and 4, but Reich did not accompany him. Some took that as a sign that Reich’s star is fading.

Still, Powell’s attention has been focused on the possible war with Iraq and the war on terrorism, leaving the United States without a clear policy toward the region, according to many analysts. “I’m not sure anybody really knows where the administration is going on Latin American policy,” Johnson said.

Birns said the policy under Reich has consisted mainly of attacking anyone perceived as friendly toward Reich’s archenemy, Fidel Castro. “He simply memorizes the names of those he considers to be communist, which means if you are for the normalization of relations with Cuba, you’re a communist,” Birns said. “Reich is looking for villains. He’s looking for some commies.”

But “the Soviet Union is dead. Cuba does not export revolution,” Birns added. “These are not the issues of today. The issues of today are that after several decades of the Washington Consensus development model, the number of poor in Latin America is greater than ever.”

The lack of a modern, post-Cold War policy is especially disturbing, analysts say, because the region is undergoing a traumatic upheaval. And meanwhile, the re-emergence of the Iran-contra figures is on few people’s radar screens. “Latin America is disintegrating, and nobody’s noticing,” said White, who is also president of the Center for International Policy, a left-of-center think tank. If Argentine leftists win next March’s presidential election, “roughly two-thirds of Latin America will live under reformist, populist rulers who explicitly reject Washington’s prescriptions of freer trade, globalization and the selling-off of public assets,” he said.

“Somebody should be paying attention to them,” White said. “Somebody should be talking about something else except how big a threat Fidel Castro is and the absurd charge that he’s a terrorist.”

Bart Jones is a reporter for Newsday.

National Catholic Reporter, January 10, 2003

www.csmonitor.com Venezuela's private banks remain closed for a second day today as the president threatens to take them over. By Kris Axtman | Staff writer of The Christian Science Monitor

CARACAS, VENEZUELA – Four years after Venezuelan President Hugo Chávez was hailed as the model for a new wave of leftist leaders in Latin America, some of those following in his footsteps are learning that you can be radical - just don't wear it on your sleeve.

To his detractors, Mr. Chávez is seen as almost a dictator and a would-be communist. They point to his close relationship with Cuban President Fidel Castro and his occasional trips to Libya and Iraq. As a result, opponents are in the sixth week of a strike aiming to oust the controversial leader.

Observers say that Chávez's radicalism is more rhetoric than reality. But seeing the trouble that Chávez faces - the country's oil industry has ground to a halt, the nations banks have shut down, and the opposition is calling for a referendum on Feb. 2 - other left-leaning Latin leaders are concluding that the best way to bring the change is to work within the system instead of constantly railing against it.

"When he was first elected, Chávez was on the frontline of a new political experiment," says Alfredo Keller, a respected pollster in Caracas. But he has failed at balancing the demands of nationalization and globalization, he says - and the result is a country thrown into economic chaos.

This has meant that other leaders with similar leftist ideologies are having to reconsider how best to tailor their messages and policies in Latin America. The leaders include Brazil's new president, Luis Inacio Lula da Silva, who took office last week and Lucio Gutierrez, who swept Ecuador's presidential election in November. While they talk about distributing their country's wealth more equally, they also want to do so without disrupting their country's economic structure - something Chávez refused to do.

Along with appointing fiscal moderates to key cabinet posts, Mr. da Silva, for instance, allowed certain officials in the previous administration to keep their posts, and he traveled to Washington before meeting with any Latin American leaders.

As well, Mr. Gutierrez last week named a US-educated former bank vice president to be his finance minister, something that would be anathema to Chávez.

Still, to satisfy his constituents, the day after his Jan 1. inauguration, da Silva had breakfast with Chávez and dinner with Mr. Castro. Da Silva says he will consider sending technical workers to Venezuela to get the country's oil company running again.

"I think a lot of that seeming friendliness is driven by internal politics and posturing within Brazil," says Stephen Haber, a Latin American expert at Stanford University in Palo Alto, Calif. "After appointing fairly conservative, middle-of-the-road cabinet members, he had to placate the militant wing of his party. And siding with Chávez is low cost."

Dr. Haber says that this idea of a leftist alliance in Latin America is being overplayed, and is nothing like the unified left of the 1960s and '70s.

"The left has a long history in Latin America, and it exists for very good reasons. But this notion of a pan-Latin American left is not what is occurring now," he says.

What is occurring, he says, is a reaction to the free-market model of the 1990s, which many Latin Americans feel left them no better off. In fact, with the exception of Chile, per capita income has not risen since 1980.

That means people are voting their pocketbooks, removing leaders who couldn't make globalization work, and electing ones who stress more nationalistic ideas.

"Latin America is at a critical point right now in terms of the left. I think everyone realizes Chávez has failed, and they are now looking to [da Silva]," says Michael Shifter, senior fellow at the Inter-American Dialogue in Washington. "He represents an evolution towards a more moderate position, and is an important bellwether for the movement."

Still, Mr. Shifter says, it's going to be very difficult for these new leftist leaders to maintain the delicate balance between economic stability and a greater attention to social issues.

Chávez is proof of that. Under him, Venezuela's economy contracted 6 percent last year, and its currency hit a record low against the dollar this week. The country's banks are in the second day of a strike today, and Chávez continues to threaten to nationalize them.

Many experts, however, argue that his inability to arrest a worsening economy is more a result of his ineptitude and mismanagement than ideology.

But many Venezuelans hear only his radically leftist rhetoric, and can't separate his actions from his words. For instance, while he says he is opposed to globalization, Chávez hasn't done anything to disconnect Venezuela from the global economy, says Vladimiro Mujica, a professor at the Central University in Caracas and a representative of Citizens Assembly, a nongovernmental organization working with the opposition.

"Some people in the opposition like to raise the ghost of communism, but I don't think that is what we have," he says. "What we have is a very corrupt regime that is clinging to power." Opponents say that since taking office, Chávez has rewritten the country's Constitution to consolidate more power in his own hands.

Pollster Keller is one of many who accuse Chávez of using state funds to finance other leftist candidates in Latin America, such as those who were recently defeated in Nicaragua and Bolivia - the main funding coming from the state-run oil company, Petroleos de Venezuela, or PDVSA.

"He wants to use the money of PDVSA as a political weapon," says Jose Manuel Boccardo, a manager at the company before the strike. "He wants PDVSA to be the cash cow for his geopolitical strategy, and we don't want to be part of that."

Keller believes that Chávez won't step down voluntarily because "he is convinced he represents the head of the new left in Latin America."

The left has a strong base in Latin America. Keller points to meetings that took place in Sao Paulo, Brazil, in 1990 among the far left. At that time, 14 groups attended the Sao Paulo Forum, a left-wing discussion group which da Silva cofounded, aimed at building political strength. Today, there are 140 members of the Forum and polls show that 15 percent of the region is left-leaning. The Forum will reconvene in Porto Allegre, Brazil, at the end of the month.

www.forbes.com Reuters, 01.09.03, 5:28 PM ET By Susan Schneider

NEW YORK, Jan 9 (Reuters) - Venezuelan sovereign bonds careened nearly 3 percent lower on Thursday after bank workers joined a five-week strike waged by foes of President Hugo Chavez, boosting concerns that the escalating conflict will irreparably damage an already crippled economy.

Venezuela's spreads -- the premium investors demand over U.S. Treasuries to compensate for risk -- widened 0.62 percent to 13.3 percent, their widest point since Feb. 7, 2002, according to the J.P. Morgan Emerging Market Bond Index Plus. The nation's share of the EMBI-Plus plunged 2.85 percent on the day.

Venezuela's debt took a dive after bank workers said they would join the opposition's efforts to force Chavez's resignation or new elections with a 48-hour halt of banking services. The bank stoppage adds to a general walkout that has strangled the oil sector, the source of half the government's revenues.

News of the bank halt helped send the bolivar currency more than 5 percent lower on Thursday, adding to Wednesday's sharp plunge, and chipped steadily away at the value of Venezuela's bonds.

"The longer the strike at (state oil giant) PDVSA lasts, the more pressure it's going to put on the markets," said Ricardo Amorim, head of Latin American research at Wall Street research firm IDEAGlobal. "With the bank strike, the prospect for a solution to resume production at PDVSA looks further away."

Many large supermarkets also began a one-day stoppage on Thursday as part of the strike, which has already caused widespread gasoline shortages.

"They haven't seen any (government) reserve losses yet but they have to be losing money somewhere -- there's just no business going on," said an emerging debt trader. "It's going to be harmful to the economy."

Brazilian debt, meanwhile, shed 0.62 percent in terms of daily returns on the EMBI-Plus as the benchmark C bond <BRAZILC=RR> slipped 0.25 point to 69.25 bid.

Brazilian assets have soared in recent days as investors warm to new President Luiz Inacio Lula da Silva, a former labor union leader who struck fear in hearts of investors because of his one-time leftist rhetoric. With Lula now vowing to pursue reforms and keep spending in check, however, investors have snapped up bonds and pushed the currency higher.

The hefty gains in Brazilian assets prompted investors to take some profits on Thursday, traders and analysts said.

EMERGING ECONOMIES RUSH TO MARKET Mexico's bonds also slipped as the nation prepared to tap international markets with a $2.0 billion, 10-year global note, an increase from the previously planned $1 billion sale. The nation's share of the EMBI-Plus lost 0.3 percent on the day.

Mexico was expected to sell the debt on Thursday in a deal seen yielding around 2.5 percentage points above comparable U.S. Treasuries, said people familiar with the sale. With 10-year U.S Treasuries yielding 4.17 percent, the Mexican bonds would have a yield less than 7 percent.

Emerging economies like Mexico have rushed furiously to international markets this week to take advantage of improved sentiment toward the asset class. After a string of rocky months in 2002, emerging markets rallied in the fourth quarter, bolstered in part by investor cheer for Lula.

Turkey, too, took advantage of the window of opportunity on Thursday, selling $750 million in 10-year bonds. The issue was made at 98.522 percent of face value and a yield of 11.25 percent, according to the lead managers.

The Turkish and Mexican deals follow Chile's sale of $1 billion in 10-year global notes on Wednesday and the Philippines' auction of $500 million, a reopening of an existing bond maturing in 2013.

Friday January 10, 8:30 PM sg.biz.yahoo.com By Angela Pruitt Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--A mix of investment-grade and junk-rated emerging market issuers are making the trek to international capital markets this week with hungry investors ready to feast on the new bonds.

Mexico and Turkey marked the latest sovereigns to access a welcoming market. Mexico launched a $1.5 billion 10-year global bond Thursday, while Turkey sold $750 million in new 10-year securities. The offerings follow Chile's $1 billion global bond priced Wednesday as well as a $500 million increase of the Philippines' outstanding 2013 global bond.

"Broadly speaking, (issuers) have reasonable access," to overseas markets, said Rob Gvozden, an analyst at Lehman Brothers, adding there was no evidence of great discrimination among credits.

The raft of new bonds comes as emerging market debt capped off 2002 with about 15% in gains and staged a spirited rally in the first week of the new year. A positive environment in the U.S. corporate bond sector and brighter political and economic outlook in Brazil have nourished the environment for new issues, observers say.

There is "clearly an appetite for paper," said Francis Rodilosso, a portfolio manager at Van Eck Capital. However, he said there is "not a bottomless pit of demand. Some credits would have a difficult time issuing now."

Indeed, analysts say the issuers rated in the single-B category, such as Brazil and Venezuela, will be hard-pressed to tap overseas markets as their spreads hover around 1250 basis points and 1300 basis points over U.S. Treasurys, respectively.

"The market is not bullish enough," to take on debt from these countries, said Siobhan Manning, an emerging markets debt strategist at Caboto IntesaBci.

Indeed, Brazil isn't expected to be able to access the market for some time given lingering questions about how President Luiz Inacio Lula da Silva's administration will engineer greater growth for South America's largest economy while maintaining fiscal discipline. Venezuela's debt servicing cost have surged recently amid an ongoing national strike that has shut down the country's vital oil industry, among many other sectors.

"There is no urgency for Brazil to come now. Over the next couple of months the window may open," Manning said, noting the country's coupon and amortization payment schedule is heaviest in April and October.

January is typically a heavy issuance month for emerging markets sovereigns, although with Brazil on the sidelines and following a slew of new debt placed during the tail end of the fourth quarter, the pipeline this quarter is seen as less frenetic compared to last year.

Exotic borrowers are expected to be the next batch of deals to hit external markets this month, including the Dominican Republic, Costa Rica and Guatemala. Market chatter also has it that Colombia could be readying a new bond soon.

Van Eck's Rodilosso said the bonds currently hitting the market don't appeal to a monolithic investor base. These "deals are not necessarily going into same portfolios."

The relative cheapness of the Philippines' deal drew some investors, but others remained turned off by the country - which doesn't have investment-grade status -due to concerns over its widening budget deficit. The new bonds were priced 553 basis points over comparable Treasurys and re-offered at 96.75.

Investment-grade corporate bond investors showed the most interest in Chile's deal, which marked the nation's largest sovereign bond ever. The government said it received some $4 billion in orders as expectations the country won't tap the U.S. market again this year fueled demand.

As such, Chile was able to price its transaction at the bottom end of official price guidance - 163 basis points over Treasurys.

Mexico, which was due to price late Thursday, has also become less of a dedicated emerging markets play given the country's investment-grade status, observers say.

"We are particularly bullish on Mexico relative to the high-grade universe," said Lehman's Gvozden. He said that Mexico's fairly small financing requirements given the government's zero net borrowing requirement "offers a fairly strong underpinning."

Mexico upsized its deal, co-managed by J.P. Morgan and UBS Warburg, from $1 billion and narrowed the price guidance to 246 basis points from an initial 250 basis points.

Meanwhile, Turkey sold its bond at a spread 712 basis points over Treasurys, via J.P. Morgan and Morgan Stanley. The new securities carried a yield of 11.25% and an 11% coupon.

-By Angela Pruitt, Dow Jones Newswires, 201-938-2269, angela.pruitt@dowjones.com

money.cnn.com

Looking to cut through the earnings fat to get to the meat? Here are next week's top reports. January 10, 2003: 1:19 PM EST By Justin Lahart, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Starting Monday, Wall Street is going to be awash in earnings reports -- and investors trying to make sense of them.

The earnings season kicked off badly, when Alcoa posted fourth-quarter results that were far worse than expected, but the overall earnings picture looks like it could be kind for the market. Analysts are expecting an 11 percent increase in earnings from a year ago, the third consecutive quarter of year-over-year earnings growth, following five consecutive quarters of declines. What's more, profit warnings have been on the light side this time around. That is often a sign that earnings will come in significantly better than expected.

So which reports should you focus on? If you're a market junkie like we are, the answer is easy: All of them. If, on the other hand, you have a life, take a look at these seven reports and let the rest of the earnings noise pass you by.

Companies to watch: Intel; FleetBoston; General Motors; Sears; Microsoft; IBM; General Electric. Intel

Intel (INTC: Research, Estimates) reports late Tuesday. The chipmaker caused a little flurry of excitement in early December when it said that it expected better revenues for its latest quarter than it had previously forecast.

But Intel's shares have slipped since then and just this past Wednesday a company official was quoted as saying Intel expects the sales environment to be tough through the first half of this year. Maybe that was just an attempt to curb investor enthusiasm and set the stage for positive surprises -- many analysts expect a long-overdue upgrade cycle to boost computer sales in 2003 and the Semiconductor Industry Association forecasts chip sales will increase by 20 percent.

Why it matters: The world's largest chipmaker, Intel can serve as a proxy for the entire computer hardware sector.

Analysts think that Intel earned 14 cents a share in its latest quarter, compared to 15 cents a year earlier FleetBoston

For FleetBoston (FBF: Research, Estimates), which reports before the open on Thursday, 2002 was a year to forget. The nation's seventh-biggest bank was forced to shutter Robertson Stephens after it was unable to find a buyer for the once-hot investment house. It's had to take a big write-off of its Argentine loan portfolio. The election of the left-wing Luiz Inacio Lula da Silva in Brazil raised the specter of a Brazilian default, and more loan worries for Fleet. Friday the bank said that it added another $350 million in loan provisions for the ailing airline and energy industries for the fourth quarter

Another year like that, and Fleet would be in mortal danger. Fortunately for Fleet, a repeat of such a horrible year seems unlikely. Still, Fleet has been badly weakened, and many investors expect it to be swallowed up by some larger competitor. The problem with that, however, is that Fleet's larger competitors have problems of their own.

Why it matters: If the banking sector has the sniffles, Fleet has the flu. If it can return to health, that will be a good sign for the entire industry. And if it does end up getting taken over, that could indicate that banks are getting back into the merger game.

Analysts expect Fleet to have earned 57 cents a share (excluding those new loan provisions) versus 3 cents in the year-ago period. General Motors

Investors worry that General Motors (GM: Research, Estimates), scheduled to report earnings Thursday morning, has become a zero-percent addict.

Early this month the No. 1 car maker said (again) that it planned to offer new cash rebates and interest-free loan incentives in an extension of its efforts to boost sales and take market share. To some it looks like a demolition derby, with GM bearing down on the badly battered Ford in a bid to be the last independent U.S. automaker whose engine still runs at the end of the day. Such games can be dangerous. It may have gotten to the point where U.S. consumers simply expect rebates and zero-percent financing plans. Take them away, and sales will suffer. Leave them in place, and profit margins are permanently compressed.

GM has also had its share of pension woes. Thursday the company said underfunding of its pension plan soared to $19.3 billion at the end of 2002, more than double the $9.1 billion underfunding a year earlier, as the plans' assets lost 7 percent of value due to stock market declines. GM said its pension expense should be about $3 billion before taxes in 2003, up from $1 billion before taxes in 2002. As a result, GM expects to earn just $5 a share in 2003 versus an estimated $6.54 in 2002.

Why it matters: In the 1950s, GM Chairman "Engine Charlie" Wilson used to say, "What's good for GM is good for America." As the United States switched from a smokestack to a service economy that became less true, but the nation's manufacturers remain heavily dependent on GM. If the big car company can't turn it around, neither could they.

Analysts expect GM to report it earned $1.54 per share in the latest quarter, compared with 60 cents a share in the year-earlier period. Sears

The softer side of Sears (S: Research, Estimates)? Lately the department store, due to report Thursday morning, has been showing nothing but soft underbelly.

The last time Sears reported results, back in October, it missed already-lowered expectations badly and sent its shares tumbling. Sears had run into credit-card trouble, extending its MasterCard to many customers whose ability to pay back their debt didn't keep pace with their ability to run it up. The result was that Sears had to add $189 million to its reserve for bad loans, accounting for much of the earnings miss.

On top of that, sales are suffering. Thursday Sears said that same-store sales -- sales at stores open for a year or more -- fell 4.6 percent in December. That wasn't quite so bad as Wall Street expected. But still...

Why it matters: Of the nation's major retailers, Sears is perhaps the one most at risk. Some of that has to do with its credit card woes, some with problems with the department store model, but mostly it's about difficult economic times. If Sears can fight its way to health, that will be a sign of an economy on the mend.

Analysts expect Sears earned $1.94 a share for its latest quarter, compared with $2.02 a year ago. Microsoft

Microsoft (MSFT: Research, Estimates) -- everybody's favorite 800-pound gorilla -- posts results after the close Thursday. As a company, the software maker has done remarkably well during the three-year tech wreck, continuing to grow earnings and revenues (albeit not at the 1990s go-go pace). But its stock has suffered mightily, falling by more than half since early 2000. Part of that was its drawn-out legal battle, but mostly it was investors deciding that the Microsoft of the future wasn't going to grow as quickly as the Microsoft of the past.

And now? Microsoft still trades at a rich P/E -- 29 times 2002 earnings. That seems expensive given that profits are only expected to grow by 4.7 percent this year. But Microsoft could do better than the analysts think. Many companies are still relying on the computers and servers they bought ahead of the year 2000. The dominant operating systems during that Y2K buildout were Microsoft's Windows 98 and NT 4.0. On June 30 next year both are going to enter what Microsoft calls the "non-supported phase" (translation: Don't call Microsoft with your problems). That could lead to a meaningful (though perhaps just temporary) bump in Microsoft's sales.

Why it matters: With the second-highest market capitalization, Microsoft is widely held by U.S. investors. One of the so-called "four horsemen" during the go-go years (the others were Intel, Cisco and Oracle) it has been the least scathed by the tech rout.

Analysts polled by Multex expect Microsoft to report earnings of 47 cents a share compared to 49 cents in 2001's fourth quarter. IBM

IBM (IBM: Research, Estimates), which reports after the close Thursday, is trying to keep up with the times. Investors want to know if the company will be able to pull off.

When most of us think of IBM, we think of HAL-sized mainframes, Deep Blue, and personal computers, but over the past year it has been scuttling its hardware operations, focusing on its services and software businesses. To that end, it's been on something of a buying binge lately, acquiring companies like Rational Software and the consulting business of PricewaterhouseCoopers.

Seems like a great plan, given that computer hardware is acting more and more like a commodity. But there is a world of difference between saying you're going to do something and actually doing it. IBM CEO Samuel Palmisano is still rather untested, and investors remember that while the company has made some terrifically good moves in its past, it's also made some terrifically bad ones.

Why it matters: The leading edge of technology is moving away from hardware to software and services. Will today's leaders will be able to keep pace with that change, or are tomorrow's tech juggernauts still nascent, walking around in people's heads, getting cooked up in the nations' garages? Big Blue could provide the blueprint for where we're headed.

Analysts expect IBM earned $1.30 a share in its latest quarter, compared with $1.33 in the year-ago period. General Electric

It used to be that investors always knew exactly what to expect when General Electric (GE: Research, Estimates) reported earnings: It would beat estimates by one penny a share, and promise to continue to give them steady growth, year in and year out.

And heck, maybe GE will beat by a penny when it reports Friday -- but it seems unlikely that the promise of a return to the old growth will still be there. Although GE's results held up well initially, the lousy business environment eventually caught up with it. In particular, the customers of its the power and jet divisions, which accounted for about a quarter of GE's sales in 2001, have fallen on hard times. It could be a long time before the company is able to post substantial profits growth.

Why it matters: GE is the world's most highly capitalized company, and it does just about everything -- from making lightbulbs, to financing new companies, to building jet engines, to making CAT scan machines.

Analysts expect GE earned 31 cents a share in the fourth quarter of 2002, compared with 2001's 39 cents.