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COVER STORIES: WALL STREET 2005
In a special package, FORTUNE looks at how "the Deal" is back on Wall Street. To make the point, the cover of the June 13 issue features Michael Douglas in a reprise of one of his best-known roles—the impressively gelled, insatiably greedy corporate raider Gordon Gekko, from Oliver Stone's seminal 1987 film Wall Street. "When we got to thinking about whom to put on the cover of this special report about Wall Street's new era of dealmaking—starring the hedge funds and buyout funds that seem to be taking the Street back to the future—we realized there could be no better choice than the character who famously said (echoing Ivan Boesky), 'Greed is Good,'" says FORTUNE managing editor Eric Pooley.

And, Douglas tells FORTUNE he's found time to meet with Oliver Stone and producer Ed Pressman to kick around some ideas for a Wall Street sequel. "Here's the scenario," Douglas says. "As the picture begins, Gordon's getting out of jail."

• Let's Make A Deal, by Andy Serwer, page 50
  Wall Street has fallen back in love with the Deal. Buyouts, takeovers, and activist investing are all the rage again. Dozens of high-profile companies have been acquired or had their cages rattled, not so much by acquisitive CEOs or by rogue operators armed with junk bonds, but by two new bold castes of investors who are growing more flush and confident by the quarter. On the one hand are private-equity or buyout funds—some of which are supermuscular versions of firms that first made headlines two decades ago. On the other hand is a sprawl of hedge funds, which are not only snapping up huge stakes in companies but also redefining trading in bonds, futures, and commodities—even the way Wall Street itself works. Andy Serwer takes a look at how Wall Street still keeps score with money—only its style has changed.



• Getting Too Greedy?, by Bethany McLean, page 61
  Though skeptics see signs of 80s-style excess in some recent buyout deals, for many the market is just catching its breath, and that because most LBOs have been done at "reasonable prices," everything is fine. But there is a debate about just how reasonable some of these deals are. Using the upcoming acquisition by seven private-equity firms of SunGard Data Systems as an example, FORTUNE's Bethany McLean looks at new hints of excess on Wall Street. "There are many reasons why we're unlikely to see a repeat of the 1980s meltdown—among them, banks have much stronger balance sheets today," says McLean. "But the market's jitters are a reminder that with the potential for great reward comes a four-letter word called risk.



• KKR: The Sequel, by Carol Loomis, page 64
  Though KKR didn't invent the leveraged buyout, in the 1980s it became the undisputed king of the field—the only firm that could have pulled off the $25 billion RJR Nabisco deal in 1989, still the largest LBO on record. But RJR turned out to be a watershed, a costly and damaging miscue after which KKR went through a period of embarrassing sloppiness—misjudging markets and managements—that eroded its competitive position. Though it no longer rules over the buyout field, which has too many jousting princes these days for any absolute monarch to emerge, George Roberts and Henry Kravis have no intention of retiring. In lengthy and unusual conversations with FORTUNE, the normally press-shy Kravis and Roberts tell editor-at-large Carol Loomis about how the firm has had to change the way it does business—and about how it plans to stay on top of the buyout game.

Drug Wars, by Matthew Boyle, page 79
Walgreens is the only FORTUNE 500 company other than Wal-Mart to have increased both sales and earnings every year for the past 30 years. Its share of the $221 billion prescription-drug market is 14% and growing, and between the end of 1975 and 2002, its shareholder returns exceeded those of GE and Intel. And yet the company is in the middle of a vicious multi-front war, reports Matthew Boyle. In addition to rivals such as CVS, which has been expanding rapidly, Walgreens faces a threat on another front—one to which it was late to respond: the rise of low-cost, mail-order prescriptions. "It's crunch time for Walgreens," says Boyle. "And here's the question: Does this company have another big run left in it?"

Prosperity Without Peace, by Nelson Schwartz, page 86
After a three-year slump brought on by the intifada and the bursting of the global tech bubble, Israel's economy is growing again, and its success has implications for both the U.S. and the entire Middle East. But economic growth couldn't have returned if the government hadn't found a way to block the suicide bombers who carried out dozens of attacks in 2002 and 2003: the controversial security barrier now snaking its way through the West Bank—a forbidding amalgam of concrete, barbed wire, and deep ditches that has been condemned by the World Court and the European Union. Reestablishing Israel's security hasn't just helped merchants at home, reports Nelson Schwartz, it has been a key factor in allowing Israeli companies to sell their wares throughout a terror-torn world.

Diagnosing for Dollars, by Roger Parloff, page 96
Silicosis and asbestosis, which have nearly identical symptoms, are ghastly diseases. Perhaps the only consolation in having one is that you almost certainly won't get the other. And yet of 8,629 people diagnosed with silicosis now suing in federal court, 5,174—or 60%—are "asbestos retreads," i.e. people who have previously filed claims for asbestos-related disease. The real importance of this, says Roger Parloff, is not what it reveals about possible fraud in silica litigation, but what it suggests about a possible fraud of vastly greater dimensions, one that may have been afflicting asbestos litigation for almost 20 years, resulting in billions of dollars of payments to claimants who weren't sick—and to the attorneys who represented them.

DEPARTMENTS
In FIRST: Betting Against the House What's the only thing crazier than buying in a bubble? Betting on when it will pop. Boeing Finally Has a Flight Plan After years of scandal, the aerospace giant may be righting itself. Meet the Cheapest Casino King in Vegas Entrepreneur Nick Ribis hits it big with a downmarket niche for slots-and-burgers conventioneers. India's Top Export: Headed Home? A vaunted talent pool in the U.S., graduates of the elite Indian Institutes of Technology look homeward. Question Authority Netflix's Reed Hastings on hooking up with Wal-Mart and video-on-demand. SketchbookA graphic look at Trump University. This Just In Even corporations are making decisions with Rock Paper Scissors. You Do What? Lost-and-found agent. In COLUMNISTS: Brainstorm Electric therapy that gets inside your head. Value Driven It's past time to kill our worst tax: the AMT. In INVESTING: Take a Look at Hewlett-Packard HP CEO Mark Hurd is expected to put execution ahead of vision. That's why it's time to buy the stock. Mr. Consistent Makes a Comeback A star in the 90s, fund manager Don Yacktman is on top of the charts again. Electronic Arts: Game On! Robert Hagstrom says the videogame giant will rebound. In BUSINESS LIFE: Mandarin a Bit Rusty? China Helpline in Shanghai lets travelers hit speed-dial for on-the-spot translation aid. Gadgets Next-generation consoles from Sony and Microsoft. Careers Salespeople in the catbird seat.

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For further information please contact:
Susan Brown
212-522-0133
susan_brown@timeinc.com

Amy Mahfouz
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amy_mahfouz@timeinc.com

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