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COVER STORY
Samsung: The Perpetual Crisis Machine, by Peter Lewis, page 34
Once known for making cheap black-and-white TVs and other knockoff products that were sold in convenience stores, Samsung Electronics is now one of the most innovative, respected—and profitable—players in the consumer-electronics and semiconductor businesses. Last year it earned more than $9 billion on $72 billion in sales, good by any standard but remarkable for a manufacturing company. It has double the market capitalization of Sony, and is the world's leading maker of memory chips, flat-panel LCD displays, and color television. And, they're battling Motorola to be the world's No. maker of mobile phones, behind Nokia. Peter Lewis profiles the company—restructured in 1997 by CEO Jong-Yong Yun—for which "disaster lurks in every overlooked detail, and success only increases the danger of complacency and eventual failure."

Chevron's Dave O'Reilly: Pumped Up, by Nelson Schwartz, page 43
SOON AFTER CHEVRON BEAT CNOOC AND CLOSED THE UNOCAL DEAL, O'REILLY GAVE AN EXCLUSIVE INTERVIEW TO FORTUNE: "There's nothing personal about it, I don't see any reason why this should affect the relationship with CNOOC. They're on a growth trajectory, and we'll see other opportunities to work together." With the biggest oil merger in years under his belt—and with legendary Exxon Mobil CEO Lee Raymond set to retire at the end of this year—Chevron CEO Dave O'Reilly is poised to become the new face of Big Oil in America. Although Exxon remains the largest U.S. company and BP's John Browne is prominent in Europe, Chevron and O'Reilly are catching up. Nelson Schwartz shows how O'Reilly has been confronting the key dilemma facing the oil giants: how to boost production and find new reserves when the world's best assets are increasingly in the hands of state-owned firms. O'REILLY SAID: "The next couple of months are very critical. One thing you learn about bringing two companies together is that the tone is set very early on, and if you're going to be successful, you need to come out of the gate quickly."

The China 100, page 49
It got a lot harder to make FORTUNE's list of China's largest publicly traded companies this year, thanks to high-profile stock offerings and pumped-up oil revenues. Two big state-owned companies that went public last year—China Netcom (No. 7) and Ping An Insurance (No. 9)—crashed into the top ranks of this year's list. Old-economy companies—such as China Petroleum & Chemical (No. 1) and Petro China (No. 2)—continue to dominate, while some auto and tech companies had little or no growth and lost ground.

Fighting for Their Lives, by Betsy Morris, page 54
The passage of Proposition 71—California's bold but beleaguered initiative to spend $3 billion on stem-cell research, the study of how life develops from a single cell—was meant to open the doors to a scientific endeavor as exciting and promising, many believe, as the sequencing of the genome. But as the issue swept through the state legislature, it pitted economic development leaders and scientists against an odd but potent army of pro-lifers and anti-tax groups. "There is no better place than here, at the edge of the San Andreas fault, to observe the forces of free-market capitalism coming head-to-head with the forces of evangelical Christianity," says FORTUNE senior writer Betsy Morris in her wide-ranging look at the stem-cell controversy. "This is likely to just be the beginning. If the 20th century was the Age of Physics, say both scientists and venture capitalists, the 21st will be the Age of Biology."

IBM Shares Its Secrets, by David Kirkpatrick, page 64
Fast-growing, increasingly sophisticated, low-cost generic competition—known in the IT world as commoditization—is an old nemesis for companies such as IBM. Commoditization changed IBM's mainframe and PC business, and it now threatens the company's services business. But as David Kirkpatrick reports, CEO Sam Palmisano has a strategy that not only challenges upstarts—such as the Indian company Wipro—by embracing their low-cost model, but also includes a dimension that is so original and so bold that it will either reenergize Big Blue's profits or undermine its vaunted status as the biggest company in IT. "Put plainly," says Kirkpatrick, "he is betting that IBM can win by giving away some of its crown jewels—precious intellectual property in the form of software, patents, and ideas." The goal? To help the entire industry grow faster—and open new frontiers lost to commoditization.

Plus: America's Fastest-Growing Companies
Yahoo tops FORTUNE's 17th annual list of hot companies. And though technology is still well-represented on the list, the real story this year is energy. Nineteen oil companies—all of them basking in the $2.60 a gallon Americans are paying at the pump—are among FORTUNE's Fastest-Growing Companies. Housing is another hot industry, with four homebuilders, three mortgage lenders, and two land developers on the list. Older companies also made a strong showing; out of the 100, 54 have been publicly traded for at least ten years, and 16 are among the best-performing U.S. stocks of the past decade.

DEPARTMENTS
In FIRST: Indonesia v. Newmont The gold-mining outfit is accused of poisoning villagers. Will this be a test case for the nation's judicial reform? A Bite of Bollywood Indian movies inspire restaurants. Thai Exchange at Lagerheads With Protesters Buddhist monks and social activists take on the country's stock exchange after a beer baron applies to list Thai Beverages. Banks Vie for Islamic Customers Since the Islamic Bank of Britain opened a branch in London last year, British competitors have charged after the same market, offering accounts that comply with shari'a. Off With Their Beds The French shrug as the last of the top-of-the-line Parisian hotels passes into foreign hands. Will a Floating "Tech Factory" Fly? A San Diego startup arrives at a new definition of "offshoring." Question Authority SABMiller's Graham Mackay on what's hopping in the beer business. This Just In The quixotic, extremely human movement to put fine art in outer space. First Person In a speech at Stanford University, Apple founder and CEO, Steve Jobs shared three life lessons—and struck a chord. Value Driven America's immigration policy is backward.

FORTUNE is the global leader in business, known for its unrivalled access to industry leaders and decision-makers throughout the world. FORTUNE's European edition, based in London, is dedicated to covering European business from a trademark global perspective. With a European circulation of 105,000 and a worldwide circulation of 1,020,000, FORTUNE is one of the fastest growing magazines in the world. Founded in 1930, FORTUNE has grown to a worldwide circulation of over one million and a readership in excess of five million.

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TIME & FORTUNE
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Azmar Sukandar
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FORTUNE Asia
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