Apple to Offer 3G iPhone From This Year

Reports that Apple is cutting production orders on current iPhone models support rumors that a 3G version of the cutting-edge device is in the works for midyear, analysts say.

Last week, Craig Berger of FBR Research reported to clients that Apple has been accelerating production cuts for the iPhone and iPod Touch. "For both iPods and iPhones, we believe Apple was previously targeting a roughly 50 percent quarter-over-quarter decline for first-quarter units, whereas we now think the firm is targeting a 60 percent quarter-over-quarter unit decline for first-quarter units," Berger said.

In a research note Monday, analyst Richard Gardner of Citigroup cited the falling production numbers as an indicator that Apple is gearing up for a new model, The Washington Post reported. In Europe, iPhone sales have been underwhelming. "We believe that lack of 3G has been a significant headwind for iPhone in Europe, where 3G is already pervasive," Gardner said.

Not If, But When

Apple told Citigroup analysts that it plans to enter Asia and more European countries by the end of the year. Apple and AT&T, the exclusive U.S. carrier, have separately indicated that a 3G iPhone will be released this year.

"You'll have it next year," AT&T CEO Randall Stephenson told an audience in November when asked about a 3G iPhone. That comment suggested AT&T would be building out a 3G network this year, and the company recently made good on that promise, announcing plans to roll out 3G in 350 U.S. markets, including all of the largest 100 cities.

Tim Bajarin, principal analyst with Creative Strategies, said that while 3G is definitely in Apple's future, "the timing of this is still in question." Whenever it happens, the development will "help Apple get even more attention for the iPhone in the U.S. and abroad in markets where it is legal."

Apple has yet to officially roll out the iPhone in Asia, where "3G networks are the norm," Bajarin said. If a 3G iPhone is close to completion, Asian consumers might see carriers offer the new version this year. Such a move would "help them sell a lot of these phones through telecom partnerships in key Asian markets," Bajarin said.

The lack of a 3G iPhone hasn't stopped Asians -- and people in about 100 countries where the iPhone isn't officially sold -- from snapping up Apple's trendy phone. A Business Week investigation reported this week that between 800,000 and 1 million iPhones are illegally unlocked for use with carriers other than Apple's official partners.

Thriving Gray Market

The Business Week article described a worldwide pattern of visitors to the U.S. buying as many iPhones as they can -- the limit is five from Apple and three from AT&T. Research from Gene Munster, an Apple analyst with Piper Jaffray, described busloads of Asian tourists descending on Apple Stores, with each person buying the maximum.

It's not just individuals buying up phones and unlocking them, though. Gray-market entrepreneurs are developing a entire economy around buying iPhones, unlocking them and reselling them.

Business Week reported that workers in Chinese factories may be providing iPhones to resellers. One distributor said its supplier recently gave him an internal Apple document -- likely stolen -- showing the schematics and repair instructions for the original iPhone, pure gold for the iPhone-unlocking businessman.

With all the hunger for iPhones around the world, carriers not blessed by Apple are not exactly trying to stop customers with unlocked phones from using them on their networks, according to one aftermarket reseller. Nathan Walberg, who sells an altered SIM card for the iPhone for $44, says he gets calls not only from customers around the world but also from carriers.

"I don't know if [these carriers] can legally encourage unlocking, but they're not going to discourage it," Walberg told Business Week. "This market will go on forever, because I don't think there's a way for Apple to stop us."

Battling To Survive, Yahoo acquires Maven Networks

Undeterred by the threat of a hostile takeover, slumping Internet pioneer Yahoo Inc. completed an acquisition of its own Tuesday by buying online video service Maven Networks Inc. for $160 million.
The deal marks Yahoo's latest attempt to expand its online advertising network and snap out of a two-year financial funk that has culminated in unsolicited takeover offer from Microsoft Corp.

Yahoo's board rejected the bid Monday, prompting Microsoft to raise the possibility of taking its offer — originally valued at $44.6 billion or $31 per share — directly to shareholders.

Sunnyvale-based Yahoo thinks it's worth more, an opinion echoed by its second largest shareholder in a letter released Tuesday.

"We think (Microsoft) will have to enhance its offer if it wants to complete a deal," wrote Bill Miller, a respected fund manager for Legg Mason Inc., which owns more than 80 million Yahoo shares.

Like many other industry analysts, Miller predicted Yahoo ultimately will end up in Microsoft's clutches.

"We think it will be hard for (Yahoo) to come up with alternatives that deliver more value than (Microsoft) will ultimately be willing to pay," he wrote.

Miller also wrote that he has already met with Steve Ballmer, Microsoft's chief executive, and spoken to Jerry Yang, Yahoo's CEO and co-founder, to share his views.

Redmond, Wash.-based Microsoft so far has indicated it's not budging from its original offer, calling the proposal "full and fair." Analysts believe the tense mating dance will last at least a few more weeks.

In the meantime, Yahoo continues to work on a long-promised turnaround.

The talks to buy Cambridge, Mass.-based Maven began before Microsoft announced its bid Feb. 1, said Tim Cadogan, Yahoo's senior vice president of marketing products.

Maven helps television and movie studios find Web sites to show their videos and manage the accompanying advertisements. The six-year-old startup works with a wide range of media outlets, including CBS Sports, Gannett Co., News Corp., Hearst Corp. and Sony Pictures.

Online video advertising is steadily climbing as more people watch news and entertainment online. The amount spent on Internet video ads annually is expected to triple during the next three years to $4.3 billion in 2011, estimated research firm eMarketer Inc.

"We think video is going to become the third leg of the advertising stool," said Cadogan. Ads tied to search requests is currently the Internet's biggest moneymaker, followed by so-called display ads featuring photos, illustrations and other images.

Yahoo has been discussing a search advertising partnership with the market leader, Google Inc., as a way to boost its profits and thwart Microsoft's bid. But a deal between Google and Yahoo would face significant antitrust hurdles because it would meld the two largest search advertising networks, causing more analysts to conclude an alliance is unlikely.

As in search, Yahoo is trying to catch up to rival Google in Internet video.

As of December, Yahoo held a 3.4 percent share of the U.S. online video market, lagging far behind Google, whose ownership of industry leader YouTube.com gave it nearly one-third of the market, according to comScore Inc.

Yahoo plans to retain Maven's roughly 70 employees even as it completes plans to lay off 1,000 workers in other divisions as part of a plan announced two days before Microsoft's bid.

Employees affected by the job cuts reportedly began receiving layoff notices Tuesday. Yahoo spokeswoman Diana Wong declined to comment.

Based on a previous mid-February timeline established by management, Yahoo is expected to release additional details about the layoffs late this week or early next week.

Yahoo shares fell 1 percent, or 30 cents, to $29.57 Tuesday while Microsoft shares rose 13 cents to close at $28.34.

BlackBerry outage caused by upgrade

The company behind the BlackBerry smart phones said a three-hour e-mail outage Monday was caused by an upgrade designed to increase capacity.
Research in Motion Ltd. Tuesday said the upgrade was part of "routine and ongoing efforts," and that similar upgrades in the past had caused no problems.

The outage, which started about 3:30 p.m. EST, annoyed subscribers who are used to checking and writing e-mail whenever they're in cellular coverage and able to make voice calls. It affected only some of the BlackBerry users in North America — for others, the service kept working fully.

It was the second major outage for the service in less than a year. In April, a minor software upgrade crashed the system for all users. A smaller disruption in September also was caused by a software glitch.

RIM, which is based in Waterloo, Ontario, has been on a tear, adding 1.65 million subscriber accounts in the quarter that ended Dec. 1, for a total of 12 million subscribers worldwide. It has deals with scores of wireless carriers around the world.

Experts said RIM's system is relatively reliable, but its centralized structure means that when there are problems, they can affect millions of users.

E-mail sent to and from BlackBerry phones in North America all goes through a Network Operations Center. It appears the problem occurred there, when one of two Internet addresses that relay e-mail from corporate servers stopped responding, according to Zenprise, a Fremont, Calif., company that helps companies troubleshoot BlackBerry problems.

"Any time you got a system that's got a NOC, a Network Operations Center, you have the potential for a single point of failure," said Jack Gold, with technology analyst firm J.Gold Associates in Northborough, Mass.

"What's a bit surprising to me is that with all the work they've been doing over time ... that they haven't been able to have enough redundancy in the NOC so that there isn't a single point of failure," said Gold, who has done business with RIM.

Microsoft's competing solution for mobile corporate e-mail doesn't use an equivalent to the NOC. Instead, it sends e-mail directly from a corporate server to user's handsets. That means widespread outages are unlikely, though the system can fail on the local level.

"Those types of issues occur so often ... they slide under the radar," said Chris Ambrosio, director of wireless research at Strategy Analytics.

The analysts agreed that RIM's centralized system had advantages, including strong security.

Ahmed Datoo, vice president of marketing at Zenprise, said RIM had significantly improved its handling of the outage, notifying customers soon after it started.

"That process didn't exist a year ago," Datoo said, noting that most subscribers affected by the April outage learned of it through the news media.

T-Mobile Replaces Google By Yahoo in Europe

Yahoo Inc ousted archrival Google Inc as T-Mobile's top Internet partner in Europe as it unveiled a service to squeeze social Web connections on to cell phone screens, a day after rebuffing a $41.6 billion takeover bid from Microsoft Corp.

The deal, announced at the Mobile World Congress wireless fair on Tuesday, puts Yahoo on a strong footing with carriers in Europe, building on deals it has closed with operators in the Americas and Asia, as it seeks to make up in mobile the ground it has lost to Google in computer-based Web search.

Yahoo now has access to 600 million potential users through its carrier partners worldwide, and Marco Boerries -- the executive leading Yahoo's mobile push -- told Reuters he aimed to reach 1 billion by the end of 2009.

"Europe is now wide open," he said in an interview at the trade fair. "For the rest of Europe, let the games begin."

Yahoo's new service, called oneConnect, creates a single contacts list for users that draws on all their Web connections -- regardless of whether those connections were made through instant messaging services, email or online social networks.

Users can then see -- to the extent that their contacts allow them to -- their friends' availability, activities and messages, without the bother of trying to navigate between Web sites and inboxes on a mobile phone.

"Today, most people have too many forms of communications," said Boerries, executive vice president of Yahoo's Connected Life division. "To keep in touch with all of them you have to go to all of these different Web sites."

Once the free service becomes established, Yahoo plans to introduce discreet advertising on parts of oneConnect, sharing the revenues with phone operator partners.

RACE FOR HEADLINES

Google and Nokia briefly grabbed the headlines at the Barcelona wireless fair on Tuesday, announcing a deal to integrate Google Search into Nokia's own search engine it preinstalls on dozens of its handset models.

Nokia, which makes 40 percent of cell phones sold in the world, will add Google to the Microsoft and Yahoo search options it already includes.

The race between companies wanting to put their own stamp on consumers' experience of the mobile Internet -- and gather information critical to advertising strategies -- has made rivals of parties once happy to mind their own business.

Microsoft, Google, Yahoo and Nokia have been outdoing each other with mobile Web-related news at the fair this week.

Yahoo's deal on Tuesday with Deutsche Telekom's T-Mobile division trumped the excitement that broke out around Microsoft's announcement late on Monday that it had agreed to buy Danger, a company best known for the software that drives the Sidekick mobile Web browser.

Before the fair, a buzz had built up around anticipated sightings of prototypes of phones based on Google's new Android software platform -- a buzz that quickly subsided as it became apparent that the working models on display bore little resemblance to anything that might appear in shops.

But the struggle for influence over the mobile Web need not have a single or even just a few winners, said the head of Microsoft's mobile communications division, Pieter Knoock, pointing out that the market was growing fast but still tiny.

Just 123 million of the 1.1 billion phones sold last year were so-called smartphones, cell phones with computer-like capabilities like e-mail and Web browsing, and business models are still being developed for mobile advertising.

"There's a lot of opportunity," Knoock said in an interview. "Mobile advertising is a greenfield site, and PC advertising expertise doesn't necessarily help."

"The question is who's going to win in which services."

Economic Stimulus Plan Signed By Bush

President Bush signed legislation on Wednesday to send $300 to $1,200 rebate checks to millions of Americans as a "booster shot" for the economy.

Rebates are to go out beginning in May to taxpayers and low-income people, including seniors living off of Social Security and veterans who depend on disability checks. Businesses would get tax breaks for investing in new plants and equipment.

"I know a lot of Americans are concerned about our economic future," Bush said. "Our overall economy has grown for six straight years, but that growth has clearly slowed."

Several dozen members of Congress, including House Speaker Nancy Pelosi, stood on the stage behind Bush as he signed a bill to fend off a possible recession. He said the stimulus package was achieved after he talked with leaders of Congress in January about "whether or not we could come together to provide a booster shot for our economy — a package that is robust, temporary, and puts money back into the hands of American workers and businesses."

Most taxpayers will receive a check of up to $600 for individuals and $1,200 for couples from the Internal Revenue Service, with an additional $300 per child. People earning at least $3,000 and those who owe little or no taxes would get $300 for singles, $600 for couples. Those making more than $75,000 and couples with income exceeding $150,000 are to get smaller rebates — $50 less per $1,000 they make over those thresholds.

"Americans struggling with the high cost of energy, groceries and health care will soon receive relief, and our economy will get a timely, targeted, and temporary boost — thanks to our bipartisan stimulus package," Pelosi said. "This package gets money into the hands of Americans struggling to make ends meet, helps families with children, cuts taxes for small businesses that will create new jobs and stimulates our slowing economy."

Economic analysts generally believe the $168 billion package Bush signed will help prevent the current downturn from ballooning into a crisis. But if the rebates don't spur a consumer spending spree strong enough to cure what ails the economy, Congress is ready to throw more money at the problem. Bush said the measure was "large enough to have an impact."

Democrats and Republicans who put aside deep differences to craft the plan and rush it to enactment joined the president at the White House for the signing ceremony in the East Room. The package is designed in part to inoculate lawmakers from voter blame should the economy continue to lag as the November elections bear down.

Congressional leaders already are considering more economic rescue measures that could include transportation spending, unemployment aid and measures to address the housing crunch that's at the root of the current economic doldrums.

In the meantime, economists are debating how effective the rebates will be, with critics arguing that debt-burdened consumers will use the money to pay bills rather than spending the checks and spurring growth.

An Associated Press-Ipsos poll found that only 19 percent of those surveyed said they planned to spend their rebate checks. Forty-five percent said they would pay bills, while 32 percent said they planned to invest the money.

The last time the government sent out rebates, in 2003, recipients spent a little less than a third in the first six months, and about two-thirds within the first year, according to findings by the University of Michigan Survey of Consumers, cited by congressional tax analysts. After rebates were sent out in 2001, just 22 percent said they would mostly spend them — rather than saving the money or using it to pay off debt — and only one-third of the rebate was spent in the short run, according to the same study.

Profits Up as Coca-Cola Sales Rise

The Coca-Cola Co. reported Wednesday a 79 percent jump in fourth-quarter profit and maintained its growth targets despite a slowing U.S. economy, but has no plans to be more aggressive with its stock buybacks.

The results posted by the world's largest beverage maker beat Wall Street expectations, but company shares slipped.

The Atlanta-based company said it earned $1.21 billion, or 52 cents a share, for the three months ending Dec. 31, compared to a profit of $678 million, or 29 cents a share, a year earlier, when the company took a big impairment charge at its largest bottler.

Excluding one-time items, Coca-Cola said it earned $1.36 billion, or 58 cents a share, in the quarter, ahead of the 55 cents a share analysts surveyed by Thomson Financial were expecting.

Revenue in the quarter rose 24 percent to $7.33 billion, compared to $5.93 billion recorded a year earlier.

Looking ahead, Coca-Cola executives said the company is mindful of the slowing U.S. economy.

Chief Financial Officer Gary Fayard said the company is confident about its overall volume and growth targets. But, he said Coca-Cola only plans to buy back $1 billion to $2 billion in company stock in 2008, about the same amount as in 2007.

Fayard said the company wants to be conservative because of uncertainty in the credit markets.

Chief Executive Neville Isdell told analysts during a conference call that the fourth quarter was "a very positive finish to 2007" that "capped an excellent year for The Coca-Cola Co."

He said the company is doing well based on its growth goals.

"We realize the journey is long, and we are by no means declaring victory," Isdell said, adding that Coca-Cola will respond to future "opportunities and challenges."

Worldwide unit case volume was up 5 percent in the fourth quarter and 6 percent for all of 2007.

Growth in several international markets was strong in the fourth quarter. Unit case volume in Coca-Cola's Africa group increased 7 percent in the quarter. It increased 18 percent in the quarter in India and 10 percent in Latin America.

However, unit case volume in the company's key North America unit increased only 1 percent in the quarter. Unit case volume in the company's European Union group increased 2 percent in the quarter. That group's results for the fourth quarter were weighed down by a volume decline in Germany.

President and Chief Operating Officer Muhtar Kent said Coca-Cola remains committed to creating strong, consistent growth in its home market, though he acknowledged that "international operations continue to be the primary driver of growth for the company."

Kent has been named to succeed Isdell as CEO on July 1. Isdell remains as chairman until Coke's annual meeting in April 2009.

For all of 2007, Coca-Cola said it earned $5.98 billion, or $2.57 a share, compared to a profit of $5.08 billion, or $2.16 a share, for all of 2006. Full-year revenue rose 20 percent to $28.86 billion, compared to $24.09 billion recorded in 2006.

Coca-Cola completed its $4.1 billion purchase of Vitaminwater maker Glaceau last June. Kent said Wednesday that Glaceau will be moving beyond the U.S. market. "You will certainly see Glaceau in international markets in the very near future," Kent said.

Coca-Cola shares fell 33 cents to $59.58 in afternoon trading Wednesday.

___

Retail Sales Shot Dollars Skywards

The dollar hit a one-month high against the yen on Wednesday after an unexpected rise in US retail sales.
Figures revealed US sales rose 0.3 per cent in January, confounding expectations for a 0.3 per cent fall.

Michael Woolfolk at Bank of New Mellon said the report implied US consumers might be in better shape than previously thought and the Federal Reserve's aggressive interest rate cuts in January might indeed succeed in averting a US recession. "The implication for the dollar is undeniably positive," he said.

By midday in New York, the dollar rose 0.8 per cent to Y108.20 against the yen, climbed 0.2 per cent to $1.4550 against the euro and gained 0.5 per cent to SFr1.1070 against the Swiss franc.

However, the dollar was flat at $1.9610 against the pound as the Bank of England's quarterly Inflation Report tempered expectations for aggressive cuts in UK interest rates.

The Bank said its projections for UK consumer price inflation were higher than in its November report, particularly in the near-term because of sharp rises in food, energy and import prices. It said consumer price inflation could well rise higher than 3 per cent - far above the central bank's 2 per cent target - in the short term if rates fell as expected.

Analysts said the projections suggested the Bank of England believed UK interest rates could fall by 50 basis points to 4.75 per cent in the coming months, but that expectations of a 75 basis-point cut might be overdone.

"The Bank of England believes the market has got a little ahead of itself on rate cut expectations," said James Knightley at ING.

However, he said he still believed that the deteriorating global backdrop would further damp price pressures. He said weaker domestic demand would lead to UK inflation dropping well below 2 per cent in 2009.

"Consequently, we retain our view that the Bank of England will be cutting rates to 4.5 per cent by the fourth quarter of this year, with the risks skewed to policy-easing coming earlier rather than later," said Mr Knightley.

The pound rose 0.2 per cent to £0.7421 against the euro and gained 0.8 per cent to Y212.10 against the yen.

Meanwhile, the Swedish krona rose 0.5 per cent to SKr9.3540 against the euro and climbed 0.3 per cent to SKr6.4250 against the dollar after a surprise rise in Swedish interest rates.

The Swedish central bank, raised interest rates by 25 basis points to 4.25 per cent. It justified the rise based on a 14-year high in inflation and solid economic activity but also hinted that this would be the last rate rise of the current cycle. The move wrong-footed analysts, who were expecting increased worries over global growth to keep the Swedish authorities from acting.

Australia says sorry to Stolen Generations

Australia apologized on Wednesday for the historic mistreatment of Aborigines, heralding a new era in race relations and moving indigenous people to tears as huge crowds cheered across the nation.
Prime Minister Kevin Rudd led the parliamentary apology to members of the Stolen Generations of aborigines, who were forcibly taken from their families and communities when they were young children under old assimilation policies.

In unprecedented scenes for Australia's parliament, a huge crowd of more than 7,000 people gathered on the lawns outside to watch as the apology was broadcast live to giant screens, with Aborigines and supporters cheering as Rudd said "sorry."

"It makes the indigenous community feel, for the first time in a real long time, really feel part of Australia, that it's embraced by the whole Australian nation," Stolen Generation elder Mark Bin Bakar told Reuters.

"It's about us coming together as a country, acknowledging our past and moving on, accepting each other as brothers and sisters of this nation," he said.

Others paused at city squares, town halls and schools around the country to watch the speech, which is expected to open a new era of reconciliation between indigenous and white Australians.

In Sydney's inner-city suburb of Redfern, home to a large aboriginal community, hundreds stood in heavy rain and cheered each of the three times Rudd said "sorry."

"Sorry heals the heart, and it goes deep," said Redfern aboriginal activist Rhonda Dixon-Grovenor.

The parliamentary apology comes 11 years after a report into past assimilation policies found between one in three and one in 10 aboriginal children had been taken from their families between 1910 and 1970.

The report urged a national apology to those affected, known as the Stolen Generations, but the then conservative government under prime minister John Howard rejected the finding and offered only a statement of regret.

"Today, the parliament has come together to right a great wrong," Rudd said.

"We apologize for the laws and policies of successive parliaments and governments that have inflicted profound grief, suffering and loss on these our fellow Australians."

SORRY

Rudd made the apology the first item of parliamentary business for centre-left Labor, which won power in November last year, ending almost 12 years of conservative rule.

He said "sorry" three times to the Stolen Generations and their families, saying the old policies were a stain on Australia's soul which would never be repeated.

About 100 members of the Stolen Generations were in parliament to hear the government apologize, some wiping away tears as Rudd spoke.

Howard, who lost his parliamentary seat last November, did not attend the celebrations, but the other four living former prime ministers did attend, including conservative Prime Minister Malcolm Fraser, who governed from 1975 to 1983.

"I just wish the idea of an apology had been put before me," Fraser told Sky television.

Australia has about 460,000 indigenous Aborigines and Torres Strait Islanders, who make up about 2 percent of the 21 million population. There are no aboriginal members in the national parliament.

Aborigines are the most disadvantaged group in Australia, with a life expectancy 17 years less than other Australians, and far higher rates of infant mortality, unemployment, imprisonment, alcohol and drug abuse and domestic violence.

Rudd promised to end the gap in life expectancy within a generation, and to work to end aboriginal inequality. He announced a plan on Wednesday to ensure all young aboriginal children are enrolled in pre-school.

Rudd also announced new plans to improve indigenous housing, and give aborigines constitutional recognition as the original owners of Australia.

Probe into missing UK girl near end

The investigation into the disappearance of a British girl from a southern Portuguese resort last year is nearly over, Portugal's justice minister said Wednesday.
Madeleine McCann vanished May 3 last year — a few days before her 4th birthday — from a hotel room during a family vacation in Praia da Luz in Portugal's southern Algarve region.

Last month, Portugal's attorney general granted detectives an extra three months to investigate because of what they said was the complexity of the highly publicized case.

"We are at a stage now where we are approaching the conclusion of the process," Justice Minister Alberto Costa told lawmakers, but said he could provide no details about the investigation.

Costa said it was "premature" to say whether the investigation would find out what happened to the girl. He cited what he said were British statistics showing that around 80 percent of similar cases in Britain remained unresolved.

No one has been charged with her disappearance.

The first formal suspect was Robert Murat, a British man who lives near the hotel in the Algarve. He has denied involvement.

Weeks later, Madeleine's parents, Kate and Gerry McCann, also were named suspects. They say they were not involved in their daughter's disappearance. They returned to Britain in September.

Lawmakers questioned Costa about comments by Portugal's most senior detective, Alipio Ribeiro, who said in a recent radio interview that investigators had shown "a certain haste" in naming the girl's parents as suspects.

Costa said there was no indication Ribeiro broke secrecy laws that prohibit public discussion of ongoing investigations.

"If there was any such sign ... I am sure an inquiry would have been opened, and it hasn't been," Costa said.

But Costa said the numerous leaks in the case, apparently from Portuguese officials, were "worrying."

"It would be good if people could show self-restraint," he said.

Congress Fries Clemens, Pettitte, McNamee accusations Denied by Him

Roger Clemens struggled to find the right words under questioning during a congressional hearing Wednesday and denied new accounts of drug use made against him by former teammate and close friend Andy Pettitte.

Using words like "misremembered" and mispronouncing the last name of his chief accuser, Brian McNamee, Clemens rambled and stumbled during his early remarks on Capitol Hill.

Clemens' reputation and legacy were on the line, and there was the possibility that criminal charges could follow after the seven-time Cy Young Award winner testified.
"I have never taken steroids or HGH," Clemens said under oath, his voice rising. "No matter what we discuss here today, I am never going to have my name restored."

For many, his denials rang hollow.

"It's hard to believe you, sir. I hate to say that," said Rep. Elijah Cummings, a Maryland Democrat. "You're one of my heroes, but it's hard to believe."

McNamee's answers were generally quick and concise. His credibility also came under scrutiny.

"You're here under oath, and yet we have lie after lie after lie after lie," said Rep. Dan Burton, an Indiana Republican.

It seemed clear nearly from the start of the 4 1/2 -hour session that the committee would not treat Clemens with kid gloves, despite all the face-to-face sit-downs he did with representatives in recent days -- sometimes posing for photos or signing autographs for staff members.

In fact, after Clemens interrupted committee chairman Henry Waxman at the end, the California Democrat pounded the gavel and said: "Excuse me, but this is not your time to argue with me."

When it was over, Clemens avoided reporters by leaving the hearing room through a back door. Just before exiting, he paused to shake hands with Tom Davis, the ranking Republican on the committee.

Exactly two months after the Mitchell Report was released, Clemens and McNamee were separated by one seat in the same wood-paneled room where Mark McGwire and Rafael Palmeiro saw their careers tarnished during a hearing in March 2005. In a reference to McGwire's evasions that day, Rep. Mark Souder, R-Ind., admonished Wednesday's witnesses by saying: "It's better not to talk about the past than to lie about the past."
Clemens briefly stared at McNamee, his former employee, during his accuser's opening statement and later pointed several times at his former personal trainer. For the most part, they did not look at each other.

Members of Congress questioned the credibility of both.

Waxman pointed out inconsistencies in Clemens' comments and accused him of possibly attempting to influence statements to the committee by the pitcher's former nanny.

Burton repeatedly read remarks McNamee had made, and each time the former trainer was forced to admit they were untrue.

"This is really disgusting. You're here as a sworn witness. You're here to tell the truth," he said. "I don't know what to believe. I know one thing I don't believe and that's you."

The hearing seemed to split the committee along party lines, with the Democrats reserving their most pointed queries for Clemens, and the Republicans giving McNamee a rougher time. Chris Shays, a Connecticut Republican, likened the hearing to a "Roman Circus" featuring gladiators.

Cummings set the tone within minutes, repeatedly reminding Clemens he was under oath and admonishing the pitcher to "keep your voice up." McNamee also was asked to pull his microphone closer.

The hearing started about an hour after several teams opened spring training. This was far from the sunny settings of Florida and Arizona.

Debbie Clemens, the pitcher's wife, sat behind her husband and listened as Waxman implicated her in HGH use, citing statements by Pettitte. Later, Clemens read a statement from his wife and said she "has been broken up over this."

IRS Special Agent Jeff Novitzky, a key member of the federal prosecution team against Barry Bonds, watched from a second-row seat. Asked why by a reporter, he declined comment.

Bonds, baseball's home run king, was indicted in November on charges of perjury and obstruction of justice stemming from his 2003 testimony to a grand jury in which he denied knowingly using performance-enhancing drugs. Because of his denials under oath, Clemens could be subjected to a similar criminal probe.

Pettitte, who was excused from testifying, said in a statement to the committee that Clemens admitted to him as long as 10 years ago that he used HGH. Waxman read from affidavits by Pettitte and Pettitte's wife, Laura, supporting the accusations.
"Andy Pettitte is my friend. He was my friend before this. He will be my friend after this and again. I think Andy has misheard," Clemens said. "I think he misremembers."

McNamee told Mitchell that he injected Clemens 16 to 21 times with steroids and human growth hormone from 1998-01, and that Pettitte and Chuck Knoblauch used HGH. In his opening statement, McNamee said he might have injected Clemens and Knoblauch more than that.

"I have helped taint our national pastime," McNamee said. "Make no mistake: When I told Sen. Mitchell that I injected Roger Clemens with performance-enhancing drugs, I told the truth."

Waxman said McNamee, a former New York City police officer, lied to police seven years ago during an investigation of a possible rape. He also was tough on Clemens.

"We have found conflicts and inconsistencies in Mr. Clemens' account. During his deposition, he made statements that we know are untrue," Waxman said.

In the affidavit, Pettitte said Clemens backtracked when the subject of HGH came up again in conversation in 2005, before the same House committee held the first hearing on steroids in baseball.

Pettitte said in the affidavit that he asked Clemens in 2005 what he would do if asked about performance-enhancing substances. Pettitte said Clemens responded by saying Pettitte misunderstood the previous exchange in 1999 or 2000 and that, in fact, Clemens had been talking about HGH use by his wife in the original conversation.

Clemens read a statement from his wife in which she acknowledged using HGH once, without his knowledge.

"She has been broken up over this for a long time," Clemens said. "She feels like a pawn."