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Originally published July 2, 2007 at 12:00 AM | Page modified July 2, 2007 at 2:02 AM

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Business Digest

Navy criticizes "mismanagement"

Northrop Grumman, the nation's biggest warship builder, has mismanaged construction of the first in a class of new Navy amphibious warships...

Northrop Grumman, the nation's biggest warship builder, has mismanaged construction of the first in a class of new Navy amphibious warships, delivering a vessel with "serious quality problems," Navy Secretary Donald Winter said.

The USS San Antonio was commissioned in January 2006, yet the Navy says it has problems ranging from faulty steering and leaks to delays, incomplete work and cost increases.

Because of "inefficiency and mismanagement" the Navy "still does not have a mission-capable ship," Winter wrote June 22 to Northrop Grumman Chief Executive Ronald Sugar in a letter obtained from the Pentagon by Bloomberg News.

The "persistent shortcomings" of the nine-vessel, $13.5 billion program "are troubling" and raise "grave concern" about the company's capability to manage the Navy's new $36 billion DDG 1000 destroyer program, Winter wrote.

Winter's letter puts the company on notice that it must improve its performance. It is likely to reinforce growing concerns among lawmakers about approving large annual increases in the Navy's budget to expand the overall fleet in 20 years to 313 vessels from about 276 today.

Northrop Grumman also is under fire along with Lockheed Martin for increasing costs, schedule delays and quality problems with the Coast Guard's Deepwater project to develop vessels for homeland-security missions.

Universal Music

Long iTunes deal reportedly rejected

Universal Music Group, the world's largest music company, has declined to sign a long-term deal with Apple's iTunes music store, leaving open the possibility for exclusive deals with others, an industry source said Sunday.

Universal will continue to sell music and videos of artists including 50 Cent, Mariah Carey and Black Eyed Peas via iTunes on a month-to-month basis, rather than a two-year agreement Apple had proposed, the source said.

The music company could now agree to offer significant portions of its repertoire exclusively to new partners, potentially weakening Apple's hold on digital-music retail.

Apple has more than 70 percent market share of all digital music sold in the U.S.

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The two sides had extended a previous two-year agreement by 12 months last summer, and that deal expired last month, the source said.

Apple

Some iPhones face activation delays

About 2 percent of people who bought the iPhone, launched Friday by Apple, have been experiencing delays in activating their service, a person familiar with the matter said Sunday.

Telecommunications firm AT&T, the iPhone's exclusive carrier for two years, said it was working on fixing issues related to the delays.

AT&T spokesman Mark Siegel described the problems as partly technology-related and partly process-related.

Siegel said the problem was partly caused by a high volume of customers trying to activate the service.

Other delays were caused by people trying to transfer work phone numbers to personal iPhone accounts.

Telecommunications

Canada's BCE accepts buyout

BCE, Canada's largest telecommunications group, announced the biggest buyout in Canadian corporate history Saturday, accepting an offer worth $48.5 billion from a group including the Ontario Teachers' Pension Plan.

The consortium also includes Providence Equity Partners and Madison Dearborn Partners. It will take BCE private.

BCE is known for its Bell Canada phone services and for media interests grouped in CTVglobemedia.

Compiled from The Associated Press, Bloomberg News and Reuters

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