COVER STORY:

CARL ICAHN: SHAREHOLDERS LOVE HIM, CEOS LOATHE HIM, by Shawn Tully, page 116

Wall Street superstar Carl Icahn is no longer a lone wolf, but while a New Icahn is taking activism to new heights, the Old Icahn, the outrageous showman, is still at center stage. Icahn remains the most intimidating, the most self-aggrandizing investor in the game, a gangling 6-foot-3-inch self-proclaimed crusader who, as he quaintly puts it, "takes umbrage" at management's incompetence and responds with a scorched-earth fervor not exactly appreciated by the members of the Business Roundtable. FORTUNE went deep inside Icahn's close-knit organization for an exclusive look at how he does it, from picking the targets to persuading corporate America to see things his way. Icahn, as well as his top dealmakers, sat down for several hours of interviews with Editor at Large Shawn Tully in which they described the inner workings of an operation that has boosted the total market cap of its target companies by more than $50 billion in just over two years, spreading the wealth among shareholders far and wide.

Wii WILL ROCK YOU, by Jeffrey M. O'Brien, page 82

Nintendo's newest contraption, the Wii, has performed exactly as designed, creating Wiivangelists everywhere. Videogame controllers generally feature a bewildering array of buttons, by contrast, the Wii's wireless, motion-sensitive remote, which Nintendo's legendary videogame designer, Shigeru Miyamoto, had been dreaming of for years, often requires no button manipulation whatsoever. While game consoles typically attract youngish males with an antisocial streak, the Wii is bringing people of all demographics together: in nursing homes, for Wii bowling leagues, at coed (!) Wii-themed parties, and, of course, in lines — as hordes of people clamor to buy the impossible-to-find $250 machine. It's not unusual for a new game console to sell out during its pre-Christmas introduction, only to see sales dwindle come January. But six months after the Wii's launch, sales are accelerating. FORTUNE takes a look at how Nintendo's new game machine won over the world — and beat the pants off Sony and Microsoft.

A PRETEXT FOR REVENGE, by Nicholas Varchaver, page 94

In October 2003, Karl Kamb, then a vice president at Hewlett Packard, persuaded then-CEO Carly Fiorina to take her company into a new line of business: flat-panel televisions. Today that triumphant moment for Kamb and HP is a distant, sour memory. Fiorina was replaced in 2005, and HP's TV business has failed to take off. Now the computer giant finds itself locked in a bitter and bizarre lawsuit with Kamb — a so-far little-noticed conflict that threatens to revive the most mortifying memories of HP's 2006 "pretexting" scandal and become a blot on the company's otherwise brilliant business comeback. HP says Kamb betrayed the company. Kamb claims HP got his private phone records and spied on Dell. FORTUNE gives an inside look at HP's peculiar new legal battle.

THE SURVIVAL OF PATTIE DUNN, by Patricia Sellers, page 110

After beating criminal charges in Hewlett-Packard's pretexting spy scandal and waging her fourth battle with cancer, Pattie Dunn, the former HP chairman, speaks with FORTUNE in her first interview since the charges were dropped. Candid about her mistakes, blunt about her battle with former HP board member, Tom Perkins, and pragmatic about her multiple ordeals, Dunn speaks out on privacy and resilience.

• On agreeing to talk, "The idea that my grandchildren can Google me ten years from now and see horrible information that goes to the heart of my character distresses me. I need to do what I can to change that."
• On feeling defamed, "There's no doubt in my mind I've been defamed. Until this happened to me, I assumed that when a corporate executive was charged with a crime, they were guilty. So I assumed that everyone would think I was guilty."

FACEBOOK'S PLAN TO HOOK UP THE WORLD, by David Kirkpatrick, page 127

Facebook, the social-networking site college kids spend so much time on — the one you thought was just about hooking up — could turn out to be more important than any of us thought. In late May the company's 23-year-old CEO, Mark Zuckberberg, announced that Facebook would no longer be just another social-networking site. Instead, he said, it aims to be the place where you can involve your friends in everything you do online. In effect, Facebook is now offering the opportunity for any company, Internet service, or software maker — anyone at all, actually — to build services for its members. This platform for new businesses has Silicon Valley abuzz and the platform expert, Microsoft, is paying close attention. In advance of this announcement, Zuckerberg and other executives spoke to FORTUNE about the strategy.

BOEING PREPARES FOR TAKEOFF, by Geoff Colvin, page 133

Times have never been headier for Boeing. It booked record orders in 2005 and 2006. Its new 787 is scheduled for roll-out on July 8 — that's 7/8/07. The Dreamliner, as it is known, is living up to its name. It is the fastest-selling new airplane ever, with more than 500 ordered so far; it is sold out for years to come. Meanwhile, the company's main competitor, Airbus, is somewhere near the seventh level of corporate hell. After years of losing to Airbus, Boeing and its stock are flying high. Boeing CFO James Bell tells FORTUNE just how the company did it.

• On betting the company on the 787, "If you're going to differentiate yourself, you have to be innovative. You have to dare to be great."

BLOGGING ON DRUGS, by John Simons, page 143

Booted out of a lucrative career, Peter Rost has become the drug industry's most annoying — and effective — online scourge. The former Pfizer senior executive turned blogger is part of a large phenomenon that is forcing Big Pharma into a new era of accountability. But is Rost a gadfly looking for a cause? Or is he a guardian, protecting consumers from unethical drug companies? One thing's for sure, even his critics admit he's a force to be reckoned with when he's on his game. For better or worse, the drug industry is going to have to get used to Dr. Peter Rost — and others like him.

THE RISE AND FALL OF ILAN REICH, by Jennifer Reingold, page 148

As his plane smacked down belly-first into Bowline Pond and began to sink, Ilan Reich was oddly calm. Then 50, he didn't see flashes of glowing light or fast-forward through the highs and lows of his life. He had been in bad spots before, terrible spots, in fact, and he'd always managed — through what he terms his "maniacal pursuit of the unattainable" — to pull out of them. Nearly 20 years earlier, Reich went to jail for insider trading. He thought he'd hit rock bottom. But that was before his battle to be readmitted to the bar, his controversial stint running a breast-implant maker, the plane crash, a brain tumor, and paralysis. FORTUNE gives a glimpse inside one man's 20-year battle "to get back what I had."

LUXURY SPECIAL REPORT

LIFE AT THE TOP: THE ART OF AUCTIONS, page 63

In the second of this four-part series FORTUNE reveals why buying at auction has never been more appealing, including a Q&A with the king of vintage-car collectors, tips for navigating the auction house floor, a strategy for outsourcing your wine cellar, a look at five watches likely to gain value over the years, and more. FORTUNE's auction handbook provides all the tips for the best of what's on the block.

DEPARTMENTS

FIRST: The Dog That Ate Detroit A year ago Cerberus was largely unknown by Wall Street. Now it's buying Chrysler and aspires to be the next GE. The Weird Al of Wall Street Lazard biotech analyst Joel Sendek's voicemail ditties have drawn a cult following. The Buffett Mystery Did you hear the one about Warren Buffett, Jimmy Buffett, Google's Sergey Brin, and his wife's startup? DISPATCHES: Ideas Made Here The designers at Nottingham-Spirk take their inventions from scratch pad to store shelves. Boom on the Range An explosion of natural gas drilling has given Wyoming a huge financial boost — and new problems. No Test Dummies In Consumer Reports' auto tests, engineers don't pull any punches. COLUMNS: Books Three foodie diaries are enough to satiate the pickiest readers. Technology Why Apple TV is a dud — and why that speaks volumes. Open Letter to the Candidates A business legend's modest proposals to fix health care. INVESTING: EMC Offers a Slice of its Surging Software Unit VMware is the most intriguing Silicon Valley IPO since Google. Should you get in on it? Market Beater From Atlanta Jay Bowen has built a stunning record by identifying long-term global trends.

 

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