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Google China Pullout Would Be Permanent, `Burn Bridges,’ Ex-Executive Says

by on March 18, 2010

By Bloomberg News March 19 (Bloomberg) — Google Inc. would probably be unable to return to China should it withdraw from the market instead of abiding by the country’s censorship laws, a former executive at the company said. The public manner in which Google announced its intention to pull out of the country means they may have “burnt bridges and they’ve burnt the Google brand in China,” Peter Lui , formerly the company’s financial controller for the Asia Pacific region, said in an interview yesterday. “There is no way Google can ever come back.” Gabriel Stricker , a spokesman for Mountain View, California-based Google, declined to comment, as did Jessica Powell , a spokeswoman in Tokyo. The owner of the world’s most-used search engine on Jan. 12 said it would stop filtering its Web site in China even if that meant ending its operations in the country. Speculation that negotiations with the government had faltered intensified after China said last week the plan to stop filtering at its Google.cn site was irresponsible. “China can do without Google. They have other search engines,” said Christopher Tang, professor of business at University of California, Los Angeles. Google “will have a difficult time re-entering the China market,” he said. The U.S. company may announce on March 22 it will pull out of China on April 10, Shanghai-based China Business News reported today, citing an unidentified Chinese sales agent and an unnamed Google official. First Employees Lui, 45, said he was one of the first people at Google China and left the company in 2008 after three years because of disagreements with upper management. Lui then joined online recruiter 51job Inc. in March 2009 as chief financial officer before resigning eight months later. Growing concerns that Google would pull out led some advertising agents to advise clients to promote their products in rival Internet sites such as those of leading Chinese search- engine operator Baidu Inc. China has 384 million Internet users, according to government data, more than the total U.S. population. The number may grow to 840 million, or 61 percent of the population, by 2013, according to estimates at EMarketer Inc. in New York. Google rose $0.15 to $566.40 on the Nasdaq Stock Market yesterday. The shares have dropped 8.6 percent this year. The prospect of a pullout helped bolster shares of Baidu, China’s biggest Internet search engine, 46 percent since the Jan. 12 announcement. All Internet service providers in China must have their licenses reviewed by the Ministry of Industry and Information Technology in March, though the agency may extend the reviews for some companies into April, Shawn Zhao, Google’s managing counsel for greater China, said earlier this week. Google’s possible withdrawal would have no bearing on the overall environment for foreign companies operating in China and would be an “individual business act,” Chinese Foreign Ministry spokesman Qin Gang said this week. “It’s over for Google in China,” Lui said. — John Liu , Mark Lee , Pavel Alpeyev , Brian Womack . Editors: Young-Sam Cho , Mark McCord , Jonathan Annells

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Gilbert B. Kaplan: If China Throws Out Google, We Should Throw Out their Computers

by Gilbert B. Kaplan on March 16, 2010

The concept of reciprocity in trade has a long and storied history, and one that ought to be remembered today. Simply put, if we allow market access for the fruits of the great Chinese industrial machine, creating jobs for 100 million Chinese workers (the number of Chinese employed in manufacturing), they need to allow access to our creative enterprises, such as Google. But not only is Google being forced out by a series of actions and deliberate inactions of the Chinese government, but Google’s affiliate, YouTube, was never even let into China in the first place. It is perennially blocked by their “great firewall”. Nor do most other U. S. websites have unfettered access to China. eBay has left China. Many newspaper websites are regularly censored. The Chinese competitive sites that are willing to go along with the censorship and the dictates of the Chinese government, like Baidu and Alibaba, are the dominant players on the Chinese internet. This is not only a question of freedom of speech. It is also a trade barrier and a major economic problem for the United States. Google alone has over 20,000 employees, many in the United States, and they and the company are undercut by these actions, as are the workers at eBay and other website companies. We are struggling to rebuild our manufacturing sector, but while that occurs, we need to make sure companies like Google have full access to the largest internet market in the world, China. If a company cannot access the largest market in the world for its product it loses enormous revenue opportunities. And as a matter of economies of scale and ability to move down the learning curve, it becomes economically disadvantaged versus its competitors going forward. There had been an implicit agreement about the internet made between China and the United States. The United States agreed to lower all its tariffs on high technology manufactured goods to zero, and we agreed to let in all that China could send over here, no questions asked. What is the result of that? The result is that substantially all United States computers are now made in China. We even went so far as to allow the first U. S. PC maker, IBM, to sell its PC division to a Chinese company, Lenovo. That sale could have been stopped, under a U. S. law called the Exon-Florio Act, but not only did we not stop it, we did not even question it. Why? Because we believed that as China industrialized and moved along the economic and knowledge highway they would become a great market for those goods where we continue to have an advantage, things like search engines, and streaming video, and innovative web sites. We believed they would keep their side of the bargain. But they have not. So we are now in a completely untenable position, as a country and as an economy. The hardware of the internet, computers, disk drives, semiconductors, peripherals, are all made in China, not here. Much of the software of the internet, which is made here, advanced here, and continually reinvented here, is banned from China. So their industries grow, they develop more jobs, their economy avoids the recession. Our economy shrinks, our job base deteriorates, and our creative enterprises suffer because they are denied access to the largest internet market in the world. And the trend is only getting worse. More and more high-tech producers are moving their factories to China, because of subsidies, cheap labor, low environmental standards, and currency manipulation. Ironically, it was only a short time ago that we thought computers and semiconductors were the kind of creative industries we would always keep in the U. S. But they have now basically left our shores, though the even more creative side of the internet has not (yet). The largest computer manufacturing area in the world is in Guangdong Province, north of Hong Kong, where Foxconn employs 200,000 people as a subcontractor to many U. S. and other worldwide computer brands. While this is occurring, thousands of U. S. engineers and assembly line workers are unemployed. The Chinese government wants trade to be a completely one-sided affair where China builds up knowledge and industrial might and trade reserves and we get nothing. If there is any area where we clearly have a comparative advantage it is the complex and dynamically creative space that Google occupies. In 2009, China exported $126 billion of computers and electrical equipment to the United States. We exported a paltry $14 billion to them. Given these favorable terms of trade, one would think they would be careful with our further downstream internet companies, but they are not. Demanding reciprocity is not protectionist and should not subject us to criticism from China, the WTO, or even the most free of free traders. Reciprocity is what the trade agreements of the world are about. We let you sell in our market the goods you can make more efficiently and more creatively. You let us sell in your market the goods and services we produce. If China shuts out our internet companies, we need to shut out their hardware that the internet runs on.

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Stocks in U.S. Climb as Financials Reverse Drop, Consumer Companies Rally

March 15, 2010

By Whitney Kisling March 15 (Bloomberg) — U.S. stocks erased losses in the final hour as financial shares reversed declines, while consumer companies rallied on an analyst upgrade of Wal-Mart Stores Inc. and PepsiCo Inc.’s plan to return more money to investors. American International Group Inc. erased a 2.7 percent slide after investor Bruce Berkowitz said he bought a stake in the bailed-out insurer. Financial shares in the Standard & Poor’s 500 Index recovered most of a 1.1 percent slide after Senator Christopher Dodd outlined a plan to overhaul banking rules. Wal-Mart rallied 2.8 percent on Citigroup Inc.’s recommendation to buy the shares, while PepsiCo gained 1.6 percent on plans to boost its dividend and buy back shares. The S&P 500 increased 0.1 percent to 1,150.51 at 4:08 p.m. in New York after earlier sliding as much as 0.7 percent. The Dow Jones Industrial Average advanced 17.46 points, or 0.2 percent, to 10,642.15. “We did get some clarity on financial regulation, so the market’s bouncing around and back up at the end,” said Walter Todd, who helps manage $775 million of assets at Greenwood Capital Associates in South Carolina. “The fact that we did get an outline of what’s going to be included in this type of bill, I’m sure some people look at that and say, ‘Well, at least I know what I’m dealing with.’” The SPDR S&P 500 ETF Trust, an exchange-traded fund linked to the benchmark index for U.S. stocks, rallied for a 12th straight day, the longest winning streak since September 1995. The ETF rose less than 0.1 percent to $115.49 and has advanced 4.4 percent since Feb. 25. Small Caps Slip The S&P 600 SmallCap Index slipped 0.2 percent, ending a streak of 10 days in which it rose, as declines in the smallest U.S. stocks pushed the number of falling shares above rising ones in New York. The streak through the end of last week was the small-cap gauge’s longest in more than six years. Earlier losses in equities were limited by reports showing an unexpected increase in industrial production and an eighth straight month of growth in New York manufacturing. Investors area also awaiting the Federal Reserve’s statement on interest rates and the economic outlook tomorrow. “With the Fed meeting tomorrow, we’re going to continue to bounce around this very important technical level of 1,150,” said Greenwood Capital’s Todd. The rally that lifted the S&P 500 by 8.9 percent since Feb. 8 was led by the same industries as the advance that started a year ago. Financial companies have gained 14 percent over the last five weeks and 149 percent since the index’s 12-year low in March 2009 for the biggest increase over both periods. Industrial and consumer shares were second and third, gaining 12 percent in the latest advance after doubling since March 2009. AIG Gains AIG rose 0.3 percent to $34.32 and jumped as much as 6.3 percent after Berkowitz said he bought “significant” stakes in the company’s shares, convertible debt and bonds. Berkowitz is the head of Fairholme Capital Management who was named Morningstar Inc.’s domestic stock mutual fund manager of the decade. “Some improvement in AIG may be a factor in the move,” said Alan Gayle , a money manager at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “I would still say investors have been somewhat cautious today. Wells Fargo & Co., Bank of New York Mellon Corp. and U.S. Bancorp also reversed earlier declines to gain at least 0.7 percent. Dodd’s legislation includes a version of the Volcker Rule to require regulators to ban proprietary trading, investment in and sponsorship of hedge funds and private equity funds and to limit relationships with the funds. The plan would also empower the Federal Reserve to break up large firms that pose a “grave threat” to U.S. economic stability. ‘No Big Surprises’ “There’s no big surprises in the new financial proposals being rehatched,” said Matthew McCormick, a banking-industry analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.8 billion. “The perception is that the changes will be less onerous than expected. They seem to be making some compromises.” Wal-Mart led gains in the Dow, adding 2.8 percent to $55.42 as the stock was raised to “buy” from “hold” at Citigroup, which said the retailer is set to win market share with price cuts. PepsiCo advanced 1.6 percent to $66.15, the fifth straight day of gains. The world’s second-largest soda maker said its directors approved an increase in the annual dividend. Directors also authorized the repurchase of as much as $15 billion of common stock through June 2013. Beazer Upgraded Beazer Homes USA Inc., an Atlanta-based builder of entry- level homes, was rated a new “buy” at Citigroup, which said there is “considerable upside” for the stock compared with its valuation. The shares rose 4 percent to $4.73. St. Jude Medical Inc. rose the most in the S&P 500, gaining 8.2 percent to $40.56. The medical-instruments company, along with larger rival Medtronic Inc., may benefit from Boston Scientific Corp. ’s suspension of cardiac defibrillator sales, according to Sanford C. Bernstein & Co. Boston Scientific had to halt sales of its heart-rhythm devices because of a documentation error in regulatory filings. Medtronic rallied 4.3 percent to $45.81. Boston Scientific lost the most in the S&P 500, falling 13 percent to $6.80. Chordiant Software Inc., the maker of customer-relationship programs, rose the most in the Russell 2000 Index after Pegasystems Inc. agreed to acquire it for $5 a share. The stock surged 31 percent to $4.99, the most since 2003. Earlier Declines Earlier declines in equities came amid concern China will take steps to restrain economic growth to combat inflation. Exxon Mobil Corp. lost 0.8 percent to pace declines in 38 of 40 energy companies in the S&P 500 as oil dropped 1.8 percent to $79.80 in New York. U.S. lawmakers and economists say the China’s reluctance to let its currency appreciate is threatening global competitiveness at a time when Premier Wen Jiabao also is taking steps to rein in growth in the world’s third-largest economy. Wen rebuffed calls yesterday for a stronger yuan, while Morgan Stanley said it expects increases in bank-reserve ratio requirements and higher interest rates as early as April. Google Inc. tumbled 2.8 percent to $563.18, while Baidu Inc. gained 4.8 percent to $576.84, marking the first time Baidu’s stock has topped Google’s. Google advertisers in China are being advised to switch to rivals such as Baidu as speculation grows the owner of the most popular Internet search engine will shut its Web site in the country. China’s government last week said Google’s plan to end censorship at the Google.cn site was “irresponsible.” ‘Turn Their Back’ “It’s really pretty remarkable that Google has stated they’re going to turn their back on the largest single growth- market in the Internet,” said Robert Lutts , who manages $450 million as president of Cabot Money Management in Salem, Massachusetts, and said he owns both stocks. “That’s really a boost to Baidu and a short-term negative for Google.” MGM Mirage lost 3.6 percent to $11.38 as the casino operator and Dubai World said the primary general contractor for their Las Vegas joint venture CityCenter intends to file mechanics’ liens claiming about $492 million. European shares slipped today, with the Stoxx Europe 600 Index dropping 0.7 percent, as the region’s finance ministers plan work on still-secret plans to help Greece overcome its debt crisis today, while counting on the country’s belt-tightening steps to make a bailout unnecessary. Government Debt Concern The governments of the U.S. and the U.K. must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview. Under the ratings company’s baseline scenario the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, according to Moody’s. “The focus now is going to come back to the U.S. and what our debt is, and our companies, and how they performed for the first quarter,” said Jason Cooper , who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “I still have some hesitancy to put money fully back into the market.” To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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Google Advertisers in China Told to Switch on Speculation Site Will Shut

March 15, 2010

By Mark Lee and Brian Womack March 15 (Bloomberg) — Google Inc. advertisers in China are being advised to switch to rivals such as Baidu Inc. and business partners are exploring alternatives as speculation grows the U.S. company will shut its Web site in the country. “When we talk to clients, we have been pushing them in the direction of Baidu more,” said Vincent Kobler, managing director at EmporioAsia Leo Burnett in Shanghai, which buys advertising from Google and Chinese market leader Baidu on behalf of customers. “The Chinese government has taken a firm stance, and Google, they have their own principles and are going to shut down.” China’s government said last week Google would be “irresponsible” if it carried out a plan to end censorship at its Google.cn site, responding days after Chairman Eric Schmidt said talks with authorities may yield an outcome “soon.” A pullout may force advertisers and local Internet partners such as Sina Corp. and Tom Online Inc. to review their operation with the U.S. company. “Our co-operation with Google rests on the company maintaining its operations in China,” said Liu Qi, a Beijing- based spokesman at Sina , operator of China’s third-most visited Web site, which features Google’s search engine. The Chinese company has alternative arrangements in place to ensure it won’t be affected by Google’s possible pullout, Liu said. Mountain View, California-based Google said on Jan. 12 it plans to stop censoring search results on its Chinese site after the company was hit by cyber attacks originating in China, and may end its local operations pending talks with the government on the proposal. In 2006, the U.S. company agreed to comply with requirements to filter its search results on the Google.cn site to boost its business in the country, where the ruling Communist Party restricts information it deems unfavorable. Plan For Retreat “The company will have to bear the related results” if rules are violated, Li Yizhong , minister of industry and information technology, said on March 12. “If one company violates the Chinese law and be unfriendly and irresponsible, that’s unwanted and means the company doesn’t merit its world- class status.” Chinese regulators told some of Google’s biggest partners on March 12 that they should plan for the company’s retreat from the country, the New York Times reported yesterday, citing a person with knowledge of the notice. It indicated negotiations with the government had reached an impasse, the report said. Jill Hazelbaker , a spokeswoman for Google, declined to comment when contacted by Bloomberg News. Closure Google has drawn up detailed plans to shut its search engine in China and is “99.9 percent” certain of going ahead with the closure, the Financial Times reported March 13, citing a person it didn’t name. “If Google is no longer available, we will turn to other service providers,” said K.K. Tsang, Hong Kong-based chief executive officer at GroupM, which buys advertising space for clients. Toward the end of February, advertising officials such as Kobler said business with Google was returning to normal on speculation that the company may reach a compromise with the government or that any pullout won’t occur soon. “Things have stabilized,” Kobler said Feb. 24 as the U.S. company posted recruitment ads for engineers, managers and sales staff on its Web site and employees at its Beijing office said life had returned to normal six weeks after the pullout threat. Advertisers were returning after more than 20 percent of Google customers in China probably switched to alternative paid- search providers in the wake of the Jan. 12 announcement, Steven Chang , chief executive officer for China at ZenithOptimedia Group Ltd., which buys advertising on Google’s site on behalf of companies, said at the time. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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Video: Sacca Expects Apple’s IPad to `Disrupt’ Media Industry: Video

March 12, 2010

March 12 (Bloomberg) — Chris Sacca, a former executive at Google Inc. who is now managing director of Lowercase Capital, talks with Bloomberg’s Cris Valerio about the outlook for Apple Inc.’s iPad multimedia tablet after the company began taking pre-orders for the device today. Sacca, speaking at a “South by Southwest” conference in Austin, Texas, also discusses the outlook for the technology industry. (Source: Bloomberg)

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Verizon Said to Schedule June Release for Microsoft Phones for Teenagers

March 5, 2010

By Amy Thomson and Dina Bass March 5 (Bloomberg) — Verizon Wireless , the largest U.S. wireless carrier, will introduce two phones from Microsoft Corp. in about May or June that are targeted at teenagers, two people with knowledge of the companies’ plans said. The models will have easy access to social-networking sites and include keyboards for text messaging, according to one of the people, who asked not to be identified because the plans aren’t public. The phones will be made by Sharp Corp. and carry the Microsoft and Verizon Wireless brands, the other person said. Until now, Microsoft has focused on providing its mobile Windows software to phone makers, rather than offering a model under its own brand. The move would parallel Google Inc.’s decision to sell the Nexus One phone, which uses that company’s Android operating system. Microsoft is seeking to recapture a larger share of the phone market after Android and Apple Inc. ’s iPhone lured away customers from Windows. By moving directly into wireless phones, Microsoft and Google could risk hurting their relationships with other manufacturers and service providers. Microsoft will continue to work closely with handset companies that make Windows phones and the mobile carriers that sell them, the person said. Microsoft executive Robbie Bach , who oversees the mobile- phone business, said in January that it would be “very, very difficult” for Google to sell its own phone while keeping manufacturers and carriers for other Android handsets happy. Different Tack With its phone, Microsoft will take a different tack than Google, said the person familiar with the matter. While the Nexus One is only available from Google, Microsoft ’s phone will be sold by Verizon, the person said. The phone stemmed from a Microsoft project code-named “Pink.” Brenda Raney , a spokeswoman for Basking Ridge, New Jersey- based Verizon Wireless, declined to comment, as did Jay Cudal, a spokesman for Microsoft. Chris Loncto , a spokesman for Osaka, Japan-based Sharp, also declined to comment. Verizon is increasing its lineup of smartphones in a bid to get more revenue from data plans, which customers must buy to access the Internet or download applications. Smartphone shipments will increase 46 percent worldwide this year, research firm Gartner Inc. said. That compares with estimates for total mobile-phone market growth of as much as 13 percent. Cliq, Sidekick The phone is intended to address a similar audience as Motorola Inc. ’s Cliq or T-Mobile USA Inc.’s Sidekick, one of the people said. In 2008, Microsoft acquired Danger Inc., which makes the software for the Sidekick. The Cliq includes software called Motoblur, which serves up Twitter messages, pictures and contacts to the phone’s home screen. Microsoft will probably spend more money marketing its new mobile Windows software than the Pink phone, said Matt Rosoff , an analyst at Kirkland, Washington-based Directions on Microsoft. That will smooth over relationships with handset makers and carriers that are Microsoft partners, he said. Microsoft said last month that the software, called Windows Phone 7 Series, will be available in handsets by the holidays. “They will say, ‘Windows phones is where our investment is going. You should be betting on that,’” Rosoff said. “They did keep a team working on the successor to the Sidekick and that’s what this is. This is a legacy of Microsoft being a big decentralized company doing a lot of things and seeing what wins. It’s not quite the same situation as with Google.” Touch Screens Rosoff said the Pink phones won’t run the new Windows software. Windows Phone 7 will offer touch-screen features, letting handsets work more like the iPhone. The software, unveiled at a conference last month, also has a new design and connects with Microsoft ’s Xbox Live online games and Zune music service. Microsoft’s Windows dropped to a 7.9 percent share of the worldwide smartphone software market in the fourth quarter, from 12.5 percent a year earlier, while the iPhone and Android posted gains, according to ABI Research . The iPhone took 16.6 percent of the market in the fourth quarter, up from 10.8 percent the previous year, Oyster Bay, New York-based ABI said. Android climbed to 8.5 percent from 1.7 percent. The Wall Street Journal reported last month that the Pink phones would be made by Sharp and go on sale as early as the spring. Technology Web site Gizmodo posted yesterday what it said were photos of one model. Microsoft rose 17 cents to $28.63 yesterday in Nasdaq Stock Market trading. Verizon Communications Inc. , co-owner of Verizon Wireless, gained 14 cents to $29.27 on the New York Stock Exchange. To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net ; Dina Bass in Seattle at dbass2@bloomberg.net

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Verizon Said to Be Aiming to Release Microsoft Phones for Teens by June

March 5, 2010

By Amy Thomson and Dina Bass March 5 (Bloomberg) — Verizon Wireless , the largest U.S. wireless carrier, will introduce two phones from Microsoft Corp. in about May or June that are targeted at teenagers, two people with knowledge of the companies’ plans said. The models will have easy access to social-networking sites and include keyboards for text messaging, according to one of the people, who asked not to be identified because the plans aren’t public. The phones will be made by Sharp Corp. and carry the Microsoft and Verizon Wireless brands, the other person said. Until now, Microsoft has focused on providing its mobile Windows software to phone makers, rather than offering a model under its own brand. The move would parallel Google Inc.’s decision to sell the Nexus One phone, which uses that company’s Android operating system. Microsoft is seeking to recapture a larger share of the phone market after Android and Apple Inc. ’s iPhone lured away customers from Windows. By moving directly into wireless phones, Microsoft and Google could risk hurting their relationships with other manufacturers and service providers. Microsoft will continue to work closely with handset companies that make Windows phones and the mobile carriers that sell them, the person said. Microsoft executive Robbie Bach , who oversees the mobile- phone business, said in January that it would be “very, very difficult” for Google to sell its own phone while keeping manufacturers and carriers for other Android handsets happy. Different Tack With its phone, Microsoft will take a different tack than Google, said the person familiar with the matter. While the Nexus One is only available from Google, Microsoft ’s phone will be sold by Verizon, the person said. The phone stemmed from a Microsoft project code-named “Pink.” Brenda Raney , a spokeswoman for Basking Ridge, New Jersey- based Verizon Wireless, declined to comment, as did Jay Cudal, a spokesman for Microsoft. Chris Loncto , a spokesman for Osaka, Japan-based Sharp, also declined to comment. Verizon is increasing its lineup of smartphones in a bid to get more revenue from data plans, which customers must buy to access the Internet or download applications. Smartphone shipments will increase 46 percent worldwide this year, research firm Gartner Inc. said. That compares with estimates for total mobile-phone market growth of as much as 13 percent. Cliq, Sidekick The phone is intended to address a similar audience as Motorola Inc. ’s Cliq or T-Mobile USA Inc.’s Sidekick, one of the people said. In 2008, Microsoft acquired Danger Inc., which makes the software for the Sidekick. The Cliq includes software called Motoblur, which serves up Twitter messages, pictures and contacts to the phone’s home screen. Microsoft will probably spend more money marketing its new mobile Windows software than the Pink phone, said Matt Rosoff , an analyst at Kirkland, Washington-based Directions on Microsoft. That will smooth over relationships with handset makers and carriers that are Microsoft partners, he said. Microsoft said last month that the software, called Windows Phone 7 Series, will be available in handsets by the holidays. “They will say, ‘Windows phones is where our investment is going. You should be betting on that,’” Rosoff said. “They did keep a team working on the successor to the Sidekick and that’s what this is. This is a legacy of Microsoft being a big decentralized company doing a lot of things and seeing what wins. It’s not quite the same situation as with Google.” Touch Screens Rosoff said the Pink phones won’t run the new Windows software. Windows Phone 7 will offer touch-screen features, letting handsets work more like the iPhone. The software, unveiled at a conference last month, also has a new design and connects with Microsoft ’s Xbox Live online games and Zune music service. Microsoft’s Windows dropped to a 7.9 percent share of the worldwide smartphone software market in the fourth quarter, from 12.5 percent a year earlier, while the iPhone and Android posted gains, according to ABI Research . The iPhone took 16.6 percent of the market in the fourth quarter, up from 10.8 percent the previous year, Oyster Bay, New York-based ABI said. Android climbed to 8.5 percent from 1.7 percent. The Wall Street Journal reported last month that the Pink phones would be made by Sharp and go on sale as early as the spring. Technology Web site Gizmodo posted yesterday what it said were photos of one model. Microsoft rose 17 cents to $28.63 yesterday in Nasdaq Stock Market trading. Verizon Communications Inc. , co-owner of Verizon Wireless, gained 14 cents to $29.27 on the New York Stock Exchange. To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net ; Dina Bass in Seattle at dbass2@bloomberg.net

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China Google Attacks May Have Hit 100 Companies, Security Researcher Says

February 26, 2010

By Brian Womack Feb. 26 (Bloomberg) — The Chinese cyber attacks that Google Inc. reported last month may have targeted more than 100 companies, a larger number than previously thought, according to security research firm ISEC Partners Inc. ISEC said it discovered the additional companies while working with victims of the attack, which originated in China. Google initially alerted 30 companies to the problem, San Francisco-based ISEC said. Google disclosed last month that it suffered “a highly sophisticated” cyber attack on its corporate infrastructure. The Mountain View, California-based company said Gmail e-mail accounts of Chinese human-rights activists were targeted by the hackers. It’s hard to tell how closely related the attackers are to Google’s, ISEC said. “Although none of the attacks or technique used in this series of attacks are particularly novel, the skill set, patience and tenacity of the attackers is much greater than most enterprises are equipped to deal with,” ISEC said in a report. Jill Hazelbaker , a Google spokeswoman, didn’t immediately respond to a message seeking comment. Google climbed 37 cents to $526.80 today in Nasdaq Stock Market trading. The shares have fallen 15 percent this year. To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

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U.S. Unprepared to Battle Large Cyber Attack, Former Top Spy Official Says

February 23, 2010

By Jeff Bliss Feb. 23 (Bloomberg) — The U.S. isn’t prepared for a massive attack on its computer networks by another country, a former top intelligence official said. “If the nation went to war today, in a cyber war, we would lose,” former Director of National Intelligence Michael McConnell told a Senate panel today. McConnell joined a number of former government officials who have warned of cyber vulnerability. A bipartisan group of ex-federal officials said on Feb. 16 after a simulated cyber attack that the U.S. was unprepared to respond to the real thing. “We’re going to have a catastrophic event” before Americans are prompted to action, McConnell told the Senate Commerce, Science and Transportation Committee. He served in his intelligence post under President George W. Bush . The country is more vulnerable than other nations because a greater share of U.S. businesses and government agencies rely on the Internet, McConnell said. The U.S. also has more trade secrets that other countries want to steal, he said. Federal authorities are working with Google Inc. and security consultants to investigate a breach of the Mountain View, California, company’s computer defenses in China. Google, owner of the most popular Internet search engine, publicly disclosed the attack in January and threatened to leave China. The Chinese government has denied any involvement in the breach. McConnell said the government needs to get more involved in dictating security standards on the Internet. Several cyber-security measures being considered by Congress would give the government a greater role. They include legislation sponsored by Commerce panel Chairman Jay Rockefeller , a West Virginia Democrat, and Senator Olympia Snowe , a Maine Republican. To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .

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Cyberactivists Get Help From YouTube, U.S. to Thwart Repressive Regimes

February 23, 2010

By Indira A.R. Lakshmanan Feb. 23 (Bloomberg) — Cameran Ashraf was instant-messaging from Los Angeles with an activist in Iran during anti-government protests Feb. 11 when the chat went dead. Had Iran’s government “shut down the Internet” to thwart dissidents from organizing online or had authorities come to arrest the man, Ashraf said he wondered as he described the incident during an online video interview. Ashraf, who said he sees himself as a digital aid worker, immediately alerted other Iranian contacts to block surveillance of their Web traffic. A 29-year-old American whose parents emigrated from Iran, Ashraf is co-founder of AccessNow , a group of tech-savvy volunteers who joined forces during Iran’s crackdown on election protests last year to help Iranians evade censorship. They are the type of cyberactivists the U.S. State Department is seeking to support with $50 million in funds for an expanding counteroffensive against suppression of Internet freedom. “The fact that many governments are trying to prevent their citizens from expressing themselves or obtaining information that would be critical” underscores the importance of defending online speech and assembly, Secretary of State Hillary Clinton said in a Feb. 16 interview. The U.S. wants to support “garage-type” outfits trying to circumvent Web censorship, she said. AccessNow has communicated with Google Inc. on censorship and security issues and received help from its YouTube subsidiary when Iranian protest videos were hacked, said co- founder Brett Solomon in New York. “This is what we do, at the core of who we are: to make sure that everyone has access,” said Scott Rubin, a Google and YouTube spokesman who works on free-expression issues. Circumvent Firewalls The State Department has given $15 million in the past two years to private projects that use technology and training to promote online freedoms. It is reviewing applications for $5 million to support work including research into circumventing firewalls and surveillance and $30 million more will be available later this year, said Daniel Baer, deputy assistant secretary of State for democracy, human rights and labor. Helping activists creates a dilemma by exposing them to retribution from repressive governments. Projects are so sensitive and the people involved at such risk that the State Department declined to identify current applicants. One Washington-based group that got the bulk of the money doled out so far — more than $13 million for projects worldwide — asked not to be named, fearing Chinese employees would be jailed. AccessNow’s founders haven’t received government funds and said they would have reservations about accepting any because they want to remain independent and protect contacts in countries where taking foreign money is a crime. Surf Anonymously The group does disseminate open-source software that receives indirect U.S. support, including Tor , a network of virtual tunnels that allows people to surf anonymously. Built on work by the U.S. Office of Naval Research , the science and technology arm of the Navy and Marine Corps, Tor was developed by researchers at the Massachusetts Institute of Technology in Cambridge and volunteers. It is used by an average of 8,000 people in Iran and 100,000 in China at any moment, said Andrew Lewman, executive director of the nonprofit Tor Project in Dedham, Massachusetts. Scrutiny of digital dissidents drew headlines last month when Google, the Mountain View, California, search-engine company, said e-mail accounts of Chinese rights activists were targeted in an attack on its computer systems. Clinton called on Chinese authorities in a Jan. 21 speech to “conduct a thorough investigation” and said U.S. technology firms should use their influence to protest censorship, surveillance and theft of information. Technical Support Iran’s post-election restrictions on YouTube, Twitter and Facebook — used to organize and publicize protests — inspired Ashraf, Solomon and two Internet enthusiasts in Los Angeles, who all met online, to form AccessNow. A handful of other volunteers help run servers and share technical support. “Our genesis is Iran, but the idea behind AccessNow is to develop a global movement,” Solomon, a 39-year-old Australian, said in an Internet video chat, adding that he’s sharing his experience with Tibetan, Burmese and Cuban dissidents. The Internet has built-in perils for democracy advocates. Users who don’t utilize encryption or other methods to obscure their identity leave a digital trail of conversations, contacts and Web sites visited. Imprisoned Journalists Global Voices Online , an international bloggers network, has documented 206 cases of bloggers under arrest or threat, most in China, Egypt and Iran. Last year, Internet journalists outnumbered print, radio and television reporters among 136 imprisoned members of the press, according to the New York-based Committee to Protect Journalists . Mehdi Saharkhiz, 28, an Iranian in New Jersey, joined AccessNow after his father, journalist Isa Saharkhiz, was arrested outside Tehran eight months ago. Mehdi has gathered 2,200 videos on his OnlyMehdi YouTube channel, including iconic footage by anonymous Iranians who won a George Polk Award in journalism last week for filming the killing of Neda Agha- Soltan , who has become a symbol of resistance. “YouTube videos provided some of the only perspective of what was happening in Iran,” said Olivia Ma, 27, news manager of the video-sharing site. During this month’s protests, videos were hacked and erased; AccessNow alerted Ma, who restored them. Not every problem is so easily resolved. Ashraf hasn’t heard back from the Iranian rights campaigner who disappeared from his screen. To contact the reporter on this story: Indira Lakshmanan at in Washington or ilakshmanan@bloomberg.net

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Google’s Microsoft Takedown Helped by Rivals: Rich Jaroslovsky

February 18, 2010

Commentary by Rich Jaroslovsky Feb. 19 (Bloomberg) — The browser wars are back in full flower, for which we have Google Inc. and the European Union to thank. Google’s big plans for its Chrome browser seem to have shaken Microsoft Corp. out of its competitive torpor and forced the software giant to pay fresh attention to its own browser, Internet Explorer. Meanwhile, starting next month, the EU will require customers who buy new computers in Europe to be presented with a screen at startup listing a dozen browsers in random order, and given a choice of which and how many they want to install. It’s all part of an antitrust settlement with Microsoft. The result should be a boon to consumers and to online innovation. But you don’t have to be European, or even own a new PC, to download these free programs and start exploring. Non-Microsoft software makers are apt to say the biggest thing that keeps users from switching browsers is ignorance. A surprising number of people, they say, don’t understand what a browser is or does. To them, that big “e” on the computer desktop simply means “the Internet,” and they aren’t aware of the multitude of alternatives for accessing the Web. In the interest of education, Google has created a Web site at whatbrowser.org. It includes links to five browsers — including Microsoft’s as well as Google’s — along with an informational video, benchmark tests and other resources. Google’s Strategy Chrome, which is available in versions for Windows, Mac and Linux, is a key part of Google’s strategy to get computer users comfortable with so-called cloud computing. The idea is for everyone to spend less money and time on programs they buy from software companies (Microsoft, say), and rely more on data and services such as Google Docs , which reside on servers and storage systems on the ‘net. Described this way, Chrome sounds like a Trojan horse to make us all dependent on Google’s own services. And so it is. But for Google’s plans to work, Chrome has to be good. And so it is. The program is fast, flexible and rests lightly atop your computer’s operating system — a fine thing from a security standpoint, because it makes it harder than Internet Explorer for hackers to use as an entrée into your computer’s innards. Best for Macs Mac users probably have it easiest: The best browser comes built right into every computer. It’s Safari, Apple Inc. ’s own program. Apple has managed to avoid the controversy stirred by Microsoft’s similar bundling of Internet Explorer with the operating system primarily because it has only a fraction of Windows’ market share. Safari is also available in a Windows version that I’m less enamored of; I’m more likely to run into Web sites that don’t display properly or work quite right than happens with other Windows browsers. The blame for that probably rests more with those site developers than with Apple; still, with so many good alternatives, it’s seldom worth the effort to figure out just what’s wrong. Personally, I prefer Mozilla Firefox , a descendant of the Netscape browser that Microsoft vanquished in Browser War I. Maintained by an open-source community, Firefox is available for PCs, Macs and Linux computers, and is the second-most-used browser after Internet Explorer. The program benefits from a well-developed ecosystem that includes thousands of add-ons for everything from speeding up YouTube downloads to StumbleUpon , which adds a button that helps you discover and share Web sites that match your interests. Off to the Opera Opera , from the Norwegian company Opera Software ASA , is another good choice. Opera, which has been around since the earliest days of the Web, is available in Mac, Linux and PC versions. And of course, there’s Internet Explorer itself. The current version, IE 8 , was released last year with a slew of enhancements. Microsoft has promised that the next version, will be faster and harder for bad guys to hack into. Each browser has legions of fans, and I’m not quite dumb enough to try to tell you which one is best: I wouldn’t have time enough to answer the hate mail from devotees of all the others. What I can say is that this is the perfect time to break the shackles of habit and try something different. Better still, try them all. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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Google’s Microsoft Takedown Helped by Rivals: Rich Jaroslovsky

February 18, 2010

Commentary by Rich Jaroslovsky Feb. 19 (Bloomberg) — The browser wars are back in full flower, for which we have Google Inc. and the European Union to thank. Google’s big plans for its Chrome browser seem to have shaken Microsoft Corp. out of its competitive torpor and forced the software giant to pay fresh attention to its own browser, Internet Explorer. Meanwhile, starting next month, the EU will require customers who buy new computers in Europe to be presented with a screen at startup listing a dozen browsers in random order, and given a choice of which and how many they want to install. It’s all part of an antitrust settlement with Microsoft. The result should be a boon to consumers and to online innovation. But you don’t have to be European, or even own a new PC, to download these free programs and start exploring. Non-Microsoft software makers are apt to say the biggest thing that keeps users from switching browsers is ignorance. A surprising number of people, they say, don’t understand what a browser is or does. To them, that big “e” on the computer desktop simply means “the Internet,” and they aren’t aware of the multitude of alternatives for accessing the Web. In the interest of education, Google has created a Web site at whatbrowser.org. It includes links to five browsers — including Microsoft’s as well as Google’s — along with an informational video, benchmark tests and other resources. Google’s Strategy Chrome, which is available in versions for Windows, Mac and Linux, is a key part of Google’s strategy to get computer users comfortable with so-called cloud computing. The idea is for everyone to spend less money and time on programs they buy from software companies (Microsoft, say), and rely more on data and services such as Google Docs , which reside on servers and storage systems on the ‘net. Described this way, Chrome sounds like a Trojan horse to make us all dependent on Google’s own services. And so it is. But for Google’s plans to work, Chrome has to be good. And so it is. The program is fast, flexible and rests lightly atop your computer’s operating system — a fine thing from a security standpoint, because it makes it harder than Internet Explorer for hackers to use as an entrée into your computer’s innards. Best for Macs Mac users probably have it easiest: The best browser comes built right into every computer. It’s Safari, Apple Inc. ’s own program. Apple has managed to avoid the controversy stirred by Microsoft’s similar bundling of Internet Explorer with the operating system primarily because it has only a fraction of Windows’ market share. Safari is also available in a Windows version that I’m less enamored of; I’m more likely to run into Web sites that don’t display properly or work quite right than happens with other Windows browsers. The blame for that probably rests more with those site developers than with Apple; still, with so many good alternatives, it’s seldom worth the effort to figure out just what’s wrong. Personally, I prefer Mozilla Firefox , a descendant of the Netscape browser that Microsoft vanquished in Browser War I. Maintained by an open-source community, Firefox is available for PCs, Macs and Linux computers, and is the second-most-used browser after Internet Explorer. The program benefits from a well-developed ecosystem that includes thousands of add-ons for everything from speeding up YouTube downloads to StumbleUpon , which adds a button that helps you discover and share Web sites that match your interests. Off to the Opera Opera , from the Norwegian company Opera Software ASA , is another good choice. Opera, which has been around since the earliest days of the Web, is available in Mac, Linux and PC versions. And of course, there’s Internet Explorer itself. The current version, IE 8 , was released last year with a slew of enhancements. Microsoft has promised that the next version, will be faster and harder for bad guys to hack into. Each browser has legions of fans, and I’m not quite dumb enough to try to tell you which one is best: I wouldn’t have time enough to answer the hate mail from devotees of all the others. What I can say is that this is the perfect time to break the shackles of habit and try something different. Better still, try them all. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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Japan May Not Have Surpassed China as Largest U.S. Debt Holder, SMR Says

February 18, 2010

By Daniel Kruger Feb. 18 (Bloomberg) — The Treasury’s methodology for calculating the holdings of overseas investors leaves room to question whether Japan has overtaken China as the biggest lender to the U.S., according to Stone & McCarthy Research Associates. Japan became the biggest holder of U.S. government securities in December for the first time since September 2008, overtaking China which had held the largest position of the debt, Treasury data released Feb. 16 show. The Treasury has underestimated changes in the holdings of both China and Japan for 2006, 2007 and 2008, raising the question of whether the data reflects a shift in support for U.S. government debt as the Obama administration raises record sums amid the biggest budget deficits in the country’s history, Nancy Vanden Houten , a Skillman, New Jersey-based analyst at Stone & McCarthy, wrote in a note to clients on Feb. 16. “The further we get away from the June survey date, the rougher the proxy for actual Treasury’s monthly estimates become,” Vanden Houten wrote. “Japan may in fact have held more Treasury securities than China at the end of 2009. But it’s impossible to make that claim with a high degree of confidence.” The Treasury data on note and bond positions uses holdings recorded in an annual June survey which are adjusted by adding monthly trading information. To be included by the Treasury, one counterparty must be in the U.S., with ownership attributed to the nation where the other counterparty is located, Vanden Houten wrote. Underestimated Purchases Using that data, the Treasury underestimated China’s accumulation of Treasuries by 104 percent in 2006, 237 percent in 2007 and 130 percent in 2008, Vander Houten wrote. The data also underestimated the decline in Japan’s holdings by 132 percent in 2006, she said. It undercounted the rise in the country’s Treasury position by 127 percent in 2007 and showed a decline in the holdings for 2008 that was more than twice the size of the increase in the purchase of the securities, she wrote. Japan’s holdings rose 1.5 percent in December to $768.8 billion while China’s dropped 4.3 percent to $755.4 billion, the latest Treasury data showed. China allowed its short-term Treasury bills to mature and replaced them with a smaller amount of longer-term notes and bonds, according to the data. For all of 2009, Japan raised its ownership by 23 percent while China’s increased by 3.8 percent. China, with the world’s largest central bank reserves, may be moving money to other investments from the relative safety of Treasuries as the U.S. runs record budget deficits, economists said. China’s Treasury holdings peaked at $801.5 billion in May, and net sales in November and December were the first consecutive months of reductions since late 2007. Budget Gap China had been the largest creditor abroad to the U.S. since September 2008, when its holdings of Treasuries surpassed those of Japan. China’s holdings of Treasury bills have shrunk to $69.7 billion, about a third of the $210.4 billion held in May, as the outlook for a recovery in the U.S. remained unclear. Chinese officials have over the past year expressed concern about an increase in U.S. debt to fund the swelling fiscal deficit. Premier Wen Jiabao said in March 2009 he was “worried” about China’s Treasury holdings and wanted assurances that the nation’s U.S. investments were safe, and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar. Treasury Secretary Timothy Geithner has sought to assure China that the U.S. will close the budget gap and boost national savings over time. Dalai Lama Tension between the U.S. and China has risen in the past few months over censorship of Google Inc., climate change and arms sales to Taiwan. President Barack Obama met the Dalai Lama , the exiled Tibetan spiritual leader, in Washington today even after China called on the U.S. to cancel the gathering. Tibet has been under Chinese control since 1950. Total foreign holdings of Treasuries rose 17 percent in 2009 to $3.61 trillion as outstanding Treasury debt increased 25 percent to $7.27 trillion, according to Treasury data. Half of U.S. debt is held by foreign investors, down from a peak of 55.7 percent in April 2008. To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net ;

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Google Payroll Shrinks For First Time In 2009

February 17, 2010

If you thought that Google (GOOG) was immune to the sluggish economy in 2009, think again. Buried deep in the 10-K that the company filed late Friday was an interesting disclosure: Google’s headcount actually shrunk in 2009 for the first time since the company has been public (and most likely for the first time ever, given Google’s growth spurt).

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Microsoft Risks Margins as $19 Billion Office Business Fights Off Google

February 17, 2010

By Dina Bass Feb. 17 (Bloomberg) — Microsoft Corp. President Stephen Elop is preparing for the biggest shakeup to the $19 billion Office business in a decade as the company races Google Inc. to sell Internet-based programs. Two years into his career as head of Microsoft ’s business software unit, Elop says cloud computing and social-networking sites have created a “constructive disruption” that could be more of an opportunity than a threat. Office 2010, due by June, will include a free Web-based version for the first time, matching similar software from Google . Future updates may add Twitter-like functions that allow users to post short messages. The dilemma for Elop, 46, is how to embrace Web-based software while protecting his unit’s 64 percent profit margin . Under the cloud-computing model, Microsoft would store Office programs on its own servers and deliver them to customers online, which costs the company more than supplying software installed on computers. Elop says the shift will mean businesses actually end up spending more money with Microsoft. “In that cloud environment, we are not only selling them software but we are also saying, ‘We’ll take care of your networking, your hardware your operations, your customer support,’” Elop said in an interview. “We’re doing much more work for the customer. What that does is increases revenue and allows us to participate in more profit.” Elop’s Office unit is Microsoft’s biggest business, accounting for a third of the company’s $58.4 billion in sales last fiscal year. The shift to Internet-based versions of Office may cut margins by 5 to 10 percentage points, said Matt Rosoff , an analyst at Directions on Microsoft in Kirkland, Washington. ‘Have to Do Something’ “Elop’s challenge is to move carefully and not undercut the traditional software business,” Rosoff said. “You don’t want to give everybody free Office over the Web because that jeopardizes a highly profitable business, but you have to do something.” Microsoft, based in Redmond, Washington, rose 55 cents to $28.35 yesterday on the Nasdaq Stock Market. After gaining 57 percent last year, the shares have lost 7 percent in 2010. Microsoft’s Office division, which dominates the word- processing, spreadsheet and presentation software market, reported a 2.8 percent drop in revenue last quarter, with sales to businesses falling 6 percent. Consumer revenue rose 12 percent — a slower pace than personal-computer sales, the company said. Free Version Microsoft is projecting that consumer and small-business sales will pick up with the release of Office 2010. The program will offer Web features, such as the ability to collaborate and share documents over the Internet. There also will be a free version included on some PCs and a student offer that’s two- thirds the price of the current product, which starts at $149. That will attract consumers who might otherwise be reluctant to upgrade, Elop said. A record 4.5 million people have downloaded a test version of Office 2010, said Chris Capossela , a senior vice president who works for Elop. The U.S. Olympic Committee used Office 2010 to set up a Web site for reporters covering the winter games in Vancouver, allowing them to access the latest information on hometown athletes and follow their Twitter feeds. Dell Inc. plans to install the new Office on at least 25,000 of its employees’ computers by year-end. It will rely on the software to help engineers and sales teams share notes and collaborate on projects over the Web, said Tom Piegat, a manager in Round Rock, Texas-based Dell’s information-technology department. Microsoft is taking the right steps to let employees work, save and share on the Internet, he said. ‘Jury Is Still Out’ “Whether that promise gets completely fulfilled with Office 2010, I’m not sure about that — the jury is still out,” Piegat said. “But the building blocks are there.” Office’s Web-based features are unlikely to generate significant additional revenue for the next few years and investors may not like the narrowing profit margins that result, said Heather Bellini , an analyst at ISI Group in New York. “It’s a market they need to be involved in — if that’s the way the industry is going, you don’t want customers to rip out Microsoft and go to a Google solution,” Bellini said. “But I question whether we’ll be able to have a company where the stock will go up even though margins are going down.” Margins Shrink Microsoft is selling more of its software as a service, which may hurt profit margins, said Bellini, who hasn’t yet calculated by how much. Besides the Web-based Office project, the company started charging this year for its Azure cloud- computing services, which store and run programs on behalf of customers. Gross margin, the percentage of sales remaining after the cost of making the product, was 79 percent in the fiscal year that ended June 30. Ten years earlier, it was 86 percent, according to data compiled by Bloomberg. Elop is playing catch-up in cloud software. Companies like Google and Salesforce.com Inc. have more experience with Web- based programs. Even so, Microsoft has an edge over Google in selling to large companies, Rosoff said. Google, based in Mountain View, California, offers Internet-based word-processing and spreadsheet programs for free to consumers. It charges $50 a year per user for businesses. “We welcome Microsoft’s movement to the cloud,” Google said in a statement. “Choice is good for users, and their direction further validates that the future of computing is in the cloud.” In October, the Los Angeles City Council voted to have Google manage e-mail for city workers. Rexel SA , the world’s largest distributor of electrical equipment, also considered using Google — until Microsoft cut the price of its e-mail software by 30 percent. ‘Pushing the Envelope’ “That’s going to be the challenge for Elop,” said David Smith , an analyst at Gartner Inc. in Stamford, Connecticut. “He is going to be competing more and more with things that are free or lower cost.” Sales of cloud-computing services worldwide rose an estimated 21 percent to $56.3 billion last year, according to Gartner. By 2013, that number will hit $150.1 billion. The shift is of the same magnitude as the move to graphical computer software and the advent of the Internet, Elop said. Elop, who was chief executive officer at Web-video pioneer Macromedia Inc., has experience building successful businesses out of Internet programs. At Macromedia, he helped make Dreamweaver the top Web-page authoring program, edging out Microsoft’s FrontPage. Macromedia also developed Flash, the Internet’s most popular video and animation software. Elop said Microsoft CEO Steve Ballmer hired him in part because he had competed with the company for most of his life. Now that he’s at Microsoft, he’s championing the idea of making software that’s more compatible with rival products. Rival Browsers Elop wants to make sure that Office’s Web applications work on Mozilla Corp.’s Firefox and Apple Inc. ’s Safari browsers, as well as Microsoft’s own Internet Explorer, Capossela said. Elop’s interest in competing products impressed Capossela, who interviewed him for his current job without realizing he was screening his own boss. Elop walked into the Sunday morning interview at the Woodmark Hotel in Kirkland, Washington, with an iPhone, BlackBerry and Windows Mobile phone holstered to his belt, Capossela said. He pulled out each one to talk about them. Elop discussed his experience installing Microsoft’s Windows Vista on an Apple Macintosh computer. He arrived as an outsider at the company, at a time when all the other product units were led by executives who had been at Microsoft more than a decade. Elop spent his initial few months listening to a team he inherited from 27-year Microsoft veteran Jeff Raikes , Capossela said. After about a year, Elop started talking about changing Microsoft’s approach to the market. “He did a good job of articulating that we needed to be leaders in this disruption even though that can be scary,” Capossela said. “We can either worry about a disruption happening to us or we can do it in a way that’s constructive.” To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Video: Gillis Says Opportunity for Google in China `Overstated’: Video

February 12, 2010

Feb. 12 (Bloomberg) — Colin Gillis, senior analyst for BGC Partners LP, talks with Bloomberg’s Betty Liu about Google Inc.’s opportunity in China and the company’s public image. Gillis also discusses the growth outlook for most used Internet search site and regulatory and pricing challenges facing the company. (Source: Bloomberg)

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Palm’s Pre Plus Makes Your Pocket a Hot Spot: Rich Jaroslovsky

February 11, 2010

Commentary by Rich Jaroslovsky Feb. 12 (Bloomberg) — No two ways about it: I am one hot guy. Not that way, though don’t I wish. It’s because I’m carrying Palm Inc. ’s new Pre Plus smartphone, which turns me into a walking, talking Wi-Fi hot spot, empowered to allow lesser mortals to bask in my geeky aura. Or at least, to share my phone’s Internet connection. The original Pre, which debuted last year on Sprint Nextel Corp. ’s network in the U.S., featured a striking “smooth stone” design, an elegant new operating system called webOS and — unlike, say, Google Inc.’s more recent Nexus One — didn’t scream “iPhone wannabe.” Its big drawback was the small number of applications available for it. The new Pre Plus, now available on the much larger Verizon Wireless network, doesn’t solve the app problem, and at $150 on a two-year contract, after rebate, it isn’t cheap. But the new Mobile HotSpot application almost makes up for these drawbacks. The Pre is more compact, but chunkier than, say, Apple Inc. ’s iPhone or the Nexus One, which is manufactured by Taoyuan, Taiwan-based HTC Corp. In repose, the screen is all shiny blackness — even more so than the original Pre, whose function button has been replaced by a horizontal stripe across the bottom that is only visible when the screen is in use. Fingernail Typing Sliding the screen up reveals a tiny physical keyboard. On the first Pre, I had a lot of trouble typing; the keys were so small I would constantly hit the wrong one. Things got better, but only a little, when I figured out one secret for thick- fingered typists like myself: Use the edge of your fingernail, rather than your finger itself. Palm has made some minimal changes in the keys, but my earlier advice still holds. Things have gotten a little better on the app front as well. The number of programs available for the Pre and Pixi Plus, its lower-cost, lightweight sibling, has inched up to about 1,000. That’s still much less than the 140,000 available for Apple’s iPhone or even the 20,000 for Google’s Android operating system, which drives the Nexus One and Motorola Inc.’s Droid. But there are apps for key social networks such as Facebook and Twitter, plus games including “Need for Speed Undercover” and “The Sims 3” from Electronic Arts Inc. But the coolest app by far is Mobile HotSpot, which lets as many as five Wi-Fi-capable devices share the phone’s Internet connection. Once you install it and establish a password, the phone becomes visible on any nearby Wi-Fi computer, phone or other device as a “webOS network.” Anyone entering your password is then able to make use of the phone’s 3G connection. Your Own Thing You can imagine the uses. In a carpool or on a family trip, everyone can do their own thing. You’re no longer tethered to Starbucks or other commercial Wi-Fi locations; any public space where you can get a 3G signal from Verizon becomes a hotspot. The range is impressive, too. Placing the Pre Plus on a colleague’s desk, I was still able to surf the Web on a laptop computer about 200 feet (61 meters) away. Speed was variable but more than acceptable, even with multiple devices attached. Drawbacks? Price is one. Verizon charges $40 a month for the hotspot service for as much as 5 gigabytes of data. That’s less than what it charges to use Novatel Wireless Inc. ’s MiFi, a standalone device that provides the same ability. But it’s still a hefty chunk of extra change on top of the $30 you’re already paying for a data plan. Then there’s the impact on your battery: The Mobile HotSpot app sucks power like a straw in a Coke on a hot summer’s day. With two devices connected in addition to the phone itself, I used most of a full charge in about three hours. If you’re using the feature for more than a quick Internet session, the best advice is to plug the phone into a wall outlet or your car’s cigarette lighter. Offsetting those is the sense of power you get from controlling other people’s online access. If I like you, it’s my world and welcome to it. If I don’t, it’s hey, you — get off my cloud. Did I say I was hot? I’m smokin’. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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Nokia Said to Unveil No New Phone at Mobile Event for First Time in Decade

February 11, 2010

By Diana ben-Aaron Feb. 11 (Bloomberg) — Nokia Oyj , the world’s largest mobile-phone maker, has ruled out showing new devices at the industry’s biggest annual gathering next week, the first time in at least a decade the company has done that, a person involved in the planning said. Nokia won’t have a stand at the Mobile World Congress in Barcelona. The Espoo, Finland-based company made a “strategic” decision not to unveil any new phones at the event, according to the person, who didn’t want to be identified because the plans are not public. The company’s low-key presence may disappoint those expecting to see Nokia’s newest devices to take on Samsung Electronics Co. and Apple Inc. It gives rivals the chance to dominate the show with touchscreen devices at lower prices. Technology blogs Fonehome.co.uk and Phonesreview have raised expectations by reporting that Nokia plans to show a new range of phones called the C Series at the event. “It would be a problem to have no introduction now because people want to see Nokia has something up its sleeve for summer,” said Tero Kuittinen , an analyst with MKM Partners in Greenwich, Connecticut, who has a “sell” rating on the stock. “Last year, they had a huge presence. The Nokia booth was like a spaceship.” Nokia will focus instead on announcements related to its services business, highlighting Chief Executive Officer Olli- Pekka Kallasvuo ’s effort to transition from a pure mobile phone maker to a company offering customers paid applications and media on its devices, the person said. Nokia spokesman Doug Dawson declined to comment. The company will hold offsite briefings during the event in Barcelona, Nokia says on its Web site. New Devices Nokia shares fell as much as 4 cents, or 0.4 percent, to 9.49 euros and were trading up 0.2 percent to 9.54 euros as of 2:17 p.m. in Helsinki. The company introduced six new devices at last year’s show including the E75 and E55 smartphones with push e-mail. It rolled out four devices at the Mobile World Congress in 2008 and four in 2007, including the E61i Qwerty smartphone and its first phone with navigation, the 6110 Navigator. The company “will undoubtedly unveil new devices” in Barcelona, Ben Wood , a London-based analyst with CCS Insight, wrote in a report on Feb. 5. In an interview yesterday, Wood said, “They need to get devices addressing the low-cost Qwerty and touch segment into the market as soon as possible. Samsung and LG in particular have stolen quite a march on Nokia in the $50-$150 bracket and if they leave gaps in the portfolio, their market share is vulnerable to a slow and steady decline. The longer they leave it, the more share they will cede.” Android Domination Products based on Android, the smartphone software from Google Inc., can be expected from Dell Inc., HTC Corp., Samsung Electronics Co. and Sony Ericsson Mobile Communications AB, he wrote in his report. “We expect Android to dominate this year’s events with a plethora of device announcements and more than 50 devices on the show floor,” Wood wrote. Nokia’s Symbian operating platform is losing ground to competitors, declining to 47.2 percent of smartphones last year from 52.4 percent in 2008, as Android, Research In Motion Ltd.’s BlackBerry, and Apple ’s iPhone gained, Reading, U.K.-based market researcher Canalys said. The company has said it plans major product announcements in the second half after completing a new version of Symbian. To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

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Google to Build High-Speed Internet Network in Challenge to AT&T, Verizon

February 10, 2010

By Ari Levy and Kelly Riddell Feb. 10 (Bloomberg) — Google Inc. is planning to build high-speed fiber-optic broadband networks in the U.S. to offer Internet speeds that are more than 100 times faster than what Verizon Communications Inc. and AT&T Inc. sell today. The company, owner of the world’s most popular Web-search engine, said today it will offer the service at a “competitive price” to at least 50,000 people and potentially as many as 500,000. Google wants to use the networks for applications that consume lots of bandwidth. Google’s jump into the market may pressure AT&T , Verizon and Comcast Corp. to bolster their high-speed networks, said Mike Jude, an analyst at researcher Frost & Sullivan in Denver. The company already offers a wireless network in Mountain View, California, and is an investor in Clearwire Corp. , which provides Internet access using a technology called WiMax. “The more competition in broadband the better, the higher the bandwidth the better,” Jude said. Google’s plan to offer speeds of 1 gigabit per second may prompt competitors to follow, he said. “If Google went out and started delivering a gigabit per subscriber, it would show that anybody with fiber can do the same thing.” Verizon’s FiOS, AT&T’s U-Verse, and Comcast’s DOCSIS 3.0 services offer residential downloads no faster than 50 megabits a second, with the cheapest connections being 1 megabit or less. While the companies could offer faster speeds, they haven’t done so because there hasn’t been demand, said Lawrence Harris , an analyst at CL King & Associates in New York. A 1-gigabit service could be popular with video-game players and those who want faster video, and could eventually extend into 3-D viewing, Harris said. ‘Real Progress’ Google’s first step is to find cities that want the service, said Minnie Ingersoll, a product manager at the Mountain View-based company. She said Google will likely identify at least one city this year. The company’s engineers and outside developers will work on applications that illustrate the speed of the fiber connection, she said. Google plans to work with companies that build fiber-optic networks, Ingersoll said. Google is probably still soliciting interest from vendors, and companies that helped with Verizon’s FiOS build may be poised to benefit from the project, Harris said. Those include Alcatel-Lucent SA , BigBand Networks Inc., Tellabs Inc. and Corning Inc., he said. “Network providers are making real progress to expand and improve high-speed Internet access, but there’s still more to be done,” Google said on its blog. “We don’t think we have all the answers — but through our trial, we hope to make a meaningful contribution to the shared goal of delivering faster and better Internet for everyone.” Broadband ‘Testbed’ Google fell $2 to $534.45 at 4 p.m. New York time on the Nasdaq Stock Market. Comcast slid 8 cents to $15.31. AT&T fell 14 cents to $25.12 on the New York Stock Exchange, and Verizon rose 12 cents to $28.87. Google has urged the Federal Communications Commission to find new ways to promote high-speed Internet access. FCC Chairman Julius Genachowski said today in a statement that Google’s trial is a “testbed for the next generation” of Internet services. Bob Varettoni , a spokesman for New York-based Verizon, said Google’s network expansion is “another new paragraph in this exciting story.” AT&T spokesman Michael Coe and Comcast spokeswoman D’Arcy Rudnay declined to comment. “We look forward to learning more about Google’s broadband experiment in the handful of trial locations they are planning,” Brian Dietz , a National Cable and Telecommunications Association spokesman, said in a statement today. The cable industry will invest in and improve the speed of its networks, he said. Clearwire Investment Google will collect responses from communities until March 26, and will announce which areas have been chosen later this year. The company plans on building the fiber lines to the home, much like Verizon’s FiOS, and will be paying for the deployment, Ingersoll said. Verizon is investing $23 billion in its fiber-optic network. Ingersoll declined to specify how much money Google has dedicated to its venture. The company had $24.5 billion in cash and short-term investments at the end of December. Google is expanding in the telecommunications industry in other ways. In January, the company introduced a touch-screen mobile phone called Nexus One and opened an online store to sell the handset. In 2008, Google was part of a group of companies that invested in Clearwire, founded by mobile-phone pioneer Craig McCaw . ‘Grandiose’ Plans In 2008, Google pushed for spectrum being auctioned by the U.S. government to be open to any device or program. “Google’s announcement today amounts to a nationwide competition for communities to step up and make the case for what a next generation network could do for them and then show America what is possible,” Massachusetts Senator John Kerry said in a statement. “I believe in the power of big broadband pipes over which people are free to innovate and deliberate and will be watching this experiment carefully.” In 2006, Google won a bid to build a free Wi-Fi network in San Francisco. The plan was put on the back burner after EarthLink Inc., which was going to build the network, backed out and city politics delayed deployment. “Sometimes Google has a very short attention span, they have grandiose plans and then a year later everyone asks what have they done with that?” said Tero Kuittinen , an analyst at MKM Partners LP in Greenwich, Connecticut. “This announcement took everyone a bit by surprise and we don’t know what’s going to come of it.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Kelly Riddell in Washington at kriddell1@bloomberg.net

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Stocks in U.S. Fluctuate as Gain in Financials Offsets Bernanke’s Remarks

February 10, 2010

By Rita Nazareth Feb. 10 (Bloomberg) — U.S. stocks fluctuated as Legg Mason Inc. and Stifel Financial Corp. led a rally in financial shares, offsetting Federal Reserve Chairman Ben S. Bernanke ’s plan to raise the discount rate for loans to banks “before long.” Legg Mason rallied 5.6 percent after reporting it had $679 billion in assets under management for January, while Stifel Financial jumped 7.8 percent on earnings that topped analyst estimates. Sprint Nextel Corp. slid 9.1 percent as the third- largest U.S. wireless carrier reported sales that trailed analyst estimates, while Dean Foods Co. slumped 14 percent after the nation’s biggest dairy processor forecast profit below projections. “Finally, the U.S. is taking Greece off the cover page,” said Joseph Saluzzi , co-head of equity trading at Chatham, New Jersey-based Themis Trading LLC. “The Fed’s announcement certainly did not help the market. Nobody expects them to be raising rates like they normally do. So they’re trying something creative. These are different times now.” The Standard & Poor’s 500 Index fell 0.1 percent to 1,069.58 at 12:52 p.m. in New York. The Dow Jones Industrial Average lost 5.75 points, or 0.1 percent, to 10,052.89. About 4.3 billion shares changed hands on all U.S. exchanges, 4.3 percent fewer than at the same time a week ago as trading slowed amid a snow storm in the U.S. Northeast. U.S. benchmark indexes fluctuated at the start of trading as investors weighed the prospects of a possible financial bailout of Greece by fellow European Union country Germany. Greece Concern Equity-index futures erased an early advance before the open of New York exchanges as a German official said no decision has been made on a Greek rescue. Stocks rallied yesterday, sending the Dow Jones Industrial Average back above 10,000, as prospects for a Greek bailout eased concern that deteriorating government finances will derail the global economic recovery. The Dow increased 1.5 percent yesterday, the biggest gain since Nov. 9. An official said German Finance Minister Wolfgang Schaeuble told lawmakers that options for helping Greece extended beyond loan guarantees. The lawmaker, who attended a briefing at the Parliament in Berlin today, spoke on condition of anonymity because the discussions were confidential. So far, 327 companies in the S&P 500 have reported fourth- quarter earnings since Jan. 11, and about 76 percent have beaten analysts’ estimates, according to data compiled by Bloomberg. Confidence in the world economy dropped in February on concern worsening government finances in some European nations will threaten the global recovery, according to a Bloomberg survey of users on six continents. Confidence Slumps The Bloomberg Professional Global Confidence Index dropped to 54.9 from 66.6 in January, when the reading was at the highest level since the series began two years ago. The index exceeded 50 for a seventh straight month, which means there were more optimists than pessimists. The survey was conducted last week, before Germany and other European Union nations signaled they may help support Greece’s government finances. Most Bloomberg users were less optimistic on the outlook for their equity markets in the next six months, with respondents in the U.S., the U.K. and Spain turning bearish. Gauges of raw-materials and energy fell at least 1.2 percent, for the two biggest declines in the S&P 500 among 10 industries today. Newmont, the world’s second-largest gold producer by sales, dropped 2.9 percent to $44.48. Chevron, the second-biggest U.S. energy company, lost 1.2 percent to $70.44. Sprint Tumbles Sprint Nextel dropped 9.1 percent to $3.32. The third- largest U.S. wireless carrier reported fourth-quarter sales that missed analysts’ estimates after losing contract customers to rivals. Sales dropped 6.7 percent to $7.87 billion, while analysts in a Bloomberg survey had projected $8.04 billion on average. Dean Foods lost 14 percent to $15.14. The biggest U.S. dairy processor forecast 2010 profit excluding some items of $1.64 a share at most. On average, the analysts surveyed by Bloomberg estimated earnings of $1.70. Micron Technology Inc. declined 9.1 percent to $8.25. The biggest U.S. producer of computer memory agreed to buy flash- chip maker Numonyx Holdings BV of Switzerland for about $1.27 billion to help it compete better with Samsung Electronics Co. Wyndham Worldwide Corp. had the biggest gain in the S&P 500, climbing 4.9 percent to $22.26. The franchiser of Days Inn hotels and Super 8 motels reported a fourth-quarter profit and said it will triple its dividend. Dell Inc. rose 1.6 percent to $13.77. Bank of America Corp. raised its recommendation on the world’s third-largest maker of personal computers to “buy” from “neutral,” citing the stock’s underperformance relative to the market since November. Baidu, Adobe Baidu Inc. soared 8.5 percent to $472.14. The operator of China’s biggest Internet search engine forecast first-quarter sales that topped analysts’ estimates after rival Google Inc. said it may exit the country. Adobe Systems Inc. , the largest maker of graphic-design software, advanced 1.5 percent to $32.79 after Credit Suisse Group AG raised its recommendation on the stock to “outperform” from “neutral.” The shares will “trend higher over the next few months given the pending release of the next version of Creative Suite in April,” the brokerage wrote in a report. Jefferies & Co. also recommended clients buy the shares. To contact the reporter on this story: Rita Nazareth at rnazareth@bloomberg.net .

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Stocks in U.S. Fluctuate as Gain in Financials Offsets Bernanke’s Remarks

February 10, 2010

By Rita Nazareth Feb. 10 (Bloomberg) — U.S. stocks fluctuated as Legg Mason Inc. and Stifel Financial Corp. led a rally in financial shares, offsetting Federal Reserve Chairman Ben S. Bernanke ’s plan to raise the discount rate for loans to banks “before long.” Legg Mason rallied 5.6 percent after reporting it had $679 billion in assets under management for January, while Stifel Financial jumped 7.8 percent on earnings that topped analyst estimates. Sprint Nextel Corp. slid 9.1 percent as the third- largest U.S. wireless carrier reported sales that trailed analyst estimates, while Dean Foods Co. slumped 14 percent after the nation’s biggest dairy processor forecast profit below projections. “Finally, the U.S. is taking Greece off the cover page,” said Joseph Saluzzi , co-head of equity trading at Chatham, New Jersey-based Themis Trading LLC. “The Fed’s announcement certainly did not help the market. Nobody expects them to be raising rates like they normally do. So they’re trying something creative. These are different times now.” The Standard & Poor’s 500 Index fell 0.1 percent to 1,069.58 at 12:52 p.m. in New York. The Dow Jones Industrial Average lost 5.75 points, or 0.1 percent, to 10,052.89. About 4.3 billion shares changed hands on all U.S. exchanges, 4.3 percent fewer than at the same time a week ago as trading slowed amid a snow storm in the U.S. Northeast. U.S. benchmark indexes fluctuated at the start of trading as investors weighed the prospects of a possible financial bailout of Greece by fellow European Union country Germany. Greece Concern Equity-index futures erased an early advance before the open of New York exchanges as a German official said no decision has been made on a Greek rescue. Stocks rallied yesterday, sending the Dow Jones Industrial Average back above 10,000, as prospects for a Greek bailout eased concern that deteriorating government finances will derail the global economic recovery. The Dow increased 1.5 percent yesterday, the biggest gain since Nov. 9. An official said German Finance Minister Wolfgang Schaeuble told lawmakers that options for helping Greece extended beyond loan guarantees. The lawmaker, who attended a briefing at the Parliament in Berlin today, spoke on condition of anonymity because the discussions were confidential. So far, 327 companies in the S&P 500 have reported fourth- quarter earnings since Jan. 11, and about 76 percent have beaten analysts’ estimates, according to data compiled by Bloomberg. Confidence in the world economy dropped in February on concern worsening government finances in some European nations will threaten the global recovery, according to a Bloomberg survey of users on six continents. Confidence Slumps The Bloomberg Professional Global Confidence Index dropped to 54.9 from 66.6 in January, when the reading was at the highest level since the series began two years ago. The index exceeded 50 for a seventh straight month, which means there were more optimists than pessimists. The survey was conducted last week, before Germany and other European Union nations signaled they may help support Greece’s government finances. Most Bloomberg users were less optimistic on the outlook for their equity markets in the next six months, with respondents in the U.S., the U.K. and Spain turning bearish. Gauges of raw-materials and energy fell at least 1.2 percent, for the two biggest declines in the S&P 500 among 10 industries today. Newmont, the world’s second-largest gold producer by sales, dropped 2.9 percent to $44.48. Chevron, the second-biggest U.S. energy company, lost 1.2 percent to $70.44. Sprint Tumbles Sprint Nextel dropped 9.1 percent to $3.32. The third- largest U.S. wireless carrier reported fourth-quarter sales that missed analysts’ estimates after losing contract customers to rivals. Sales dropped 6.7 percent to $7.87 billion, while analysts in a Bloomberg survey had projected $8.04 billion on average. Dean Foods lost 14 percent to $15.14. The biggest U.S. dairy processor forecast 2010 profit excluding some items of $1.64 a share at most. On average, the analysts surveyed by Bloomberg estimated earnings of $1.70. Micron Technology Inc. declined 9.1 percent to $8.25. The biggest U.S. producer of computer memory agreed to buy flash- chip maker Numonyx Holdings BV of Switzerland for about $1.27 billion to help it compete better with Samsung Electronics Co. Wyndham Worldwide Corp. had the biggest gain in the S&P 500, climbing 4.9 percent to $22.26. The franchiser of Days Inn hotels and Super 8 motels reported a fourth-quarter profit and said it will triple its dividend. Dell Inc. rose 1.6 percent to $13.77. Bank of America Corp. raised its recommendation on the world’s third-largest maker of personal computers to “buy” from “neutral,” citing the stock’s underperformance relative to the market since November. Baidu, Adobe Baidu Inc. soared 8.5 percent to $472.14. The operator of China’s biggest Internet search engine forecast first-quarter sales that topped analysts’ estimates after rival Google Inc. said it may exit the country. Adobe Systems Inc. , the largest maker of graphic-design software, advanced 1.5 percent to $32.79 after Credit Suisse Group AG raised its recommendation on the stock to “outperform” from “neutral.” The shares will “trend higher over the next few months given the pending release of the next version of Creative Suite in April,” the brokerage wrote in a report. Jefferies & Co. also recommended clients buy the shares. To contact the reporter on this story: Rita Nazareth at rnazareth@bloomberg.net .

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Macquarie Banker Caught Browsing Topless Pictures on Live TV Keeps His Job

February 5, 2010

By Angus Whitley Feb. 5 (Bloomberg) — Macquarie Group Ltd. said an employee in Sydney who was caught on live television looking at topless photographs on his computer will stay at the bank. While a Macquarie Private Wealth worker discussed interest rates live on Australia’s 7 News on Feb. 2, an employee could be seen in the background opening several semi-nude photographs on his desktop, before turning to look at the camera. “An internal review into the events has been completed,” said Laura Bramwell, a spokeswoman for Macquarie, Australia’s largest investment bank. “This review has been discussed with the employee and action taken. He will remain an employee. Macquarie and the employee apologize for any offense that may have been caused.” The bank declined to name the individual. Miranda Kerr , the Australian supermodel appearing in the snaps, offered to sign a petition to help the banker keep his job, the Daily Telegraph said today . An archived video of the television footage on Google Inc.’s YouTube won a five-star rating and attracted almost 1 million hits. To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

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AOL Content Chief Wilson to Leave Web Company, Making Way for Google’s Eun

February 4, 2010

By Sarah Rabil Feb. 4 (Bloomberg) — AOL Inc. ’s Bill Wilson is leaving as chief of content production after nine years with the Internet company and will be succeeded by David Eun , a veteran of Google Inc. and Time Warner Inc. Wilson informed AOL of his decision to step down earlier this year, according to an internal memo from Chief Executive Officer Tim Armstrong . He will leave the company May 1, said Caroline Campbell, an AOL spokeswoman. Eun will join as president of AOL Media and Studios, starting March 1, the New York-based company said today in a statement. Eun, 43, will oversee more than 80 Web sites, including Lemondrop and Politics Daily ; Seed, the publishing platform for assigning and distributing freelance journalism; and video creator StudioNow. Separated from Time Warner in December, AOL is trying to reignite profit growth by investing in specialized Web sites and producing more original news and feature articles. Wilson, 41, helped AOL evolve to producing instead of licensing content as the company shifted its revenue source to advertising sales. “The fact that we have such a strong foundation in the content space is due to the determination and dedication of Bill Wilson,” Armstrong, who was named CEO in March and previously worked at Google, said in the memo. “He saw the opportunity presented by audience fragmentation on the Web.” Eun most recently managed global content partnerships for Google and its video-sharing site YouTube . Until 2006, he helped develop new digital and broadband businesses for Time Warner units, including AOL. AOL fell $1.05, or 4.2 percent, to $24.18 at 4:01 p.m. in New York Stock Exchange composite trading . To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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Communications Expert Calls Toyota’s Recall ‘The Worst-Handled Auto Recall In History’

February 3, 2010

If you Google Toyota, among the first things that pop up is an ad slugged “Toyota Recall News.” That’s accompanied by links to Toyota.com and a Web site about the new Prius. With just a few more clicks, you’ll find hundreds of news reports that the car company’s faulty accelerators have been linked to 19 deaths.

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Communications Expert Calls Toyota’s Recall ‘The Worst-Handled Auto Recall In History’

February 3, 2010

If you Google Toyota, among the first things that pop up is an ad slugged “Toyota Recall News.” That’s accompanied by links to Toyota.com and a Web site about the new Prius. With just a few more clicks, you’ll find hundreds of news reports that the car company’s faulty accelerators have been linked to 19 deaths.

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Chip Conley: What Business Leaders Can Learn From Bhutan

February 2, 2010

Having spent the past 32 years in the Silicon Valley/Bay Area region, I guess I’ve grown accustomed to start-ups wreaking havoc in mature industries. Hewlett-Packard, Apple, Google, Facebook — they all were launched within a 15-mile radius of my alma mater, Stanford University, and they went on to revolutionize not just their industry, but they changed our relationship with technology and, frankly, in Facebook’s case, our relationships with each other. So, it’s no surprise that I’m fascinated with a little, almost-mythical country in the Himalayas that is revolutionizing how world leaders are looking at the definition of success. Like The Mouse That Roared (a popular book and film from the late 1950s about an imaginary, bucolic country situated between France and Switzerland that becomes the admiration of modern society when it declares war on the United States), Bhutan is getting the kind of attention an off-off-Broadway play gets when you know it’s destined to be a hit. In 1972, the 17-year old King of Bhutan asked the blasphemous question, “Why are we so focused on Gross Domestic Product? Why aren’t we more concerned with Gross National Happiness?” For nearly 40 years now, Bhutan has been reinventing itself based upon the premise that the ultimate public good a leader can provide his or her people isn’t material possessions, but instead it’s happiness or well-being. This “beginner’s mind” idea has found fertile ground in the 21st Century as more than 40 countries are now studying their own GNH (Gross National Happiness). Nicolas Sarkozy recently announced what some are calling a “joie de vivre index” in France based upon an 18-month study of two Nobel economists who recommended that the largest countries of the world end their obsession with GDP and consider some new intangible metrics. In essence, they’re suggested that GDP — which focuses exclusively on tangible production and consumption — no longer should be our sole definition of global success especially at a time when 64% of the world’s GDP now comes from the intangible service industry. In other words, GDP measures outputs which might have made sense in a more mechanized, industrial era. But, given the knowledge era we now live in, measuring those inputs that influence the output is a more holistic method of evaluating whether we’re creating sustainable success. This may seem abstract, but it’s extremely relevant to business leaders who have come to realize that a myopic focus purely on the bottom line can have the same effect as driving a car at full speed all the time without doing occasional maintenance and refueling. Here are three important lessons for business leaders to learn from Bhutan: (1) Leaders don’t create happiness for people. The Prime Minister of Bhutan told me his goal is “to create the conditions in which happiness can flourish.” Abraham Maslow once suggested business leaders “can set up the conditions so that peak experiences are more likely, or one can perversely set up the conditions so that they are less likely.” Great leaders create healthy habitats. From those healthy habitats sprout the outputs we’re looking for whether it is happy citizens or a profitable business. Silicon Valley has an eco-system that is primed for innovation, but as many regions of the world have learned, you can’t easily replicate the intangibles that create such a cultural habitat. So, first brainstorm with the leaders in your company about what cultural “conditions” would help your company flourish and what kinds of specific things you can do to create that habitat. (2) Leaders value and measure the intangible. The Bhutanese have created a science behind the art of happiness. They measure four (4) pillars, nine (9) key indicators, and 72 various metrics to help them understand whether they are creating fertile conditions for happiness. The Gallup organization has developed 12 questions that help leaders measure employee engagement like “At work, do you have the opportunity to do what you do best every day?” or “Does the mission/purpose of your company make you feel your job is important?” It’s time for leaders to distinguish between what they can easily count (“Are you being paid enough?”) with what employees most value. The intangibles of mission and meaning are powerful fuel for knowledge-driven industries, so find ways to measure these vital inputs. (3) Leaders are willing to deviate from the norm. Most world leaders didn’t take notice when the teenage King of Bhutan asked his impertinent questions about GDP. Those that did notice chuckled and chalked this idea of GNH up to “Buddhist economics.” But, if you’re a small country or a small company, your best strategy to compete with the big boys is to find a niche and own it. In my case when I started my company 23 years ago by purchasing an inner-city motel, I went after rock ‘n roll bands as our core customer, even though conventional hoteliers told me I was crazy to want these party animals. Yet this target customer was perfectly suited to my funky motel and this was an untapped market (bands) that was growing and recession-proof. Similarly, it took 30 years for the world to embrace Bhutan’s approach to GNH, yet this “happiness niche” has turned out to be much larger than the King of Bhutan ever imagined. Find a niche, embrace it wholly even if it’s unconventional, and deliver on your promise better than any of your competitors.

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Arianna Huffington: Davos Diary 2010: Snapshots from My Short But Sweet Visit

February 1, 2010

Because of a jam-packed week , my time at this year’s World Economic Forum was limited. But as is always the case with Davos, there were more than a few snapshot-worthy moments. Things got off to an interesting start before I even arrived. I happened to be on the same flight from D.C. to Zurich as Larry Summers, who was reading Martin Jacques’ weighty tome, “When China Rules the World . His review: “Interesting…and disturbing.” I arrived in Davos and went straight to the Newsweek lunch hosted by Lally Weymouth and Fareed Zakaria. Lally had Israeli president Shimon Peres seated on her right and Palestinian Prime Minister Salam Fayyad on her left. But the real tension at her table was between Barney Frank and Gary Cohn, the president and COO of Goldman Sachs. After the lunch, I chatted with Harvard’s Niall Ferguson about the State of the Union speech. “The president’s spending freeze is a joke,” he exclaimed. Finally, I told him, something you and Paul Krugman agree on! Then it was off to CNBC’s outdoor studio where I was interviewed by Becky Quick for Squawk Box . Here is the clip . Never mind what I said; just take in the gorgeous surroundings — it’s all about the Davos backdrop! Friday night brought a wave of end-of-week parties. At the Towers Watson/ Wall Street Journal gathering, I ran into Alan Murray, executive editor of the Journal ‘s online operations. Alan and I go way back, and found ourselves reminiscing about the days when our children were in kindergarten and elementary school together in Washington. Back then, neither one of us could ever have imagined that, 15 years later, we’d both be up to our necks in the digital world, living and breathing online news. As usual, the Google party was packed. Maybe, for Davos, they can temporarily replace “Do No Evil” with “Get More Room.” On my way out, I ran into Jacob Weisberg, who had been imbibing at the flavored oxygen bar. I asked him how it was. “Great,” he told me, a smile breaking across his face. “It gave me enough energy to last for another hour.” His favorite O2 flavor? Eucalyptus. On Saturday morning I took part in a CNBC debate on gender parity with Coca-Cola CEO Muhtar Kent, WPP CEO Martin Sorrell, Facebook COO Sheryl Sandberg, and Orit Gadiesh, chairman of Bain and Company. (Read more about the debate here .) One of the “challengers” at the event was Nicholas Kristof of the New York Times . At the end of the discussion, which included much talk about how things would be different if women were in charge, Kristof wondered what would have happened if Lehman Brothers had, in fact, been Lehman Brothers and Sisters. I said it might still be standing, since the highest form of leadership is the ability to look around corners and see the iceberg before it hits the Titanic. If women are better at maintaining the work-life balance, a less-frazzled, less sleep-deprived Lehman sister might have been able to spot the looming iceberg through the fog of highly leveraged profits and sound the alarm in time.

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Profit Surprises in ’09 Led by Google, Ford, Lockheed May Vanish This Year

February 1, 2010

By Jack Kaskey and Wendy Soong Feb. 1 (Bloomberg) — Earnings at U.S. companies are topping analysts’ estimates at the second-highest rate in almost two decades, a pace that may falter this year without increased sales. Lockheed Martin Corp. , the world’s biggest defense contractor, Google Inc. and Ford Motor Co., are among the companies surpassing predictions as the U.S. economy begins to recover from recession. Altogether, 78 percent of the Standard & Poor’s 500 Index companies’ quarterly reports so far this earnings cycle have beaten analysts’ profit estimates, while 56 percent topped sales projections. The positive surprises are just short of the 80 percent mark of the third quarter, the highest since at least 1992. Companies that have expanded margins by cutting jobs and other expenses won’t be able to sustain earnings growth this year without increasing sales, investors said. “At some point cost-cutting hits the wall and you have a snap-back, because you are not able to grow revenue when demand picks up,” Peter Sorrentino , who helps manage $12.8 billion as a senior portfolio manager at Huntington Financial Advisors, said by telephone from Cincinnati. “Pricing growth and volume growth are what we are looking for.” The best-performing area so far in the most recent quarter is information technology, including Google and disk-drive maker Western Digital Corp. , a sector where profit at 41 of 42 reporting companies surpassed analyst estimates as of Jan. 29. Google Sales Market reaction shows investors are paying attention to sales, not just profit. Shares of Mountain View, California- based Google fell when revenue trailed some projections even as the company posted higher-than-estimated profit. Competitor Yahoo! Inc. , based in Sunnyvale, California, said a surge in online spending helped sales beat estimates, and the shares rose while profit trailed expectations. Companies in the S&P 500 lost about $1.13 trillion of sales last year, even as operating margins widened through the year to about 7.3 percent in the most recent period, said Howard Silverblatt , S&P senior index analyst in New York. Without a strong economy to boost sales, earnings growth will wane, he said. Companies have pared 7.2 million workers since the recession began in December 2007, the most since World War II. Initial jobless applications fell to 470,000 in the week ended Jan. 23, from 478,000 the prior week, the Labor Department said. ‘Cut Too Deeply’ “If it turns out that these executives are wrong and a return to growth becomes a return to robust growth, those that cut too deeply are likely to feel the impact,” said Colin Gillis , an analyst with BGC Financial LP in New York. “A lot of people who cut too deep are going to be caught on their heels.” Another impediment to economic growth is housing, said Mark Demos , who helps manage $19.8 billion as a portfolio manager at Fifth Third Asset Management. Sales of new homes in the U.S. unexpectedly dropped in December, capping the worst year on record. “The unemployment data hasn’t improved as much as we thought and housing hasn’t been as good,” Demos said from Minneapolis. “Earnings in 2010 will be based on true revenue growth to make some of these estimates, and that is dependent on the economy.” Retailers such as Home Depot Inc. and Wal-Mart Stores Inc., both of which report results in February, continue to eliminate U.S. positions amid weak sales. Bentonville, Arkansas-based Walmart, which forecast flat comparable-store sales in the fourth quarter, is closing 10 of its Sam’s Club chain of membership warehouse clubs and separately slashing 11,200 jobs. Atlanta-based Home Depot this week started cutting 1,000 employees after sales at older stores fell 6.9 percent in the quarter ended Nov. 1. ‘Can’t Do That Forever’ “You can’t do that forever so you’ll have to see some revenue growth,” said Walter Todd , who helps manage $775 million at Greenwood Capital Associates in Greenwood, South Carolina. The firm owns shares of Walmart and Procter & Gamble Co. “That means the economy is going to have to continue to improve.” In the fourth quarter, U.S. gross domestic product increased at a 5.7 percent annual pace, the fastest expansion in six years, the Commerce Department reported Jan. 29. Ford boosted North American output 33 percent in the fourth quarter and posted adjusted profit of 43 cents a share on sales of $35.4 billion, both of which topped estimates. The carmaker increased average revenue from each vehicle by selling new models such as the Taurus and Fusion with more options and higher prices, Chief Executive Officer Alan Mulally told analysts on a conference call. Ford ‘Well-Positioned’ “They’re very well positioned for significant improvements in profitability as production rebounds,” said Joe Phillippi , president of AutoTrends Consulting in Short Hills, New Jersey. Bethesda, Maryland-based Lockheed is focused on reducing costs to boost performance because Defense Department sales may be limited by federal budget constraints. The company beat fourth-quarter earnings estimates by about 19 cents a share while sales topped estimates by less than 1 percent. The midpoint of the company’s 2010 revenue forecast trails the $47 billion average estimate. Technology companies that reduced capital expenditures last year are facing higher demand with fewer workers, said Craig Berger , an analyst at Friedman Billings Ramsey & Co. in New York. In telecommunications, AT&T Inc. and Verizon Communications Inc., the two largest U.S. phone companies, slashed jobs in their fixed-line businesses last year as home phone subscribers moved to mobile phones and businesses cut lines along with employees. Verizon Jobs New York-based Verizon said last week that it will eliminate about 13,000 more workers in the fixed-line business this year after trimming about the same number in 2009. That’s about 6 percent of the company’s total workforce. Growth for the sector is coming from selling wireless connections to the Internet and connections between machines for devices such as Apple Inc.’s iPad and Amazon.com Inc.’s Kindle, said Rick Franklin , a St. Louis-based analyst with Edward Jones. “A large portion of today’s global electronics consumption is coming out of China and other emerging markets where growth and economies and GDPs are much better,” Berger said. “Industrial demand has come back, consumer purchases of PCs and TVs came back with a vengeance.” ‘Hunkering Down’ The best investment bets this year are in companies with significant sales outside the U.S. as American demand may remain weak, said Barry James , who helps manage $2 billion at James Investment Research in Xenia, Ohio. He is cutting equities to 40 percent of the James Balanced Golden Rainbow Fund, from as much as 55 percent last year. “We are hunkering down,” James said. “The consumer is still in dire straits, foreclosures and delinquencies are high, so the economy is very iffy.” The S&P 500 index has dropped 6.4 percent since earnings season kicked off Jan. 11 with New York-based Alcoa Inc. , the largest U.S. aluminum producer. The index dropped 3.7 percent in January, the biggest decline in 11 months. Stocks may be down partly because of President Barack Obama’s plan to restrict the size and activities of financial institutions, which could limit trading at some of the nation’s largest banks, Sorrentino said. Capital spending, meanwhile, is poised to rebound after dropping the most on record last year, potentially spurring economic growth and hiring. Spending on plants and equipment this year may rise 28 percent after declining 22 percent last year, said Silverblatt, the S&P analyst. Equipment Orders “We’re seeing a pretty good bounce back,” Jeffrey Immelt , chief executive officer of Fairfield, Connecticut-based General Electric Co., told analysts Jan. 22. “We think equipment orders should be positive for the year.” Capital spending may increase more than forecast if Congress adopts President Obama’s Jan. 27 proposal to renew a so-called bonus depreciation program that allows companies to write off 50 percent of equipment purchases in the first year, Silverblatt said. The program expired Dec. 31. Among steelmakers, Nucor Corp. , AK Steel Holding Corp. and Allegheny Technologies Inc. all topped earnings estimates. Some performances were seen as low quality, driven by a lower tax rate in Nucor’s case, or inventory accounting for West Chester, Ohio-based AK Steel, and not necessarily indications that earnings will stay strong later in the year, said Charles Bradford , a partner at New York-based Affiliated Research Group LLC. ‘Sensitive to the Economy’ Forecasts for the first quarter from steel companies such as Charlotte, North Carolina-based Nucor and Pittsburgh-based U.S. Steel Corp., where fourth-quarter results missed analyst estimates, were disappointing, he said. “These companies are very sensitive to the economy and the economy really hasn’t done anything for them,” Bradford said. “The first quarter is not going to be terribly good.” One of the biggest positive surprises so far was posted by Parker Hannifin Corp. , the world’s largest maker of hydraulic equipment. The Cleveland-based company on Jan. 19 reported adjusted per-share earnings of 64 cents, 88 percent higher than the 34 cents analysts projected. “Parker knocked the cover off the ball,” said Eli Lustgarten , an analyst with Independence, Ohio-based Longbow Securities. “They did it on better volume, and profitability. Most of the other companies you are just seeing better profitability without improved volume.” To contact the reporters on this story: Jack Kaskey in New York at jkaskey@bloomberg.net ; Wendy Soong in New York at at csoong@bloomberg.net .

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Brett King: Would Google make a better bank?

January 30, 2010

This is not the first time this question has been asked. Jeff Jarvis started this discussion back in 2008, and covered the topic in his book entitled What Would Google Do? However, in recent times with the banking sector in so much turmoil and facing the ire of so many, the question probably is not whether a Google might come along and start a bank, but when will an Amazon, Google or Facebook weigh in to this space? Unlikely? Sceptical? Let me challenge that thought with a simple fact. Google already has a banking license… Yes. Since late 2007 Google has held a banking license issued by the Central Bank of the Netherlands- De Nederlandsche Bank. The license is nominated as being for digital banking services. They’re not the only ones looking at financial services to extend their brand. As of May of 2007 Pay Pal has held a banking license from Luxembourg. HP has banking licenses in a few countries, allowing it to issue loans and leasing agreements. The publisher of the online science-fiction game “Entropia Universe” has a banking license from the Swedish Financial Supervisory Authority and this enables it Entropia to encourage trade of their virtual currency used in their online world. What about Apple? Well as far as we know they don’t have one…yet. What’s wrong with your bank? Many feel today that the big banks have got too big, have lost touch with their customers. They seem more interested in speculating on the assets they hold to create profit, than basic banking services to their customer. The criticism is often levelled that these banks feel they are big enough that if you don’t like it, they’ll just ignore you. The fundamental issues that customers face today, however, are relatively simple to fix. For example, when you go down to your bank to apply for a loan or a credit card, they ask you all the same questions they’ve already asked before a million times before. Banks have a habit of hiking up fees without any warning , and you can’t do anything about it. When you do need a new loan or changes to your mortgage, you feel like you have to beg just to get some consideration. No matter how many times you ring the bank, you have to repeat the same story you’ve already given to the last person you spoke to. The question at hand, however, is Would Google build a better bank? The immediate answer might be – it couldn’t be worse than what we’ve got now. The question really is how could a Google or someone like them build a better bank? Simplicity is a service in itself “The perfect search engine,” says co-founder Larry Page, “would understand exactly what you mean and give back exactly what you want.” This was the power behind Google’s early success obviously, but we could easily paraphrase this for banking – the perfect bank would understand what you need and give you exactly what want… Google has built its business around ten key business principles, what they like to call “Then things we know to be true”. A number of these principles would come into play in creating a different type of banking environment for customers Google Style. Focus on the user and all else will follow, fast is better than slow, you don’t need to be at your desk to need an answer, you can make money without doing evil, there’s always more information out there, you can be serious without a suit, and great just isn’t good enough. How would this manifest in a better bank? Are you ready? Whether it is Google, Apple or a fresh start-up, the likelihood of a new retail financial services organization stepping into the fray over the next few years is extremely high. As Google learned with its search engine opportunity for innovation is often borne out of either customer frustrations or simply a better way of doing things. Given our recent experiences with the big banks, is it unthinkable that someone might try to innovate your banking experience?

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Larry Summers’ Davos Speech: Obama’s Top Economic Adviser Adamant Reform Is Coming

January 29, 2010

DAVOS, Switzerland — Confronting bankers head on, President Barack Obama’s top economic adviser told them Friday to put their customers first and insisted the U.S. government would push through new banking reforms despite pressure from lobbyists. “Our challenge now is to put in place a new system,” said Lawrence H. Summers, telling a crowd at the World Economic Forum that the reforms wouldn’t last forever but should be able to protect a generation from banking excesses. Summers, the top U.S. official in Davos this year, said there needed to be rules restraining how risky these banks can become. His session came after three days of complaints from senior officials in the banking industry that governments – and the U.S., in particular – risked choking off growth with a glut of new financial regulations. The level of anxiety among financiers at the new populist push was reflected in a series of closed-door meetings at Davos on the subject of the regulation proposals, and bankers and financial regulators were expected to meet again Saturday on the forum’s sidelines to discuss a range of issues, officials said. Summers was adamant that “we are going to put in place a set of reforms that will make a real difference.” He said banks should be aware of their obligations to their communities in making lending decisions and to contain risk, especially when they benefit from taxpayer support after getting into trouble. He also questioned the bank’s “paying out bonuses in large quantities.” The impact of government support for the banks has been far-reaching, he said. “Half a trillion dollars of market value exists today that would not have existed” if the government hadn’t acted. He said Obama’s proposed banking fees did not stem from populist pressure for revenge. “Our focus is not on trying to pick a fight with anyone but getting the economy rolling again,” he said. Summers didn’t appear to engage his audience of business leaders at their annual gathering in the Swiss Alps, and looked more like he was talking to American voters at home. He lamented the current situation in Washington where there are three banking lobbyists per member of Congress, saying it raises questions when some of them are even pushing for financial institutions to be able to jack up credit card rates without letting customers know. Banks must accept new constraints on their activities, he said. “They need to think very carefully about their obligations to their customers,” Summers said. He also welcomed the latest figures showing strong economic growth in the U.S., but said now is not the time to celebrate. The 5.7 percent increase in fourth-quarter growth that came under Obama’s economic policies has helped “moved the economy back from the brink of depression,” but the figure does not mean that “we are in any position to pop any champagne corks” or be satisfied. Joaquin Almunia, EU competition commissioner, supported Summers. “I fully agree with the objectives and with the way he has explained the need for financial regulations to avoid the imbalances and the accumulations of risk that brought about this crisis,” he said. Summers’ session was generally well received, though there were a number of empty seats in the crowd as some top executives left after the preceding debate featuring Google CEO Eric Schmidt. Summers tone “makes a businessman more comfortable,” said Francisco Rubiralta, CEO of Spanish steel company Celsa. Manuel Teehankee, a Philippine trade envoy, said Summers may have helped ease business tensions even as the U.S. seemed to be proposing something akin to the Depression-era Glass-Steagall Act, which separated commercial from investment banking in a bid to limit speculation. Most of the Glass-Steagall restrictions were repealed by Congress and President Bill Clinton in 1999. “I think it calms the general public, and the middle class that the lobby, or the Davos elite, won’t stem the tide of financial reform,” Teehankee said. “He’s making clear Washington’s commitment to substantial financial reform, in a reasonable way.” ___ Associated Press reporter Bradley S. Klapper contributed to this report. _____ To see more about the World Economic Forum or discuss the topics being talked about, go to AP’s World Economic Forum discussion page at http://bit.ly/amY7Sp

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Google At Davos Is Like ‘A Successful And Secretive Nation’

January 29, 2010

Google is not a country. Eric Schmidt– who would be prime minister if it was –kept repeating the point at a briefing he gave at Davos this afternoon. They didn’t have a police force, they didn’t have jails, they didn’t have their own prosecutors. Only once did he slip and say : “Nevertheless we have to secure our borders.” In other respects Google is not unlike many other countries (Britain, say) which turn up at Davos with half the cabinet.

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Clinton Likely to Discuss Google, Censorship With China’s Yang, U.S. Says

January 27, 2010

By Indira Lakshmanan and Mary Childs Jan. 27 (Bloomberg) — Secretary of State Hillary Clinton is likely to raise her concerns about Web censorship and cyber attacks, such as those that targeted Google Inc. , with her Chinese counterpart tomorrow in London, a senior U.S. official said. Clinton has called for a transparent investigation of what Google described as an infiltration of its technology and the Gmail accounts of Chinese human rights activists. She and China’s Foreign Minister Yang Jiechi will be in London to attend a conference on Afghanistan’s future. In a speech in Washington Jan. 21, Clinton called on U.S. technology companies to resist censorship of the Internet and said perpetrators of cyber attacks such as those who targeted Google must face consequences. China said Clinton’s remarks were unjustified and damaged bilateral ties, and denied involvement in the cyber attacks. Google , which runs the most popular Internet search engine, said Jan. 12 it would stop censoring its search results as required by the Chinese government and might end operations in the country because of the intrusions. The company, based in Mountain View, California, said last week it is in discussions with Chinese authorities about how it operates in China. To contact the reporter on this story: Indira Lakshmanan in London at ilakshmanan@bloomberg.net ; Mary Childs in New York at mchilds4@bloomberg.net

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New York Forum: The New, More Focused Davos?

January 25, 2010

Might New York be the new Davos? If Richard Attias — who produced the World Economic Forum for 13 years and launched the Clinton Global Initiative — has his way, the answer is yes. While the global elite descend on Davos this week, Attias is busy planning for the New York Forum, to be held in New York City in June. The event is designed as a “cooperative dialogue among the world’s top CEO’s, financial leaders and government regulators,” according to an announcement . “Davos is very global now and it’s a great forum but you have over 300 sessions, about all issues from health to culture to sports to even anti-aging,” Attias said in an interview conducted by phone from Munich. “And we know living in New York that the major, major issue today is to try to find solutions for the economy. How can we help social issues, how can we finance health if we don’t have a very healthy economy? So I thought it is definitely the time to focus, to discuss, to work on economic issues.” Attias said he chose New York both because it is a financial center and because of the energy in the city. “When I was in New York, just after September 11th — when I moved Davos to New York — I spent four months in New York and I was really, really impressed by the way New Yorkers were reacting, were spending, were working, were united,” he said. “And I found in New York, which is now my city with my family, something which is magic. Everybody knows about the energy, about the creativity of New York, but you feel it really when you live there everyday. I made a bet with myself which was to one day create an event in New York, because New York really deserves to host great events.” Attias lives on the Upper East Side with his wife, Cecilia (the ex-wife of French President Nicolas Sarkozy). But Attias also stressed a practical reason for hosting a global economic forum in New York. “Of the Fortune 200 companies, I believe 40 are headquartered in New York,” he said. “When companies are cutting costs in the present climate, it makes sense to have an economic forum in the city where most of them are found. I want a very strong presence from American companies and leaders, but I also want to bring business leaders form Europe, from Asia, and from the Middle East. “I can tell you as a non-American in total humility that Americans are often too timid to assert their dominance in business,” he continued. “When I was looking at the past decade, the major innovations, which definitely made a revolution, are coming from the United States. Look at the iPod, look at Facebook, look at Twitter, look at Google, and I can continue the list. For me, New York, which is an iconic city, is the center of innovation and creativity. And its energy, as I mentioned, s what differentiates it from other world cities where i have had the privilege to live.” The New York Forum, which will launch with the New York Times as a media partner, will limit itself to 500 participants and include what Attias describes as “task forces by industry where we will spend time to really work deeply to analyze the situation by industry and to start the process of reinventing these business models by putting all these players around the same table.” The conference is deliberately planned for June 22-24, two days before the G20 meets in Toronto, Attias said, so that participants can bring proposals for solutions to the world’s leaders in Toronto. Sessions will take place at the Grand Hyatt Hotel and the New York Public Library.

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What next for Google shares?

January 25, 2010

What next for Google shares?

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Ari Herzog: Inspiring You to Write a Popular Blog Post

January 24, 2010

The below advice previously appeared at AriWriter . The typical blog post is written, shared, indexed, and quickly forgotten to be replaced by newer blog posts about the same topic or by the same author. You can cross your fingers all you want in the hopes your best-written piece is shared by more people or indexed by more search engines than in the past, but crossing fingers will not boost a blog post’s value if nobody else believes there is value. For the same reason a video creator can not gauge how many people will view a video before it is created, a blogger can not predict the popularity of a post. While there are ways to resurrect and recycle the majority of old blog posts, there are also the few that survive the above tests and remain actively visited because of a high search engine index rate or limited online information. Take a look at my most popular blog post article of 2009, for instance, wherein I share screenshots explaining how I hacked a popular Facebook game . As of today, my post on the Bejeweled Blitz game has been shared 59 times on Facebook and 3 times on Twitter, not to mention being the recipient of 23 comments. The popularity of a blog post goes beyond comments and shares, though; you must also remember the ubiquitous Google, let alone other search engines. Based on a myriad of reasons known collectively as Google Page Rank, if a blog post is viewed so many times and commented and linked to so many more times, Google considers the information timely and valuable — and will continue to rank it high in a keyword’s results page until nobody else clicks on it or comments on it. Since I published the article in July 2009, it’s seen 1-2 comments every month. Google likes it. Querying a Google Analytics report (that excludes my own visits) on the most popular content viewed between January 18, 2009 and January 19, 2010, the Bejeweled Blitz article is most popular, with 91,018 pageviews across 70,662 unique visitors. In comparison, here’s an image of my top 5 viewed articles over the past year: Over 95% of those 70,662 visitors entered the page directly from a search engine or a referral link, with Google responsible for 60,869 unique visits. People typed a combination of 9,175 keywords to reach the page. Evident from over a dozen unique visits to the page while I typed this retrospective article, Google continues to share its value with you and your Facebook peers. I challenge you to write your next blog post from the perspective you are the Internet Newspaper. Write succinctly but clearly. Share a fact, a tidbit, or an image that nobody has seen before — but that everybody wants to see. Think to the future, but write for the present. Most of all, be yourself and write like the passionate scribe you decided to be when you created your first post. Don’t worry about comments or shares. Don’t worry about page rank. When you reach the gold nugget, savor the moment and share with all of us your tips for success. I don’t know why the Facebook article remains popular. I don’t know why people still view it, for there are surely comparable articles online. I have a hunch, though, for its success, and that is because I likely wrote what I wrote before everyone else wrote what they wrote; and in Google’s eyes, original ideas mean something.

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Dubai Index Drops Most in Month on Obama Bank Plan, Oil; Leads Gulf Lower

January 24, 2010

By Zahra Hankir Jan. 24 (Bloomberg) — Dubai’s index lost the most in a month, leading Gulf markets lower, after U.S. stocks fell on a White House proposal to limit financial risk and as China moved to cool economic growth. Oil closed at a one-month low. Shuaa Capital PSC, the United Arab Emirates’ biggest investment bank, slumped to its lowest intraday level since May. United Development Co., the Qatari developer building man-made islands off the Qatari coast, retreated to the lowest in almost two months after profit declined. The DFM General Index fell 3.9 percent, the most since Dec. 23, to 1,587.38 at 12:48 p.m. in the emirate. Qatar’s gauge lost 1.7 percent. Crude closed down 2 percent at $74.54 a barrel on Jan. 22. “Friday’s declining oil prices and U.S. equities have had an impact, the Gulf always overreacts to U.S. equities downside,” said Mohamed Abu Ghoush , head of equity brokerage at Al-Ahli Bank in Doha, Qatar. “Markets are still waiting for the 2009 results.” The Standard & Poor’s 500 Index on Jan. 22 lost the most since October as financial shares slumped for a second day on President Barack Obama ’s plan to rein in banks and results at Google Inc. disappointed investors. Obama asked Congress on Jan. 21 to bar banks from proprietary trading solely for their own profit and sponsoring private-equity and hedge funds. Saudi Advances Shuaa tumbled as much as 9.5 percent to 1.15 dirhams, the lowest intraday level since May 26. The shares last traded at 1.16 dirhams. Emirates NBD, the U.A.E.’s biggest bank, lost 2.7 percent to 2.52 dirhams. United Development dropped 7.5 percent to 33.5 riyals, the lowest since Dec. 1. Net income for the full-year declined 13 percent to 505.4 million riyals ($139 million), according to a company statement on the Web site of the Qatari bourse. Abu Dhabi’s ADX General Index retreated 1.3 percent. Oman’s MSM30 Index fell 0.5 percent, Bahrain’s measure lost 0.7 percent and the Kuwait Stock Exchange Index dropped 0.6 percent. Saudi Arabia’s Tadawul All Share Index gained 0.3 percent, paring some of yesterday’s 1.4 percent decline. To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

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Dave Johnson: Supreme Court Shifts Business Playing Field Away From Marketplace

January 23, 2010

The Supreme Court ruling allowing corporations to use their vast resources to directly influence the political process shifts the business playing field away from competing in the marketplace with products and services, to purchasing government/legal/reguatory advantages, subsidies and monopolies. The marketplace is now irrelevant – only company size matters. It is just more efficient to beat your competitors by buying legislation than it is by competing in the marketplace. When you can purchase $1 billion in tax breaks, subsidies, mandates, contracts, whatever by spending a few million on candidates/influence, etc. it just makes more sense to do so. The return on investment is just so much higher than building factories, spending on research, paying employees, and other tedious, time-consuming, capital-intensive work . For some time companies have recognized that the rewards from lobbying outperform the rewards from competing in the marketplace, and this ruling just amplifies that. This 2006 New York Times article, Google Joins the Lobbying Herd , discussed how Google felt it had “no choice but to get into the arena” to start “spreading its lobbying dollars” around to politicians and quotes Lauren Maddox, a lobbyist for Google, saying the “policy process is an extension of the market battlefield.” This supreme court ruling just clinches this shift away from markets. The game is necessarily going to be to use the superior resources of larger companies to purchase barriers that block smaller, innovative companies from getting anywhere, and force them to be absorbed. Companies that think they can opt out of this and continue to compete with innovation, superior products and services are just mistaken. Any company that doesn’t see this change will find that their competitors are working to buy legislation/rulemaking against them, and won’t last long. It’s going to take a little while for this to sink in, but it is inevitable now.

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Grant Cardone: Tips for Creating Wealth

January 23, 2010

You will probably not win the lottery, create the next Google or be entitled to a significant inheritance. Most of us can not just go out into the marketplace and double our income overnight or find a million dollars. Whether a person builds substantial wealth in their lifetime is left up to the decisions they make and the actions they take. Anyone can achieve their financial goals if they have a plan, use discipline in executing that plan and take actions in accordance with a financial destination. I do not pretend to be a financial expert but I do know that I have survived multiple recessions, bad business decisions, built three businesses from scratch, started with no money and have successfully built both my net worth and income. Building a millionaire net worth is very achievable regardless of your income even when things are difficult. 1) Make A Decision to Create Wealth for Yourself There is nothing wrong with being wealthly, and there is a lot of pain associated with being poor and despite what you may think it is available to everyone not just a select few. There are trillions of dollars on this planet and those that go after it are more likely to attract it. Decide you want to build net worth and make all your decisions based on that. If you never make this decision it probably will not happen for you. Do the math. 1,000,000 over 20 years mean you have to save 50,000. This requires that you a) produce income, and b) save the money. If you want to reduce how long it takes then you will have to get the money to grow. The only way to do it faster is to create something that makes you a millionaire but typically that will even take money. 2) Stop Spending Your Future Wealth To create real wealth you must quit spending your future wealth on goods and services that you want today but deprive you of wealth long term. I enjoy spending money as much as anyone but I don’t do so until I have my wealth created. You aren’t just wasting money, you are spending funds that are going to make you a millionaire. Did you know if you started an account with $200 and then saved $200 a month every month for the next 30 years and it if that money earns 8% a year you would accumulate $295,642. That wouldn’t make you a millionaire but it would get you going in the right direction. So what if you put 600 a month away? The rule for me on spending is once have taken care of my savings and ensured my financial future then I spend whatever I want on whatever I want but not until then! Understand that if you only waste $2000 a year each year over the next thirty years you will have wasted over $600,000. It is important to realize that it’s usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). 3) Lastly and most importantly for those that don’t want to wait 30 years. Learn everything you can about selling, marketing, getting attention, networking, and promoting. Money tends to follow those that get the most attention. Your ideas and your products have no value if no one gives you or them attention. The faster you can create attention the faster you will create income and the more powerful you become with attaining wealth. Sales is the fastest way to create income and new income is required in order to build true wealth. For any idea or product to turn into revenue and then wealth it must be sold. Learn everything you can about selling in the 21st Century! Grant Cardone, Author of Sell to Survive and Founder of Virtual Sales Training Haiti Relief Funds- All proceeds from my book Sell to Survive go to Haiti Earthquake Victims.

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Decline in U.S. Stocks Pays Options Traders 75% Profit on Volatility Bets

January 23, 2010

By Lynn Thomasson and Jeff Kearns Jan. 23 (Bloomberg) — The biggest sell-off in the Standard & Poor’s 500 Index since March is rewarding options traders who bet on a surge in volatility with gains of 75 percent. “It’s been a nice shift for some people,” said Justin Golden , a strategist at New York-based Macro Risk Advisors LLC, which advises institutions on equity derivatives. “Before this week, the long options community had been very frustrated. Volatility has been on a downward path.” Traders who buy options that gain in value when the VIX rises are usually betting equities will retreat because the volatility gauge moves in the opposite direction of the S&P 500 more than 80 percent of the time. Financial and technology stocks led the market lower yesterday as some Democrats said they will oppose Ben S. Bernanke for another term as head of the Federal Reserve and results at Google Inc., the Mountain View, California, owner of the world’s most popular search engine, disappointed investors. Wagers that the Chicago Board Options Exchange Volatility Index would jump 46 percent to 32.5 were the most-active contract on Jan. 20 and 21, according to data compiled by Bloomberg. An increase to that level corresponded with a decline of about 3 percent in the Standard & Poor’s 500 Index , said Randy Frederick , the Austin, Texas-based director of trading and derivatives at Charles Schwab & Co. The benchmark gauge for U.S. equities fell 2.2 percent yesterday, capping its biggest three-day retreat in 10 months. The VIX, which is derived from the price of options on the S&P 500, has risen 55 percent to 27.31 in that period, the most since February 2007, according to data compiled by Bloomberg. Global Sell-Off Equities around the world declined since Jan. 20 following a White House proposal to reduce risk-taking at banks and signs China will take more steps to slow economic growth. The Dow Jones Industrial Average lost 2 percent on Jan. 21 to erase its gain for 2010 and fell 2.1 percent yesterday. The surge in volatility has been “pretty significant for the VIX,” said Stefen Choy, founder of Livevol Inc., a San Francisco-based provider of options market data and analytics. “Maybe people are starting to feel that the market is running out of steam.” About 64,000 February 32.50 calls on the VIX traded on Jan. 20 and 21. The contracts climbed 75 percent to $1.05 yesterday and have almost quadrupled in price since Jan. 19. The options gauge, which averaged 20.28 over its 19-year history and 31.5 in 2008, last closed above 32.5 on June 16, data compiled by Bloomberg show. Ask Price Eighty-nine percent of the contracts that changed hands on Jan. 20 and 21 traded on the ask price, which indicates they were initiated by buyers. Investors have also sought protection by purchasing shares of the iPath S&P 500 VIX Short-Term Futures exchange-traded note, which increased 8.8 percent to $31.89 yesterday. Volume jumped to 11.6 million, the highest level since the ETN began trading almost a year ago and more than twice the 4.56 million four-week average. The number of shares outstanding has doubled in the last six weeks to 40,447. The VXX, as the note is known, tracks futures for the options benchmark . The VIX is derived from investor expectations for market swings over the next 30 days using a formula that incorporates the implied volatility, a key gauge of options prices, for S&P 500 puts and calls that are one or two months from expiration. VIX futures that expire in March gained 4.4 percent to 25.15 yesterday, while April’s added 3.3 percent to 25.35. “You get two days like this and people do start to sit up and notice,” said Carl Mason , head of U.S. equity derivatives strategy at BNP Paribas SA in New York. “People are betting on higher levels of volatility in the short term.” To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net ; Jeff Kearns in New York at jkearns3@bloomberg.net .

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Google’s YouTube in Talks With Hollywood Studios for Film-Rental Service

January 22, 2010

By Michael White Jan. 22 (Bloomberg) — Google Inc. ’s YouTube is talking with major Hollywood studios about providing movies for an online rental service that started today with five independent films from the Sundance Film Festival. The discussions reflect Google’s interest in expanding the fledging service, which offers the Sundance movies for 24-hour to 48-hours for $3.99, David Eun , Google’s vice president for content partnerships, said today in an interview. YouTube, the world’s most popular video-sharing site, is seeking new ways to generate revenue. Record labels led by Universal Music Group started the advertising-supported Vevo site with YouTube in December. With movie rentals, filmmakers can decide how much to charge and retain all movie rights. The talks range from “big-media studios to new-media startups, individual filmmakers,” said Eun, who declined to elaborate on the discussions. “We don’t want to own content. We want to be a neutral platform.” Eun spoke following a Sundance news conference in Park City, Utah, to introduce the directors of three of the films offered by YouTube. The agreement with Sundance is a “first step” to a potentially larger rental service, Eun said at the press event. “We are experimenting, frankly,” he said. The movies will be available through the festival’s Jan. 31 close, Sundance said in a statement. The service gives filmmakers a chance to attract viewers at a time when theatrical distribution deals are becoming more difficult to get, said Todd Barnes, co-director of “Homewrecker,” one of the movies being shown. ‘Huge Screening’ “We think of it as a huge screening,” Barnes said. “We just sent an e-mail to a friend and said, ‘We’re going to premiere at Sundance. Why don’t you watch it at home?’” Many studios have pared back distribution and some have closed units that specialized in independent movies. Of the 9,000 movies submitted to Sundance last year, 53 were distributed to theaters, Google said on its Web site . Other feature films being offered include “Bass Ackwards” and “One Too Many Mornings.” YouTube is also showing “The Cove” and “Children of Invention” from last year’s festival. “Children of Invention” producer Mynette Louie said the YouTube showings allowed her to seek distribution elsewhere. Google, based in Mountain View, California, lost $32.97, or 5.7 percent, to $550.01 today on the Nasdaq Stock Market. The shares have climbed 79 percent in the past year. To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

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Video: U.S. Stocks Tumble, Cap Biggest 3-Day Plunge Since March: Video

January 22, 2010

Jan. 22 (Bloomberg) — Bloomberg’s Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks sank, capping the market’s biggest three-day tumble since March, as financial shares slumped on President Barack Obama’s plan to rein in banks and results at Google Inc. disappointed investors. (Source: Bloomberg)

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Obama’s Bank Limits: Week in Review

January 22, 2010

Jan. 22 (Bloomberg) — President Barack Obama’s proposal to restrict commercial banks leads a selection of the week’s top stories on Bloomberg.com. Click here for a special report on Obama’s plan, which aims to make banks more secure by forcing them to minimize trading for their own account and give up stakes in hedge funds and private-equity firms. The video pick of the week is an interview with billionaire investor Warren Buffett. Click on the VIDEO tab above to watch. The accompanying story “ Buffett Says He Can’t See Rationale for Bank Levy ,” was the most-read item on Bloomberg.com in the past week. Bloomberg BusinessWeek’s cover story is “ King of the World (Again) ,” the inside story of how Avatar director James Cameron became the most powerful commercial force in the movie business — twice. Following is a selection of stories from the past week, chosen by senior editors at Bloomberg News. Wall Street Seeing Goldman in Rare Reversal With Morgan Stanley Jan. 19 (Bloomberg) — Goldman Sachs Group Inc., whose record earnings in the first nine months of last year fueled public outrage, will probably hit a profit plateau in 2010, just as Morgan Stanley rebounds from its worst year ever. AIG 100-Cents Fed Deal Driven by France Belied by French Banks Jan. 20 (Bloomberg) — The Federal Reserve Bank of New York paid French banks 100 cents on the dollar to settle trades with American International Group Inc. in November 2008, the same month an AIG competitor negotiated payments of less than a third of that to retire similar bets. FARC’s Cocaine Sales to Mexico Cartels Prove Too Rich to Subdue Jan. 20 (Bloomberg) — Mexican drug cartels are getting cocaine from Colombia’s biggest guerrilla group in a deal that increases the security threat to both nations, according to a document captured by Colombian military intelligence and to a government official in that country. Apple Said to Talk With Microsoft to Replace Google on IPhone Jan. 20 (Bloomberg) — Apple Inc. is in talks with Microsoft Corp. to replace Google Inc. as the default search engine on the iPhone, according to two people familiar with the matter. Carbon Falls as Climate Failure Is Boon for Oil Polluters Jan. 19 (Bloomberg) — The inability of government leaders to agree on stricter pollution controls at meetings in Copenhagen last month is showing up in commodity markets, where it’s getting cheaper to emit greenhouse gasses. Who in Malaysia Knows Oakland Raiders Becomes AirAsia Strategy Jan. 20 (Bloomberg) — On a sultry June night, Kuala Lumpur’s rooftop Luna Bar is throbbing with dance music as an overflow crowd takes in the view of the Malaysian capital’s Petronas Twin Towers. Champagne corks pop as men in suits mingle with women in little black dresses, joined by American football players and cheerleaders. U.K. Traders May Face ‘Skittish’ Markets on Delayed Vote Count Jan. 20 (Bloomberg) — Adam McCormack worked through election night in 1992, selling U.K. government bonds as markets rallied on an unexpected win by the Conservatives. Billionaire Abramovich Buys Art for Yacht With Helipads, Lasers Jan. 19 (Bloomberg) — Russian billionaire Roman Abramovich bought 35 contemporary artworks for his luxury yacht, “Eclipse,” an art dealer revealed. The top 10 most-read stories on Bloomberg.com for the past week (excluding daily market coverage): 1. Buffett Says He Can’t See Rationale for Bank Levy 2. Obama Calls for Limiting Size, Risk-Taking of Financial Firms 3. Health Bill Can Pass Senate With 51 Votes, Van Hollen Says 4. Democrats Face Loss of Kennedy Seat, Health-Care Vote 5. Obama to Propose New Rules on Banks’ Size, Trading 6. Pelosi Says House Lacks Votes for Senate Health Plan 7. Wall Street Seeing Goldman in Rare Reversal With Morgan Stanley 8. China’s GDP Growth Accelerates to Fastest Since 2007 9. Citigroup Posts Second Annual Loss on Costs to Repay the U.S. 10. Hedge Funds Hold Investors ‘Hostage’ After Rebound # # -0- Jan/22/2010 17:47 GMT

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Lenovo Says Google Dispute With China Not Hurting Phone Business in China

January 21, 2010

By Mark Lee Jan. 22 (Bloomberg) — Lenovo Group Ltd. , whose investors today approved the buyback of a mobile-phone division, said its handset business in China won’t be affected by the possible exit from the country of technology supplier Google Inc. Google’s actions will have “no effect” on Lenovo’s new LePhone handset, which uses the U.S. company’s Android technology, Chief Technology Officer He Zhiqiang told reporters today in Hong Kong. Lenovo, China’s biggest maker of personal computers, plans to offer the smartphone for the Chinese market, He said. Google this week delayed the introduction of two handsets for China, the world’s biggest mobile-phone market, amid a dispute with Chinese Internet regulators over censorship following cyber attacks on its local Web site. The U.S. search engine operator said last week it may end its search-engine operations in the Asian country pending talks with the Chinese government. A Jan. 20 ceremony planned by Google and China Unicom (Hong Kong) Ltd. to introduce new handsets was postponed, Marsha Wang , spokeswoman for the U.S. company, said on Jan. 19, without giving a reason or a new date. Lenovo expects to eventually sell more handsets than computers in China, Chief Executive Officer Yang Yuanqing said today, without providing a timeframe. Lenovo investors approved the company’s plan to buy Lenovo Mobile Communication Technology Ltd. for $200 million, he said. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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Google Revenue Misses Some Estimates on Advertising Slump; Shares Decline

January 21, 2010

By Brian Womack Jan. 21 (Bloomberg) — Google Inc. , owner of the world’s most popular search engine, reported fourth-quarter sales that fell short of some analysts’ estimates as the economic recovery took longer to boost advertising spending than predicted. The stock fell 4.4 percent in extended trading. Excluding revenue passed on to partner sites, sales totaled $4.95 billion, the company said today in a statement. That compares with an average estimate of $4.91 billion in a Bloomberg survey of analysts. Profit excluding some costs, such as stock-based compensation, was $6.79 a share, Mountain View, California-based Google said. Analysts had estimated $6.44. Google is still grappling with a slowdown in the online ad business even as some industries such as retail are rebounding. “Whisper numbers” circulating on Wall Street had predicted Google would beat estimates by a wider margin, said Martin Pyykkonen , an analyst at Janco Partners. “The numbers are fine as far as fundamentals but not enough to sustain the momentum” in Google shares, said Pyykkonen, who’s based in Greenwood Village, Colorado. “It’s a good result, without the glitz to drive the stock.” Google fell $25.87 to $557.11 in extended trading at 5:32 p.m. New York time. Earlier the shares rose $2.57 to $582.98 on the Nasdaq Stock Market. Net income jumped more than fivefold to $1.97 billion, or $6.13 a share, from $382.4 million, or $1.21, a year earlier, when Google wrote down $1.09 billion of investments. “Google delivered great numbers, but expectations were very high,” said Andy Miedler , an analyst at Edward Jones in St. Louis. “It’s a little bit of ‘buy the rumor, sell the news.’” Revenue Sharing Revenue passed on to partner sites rose to $1.72 billion from $1.56 billion in the third quarter. Google’s share of revenue was smaller than expected because more of its searches came through business partners such as AOL Inc., said Clay Moran , an analyst at Benchmark Co. in Boca Raton, Florida. Revenue from Google-owned sites rose 16 percent, while revenue from partner sites rose 21 percent. “People expected growth at Google properties to be higher than the network, and that drove the higher payment” for so- called traffic acquisition costs, Moran said. Chief Executive Officer Eric Schmidt said on a conference call with analysts that overall he was “very pleased with the performance of Q4.” “We’re back in business, full blast,” he said. “We’re investing heavily.” He said the company will continue to make acquisitions this year at the rate of about one a month. Search Advertising Spending on U.S. search advertising was little changed in the fourth quarter after falling 1 percent in the third quarter, according to SearchIgnite, an online marketing and software company in Atlanta. Overall online advertising in the U.S. shrank 4.6 percent last year, according to December estimates by EMarketer Inc. in New York. The market should rebound this year with growth of 5.5 percent, EMarketer said. Paid clicks on ads increased about 13 percent from the fourth quarter of 2008, Google said. The cost-per-click rose about 5 percent from a year earlier. Google has extended its lead in the search engine market in the U.S., warding off an attack from Microsoft Corp.’s Bing, which was introduced in June. Google claimed 65.7 percent of U.S. searches in December, up from 65 percent in May, according to ComScore Inc. in Reston, Virginia. Microsoft is joining forces with Yahoo! Inc. to form a bigger search competitor to Google. The partnership, scheduled to take effect this year, would put Bing on Yahoo’s Web sites. China Question The future of Google’s stake in the world’s largest Internet market, China, is less clear. Google said earlier this month that it would stop censoring results and might shut down the Google.cn site and offices in the country. The company made the decision after attacks on e-mail accounts of human-rights activists. Schmidt said today that Google is in discussions with Chinese authorities about how it operates in China. today on a conference call with analysts. The company continues to follow Chinese law and offers censored results on its Web site, he said, adding that in a “reasonably short time from now we will be making some changes there.” “We’ve made a strong statement that we wish to remain in China,” he said. Google will generate about $600 million of its revenue in China this year, according to Imran Khan , an analyst at JPMorgan Chase & Co. in New York. Google has been stepping up investments in its global businesses, including its mobile-phone efforts, after cutting costs in the earlier part of 2009. Two Acquisitions The company said in November that it would pay $750 million for AdMob, a mobile advertising company, to boost sales beyond desktop-based ads. The acquisition helps Google get a bigger foothold in ads on smartphones, including Apple Inc.’s iPhone. This month, the company started selling its own mobile phone, the Nexus One. The smartphone, manufactured by Taiwanese partner HTC Corp., uses Google Android software that’s available for other phone makers, such as Motorola Inc. The software is designed to encourage Web surfing on phones where Google sells ads. To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net .

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Apple Said to Talk With Microsoft About Replacing Google Search on IPhone

January 20, 2010

By Peter Burrows and Cliff Edwards Jan. 20 (Bloomberg) — Apple Inc. is in talks with Microsoft Corp. to replace Google Inc. as the default search engine on the iPhone, according to two people familiar with the matter. The talks have been under way for weeks, said the people, who asked not to be identified because the details aren’t public. The negotiations may not be concluded quickly and might still fall apart, the people said. The discussions reflect the intensifying rivalry between Apple and Google, currently the main search engine on the iPhone. While the companies have worked as partners in the past and Google Chief Executive Officer Eric Schmidt served on Apple’s board , they now compete in markets such as mobile phones. Google introduced its Nexus One phone this month and offers a mobile operating system called Android. “To the extent that it threatens Google, such a deal would be good for Apple,” said James McQuivey , an analyst at Cambridge, Massachusetts-based researcher Forrester Research Inc. Apple is also working on ways to manage ads displayed on its mobile devices, a move that would challenge Google’s advertising business, one of the people said. Frank Shaw , a spokesman for Redmond, Washington-based Microsoft, and Katie Cotton , a spokeswoman for Cupertino, California-based Apple, declined to comment. Google spokeswoman Katie Watson also declined to comment. Microsoft, the world’s largest software maker, fell 38 cents to $30.72 at 9:39 a.m. New York time in Nasdaq Stock Market trading. Apple declined $1.48 to $213.56. Google, based in Mountain View, California, dropped $7.37 to $580.25. Bing Default A deal between Apple and Microsoft would likely mean iPhone owners would automatically get Microsoft’s Bing as the main search engine, possibly requiring them to actively change the phone’s settings if they want to search using Google. Google is now the default engine on the iPhone. To search via Bing, users need to go to the Bing Web site through the phone’s Web browser or download a separate Bing application. Being the default search engine on the iPhone generates sales for Google, which collects revenue from ads placed alongside its search results. To clinch the deal, Microsoft may be willing to share more revenue with Apple, one of the people said. Apple and Google don’t disclose the financial terms of their search partnership. Market Share Taking the default spot on the iPhone would also help Microsoft gain market share for Bing. Of people who use their phones to search the Web, 86 percent used Google in November, compared with 11 percent for Bing, according to New York-based Nielsen Co. Cooperation between Apple and Microsoft isn’t unprecedented. Microsoft sells Mac versions of its Office suite of business programs. When Apple co-founder Steve Jobs returned to the company in 1997, one of his first acts was to settle intellectual property infringement claims with Microsoft in exchange for $150 million and a promise from Microsoft that it would continue developing Office for the Mac. To contact the reporters on this story: Peter Burrows in San Francisco at peter_burrows@businessweek.com ; Cliff Edwards in San Francisco at cliff_edwards@businessweek.com

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China Needs to Explain, Investigate Google Web Attacks, U.S. Official Says

January 19, 2010

By Indira A.R. Lakshmanan Jan. 20 (Bloomberg) — The U.S. expects China to conduct a full and transparent investigation of Google Inc .’s accusations that its Chinese Web site was attacked in part to target e-mail accounts of human rights activists, a senior U.S. official said. The State Department hasn’t lodged a formal protest to the Chinese government over the incident, and whether one is issued may hinge on how China responds to U.S. questions in discussions planned in the coming days, said the official, speaking on condition of anonymity because of the case’s sensitivity. The U.S. envoy for East Asia yesterday said that while the Chinese government has denied involvement in the cyber attacks, it is in the “best position” to explain what happened to the operator of the world’s most-popular search engine. The envoy, Assistant Secretary of State Kurt Campbell , declined to comment on the pending U.S. protest, known as a demarche. Google has said the “highly sophisticated” attacks included theft of its intellectual property and targeted at least 20 other international companies in technology, finance and chemicals. The Mountain View, California-based company said it would stop censoring its search engine results as required by the Chinese government, and may end its operations in China. Clinton Speech Secretary of State Hillary Clinton will give a major address on Internet freedom and security tomorrow in Washington, in which she is likely to detail new initiatives by the U.S. government. Google officials informed Clinton and other national security officials about the cyber attacks the week before announcing them publicly, the Obama administration has said. While Clinton issued a statement of concern following Google’s announcement, she hasn’t spoken with a Chinese counterpart on the issue, the senior U.S. official said today. “It would be fair to say that the U.S. government has had multiple meetings with Chinese authorities on this matter and will have more in the coming days,” Campbell said yesterday. “President Obama has identified cyber security as a national priority that underpins global security and economic prosperity, and also contributes to free expression,” he said, noting that Obama “specifically made Internet freedom a central human rights issue of his trip to China.” Chinese Market An exit from China would leave Google, whose revenue growth slowed during the U.S. recession, on the sidelines of the world’s biggest Internet market by users. The number of Chinese Web users will grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That would be up from 396 million last year. It would also leave China without a foreign company operating independently to serve Web users. Local operator Baidu Inc., based in Beijing, accounted for 58.4 percent of the country’s search engine market last quarter, compared with Google’s 35.6 percent, according to researcher Analysys International. To contact the reporter on this story: Indira Lakshmanan in Washington at ilakshmanan@bloomberg.net

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Health Stocks Up As Investors Sense GOP Victory in Mass.

January 19, 2010

Wall Street is already betting that a Republican win in Massachusetts will complicate efforts to get a strong health care reform package through Congress. Six major health insurance company stocks were up early Tuesday as pundits and reporters began writing off the candidacy of the state Attorney General Martha Coakley. Republican State Senator Scott Brown appears to have won before the votes have even been counted. Investors are counting on it. Health insurance companies would presumably benefit financially if the current legislation is further watered down or even killed. Without a 60-vote super-majority, so goes the thinking, Democrats would have to start negotiating away hard-won concessions or face defeat. As of 3:00 pm ET: Coventry Health Care, Inc. was up 5.48 percent; CIGNA Corp. was up 1.33 percent; Aetna Inc. was up 4.11 percent; WellPoint, Inc. was up 1.76 percent; UnitedHealth Group Inc. was up 2.49 percent; And Humana Inc. was up 4.82 percent. The Dow Jones Industrial Average, by comparison, was up just 0.9 percent. Source: Google Finance Get HuffPost Business On Facebook and Twitter !

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Google Sends Right Message to China’s Police State: David Pauly

January 19, 2010

Commentary by David Pauly Jan. 19 (Bloomberg) — Here’s hoping Google Inc. makes good on its threat to quit China. It’s time someone in the U.S. stopped coddling the Chinese police state. The American government can’t, or won’t. Though Google is late coming around as an advocate of free speech in China, it still deserves applause. The company said last week it would stop censoring its Chinese search engine, Google.cn, as the communist government dictates — and might even close the business. Google got religion after discovering that last month hackers — read Chinese government technicians — tried to access accounts of, and managed to steal information from, human-rights activists who used Google e-mail. Hackers went after at least 20 other companies’ computers, Google said. Adobe Systems Inc. , the leading maker of graphics design software; Juniper Networks Inc. , the second-biggest maker of computer networking gear; and Rackspace Hosting Inc. , which manages Web sites, said they also had been attacked. Google can exit China without hurting its stockholders, at least in the short run. The company’s revenue from China would be as much as $350 million this year, about 1.5 percent of total sales, according to a report from Citigroup Inc. Still, the potential market is huge. Some 330 million Chinese use the Internet. The company could sell its Nexus One mobile phone to the Chinese. Market Shares Google’s departure would benefit search rival Baidu Inc. no end. The Beijing-based company now has 58 percent of the country’s Internet search market against Google’s 36 percent, according to researcher Analysis International. With only 6 percent of the market left for others, Google’s U.S. competitors in China clearly could afford to thumb their noses at the police state. Yahoo! Inc. and Microsoft Corp. do business there with partners. Microsoft Chief Executive Office Steve Ballmer said he has no plans to leave the country. It’s easy to see why most companies choose Chinese profit over political stands. China is now the U.S.’s No. 2 trading partner after Canada, with 2008 transactions of $409 billion. U.S. companies manufacture there. Money managers invest there. American companies keep doing business with the communist state in the face of complaints from the auto parts, steel, insurance and electronics industries that China manipulates its currency to help its exporters, prices products at unfairly low levels and protects its home markets from competition. Look Elsewhere Perhaps U.S. companies should seek cheap labor elsewhere. The U.S. government has both economic and political reasons for not challenging a government that muzzles its people and kills them if they get too obstreperous. China has been the biggest purchaser of U.S. debt at a time when the U.S. is borrowing massively to right its economy and financial system. China held about $800 billion of Treasury securities on Oct. 31. Still, China has nowhere else to invest its huge trading gains. The U.S. won’t have to borrow so heavily if its budget deficits begin to decline. The political front may be tougher. Barack Obama’s administration needs China’s cooperation, for example, in its effort to curtail the nuclear weapons capability of Iran and North Korea. Google may eventually compromise with China. That would be a shame. Someone in the U.S. has to let the dictatorship know what we stand for. Google slamming the door as it leaves China would be a welcome step. ( David Pauly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Pauly in Fort Myers, Florida dpauly@bloomberg.net

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Adam Hanft: The Haiti Tragedy: Why Is There Digital Silence?

January 18, 2010

Tragedies are capitalist conundrums. Whenever the world is gripped by an unfolding disaster, American corporations wrestle with their response strategies. Ignore it and you risk looking detached, or worse, callous. Particularly in an era when consumers expect big companies to make big gestures. But splash it over your website and you run another risk — coming across as grubby and opportunistic. Public skepticism isn’t what it used to be, though. Walmart’s heroic response to Katrina, in comparison to FEMA’s ineptitude, sparked excited commentary like this in the Washington Post : “…an unrivaled $20 million in cash donations, 1,500 truckloads of free merchandise, food for 100,000 meals and the promise of a job for every one of its displaced workers — has turned the chain into an unexpected lifeline for much of the Southeast and earned it near-universal praise at a time when the company is struggling to burnish its image.” So what has been the corporate response to the wrenching scenes out of Haiti? A quick scan of the websites of some of our most well-known brands indicates a surprising – if not shocking – minimalism It’s nothing even close to the post-Katrina period, when website after website devoted their home pages to messages of shared sorrow and invitations to contribute to the relief programs. The reason this is important to assess is that a company’s website is a wide-open front door into its heart and soul. Visibility is strategy. Responsiveness is diagnostic. What’s featured and what isn’t featured – and what the relative emphasis is – speaks volumes. And in our world of instant digital communication, in which websites can change in seconds, when a major American institution chooses to ignore a global catastrophe, without even a pro forma “Our hearts are with the people of Haiti” message, it makes you wonder about them. • Let’s start with our eleemosynary friends at Goldman Sachs , Bank of America , JP Morgan Chase and Morgan Stanley , whose CEOs testified before a bi-partisan Congressional Committee on the financial crisis last week. I don’t know what their response was during Katrina. But today, when they should be scrambling for any shred of goodwill, their websites are completely silent about the devastation, not even an insey weensey “Contribute to Haiti” button. You’d think (hope?) one of their PR flaks would have said “Hey guys, let’s burnish our brands a little while we’re in the withering glare.” But nothing. And the silence is devastating; they don’t even care enough pretend. • Wal-Mart hasn’t given its Haiti efforts any dramatic home-page placement. There’s just some small real estate below the fold that features a Red Cross logo and an invitation to “Join Walmart’s efforts to support those in need.” Click on the link, though, and you come to a page dedicated to the company’s efforts in Haiti. While not on a Katrina-like scale, they include a $400,000 monetary donation. Target goes bigger than its rival Walmart on their home page – with a big horizontal banner that sits right under their logo and top navigation. Click on it and you come to a page that details “How Target is Helping” and “How You Can Help.” • Media companies are obviously following the story intently, and their websites show it. But while their newscasts continually direct viewers to organizations who are accepting donations, it’s curious that their websites generally offer no opportunities for readers to contribute. Nor do they boast of their own philanthropic efforts; that’s probably to be expected, given that media companies are experiencing their own metaphorical earthquakes. NPR asks for donations, but PBS , the New York Times , the Wall Street Journal and USA Today don’t. CNN is running a paid ad unit from a non-profit World Vision, asking for contributions. (Yikes, does that mean they are profiting from the earthquake?) • Big consumer brands, usually quick to associate themselves with so-called CSR – Corporate Social Responsibility – efforts, are conspicuously mute. Surprisingly, that includes Starbucks and Nike , two brands that usually chase down socially conscious opportunities wherever they find them. Their websites are acknowledgement-free zones. The cone of silence extends to Coca-Cola , which is a fascinating case because their foundation donated a million bucks. But their website doesn’t hint at that; it remains plushly dedicated to their “Open Happiness” message. Clearly, they’ve resolved to keep their philanthropic and marketing efforts separate, perhaps deciding that the grim news out of Haiti would be inappropriate in juxtaposition to the bubbly promise of “Open Happiness”. A perfect example of the Capitalist Conundrum. As for Amazon, they yield some room above the fold, in the upper right portion of its homepage, asking for donations to “Mercy Corps to help victims of the Haiti earthquake.” • Most technology companies and telecom are too busy. IBM , HP, Verizon and Sony keep their mouths closed. Microsoft is an exception, with a message on the home page that links to an impressive page that notes the company has made an initial commitment of $1.25 million and that it has: “… activated its Disaster Response Team. Through Microsoft’s support, nonprofit partner NetHope has been able to set up an immediate response, with specific focus on establishing temporary telecommunications infrastructure to allow humanitarian agencies to communicate and provide relief to the affected victims.” • Google’s and Apple , as you might expect, are also exceptions. Google’s home page features a big link that reads “Information, resources, and ways you can help survivors of the Haiti earthquake.” The link takes you to a page that references Google’s $1 million contribution, but is largely devoted to a range of contribution options, including Unicef and CARE, as well as organizations that only accept SMS donations. Apple has a small message on their homepage, which takes to the iTunes store. There, the usual storefront is replaced an interruptive page which asks for donations to the Red Cross in amounts from $5 to $200, with all transactions processed through iTunes. Lastly, the site for the Vatican makes no reference to the earthquake. (Note to Holy See webmaster: Time to take down “Christmas 2009″ from your site messaging.) Bottom line: compared to Katrina or the 2004 tsunami – when the Internet was far less developed – most of corporate America has chosen to leave Haiti unacknowledged on their websites. They’ve chosen not to leverage their digital presences; which means no opportunities to contribute, and certainly no efforts to use their databases or social media to rally support. I don’t know if it’s disaster fatigue, or if the recession has downsized their digital departments, but our biggest companies have failed to rise even to the level of meretricious opportunism.

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Google Pledge to Stop China Censoring Spurs Increase in Tiananmen Searches

January 17, 2010

By Bloomberg News Jan. 18 (Bloomberg) — Searches on Google Inc. ’s Chinese Web site for information about the 1989 crackdown on protesters in Beijing’s Tiananmen Square have surged since the search engine said last week it will stop censoring results. Queries for “Truth of Tiananmen” grew at the second- fastest pace of any search term on the Google.cn site as of 9 a.m. local time today, according to data available on the company’s mainland Chinese Web site. China strictly controls information on the crackdown. The searches underline the growing conflict China faces as government efforts to control online content confront a surging population of Internet users who demand greater access to information. Hundreds of Chinese Web users gathered last week at Google’s Beijing offices to show support after the company said it may leave the nation. Google said today it’s meeting with the government and continues to censor its China site. “Irrespective of where one stands on the political spectrum of China, people will still be curious to test if censorship has been lifted,” said Cherian George, an associate professor at Nanyang Technological University, said by telephone from Singapore. “Internet censorship is ineffective in stopping determined activists or the highly-committed information seeker.” Google said last week it had discovered “highly sophisticated” attacks on its network emanating from China and attempts to access the accounts of human rights activists using its Gmail e-mail service. Internet Censorship Those attacks and increased limits on free speech online in the past year led Google to say Jan. 12 it was no longer willing to censor Google.cn and may shut the site and its offices in China if unable to reach an agreement with the government on operating an unfiltered search engine. Google continued today to censor its site in compliance with Chinese laws, Jessica Powell, a Tokyo-based spokeswoman at the company, said by e-mail. Searches for information on the Tiananmen Square crackdown began soon after Google’s announcement last week on censorship. “Tiananmen Square incident video” was the second fastest growing search term on Google.cn as of 6 p.m. on Jan. 14., according to data from the Web site. Terms related to the Tiananmen Square protests weren’t among Google.cn’s most-searched for in November and not one of the top 10 searches for 2009, according to data available on the Web site. Google.cn’s most-popular searches last year were for information about the solar eclipse that darkened China in July and the violent ethnic rioting that hit China’s westernmost Xinjiang province the same month, according to the data. Acid-Tests “The sudden surge in searches for Tiananmen related topics shows users have been trying to work out whether Google has now dropped censorship altogether,” said Isaac Mao, a fellow at Harvard University’s Berkman Center for Internet & Society . “Subjects like Tiananmen are good acid-tests.” Searches for information on the crackdown fell to the seventh-fastest growing as of 11 a.m. local time today. The fastest-growing volume of queries was for the Web log of Chinese financial analyst Wang Weichen. Differing phrases for Google’s departure from China were the fifth and 18th fastest growing searches, according to the site. China is the world’s biggest Internet market. It was home to 384 million Web users at the end of 2009, according to the China Internet Network Information Center, a government agency that registers online domain names. That’s more than triple the 110 million users the nation had four years ago when Google opened its mainland China site. Blocked Sites Authorities censor online content deemed critical of the government by shutting domestic Web sites and blocking access to ones based overseas, including those of Facebook Inc. and Twitter Inc. The Chinese government shut more than 100,000 Web sites in December in an “escalation” of its censorship efforts, according to Pali Capital Inc. analyst Tian Hou. Google agreed to censor search results on Google.cn when the Mountain View, California-based company started the site in January 2006. The company said it opened the site “in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor the results.” The company had a 35.6 percent share of the Chinese market last year, trailing leader Baidu Inc. ’s 58.4 percent share, according to researcher Analysys International. Chinese Support Crowds of Chinese Internet users gathered outside Google’s Beijing office after the company’s announcement. They arrived at the Tsinghua Science Park in western Beijing in freezing temperatures to lay fresh-cut flowers, candles and hand-written letters in front of the building. “The government was right in filtering some stuff on the Internet but we need more sources of information to separate truth from rumor,” said Shen Shihai, a 27-year-old who works for a technology company in the western city of Chengdu and took time out of a business trip to the Chinese capital to visit Google’s offices. The nation’s system of internet censorship, dubbed the “Great Firewall of China,” is the world’s most pervasive, according to Harvard University’s Berkman Center for Internet & Society. On the tablet outside Google’s Beijing offices where its logo is inscribed, Shen left a note that read in Chinese, “Google, bye. See you on the other side of the wall.” — With assistance from Alfred Cang in Shanghai. Mark McCord in Hong Kong. Editors: John Liu, Bret Okeson To contact Bloomberg News staff for this story: Baizhen Chua in Beijing at +86-10-6649-7561 or Bchua14@bloomberg.net Mark Lee in Hong Kong at +852-2977-6909 or Wlee37@bloomberg.net

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