MAJOR PAPERS:

• In an effort to refocus on coffee, the Wall Street Journal reported that Starbucks Corporation (NASDAQ: SBUX) will attempt overhaul its entertainment business.
• Private equity players Apax Partners and Kohlberg Kravis Roberts, along with Lehman Brothers Holdings Inc (NYSE: LEH) in a supporting role, are looking to form a consortium to examine a bid for the insurance assets of The Royal Bank of Scotland Group Plc (NYSE: RBS), the Financial Times reported.

OTHER PAPERS:

• Yahoo! Inc (NASDAQ: YHOO) is going to let outside developers create applications across its network of sites, the New York Times contended. The search engine is also going to combine its online services under the social profile concept in an attempt to allow its users to replicate the social experience that social networks like News Corporation's (NYSE: NWS) MySpace and Facebook have made so popular.

WEB SITES:

• Research In Motion Limited (NASDAQ: RIMM) will reportedly delay the launch of its new hotly anticipated 3G BlackBerry phone, Fortune reported, which the company is developing for AT&T Inc (NYSE: T). The phone, originally supposed to be launched in June, may not be released until as late as August, inside sources said.

Starbucks Corp. (NASDAQ: SBUX), the epitome of high-priced coffee and latte beverages, saw a drop-off in customer traffic in 2007. Founder Howard Schultz even returned to the CEO helm to try and figure out why customers stopped coming in its stores. He even announced some store closures and the banishing of breakfast sandwiches that were competing with its trademark coffee smell.

This year may see much of the same customer traffic patterns though it may be due to different reasons. With many people predicting gas prices of $3.75 to $4.00 per gallon by this summer, will customers simply stop buying $4 cups of macchiato? They already are in droves. Add that to the rising cost of coffee, and Starbucks may be in for a world of hurt in 2008.

In the meantime, Schultz is making changes at the top of the ranks, starting with the "retirement" of Launi Skinner as head of U.S. operations. Skinner's performance could be seen as semi-disastrous, so she'll be "spending more time with her family" while Cliff Burrows steps in to take over. Burrows formerly was president of Starbucks Europe, Middle East and Africa stores, but he'll have a much larger challenge in the U.S.

After Starbucks saw a share price decline of 43% last year in addition to a 13% drop this year, Shultz has to do something to stem the bleeding. Shoring up that trademark smell inside stores, limiting growth and decreasing store/brand dilution and stuffing in some new blood may do the trick, but 2008 won't be easy for the coffee retailer in way, shape or form.

One of the key features of any Starbucks Corp. (NASDAQ: SBUX) location is the pungent aroma that emanates from its stores. That smell, the trademark scent of coffee beans being roasted, is a main reason customers flock to Starbucks locations instead of the competition. Okay, make that the only reason; well, in my opinion.

In the last year, Starbucks began serving breakfast sandwiches and other non-coffee fare in its U.S. stores under former (and short-lived) CEO Jim Donald. Founder Howard Schultz has made it a point that opening a plethora of new stores and offering a bunch of new items was a reason for falling sales and disappointing performance for the company last year.

As such, Donald was pushed out and Schultz returned to the CEO spot just recently. His main reason: Starbucks was not the company he founded. The "experience" had been lost and the coffee retailer was in contention to become yet another ordinary coffee shop. Donald was following short-term Wall Street greed; Schultz could care less about that and said he will return focus to the consumer experience (which will bring its own returns).

Schultz, over and over, makes the point that Starbucks needs ambiance, including that trademark roasting smell, if it is to become successful again. He's right -- the smell and the quiet, homely atmosphere are its largest marketing pitches, more than store openings and new product offerings. Schultz plainly said it, "In short, the scent of the warm sandwiches interferes with the coffee aroma in our stores." He then then announced that breakfast sandwiches are going away permanently and that the chain will also close 100 under-performing U.S. locations in order to slow down what he calls the "dilution" of the Starbuck's brand. Again, he is correct. The chain should be exclusive to each area it serves, not plowing down the landscape with so many locations that the brand itself loses its luster.

Ethisphere Magazine, which insists that ethical behavior and profitable businesses are not mutually exclusive, recently released its annual ranking of the world's most ethical companies, and there are a few surprises on the list of those companies that use ethical leadership to drive profits.

To make the list for consideration, companies are first peer-reviewed according to standards in 9 separate criteria sets for 30 different categories of industry. Those criteria, not equally weighted, are legal and regulatory compliance, governance, corporate citizenship, internal ethical systems, transparency, perception and reputation, industry leadership, executive leadership, and innovation. What the companies on the list seem to share is a commitment to corporate social responsibility that far exceeds mere regulatory compliance. Ethical standouts are generally led by senior management that is willing to make ethical decisions on economic, social, and environmental factors despite unfavorable short-term consequences. These companies consider themselves as stakeholders in their own reputations.

Surprises on the list include McDonald's Corp. (NYSE: MCD), though even small changes in corporate behavior can have a enormous result given the size of the company. McDonald's offers minorities special opportunities to own franchises in the company, and is becoming increasingly aware of environmental consequences of its production and packaging policies. Also a surprise on the list is Google Inc. (NASDAQ: GOOG), a company with virtually no consumer privacy protection policies. Surprising because of their absence from the list are Dell Inc. (NASDAQ: DELL), which has a comprehensive computer recycling program, and Newmont Mining Corp. (NYSE: NEM), which sponsors educational programs for children living near its mining operations in developing countries.

Also included on the list are the Kellogg Co. (NYSE: K), which has produced nutritious products in recycled packaging since 1906 and has had a Social Responsibility Committee in place since 1979; and Starbucks Corp. (NASDAQ: SBUX), which is the world's largest seller of Fair Trade Certified Coffee since 2000.