Your update of the most important business news from dozens of respected news sources, selected by the editors of BusinessWeek.

Early Edition August 20 2008 at 05:58 AM Chi-Chu Tschang and Harry Maurer

World Markets Fall on Fears More Pain to Come

Share prices dropped sharply on world markets Aug. 19 amid concerns that the year-long credit crunch is entering a dangerous new phase marked by a severe economic slowdown and failing banks. Indexes fell 3% in Japan, more than 2% in Europe, and more than 1% in the U.S. Adding to the anxiety were earlier comments from a former IMF official who predicted that a major U.S. bank could collapse.

Another worry was the continuing struggle at U.S. government-backed mortgage giants Freddie Mac and Fannie Mae. Freddie Mac was forced to pay its highest risk premium when it sold $3 billion in debt on Aug. 19, underscoring investor concerns over the viability of the lenders and the prospect that they may need to be bailed out by the government.

Source: The Guardian, Financial Times

Russia Tightens Its Grip in Georgia

Despite Russia's vows to withdraw its troops from Georgia, parts of contested South Ossetia are likely to remain under Russian control, potentially altering borders and the balance of power in the region. NATO leaders continue to struggle for a response.

Source: Wall Street Journal

BAA Told to Sell Three British Airports

In a surprisingly tough ruling issued Aug. 20, Britain's competition commission told the Spanish-owned operator of seven major airports in Great Britain, including London's Heathrow and Gatwick, that it must divest two of its three airports in London as well as one in Scotland to boost competition. But the move may not solve underlying capacity constraints and other problems.

Source: Times of London, BusinessWeek

HP Posts Strong Results on Laptop Sales

Info tech giant Hewlett-Packard beat Wall Street expectations for second-quarter results, announcing a 14% jump in net earnings, to $2 billion, on revenues of $28 billion, up 10.5%. International sales and laptops were strong, but the company's troubled printer unit continues to struggle.

Source: Reuters, New York Times

Ericsson, STMicro to Form Wireless Chip Business

Swedish telecom equipment giant Ericsson and Franco-Italian semiconductor maker STMicroelectronics announced Aug. 20 that they will combine their mobile chip units, forging a stronger challenger to U.S. rivals Texas Instruments and Qualcomm.

Source: MarketWatch

EBay: Amazon-ification Takes Hold

The electronic marketplace, once known primarily for its online auctions, is moving increasingly into the business of fix-price sales, posing a competitive threat to e-tailing king Amazon.

Source: BusinessWeek

Intel Bullish on new Atom 'Netbook' Processor

At its annual developers' forum, chipmaker Intel talked up prospects for its low-power Atom microprocessor, which can be used to power inexpensive Internet-connected laptops. The chip may show up as well in handheld devices.

Source: Financial Times

Growth Wanes for India's Tech Titans

The outsourcing giants--Infosys, Wipro, Tata Consulting--that put India on the global technology map and helped drive its recent economic growth are feeling the effects of the global economic slowdown and increased competition from cheaper locales.

Source: Wall Street Journal

Retailers Struggle at High and Low End

Weak results announced Aug. 19 by Saks and Target highlight that retailers at all points along the price spectrum are struggling against weak consumer spending and rising costs.

Source: Reuters/New York Times

Barclays Sees Potential in the U.S.

Bob Diamond, the American-born president of the big British bank, says Barclays would consider acquiring a U.S.-based wealth manager but not likely an investment bank, even at today's depressed share prices.

Source: Financial Times

Gerstner Retiring as Carlyle Chairman

Legendary business executive Louis Gerstner, who once led RJR Nabisco and later earned credit for turning around IBM, said Aug. 19 that he will retire as chairman of private equity giant the Carlyle Group.

Source: Reuters

Struggling Palm Seeks a Path in Smartphones

The pioneering maker of the PalmPilot and Treo smartphone has stumbled badly in recent years, losing out to rivals such as BlackBerry-maker Research in Motion and Apple. Now the company is trying to fight back with the new Treo Pro and improved software.

Source: New York Times

Conversation of the Day: The iPhone Kill-Switch Kerfuffle

Reader FreeRange writes: "The last thing any iPhone user wants is to have buggy or malicious software that can not only impede the use of the phone, but also damage the network."

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