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Closing Bell: Netflix

Fannie Mae (FNMA) Chairman and CEO Franklin Raines is known for his shrewd political instincts. He'll need them, because he's in for the lobbying fight of his life. Federal Reserve Chairman Alan Greenspan on Feb. 24 said that Fannie and its smaller housing-finance sibling, Freddie Mac (FRE), have become so large that they pose a risk to the financial system and urged Congress to limit what they can borrow. Together, Fannie and Freddie own or guarantee $4 trillion in mortgages, or about 75% of all home loans. Earlier, Greenspan suggested that home buyers would be better off choosing adjustable-rate mortgages over fixed-rate loans, which would make it harder for Fannie to operate. A Fannie spokesman suggests that Greenspan is backing commercial banks long envious of Fannie's market dominance. But with Greenspan's support, the White House's push to subject Fannie and Freddie to more regulatory scrutiny and tighter capital standards will put Raines' vaunted political clout to the test. Microsoft's (MSFT) day of reckoning in Europe may be at hand. Having determined that the software giant violated antitrust law, European regulators have prepared a final ruling in the five-year-old case requiring Microsoft to sell two versions of its Windows operating system -- one with audio and video software and one without. Microsoft has said that the software code cannot be excised without degrading Windows. The proposed ruling would also require Microsoft to disclose some code to rivals. The ruling still needs to be approved by European Union government representatives, scheduled to meet in March. Meanwhile, Microsoft and regulators are trying to hammer out a settlement. The coronary stent war has begun. Rivals Johnson & Johnson (JNJ) and Guidant (GDT) have joined forces to thwart a challenge from Boston Scientific (BSX), which expects Food & Drug Administration approval soon for its drug-coated stent that props open clogged arteries. Many doctors prefer Boston Scientific's Taxus device to J&J's Cypher -- the only one of its kind on the market -- because it's easier to deliver to arteries. But with access to Guidant's delivery system and sales force, J&J hopes to continue to dominate the market. Before the J&J-Guidant deal, analysts had figured that Boston Scientific would gain 60% to 70% share after Taxus' launch. Companies struggling to comply with tough new audit rules are getting a breather from the Securities & Exchange Commission. On Feb. 24, the SEC said it would give companies an extra five months to comply with new rules that require executives of public companies to assess the adequacy of their internal controls at the end of each fiscal year. The delay means that companies with fiscal years that end on June 30 or Sept. 30 won't have to comply until the following year. The SEC was besieged with requests from companies for a delay in the rules, which are required under the 2002 Sarbanes-Oxley reform law. Executives argued they could not be ready in time because the Public Company Accounting Oversight Board had yet to finalize the new audit standard. In a move aimed at boosting its stock multiple and return on capital, diaper and tissue maker Kimberly-Clark (KMB) announced on Feb. 25 that it's considering a tax-free spin-off of its paper and pulp businesses. Shedding the Neenah Paper and Technical Paper units, along with some pulp and paper assets, would create a new company with about $650 million in sales, or less than 3% of Kimberly's total. Management will make a final decision in the second quarter. Under CEO Thomas Falk, the company has been moving steadily to improve its focus on its health and hygiene businesses. Kimberly-Clark's plan would follow a similar move by rival Procter & Gamble (PG) in the early 1990s. -- AT&T plans to cut 8% of its workforce, or 4,600 jobs, in 2004 (HAL).

-- Tiffany's (TIF) fourth-quarter net income climbed 24%, beating expectations.

-- Adelphia (ADELQ) set up $8.8 billion in financing in a plan to emerge from bankruptcy. Shares of highflier Netflix tumbled 11% on Feb. 24, to $31.20, after the DVD-rental service said it would report a net loss for the first quarter. But did investors miss the point? Netflix said a jump in new subscribers hiked marketing costs but should boost profits in the long run.

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