Business highlights

SAN FRANCISCO — Slumping clothing retailer Gap Inc. said Friday it has hired interior designer and television personality Todd Oldham to bring his sense of style to its Old Navy discount chain.

Oldham, who is currently hosting an interior design show on the Bravo network, will be Old Navy’s design creative director. He will join Gap on Oct. 1, about two months after the San Francisco-based company hired a new chief executive, Glenn Murphy, to steer its turnaround efforts.

Besides Old Navy and its namesake chain, Gap also owns Banana Republic.

Although he has been focused on interior design in recent years, Oldham began his career in fashion. He also has previous experience working for discount retailers, having designed a line of dorm room furniture for Target Inc. in 2002 and 2003.

Mattel apologizes

to China over recalls

LOS ANGELES — Mattel Inc. tried to save face Friday with Chinese officials, taking the blame for the recent recalls of millions of Chinese-made toys as it strives to mend a strained relationship with the nation that makes most of its toys and fattens its profit.

The world’s largest toy maker sent a top executive to personally apologize to China’s product safety chief, Li Changjang, as reporters and company lawyers looked on.

"Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys,” Thomas A. Debrowski, Mattel’s executive vice president for worldwide operations, told Li. The unusual move reflects how invested El Segundo-based Mattel has become in China.

Google’s stock price hits high

as co. gears up to sell more ads

SAN FRANCISCO — Google Inc.’s stock reached a new high Friday, reflecting Wall Street’s renewed faith in the Internet search leader as it introduces new ways for advertisers to reach its steadily expanding online audience.

The shares peaked at $560.79 before falling back to finish at $560.10, up $7.27, or 1.3 percent. The rally eclipsed Google’s previous record high of $558.58 attained in mid-July, just days before the Mountain View-based company disillusioned investors with a second-quarter profit below analyst estimates.

Google, founded just 9 years ago, now has a market value of almost $175 billion, more than long-established technology bellwethers like Hewlett-Packard Co. and IBM Corp.

The stock has increased by more than six-fold from its initial public offering price of $85 in August 2004.

The latest run-up in Google’s stock represents a turnaround from a little over a month ago when the shares briefly dipped below $500 amid the stock market turmoil triggered by a home mortgage meltdown that raised fears about a recession.

Those worries have lessened because of the Federal Reserve Bank’s decision to lower short-term interest rates by 0.5 percentage point in a move expected to free up more money for consumers and businesses to spend.

Google stands to benefit because it runs the largest advertising network on the world’s hottest marketing medium, the Internet.

Despite aggressive challenges by rivals like Yahoo Inc. and Microsoft Corp., Google has been able to widen its lead in search — the activity that triggers the text-based ad links that have become a huge moneymaker.

In August, Google handled 54 percent of all U.S. search requests, up 50 percent at the same time last year, according to the research firm Nielsen/NetRatings Inc. Yahoo lagged well behind at 20 percent followed by Microsoft at 13 percent.

The formidable lead enabled Google to earn $1.9 billion on $7.5 billion in revenue during the first half of the year. The company usually makes even more money during the second half because of the advertising blitz that accompanies the holiday shopping season.

Google already is trying to boost its profits by rolling out other marketing options besides staid advertising links.

Last month, Google began showing video ads on its subsidiary, YouTube, the Web’s most popular video channel. Earlier this week, Google dramatically increased the number of ads distributed to mobile phones and unveiled a system for displaying ads on "widgets” — mini-applications that are embedded on Web pages.

Investors are betting Google’s dominance, coupled with its expansion efforts, will yield the robust earnings growth needed to support its rich valuation. Google’s price-to-earnings multiple — a widely used yardstick for appraising publicly held companies — now stands at 37 times its estimated earnings for this year. By comparison, Microsoft’s price-to-earnings multiple is hovering around 17.

Several industry analysts already are forecasting Google shares will soon surpass $600. The stock eclipsed $500 for the first time 10 months ago.

Merck halts testing of

AIDS vaccine after it fails

TRENTON, N.J. — In a disappointing setback, a promising experimental AIDS vaccine failed to work in a large international test, leading the developer to halt the study.

Merck & Co. said Friday that it is ending enrollment and vaccination of volunteers in the study, which was partly funded by the National Institutes of Health. It was a high-profile failure in the daunting quest to develop a vaccine to prevent AIDS. Merck’s vaccine was the farthest along, considered the most promising and was closely watched by experts in the field. Officials at the company, based in Whitehouse Station, N.J., said 24 of 741 volunteers who got the vaccine in one segment of the experiment later became infected with HIV, the virus that causes AIDS.

In a comparison group of volunteers who got dummy shots, 21 of 762 participants also became infected.

"It’s very disappointing news,” said Keith Gottesdiener, head of Merck’s clinical infectious disease and vaccine research group. "A major effort to develop a vaccine for HIV really did not deliver on the promise.”

Michael Zwick, an HIV researcher at Scripps Research Institute, said it’s too soon to know if other vaccines using the same strategy would also fail.

"It’s par for the course in the HIV field,” he said of the Merck result.

The volunteers in the experiment were all free of HIV at the start. But they were at high risk for getting the virus: Most were homosexual men or female sex workers. They were all repeatedly counseled about how to reduce their risk of HIV infections, including use of condoms, according to Merck.

In a statement, the NIH said a data safety monitoring board, reviewing interim results, found the vaccine did not prevent HIV infection. Nor did it limit severity of the disease "in those who become infected with HIV as a result of their own behaviors that exposed them to the virus” — another goal of the study.

Merck’s was the first major test of a new strategy to prevent HIV infection. The first wave of attempts to develop a vaccine tried to stimulate antibodies against the virus, but that hasn’t worked so far.

The new effort — an approach that Gottesdiener said is being tried in most other current research — is aimed at making the body produce more of a crucial immune cell called killer T cells. The goal is to simultaneously "train” those cells, like an army, to quickly recognize and destroy the AIDS virus when it enters cells in the bloodstream.

Dr. Anthony Fauci, head of NIH’s National Institute of Allergy and Infectious Diseases, said other vaccines are in line for testing that use a similar strategy but with important differences. One developed by the NIH — containing the same three genes as the Merck vaccine, plus 3 versions of another gene — is set in January to enter the same large, "proof of concept” testing stage as the Merck vaccine, Fauci said.

Zwick said some researchers still are working on vaccines to neutralize the AIDS virus. He thinks ultimately what’s needed is one that combines that approach with a way to stimulate and train killer T cells.

Merck and the HIV Vaccine Trials Network, an international collaboration of researchers and institutions funded by the NIH, co-sponsored the study. The experiment, called STEP, began in December 2004 and had enrolled 3,000 volunteers in Australia, Brazil, Canada, the Dominican Republic, Haiti, Jamaica, Peru, Puerto Rico and the United States.

The results announced Friday involved volunteers who researchers thought would benefit most because they had never been exposed to the particular cold virus used in the vaccine.

Wall Street, on a generally upbeat day, showed little reaction to the news, with Merck shares rising 44 cents to $51.82.

Analyst Steve Brozak of WBB Securities said the failure won’t hurt Merck’s bottom line in the short term. But he said a vaccine is the only financially feasible way to fight the AIDS epidemic in poor countries and that the company that comes up with the first successful shot would have "a license to print money.”

"You’re talking about a Carl Sagan kind of number — billions and billions” of dollars, he said.

The Merck vaccine, known only as V520, also was being tested in a similar study in South Africa and in two smaller studies, which also were halted.

Mark Feinberg, head of medical affairs in Merck’s vaccine division, said it has no other candidates in development. The company still must do a detailed review of the data but he said he thinks this approach is dead.

Other scientists disagreed.

"You can’t say that the whole field of T cell vaccines has been dealt a death blow” by the Merck results, Fauci said. But if further examination of the Merck data and research on similar vaccines show that’s the case, he said, "then we’re in some serious trouble because the candidates representing different vaccine concepts are years away from development.”

Dr. Wayne Koff, head research and development at the International AIDS Vaccine Initiative, said the results give important data on what is not going to work and researchers will build on that as other potential vaccines are tested. He said roughly 30 are in the pipeline.

The nonprofit AIDS Vaccine Advocacy Coalition said in a statement that "while this is a disappointment, it is in no way the end of the search for an AIDS vaccine.”

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On the Net: www.merck.com