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Still to Come...
Center Stage in '06:
Natural Gas, Iran, New Cancer Tests

This much is certain about 2006: Big changes are in store.

Going into 2005, who knew that New Orleans would get flattened, General Motors Corp. bonds driven down to junk status and gold pushed above $500 an ounce?

Crystal balls, of course, are notoriously cloudy. But the possibilities for next year are intriguing. Perhaps newly enriched Google Inc. takes over a movie studio to deliver films online. Or doctors figure out how to spot cancer with a blood test. Or Big Gas starts to take its place alongside Big Oil. Or Latin America and Iran muscle Iraq aside as America's biggest foreign headache.

In a half-dozen or so different realms, Wall Street Journal reporters took a shot at identifying a few jolts that might lie ahead in the new year.

Cancer Testing: Look for the opening shots in what could become a revolution in cancer diagnosis: Detection by means of "biomarkers" -- blood proteins that can disclose the existence of a mere handful of malignant cells in someone's body. They have the potential to reveal certain cancers much earlier than current screening tests such as colonoscopies and mammograms.

Clinical trials of biomarkers for ovarian, prostate, lung and colon cancer are under way. More biomarkers are likely to be found and validated in 2006.

Today's "early detection" often finds cancer too late, and as for therapies, even the most cutting-edge often improve survival only by a matter of months. But biomarkers, once the diagnosis they suggest is confirmed, could get patients into surgery or other treatment months or years sooner, improving survival odds. Meanwhile, if biomarkers signal a clean bill of health, patients would be able to reduce the frequency of invasive tests such as colonoscopies or even skip them.

Like the human genome project, biomarkers are riding important advances in technology. A technique called mass spectrometry currently can identify the 2,000 or so most abundant proteins in the blood. But blood has an estimated eight million different proteins, which vary greatly in size and concentration. Some, if detected, might show that a cancer exists somewhere in the body. As mass spectrometry advances and can identify more proteins, it "will allow us to look in depth at many new candidate biomarkers," says Gordon Mills, an oncologist at Houston's M.D. Anderson Cancer Center.

An early-detection method can stumble either if it yields too many false positives or if it detects many indolent cancers that wouldn't shorten a lifespan if left untreated. But biomarker medicine is an "enormously revealing and important technique," says Lee Hartwell, director of Seattle's Fred Hutchinson Cancer Research Center, and offers the best hope of meeting the National Cancer Institute's goal of eliminating suffering and death from cancer by 2015.

Global Threats: Not that Iraq doesn't present enough problems, but America's biggest international worries in 2006 just might come from elsewhere: Latin America or Iraq's next-door neighbor Iran.

A resurgent political left has won control in Brazil, Venezuela, Argentina, Uruguay and Bolivia and seeks to expand its reach in elections this year in Peru, Mexico and Nicaragua. The leftward swing reflects impatience with anemic economic growth in the two decades since the region began adopting the market-oriented polices Washington favors.

Ethnicity also feeds it. Countries including Bolivia, Peru and Ecuador are experiencing an upheaval of long-marginalized indigenous populations.

Anti-Americanism is on the rise, evident when President Bush was greeted by rioters during a trade summit in Argentina. The U.S. has been too preoccupied by the war on terror to develop an effective Latin American policy.

Argentina and Bolivia have reneged on contracts with a host of foreign investors, affecting companies ranging from CMS Energy Corp. of Jackson, Mich., to Spain's Repsol YPF SA. A surging leftist candidate in Peru is calling for the renegotiation of mining and energy contracts with foreigners. Argentina paid off its debts to the International Monetary Fund, giving the government more latitude to impose populist policies aimed at controlling prices and contracts.

Hugo Chávez, Venezuela's virulently anti-U.S. leader, has been using his petrodollar windfall to try to unite the region and supplant U.S. interests. Among ventures he has launched are a regional TV network and an oil joint venture involving several Latin American producers.

The new Latin American left is anything but monolithic. Brazil's government has won over Wall Street with its tough fiscal policy; the São Paulo stock exchange index has tripled since former union leader Luis Inacio Lula da Silva took office in 2003. Argentina's leftist president, Nestor Kirchner, believes in maintaining a budget surplus, but he forced local and foreign bondholders to take a big hit on repayment. That could become a precedent for other impoverished and indebted nations.

In Iran, meanwhile, President Mahmoud Ahmadinejad is proving erratic and, at times, incendiary. He has declared that Israel should be wiped out, called the Holocaust a myth, banned Western music from state-run radio, and shown a proclivity to butt heads with Iranian officials of nearly all stripes. The turmoil next door in Iraq has given heavily Shiite-Muslim Iran a playground to try to expand its influence.

Iran seems bent on producing the kind of nuclear fuel that could power nuclear arms. As Britain and France try to negotiate a plan for Iran to scale back its nuclear program, Tehran has angered them with its persistence. In one potentially encouraging sign, Iran agreed this week to discuss with Russia a plan to have the Russians enrich uranium for them and then ship it to Iran, eliminating the need for Iran to build its own enrichment facilities. But hard-liners in Iran are calling that an unacceptable affront to their sovereignty, so it isn't clear the idea will get off the ground.

Talks aimed at getting the Iranians to back off their nuclear program are likely to resume early in 2006. If the Iranians don't agree, the U.S. is likely to seek to have the United Nations Security Council consider economic sanctions against Iran. But that will be tough because of reluctance by China and Russia to punish Iran.

The U.S. and European allies might decide on a set of economic sanctions they would adopt on their own, to build momentum for U.N. sanctions that would be global. Of course, Iran might simply respond by pulling out an oil threat: If the West doesn't like $60-a-barrel oil, how about the $100-a-barrel price likely if Iran pulls its oil from the market and blockades shipments from the Persian Gulf.

Media: In 2006, the trickle of digital experimentation that began recently may turn into a flood.

"We can't rely solely on traditional routes [for distributing media content'] any more. They are no longer the only ones out there," says Walt Disney Co. Chief Executive Robert Iger. He's anticipating the day when movies may be made available for the video iPod alongside ABC television shows, and he forecasts an "explosion" in the ways people watch TV. "We're going to see a definite change in the media business and it's going to come sooner rather than later," Mr. Iger says.

For the broadcast networks, that may mean simulcasting their prime-time shows on the Internet, says Kevin Tsujihara, president of Time Warner Inc.'s Warner Bros. Home Entertainment Group: "Networks...can't afford not to make their schedules available this way. When it happens, it will be a major issue for affiliates," the local stations.

While some media moves have been aimed at getting content onto mobile devices -- such as putting a hit show like "Desperate Housewives" on the iPod -- the Internet is likely to be the next battleground. One possible initiative: enabling people to watch TV at work. "The at-work marketplace will be significant," says media analyst Tom Wolzien. He says networks could double their profits from daytime programming by making it easier for people to watch soap operas at their desks.

It's not that employees would watch soaps all day long -- they're obviously supposed to work when they're at work. But content might be programmed in short snatches that they could catch, or streamed during the lunch hour. And Web sites that play video are easily minimized if the boss happens to walk by.

The music industry, battered by digital technology, will be trying to deliver more than just ring tones to cell phones -- the device that some see as the future core of listening habits. That shift will lead to "mobile music bundles," packages that combine ring tones, photos, video content and full songs, for around $4. Warner Music Group expects to roll out the digital bundles in the U.S. in the first quarter of 2006.

Some think all this maneuvering is merely a prelude to something really big. "The first thing to expect in 2006 is Google or Yahoo will buy a major content company -- such as a movie studio," says Rishad Tobaccowala, chief innovation officer at Publicis Groupe Media, a division of an ad holding company that seeks out advertising opportunities in new media. "At the very least they will do some similar combo with a studio where they buy a 10% to 15% stake, much like the way [Google] has structured its deal with Time Warner" to buy a stake in AOL. "What Google and Yahoo need is content." A spokeswoman for Google Inc. declined to comment.

CEOs: Eight of the 30 companies in the Dow Jones Industrial Average ring in the New Year with different chief executives than they had in 2005. The turnover rate is up steeply from 2004, when just three made changes at the top.

There's a common thread in the departures. Directors, investors and regulators, still reeling from the corporate scandals earlier in the decade, are applying more scrutiny to CEOs.

Executive recruiters and academic observers suggest that change might occur at the top of some companies that fall short of investor expectations or that simply are in struggling industries, such as airlines or autos. Fewer boards now "embrace an embattled CEO," says Jeffrey Sonnenfeld, president of Yale University's Chief Executive Leadership Institute.

While corporate politics are always murky, Mr. Sonnenfeld and some executive recruiters believe that several chief executives might come under pressure this year, including those at Coca-Cola Co., Gap Inc. and Wendy's International Inc. Coke, where Neville Isdell came out of retirement 18 months ago, faces weak sales of its flagship cola. Gap has had four straight quarterly sales declines at stores open at least a year, and its CEO, Paul Pressler, has told analysts the retailer may have focused too much on cost cutting. At Wendy's, CEO John Schuessler faces disgruntled shareholders, a group of whom recently said in a regulatory filing that the hamburger chain must "cease operating as an inefficient holding company."

James D. Robinson III, Coke's presiding director, says the board "is fully supportive of Neville and has complete confidence in what he's doing." Rebutting speculation about a Pressler exit at Gap, founder Donald G. Fisher praised him in a letter circulated within the company as "a proven leader, strategist and chief executive." A Wendy's spokesman wonders, "What do you say to wildly speculative comments?" He adds, "Our CEO has over 30 years of expertise in our company and restaurant operations."

Blockbuster Inc. CEO John Antioco is under pressure from activist investor Carl Icahn, who won three board seats at the video-rental chain this year. Blockbuster, which recently said it wouldn't pay its third-quarter dividend, is "carrying too much baggage" from a flawed strategy, says Stephen Mader, an executive of search firm Christian & Timbers. Mr. Antioco says through a spokeswoman that he has "no intentions of leaving Blockbuster and is looking forward to 2006."

Notions of what makes a good CEO are changing, says Roderick Kramer, a Stanford University business professor. He says favor has been shifting from bold, charismatic leaders of the 1990s, such as former chiefs Michael Eisner at Disney and Carly Fiorina at Hewlett-Packard Co., toward lower-key types tightly focused on day-to-day operations.

Wall Street: Gordon Gekko, the fictional character of the movie "Wall Street," would be proud: His mantra, "greed is good," seems increasingly back in fashion.

Today's symbols of excess are managers of hedge funds -- those lightly regulated investment pools for the rich and institutions -- and their cousins in private equity, the people who often buy public companies and take them private. With roughly $1.3 trillion between them to play the markets with, these funds are likely to become even bigger forces next year. They can be expected to take larger stakes in companies, to bet more aggressively on stock, currency or other trends, and to push more corporate managements for structural changes.

The result could be that some stocks get more volatile. Consider two companies that Mr. Icahn, the raider turned hedge-fund manager, has invested in and then pressured to change. Shares of Kerr-McGee Corp. have risen 57% since he got involved early in 2005 -- while those of Blockbuster have plunged 55% since he dove in late in 2004.

"This marks a slightly different version of the Predators' Ball," says Charles Munger, Berkshire Hathaway Inc.'s vice chairman, referring to the annual Drexel Burnham Lambert conference for big investors that was popular with corporate raiders in the 1980s.

Mr. Icahn, who is also confronting Time Warner, predicts more activist-investing battles in 2006. And the activists taking on managements now can sometimes count on support from institutional investors and big securities firms. In trying to unseat Time Warner directors, for instance, Mr. Icahn has the help of old-line investment bank Lazard Ltd.

Market specialists predict that private-equity funds will take aim at ever-bigger targets. For a model, look at Kohlberg Kravis Roberts & Co., which in November agreed to pay $12 billion, plus assumption of debt, to buy Danish telephone company TDC AS -- the largest such buyout since the KKR-led $25 billion takeover of RJR Nabisco Inc. in 1988.

Energy: Alongside Big Oil, expect to see Big Gas.

Jeroen van der Veer, chief executive of Royal Dutch Shell PLC, says natural gas now accounts for 40% of Shell's hydrocarbon output and is rising. "In a decade, we will be close to being 50-50," he says. "One day, the question will be whether we should be [called] an oil-and-gas company or a gas-and-oil company."

Gas use is expected to grow 50% faster than oil consumption in the next 25 years, says the International Energy Agency. Gas is expected to pass coal as the No. 2 energy source by 2020, accounting for nearly a quarter of the pie, with oil first at more than a third. One element favoring the use of gas is that it's clean burning, producing fewer so-called greenhouse gases.

Helping drive the trend is increasing output of liquefied natural gas, or LNG. Unprocessed gas moves mostly by pipeline and is landlocked, limiting its ability to be a global product competing with oil. But if liquefied, gas can move by tanker. One big Persian Gulf producer, Qatar, is investing heavily in facilities to turn gas into LNG and is eager to work with Western energy companies. Qatar, with the world's third-largest gas reserves, is on track to be the largest LNG exporter.

Big Gas won't insulate the U.S. from energy shocks. U.S. natural-gas prices have risen dramatically, hitting record highs this year. And U.S. buyers seeking cargoes of LNG recently have been outbid at times by Europeans and Asians.

The increasing use of gas could reduce dependence on the Organization of Petroleum Exporting Countries, but the resulting shift in geopolitical power would have strings attached. Gas's rise may enhance the clout of potentially unstable Russia, the nation with the biggest gas reserves. Russia wants to more than quadruple the price of gas it sells to Ukraine, the former Soviet republic that last year threw out a Kremlin-backed presidential candidate, and has threatened a supply cutoff tomorrow unless Ukraine agrees. The Russia-Ukraine spat could disrupt Russia's gas supplies to Europe, as the pipeline to Europe runs through Ukraine.

Meanwhile, for the West, the No. 2 holder of gas reserves is even more problematic: It's Iran.

Labor: There will be tough bargaining over health care and pensions in 2006, in contract negotiations for more than 50,000 hotel workers, 20,000 employees in the rubber and tire industry, plus miners, janitors, teachers and actors/performers. Tensions between the United Auto Workers and troubled parts supplier Delphi Corp. could flare into a strike over wage and benefit cuts Delphi wants.

In union and nonunion workplaces alike, benefit cuts and paltry raises have soured some employees' attitudes. The reason is that the belt-tightening comes when the economy as a whole is humming and many companies are notching up record profits and paying the very top managers as handsomely as ever.

Likely to intensify this year are employers' efforts to trim the benefits of new hires, in effect creating two-tier wage or benefit scales. This fall, for instance, Lockheed Martin Corp. said salaried employees hired after Jan. 1 won't be eligible for the company's defined-benefit pension plan or for retiree health benefits. In this month's brief New York transit strike, a key issue was an effort -- ultimately abandoned -- to make new employees contribute more to pensions than current workers.

Strikes are up. Though only about 12.5% of the work force is unionized, there were 271 work stoppages through the first three quarters of 2005, nearly 20% above the like period of 2004, according to the Bureau of National Affairs Inc., a Washington publisher. They included a machinist strike against Boeing Co. over pensions and health care and a walkout by mechanics at Northwest Airlines.

Surveys show many frustrated workers are ready to jump to new companies as the job market improves, prompting some employers to look for ways to retain individuals they value most. The result can be special deals for the stars rather than across-the-board raises and benefits. Nearly half of employers used special retention tactics such as merit raises to hang on to particular workers in 2005, up from 35% in 2004, according to a survey by the Society for Human Resource Management in Alexandria, Va.

Technology: For years, people have predicted that some sort of computer would wind up in the living room, controlling entertainment. It hasn't happened. But barriers are weakening, and important beachheads could be established in 2006. Two companies to watch will be Apple Computer Inc. and Intel Corp.

Apple, which brought big changes to music with its iPod and online music store, has introduced a new version of its iMac computer with a technology called Front Row that comes with a tiny wireless remote for letting computer users access stored movies, music and photos. Outsiders speculate Apple will soon offer Front Row on more products, possibly on devices that could reside in the living room and connect directly to TV sets.

The company won't comment. An update on Apple's plans could come as early as mid-January, when CEO Steve Jobs will deliver a keynote speech at the MacWorld trade show in San Francisco.

Intel is betting it can be a middleman in the living room. It would combine new microchip technology for computers with a branding program called Viiv. The brand would certify that digital movies, TV shows and software have been adapted to be viewed on a TV screen and on other consumer gadgets carrying the brand. The Viiv effort will be launched at the Consumer Electronics Show kicking off in Las Vegas next week.

Write to Carol Hymowitz at carol.hymowitz@wsj.com