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James A. Lewis: China’s Google Scandal

January 15, 2010

Countries rarely like spy scandals. They’re messy, and they get in the way of things like cooperation on Korea and Iran, or trade and recovery. Governments expect and tolerate some level of spying by other nations, but there are limits, unspoken, unwritten, that have to do with respect and security. Fifteen years ago a Director of Central Intelligence traveled to France to say: back off, less spying . He did not say stop, because no one will ever stop, but the limits had been crossed and he let the French know. China has gotten a pass when it comes to espionage. The Chinese themselves would say that they are a poor country, oppressed for a century by European Imperialists and/or Japan, and so it is only payback. They’d also say that we do it to them, which is true, but not really a fair comparison. The focus of American spying is traditional statecraft — arms sales, military capabilities and plans, political intentions. China’s goals are very different. The most important goal is the survival of the regime and the party. China has a huge intelligence apparatus, but most of it is focused domestically, against potential opponents or those bits of China’s empire, the Uighers or Tibetans, that would like to pull away. China’s Communist Party leadership saw what happened to the Soviet Union and their greatest fear is that it could happen to them. This is where the Google story gets complicated. Google caught someone spying on them and more than 30 other companies. In retaliation, it says it will close up shop and stop self-censoring. It’s the latter that may frighten Beijing the most — free access to information could undercut the carefully crafted story that the Party is the linchpin of stability and growth. It makes the Google episode a political challenge, not just another spy story. China’s second most important goal is catching up to the West. This is not a plan for world domination, but a desire for the power and respect that China thinks it is due Since 1986, China has invested billions in education and infrastructure and has opened its economy to Western countries to gain both growth and technology (we’ve spent the time debating whether Darwin was right). Illicit acquisition of western technology is part of China’s growth strategy — debates over piracy and Intellectual property protection are the public face of this but espionage, including cyber-espionage, plays a central role. The Chinese are not the only country that spies on us nor are they the best — perhaps that is one reason why they have been caught. Their cyber spying has been going on for more than a decade, against the Departments of Defense, State and Energy and against high tech companies that make civil and military products. The U.S. has alternated between complaining quietly to itself and loud Cox Commission hysteria, but it has not been serious about improving its defenses or pushing back on the Chinese. This Google episode may change that, by bringing the spotlight back onto the problem. Google is the administration’s favorite child when it comes to technology and its complaints won’t be ignored. Most companies don’t go public when they’ve been hacked. By being open, Google has done us a favor. Now the U.S. has a decision to make — sweep it under the rug or call the Chinese on it. The Chinese have a decision to make — tough it out or back off a bit. The likely result is somewhere in between, but we could be in for a period of tension. Only prolonged attention and from the U.S. will get the Chinese to change their behavior. The worst thing we could do is try to smooth things over. There is a precedent of sorts. In the 1980s, the Soviet Union has a massive espionage program to steal Western technology, run by a special KGB division — Line X. A Russian Colonel gave the French the Soviet wish list, and the French shared it with the US and UK . A short time later, the two countries expelled dozens of Line X agents from Soviet Embassies in their capitols, rocking the collection program back on its heels. We can’t expel cyber agents, but we need to find some equivalent to take countries to task when they cross espionage’s unwritten lines. We shouldn’t expect the Chinese (or our other opponents) to do us any favors. Getting the high tech espionage problem under control is a major security problem for the US. This means better cyber defenses — a complex task that the private sector cannot do (we don’t ask airlines to take on MiGs; let’s not expect Google to take on the PLA). It also means thinking about how to extend the rule of law into cyberspace, creating norms and making clear where national governments are responsible for their own actions and the actions of their citizens. If the Chinese have gotten a pass on espionage, we’ve given it to them and only we can change that. Calling them on Google is a good start.

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Video: Google May Have Tried to Get Support Over Cyber Attack: Video

January 15, 2010

Jan. 15 (Bloomberg) — Google Inc. approached other companies to seek their help drawing attention to a cyber attack from China last month and was frustrated by their reluctance to come forward, according to a person familiar with the matter. Bloomberg’s Cris Valerio reports. (Source: Bloomberg)

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Video: Elstrom Discusses Competition Between Apple, Google: Video

January 15, 2010

Jan. 15 (Bloomberg) — Bloomberg BusinessWeek’s Peter Elstrom talks with Bloomberg’s Erik Schatzker about the marketing campaigns Google Inc. and Apple Inc. are waging into one another’s core market businesses. (Source: Bloomberg)

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Video: Haverty Says Google Shares `Extraordinarily’ Undervalued: Video

January 14, 2010

Dec. 15 (Bloomberg) — Lawrence Haverty, a portfolio manager at Gamco Investors Inc., talks with Bloomberg’s Zeb Eckert about the implications of Google Inc.’s possible departure from China. Haverty also discusses the outlook for Yahoo! Inc. and Baidu Inc. Google said Jan. 12 it may quit the Chinese market after discovering attacks originating from China on the e-mail accounts of human-rights activists using their Gmail service. (Source: Bloomberg)

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Auren Hoffman: Common Traits of A-Players

January 14, 2010

An unscientific observation of what A-Players have in common We often talk about the elusive “A-Player” – a person that everyone wants to hire, but many can rarely find. In this article we’ll attempt to discuss how to spot these people and see what they have in common. A few points up-front: It is almost impossible to determine if someone is an A-Player until you’ve worked with them for 1-2 months. After that point though, it is really easy to determine. Unfortunately you often don’t get a chance to work with someone in an interview or via observation. Not ALL of the traits listed below are in every A-Player. But every A-Player has some of the traits. And if you meet someone that has all of them, that person is likely to be an A-Player. The A-Player Janitor When people think of an A-Player, they often think the person had have gone to Harvard. Going to a great school – or even going to college at all – is not a good predictor of being an A-Player. Each position in your company can have an A-Player. The person who cleans your toilets could be an A-Player cleaner. That person isn’t likely to be an A-Player lawyer, but the A-Player lawyer probably wouldn’t do a great job cleaning either. As a hiring manager, your goal is to fill each position with the very best person to fill that position. If you think of a baseball team, it is pretty rare that the catcher is best hitter on the team. But having a good catcher is really important. And a baseball team also needs a great doctor, a great ground crew, great secretary to handle the fan mail, and even a great person to do the laundry. Relentlessly Resourceful Paul Graham has written that great entrepreneurs are “relentlessly resourceful.” They are. But that label doesn’t just apply to entrepreneurs, it applies to A-Players as well. Great people are consistently finding ways to be great. They make things happen. The best teacher I ever encountered was Don Tedesco who taught my fifth grade class. He wasn’t satisfied with the normal curriculum… He needed to reinvent it. (More on Mr. Tedesco below.) Rules Encourage Mediocrity A-Players like to be creative. Actually, they NEED to be creative. They need to find the best way to accomplish their goals and they cannot be told exactly what to do. (B and C players often NEED to be told what to do). And so an A-Player would generally quit rather than follow stupid rules. My guess is that you won’t find an A-Player teacher that will agree to teach to a test. They’ll just quit and move to a new environment that allows them to educate kids in the best way possible. The best teacher I ever had, Don Tedesco who taught my fifth and sixth grades, created a whole school-within-a-school (and called it “Actionville”) and broke every rule in the system. If your company is trying to attract A-Players, you might first want to eliminate some of your rules. And if you are an entrepreneur of a fast-growing company, you should monitor people that like to create rules for others (generally the general counsel and the HR people). While those rules are often well-intentioned, they can drive A-Players away from the company. Getting Back to People Most A-Players get back to people quickly. Usually within 24 hours. In the few occasions that I have emailed Steve Jobs, he’s gotten back to me in about 2 hours. Ditto for Steve Ballmer, Maria Bartiromo, Marc Benioff, Pete Briger, Eric Cantor, Andy Grove, Vernon Jordan, Bill Kristol, Lenny Mendonca, Anne-Marie Slaughter, and Dave Steiner. The one group of A-Players that are really bad at getting back to people are those that work at Google (though there are plenty of exceptions). I think that is because the culture didn’t have many real customers in the early days so people there got in the practice of basically ignoring emails from the outside world. People like Steve Jobs, Steve Ballmer, and Mac Benioff, by contrast, grew up needing to quickly respond and engage with customers. Good rule of thumb: If you find someone that generally gets back to everyone in a timely way, it is usually a good sign. Early vs Late Do A-Players come to events early or late? I’ve personally found that they come to events on the early side. Certainly it would be a flag if someone was late to an interview or a meeting. Founders A-Players have often founded something. Maybe they started a student club, an association, a company, a cool web page, a user group, a neighborhood watch association, or a new committee on the PTA. Follow-up A-Players seem to better understand how to manage people – especially their bosses and their colleagues. They seem to implicitly understand what it means to manage deadlines. Work harder and smarter Great employees work harder than good employees. Partially it is because they are motivated by their company and those around them. But it is also because they take pride in what they do. Jerry Rice outworked every football player. Tiger Woods outworks every golfer. They both have some incredible natural talents – but it is their work ethic that sets them apart. My guess is that both Rice and Woods would be amazing in a business environment if that is what they were passionate about. But A-Players also work smarter. Like Rice and Woods, they don’t just spend a long time practicing, they actually practice in the right way.

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Google’s Threat to Leave China May Reflect U.S. Companies’ Growing Unease

January 14, 2010

By Mark Drajem Jan. 14 (Bloomberg) — Google Inc. ’s threat to pull out of China is the most visible reflection of U.S. companies’ growing disillusionment with the country nine years after it joined the World Trade Organization, business groups said. Trade groups representing companies like Microsoft Corp. , Boeing Co. , Intel Corp. and Cigna Corp. , which backed China’s entry into the WTO and fought off legislation to punish Chinese imports, say China increasingly discriminates against them on government contracts and through unfair subsidies. Yahoo! Inc. was targeted by a Chinese attack similar to the one that affected Google, according to a person familiar with the matter. “There are a growing number of bilateral problems,” William Reinsch , president of the National Foreign Trade Council, which represents companies including Boeing and Cigna, said in an interview yesterday. “There is a lot of frustration on the part of companies, and the Chinese brought it on themselves.” Google, owner of the most-used search engine, said Jan. 12 that it would end self-censorship of its product in China after attacks on e-mail accounts of human-rights activists. The Mountain View, California-based company said the move may cause it to close offices in the country. At least 20 other companies were targeted in a series of “highly sophisticated” attacks in December, Google said. Yahoo was one of them, said the person, who declined to be identified because the information isn’t public. Adobe Attack “Yahoo does not generally disclose that type of information, but we take security very seriously and we take appropriate action in the event of any kind of breach,” the company, owner of the No. 2 search engine in the U.S., said in a statement. After Google’s announcement, Adobe Systems Inc. said its network systems also were attacked, in a “sophisticated, coordinated” effort. San Jose, California-based Adobe, the world’s biggest maker of graphic-design programs, didn’t say where the attack originated. China agreed to cut tariffs, allow foreign investment in insurance, banking and express delivery and curtail subsidies as part of its agreement to join the WTO, which was completed in December 2001. Commerce between the U.S. and China soared to $408 billion in 2008, making China the second-largest U.S. trading partner after Canada, and foreign investment increased. ‘Undertone of Dissatisfaction’ U.S. manufacturers such as steelmaker Nucor Corp. complained over the years that China was using cheap currency, low-cost government loans and discrimination to boost its exporters. At the same time, Reinsch and business groups such as the U.S. Chamber of Commerce lobbied against legislation in Congress to erect barriers against Chinese imports. Their advocacy on behalf of China may now wane, according to Robert Kapp , a business consultant focused on China. “There is an undertone of dissatisfaction,” Kapp, who is based in Port Angeles, Washington, said in an interview. “It’s asking a lot of American companies to have them back policies in Washington, D.C., when in fact they see themselves badly treated by that same Chinese government.” U.S. industry groups have raised complaints in recent months about policies such as China’s proposal to limit government contracts to companies that develop their technology in China. “There is a growing frustration among companies about doing business in China,” John Neuffer, vice president of the Information Technology Industry Council, a Washington-based group that represents companies such as Microsoft and Intel, said in an interview. “It’s still a profitable market, but it’s become more difficult to do business there.” Banks, Insurers U.S. banks and insurance companies have protested limits on their ability to offer the same services as Chinese competitors. “The going in China has been very slow for insurers,” David Snyder , general counsel of the American Insurance Association in Washington, said in an interview. “It has been a slow and unsteady process, with a few steps forward and then a few steps back.” Google, which said it weathered a series of “highly sophisticated” cyber-attacks, faces issues peculiar to its industry, according to John Frisbie , president of the U.S.-China Business Council, a Washington-based group that represents U.S. companies with operations in China. Google’s ‘Unique Challenges’ “The other 99 percent of companies don’t have to face the same issues that Google has,” Frisbie said in an interview. “The information companies face unique challenges in China.” Google has chafed at Chinese censorship of its search results and grappled with cybersecurity challenges. The cyber attack, which occurred in the middle of December, originated in China and resulted in intellectual property being stolen, Google said. Two Gmail accounts may have been accessed as part of last month’s attack, it said. Frisbie, who represents companies such as General Electric Co. with operations in China, said in testimony before the U.S. Trade Representative in October that “new regulations, measures and practices are surfacing” in China that would “undermine previously implemented reforms.” Such comments from long-time backers of U.S.-China relations represent growing dissatisfaction among U.S. companies, said Susan Aaronson , a professor at George Washington University in Washington who writes about U.S.-China trade relations. “I see much greater disillusionment as China is promoting its national champion companies,” Aaronson said in an interview. “More and more firms are going to say: I can do without this market.” To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

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Gay-Marriage Trial in California Can’t Be Broadcast, Supreme Court Rules

January 13, 2010

By Greg Stohr Jan. 13 (Bloomberg) — A divided U.S. Supreme Court blocked the planned public broadcast of the San Francisco trial on the constitutionality of California’s ban on gay marriage. The justices voted 5-4 to bar the broadcast. Supporters of the gay-marriage ban challenged a federal district judge’s plan to have video of the trial made available for use on Google Inc.’s YouTube network. The Supreme Court earlier this week issued a two-day halt to the plan. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

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Google Hacking Attacks in China Presage Battle With U.S. to Shape Internet

January 13, 2010

By Bloomberg News Jan. 13 (Bloomberg) — Google Inc. ’s threat to pull out of China because of hacking and censorship may further the Communist government’s resolve to shape the Internet to its political advantage rather than accept the “unrestricted” Web advocated by President Barack Obama . Google said yesterday it is willing to stop doing business in the world’s most populous country unless China drops restrictions. The decision followed attacks aimed at Gmail messaging accounts of human rights activists and what the Mountain View, California-based company called “attempts over the past year to further limit free speech on the Web.” Secretary of State Hillary Clinton called on China’s government to explain the attacks, which follow attempts last year to mandate the installation of filtering software and the blocking of social-networking sites including Facebook.com and Twitter.com. China is also encouraging its companies to develop hardware that will power the next version of the World Wide Web, said Rebecca MacKinnon , an expert on Chinese Internet controls. “China is building a model for how an authoritarian government can survive the Internet,” said MacKinnon, a former fellow at Harvard University’s Berkman Center for Internet and Society who is writing a book about the Internet and free speech. “The long-term strategy is to have an influence on the next generation of Internet standards that would be more compatible with censorship.” With its gross domestic product set to surpass that of Japan as soon as this year, China’s stance on Internet screening sets up a fight between the world’s two biggest economies. Fostering Democracy Obama told Shanghai students during his visit to China in November that the U.S. was committed to a free and open Internet to foster democracy, “encourage creativity,” and promote prosperity. Google owns the world’s most popular search engine and has a market value of more than $180 billion. “I can tell you that in the United States, the fact that we have free Internet or unrestricted Internet access is a source of strength,” Obama said Nov. 16. “If it had not been for the freedom and the openness that the Internet allows, Google wouldn’t exist.” Clinton is scheduled to give a speech on Internet freedom on Jan. 21. Google Chief Executive Officer Eric Schmidt was among a group of technology executives who dined with Clinton at the State Department last week to discuss ways to promote democracy and development. ‘Deeply Disturbed’ “I’m deeply disturbed that another wave of attacks is coming from China,” Rep. Anna Eshoo , a senior Democratic member of the House Permanent Select Committee on Intelligence, said in a statement. “This raises serious national security concerns.” Wang Lijian , a Beijing-based spokesman for the Ministry of Industry and Information Technology, said he couldn’t comment as he was unaware of the Google situation. China’s foreign ministry, the country’s main government mouthpiece, declined to comment. China’s control of Internet access, dubbed the “Great Firewall of China,” restricts access to Web sites including those advocating Tibetan independence or focused on news about the 1989 crackdown on students in Beijing’s Tiananmen Square. News sites such as the U.S. government-funded Voice of America, and the Youtube.com video-sharing site also face restrictions. Google, Beijing-based Baidu Inc. and the Chinese search engine for Sunnyvale, California-based Yahoo! Inc. all self- censor search results. ‘Unable to Display’ In July, for example, Chinese who accessed those sites were unable to read accounts of a graft probe of a company once headed by the son of Chinese President Hu Jintao . Instead, google.cn posted a notice in Chinese saying “the search results may involve material that may not be in accordance with relevant laws and regulations, unable to display.” Today, an iconic 1989 photo of a man standing in front of a column of tanks during the Tiananmen Square crackdown was available on Google’s Chinese Web site. The news of the photo’s availability was earlier reported by Agence France-Presse. China’s leaders have said that it is the government’s role to control content on the Internet. In a December essay in the Communist Party’s People’s Daily, Li Changchun , a member of the ruling Politburo Standing Committee who oversees propaganda, said that “hostile forces” were using the Internet to infiltrate China with “decadent thought.” ‘Proactively Respond’ “We must proactively respond to rapid developments in Internet technology,” Li said. With 338 million Internet users at the end of last June, China has more people online than the entire population of the United States, according to figures from the government’s China Internet Network Information Center . Google set up google.cn in China in 2006, stating at the time that the advantages of giving Chinese greater access to the Internet outweighed the fact that the company had to censor some search results. “When we went into China a few years ago, we made it pretty clear that having to self-censor our search results was very distasteful for us,” Google Chief Legal Officer David Drummond said in a Bloomberg Television interview. “Knowing what we know now, having been attacked by organized forces that are politically motivated — we have dozens of Gmail users whose accounts are being accessed — we no longer feel in good conscience that we can censor our results.” — Michael Forsythe . With assistance from Indira Lakshmanan in Washington and Susan Li in Hong Kong. Editors: Bill Austin , Mark Williams To contact Bloomberg News staff on this story: Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net .

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Clinton Calls on China to Explain Attack on Google’s Chinese Internet Site

January 12, 2010

By Indira A.R. Lakshmanan Jan. 13 (Bloomberg) — U.S. Secretary of State Hillary Clinton called on China to explain what Google Inc. described as a “highly sophisticated” attack on its Chinese web site aimed at e-mail accounts of human rights activists. “We look to the Chinese government for an explanation,” Clinton, who is in Hawaii on the first stop of an Asia-Pacific trip, said in a statement. The allegations “raise very serious concerns and questions.” Google yesterday said it plans to stop censoring results on its Google.cn site after discovering the attack, adding that at least 20 other large companies had been targeted as well. The company informed Clinton about the situation last week, a senior U.S. official familiar with the matter said on condition of anonymity. Google Chief Executive Officer Eric Schmidt was among a group of technology executives dined with Clinton at the State Department last week to discuss the promotion of democracy and development. extended trading. The shares have lost 6 percent this year. Wang Lijian , a Beijing-based spokesman for the Ministry of Industry and Information Technology, said he couldn’t comment as he was unaware of the situation. China’s foreign ministry declined to comment. Clinton is planning to give a speech Jan. 21 in Washington on Internet security, during which she will disclose some new U.S. policies and actions, the official said. That speech was previously scheduled and not a consequence of Google’s announcement, the official added. The White House declined to comment directly on Google’s statement. ‘A National Priority’ “President Obama made cyber security a national priority which is why shortly after taking office he directed his National Security Council and Homeland Security Council to conduct a top-to-bottom review of the federal government’s efforts to defend our information and communications infrastructure and to recommend the best way to secure these networks and our prosperity,” Nick Shapiro , an administration spokesman, said. When he visited China in November, President Barack Obama spoke out against censorship of the Internet, telling students at a forum in Shanghai that an open exchange of information makes nations stronger rather than weaker. “Unrestricted Internet access is a source of strength, and I think, should be encouraged,” he said at the Nov. 16 event. To contact the reporter on this story: Indira Lakshmanan in Washington at ilakshmanan@bloomberg.net

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Google to Stop Censoring China Results, May Shut Site

January 12, 2010

By Brian Womack and Ari Levy Jan. 12 (Bloomberg) — Google Inc. , owner of the world’s most popular Internet search engine, plans to stop censoring results on its Chinese site, Google.cn, a move that may lead to shutting down the service. The company said it will discuss the plan with Chinese authorities and is willing to close the site, according to a blog post today. Google also said it has evidence that an attack on its China Web site was aimed at accessing Gmail accounts of Chinese human-rights activists. “Over the next few weeks, we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all,” the Mountain View, California-based company said. “We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.” Google has clashed with authorities since it started a censored version of its site four years ago in China, which leads the world in Internet users. The company said today that attacks on its site and surveillance of users prompted it to review its business operations in the country. The move signals that Google is hewing closer to its “Don’t be evil” motto, said Heath Terry , an analyst at FBR Capital Markets. “This is their way of opening up this important conversation,” said Terry, who is in New York. “This is their way of starting to move the conversation forward.” Google is still a “long way away from getting out of China,” Terry said. The company can threaten to leave the country because China accounts for such a small piece of Google’s sales, he said. Baidu Gains Google’s president of its Chinese operations, Kai-Fu Lee , stepped down in September. The country’s online search market is dominated by Chinese company Baidu Inc. Google fell $10.48, or 1.8 percent, to $580 in extended trading after closing at $590.48 on the Nasdaq Stock Market. The shares have dropped 4.8 percent this year. Baidu’s American Depository Receipts added $13.51, or 3.5 percent, to $400 in extended trading. In investigating the attack on its own site, Google said it discovered that at least 20 other large companies in industries such as finance, technology, media and chemicals had been similarly targeted. Google said it is in the process of notifying those companies and working with the “relevant U.S. authorities.” Gmail Accounts Dozens of accounts of Gmail users, who are advocates of human rights in the U.S., China and Europe, were accessed, most likely through “phishing scams or malware placed on the users’ computers,” Google said. Only two of those accounts appear to have been accessed and the information gathered was limited to account information, such as the date created and the subject line, not the content of the e-mails, Google said. In June, Google suspended its “suggest” search prompt feature on its Chinese site after the local-language service was criticized by the government for providing links to pornographic material. China adopted “punitive measures” against the company’s international site, Foreign Ministry spokesman Qin Gang said on June 25, and the service became inaccessible to Chinese Web users for hours. China has more Internet users than the total population of the U.S., according to the China Internet Network Information Center , a government-backed agency that licenses online domain names. To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net ;

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Google Phone Threatens Droid More Than IPhone: Rich Jaroslovsky

January 11, 2010

Commentary by Rich Jaroslovsky Jan. 11 (Bloomberg) — It’s a nice phone. OK, it’s a very nice phone. But nothing about the new Nexus One smartphone from Google Inc. comes close to warranting the mass hysteria that attended its unveiling last week. The Nexus One isn’t revolutionary. Nor is it an iPhone killer — a phrase we should banish to the Tech Writers’ Hall of Cliches. It is, instead, a sleek phone with some advancements in display and processor technology that will surely be matched and then overtaken by others in the months ahead. True, the rapidly evolving competition among Google, Apple Inc ., Microsoft Corp. and Research in Motion Ltd. is fascinating to watch. And Google’s plunge into e-tailing — the Nexus One can only be bought directly from the company over the Web — has the potential to shake up how phones are sold. Me, though, I find it hard to swoon over a business model. The Nexus One, manufactured by Taiwan’s HTC Corp. to Google’s specifications, is similar in both size and shape to the iPhone — a smidge thinner and lighter, a trifle longer. It runs a new version of Google’s Android operating system that makes modest tweaks to the software that debuted on Motorola Inc. ’s Droid two months ago. Thing of Beauty If anyone ought to feel threatened by the Nexus One, it’s Motorola, which committed to using Android for all its smartphones and now has powerful new competition from its own partner. Just to cite one area, the Droid’s screen used to be my favorite: super-bright, with higher resolution than the iPhone. But the Nexus One uses new technology that provides an even richer display, with deeper colors and blacker blacks. It’s a thing of beauty. Under the hood, the Nexus One uses a Qualcomm Inc. processor that’s the most powerful ever put in a phone. It also has enhanced 3-D graphics, expanded speech-to-text features — you can now dictate your Facebook or Twitter updates rather than type them — a replaceable battery and a memory-card slot. At the same time, the Nexus One shares the shortcomings of previous Android and HTC phones. The number of Android apps trails far behind the iPhone. So does Android’s ability to sync with Microsoft Outlook for e- mail, calendars and contacts, though the Nexus One does come with a version of DataViz Inc.’s Documents To Go software that lets you work with Microsoft Word, Excel and PowerPoint files. Accidental Launches Its app icons, which now whiz onto the desktop instead of rolling up window shade-style, are too small and close together; I too often accidentally launch an app when all I’m trying to do is scroll through them. The included 4 gigabytes of storage is too small and inflexible, with only 190 megabytes set aside for apps. You can’t pinch your fingers together or move them apart to zoom in or out on a screen. The home, back, menu and search buttons below the screen require too much pressure to push, and the trackball seems superfluous except when it glows to signal a new call or message. The company’s real innovation is in how it’s selling the Nexus One and the other Google-branded phones to follow. Most phones in the U.S. are purchased tied to a specific carrier, which subsidizes the cost of the handset in return for your commitment to a service contract. Google is seeking to separate the handset from the service. You can buy it with a service plan for $179, or pay $529 and purchase service separately. T-Mobile At launch, there isn’t much of a choice: The only carrier currently offering a plan is T-Mobile USA, the U.S. mobile-phone division of Deutsche Telekom AG , which charges $79.99 per month. In theory, you can also use a SIM card from AT&T Inc., but the phone wouldn’t be able to use AT&T’s 3G network for data, only its older, slower Edge network. Outside the U.S., Google is shipping the unlocked Nexus One to the U.K., Hong Kong and Singapore. The choices will multiply over time. This spring will see a Nexus One that runs on the Verizon Wireless network, which uses a different technology than AT&T and T-Mobile. Also in the spring, Vodafone Group Plc is lined up to offer a service plan for the Nexus One in Europe. Google is responsible for delivering the phone — the one I ordered on launch day last week arrived in less than 48 hours — and will be the first point of contact if anything goes wrong. Weakening the carriers’ control and compelling them to compete with each other may eventually put more power into consumers’ hands — and, of course, Google’s. While all this is interesting, it’s hardly earth- shattering. When Apple introduced the iPhone in 2007, it changed the entire way people thought about wireless devices, ushering in the era of the mobile Web. The Nexus One? It’s just a very nice phone. ( 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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Alex Berliner: What Do You Mean My Doctor Is Dead?

January 8, 2010

Anyone who claims the government can’t handle health care as well as private enterprise hasn’t yet been assigned a dead person for a doctor. But that’s exactly what happened this week to Monica, an employee of mine. When Monica opened her Anthem/Blue Cross health insurance packet on Monday, she expected to see the name of her own doctor, who she had verified as ‘in network’ by telephone with Blue Cross before she left for the holidays. Instead, she saw the name of a doctor who she had never heard of, and who had died in early September of 2008 (that second tidbit was only revealed after a series of phone calls with the deceased doctor’s office, some barely-English speaking Blue Cross representatives and some cursory Google searching). It wasn’t until Monica directly asked the deceased doctor’s office staff if the information she had seen on the internet was true did they confirm it and apologize to her. To date, no new information has come from Blue Cross following her calls on Monday. She is left to fend for herself and find another practitioner. This being said, Monica is more likely to find a doctor with a pulse as well. I have friends without employer-provided health insurance who tell me they want to come work for me just for the benefits. As a small family run business, we’ve always made sure to care for our employees as best we can, which includes providing health coverage (the cost of which rises every year). But now I’m forced to ask myself: what “benefit” is even being provided? Is the jumping through rings and over hurdles, only to learn that the doctor you’ve been assigned is six feet under, a benefit ? Despite its faults, the federal government (certainly) at least knows when you’re dead, be you a loyal taxpayer, an employee, a ward of the state, or anything else. If private HMOs can’t even keep track of the sentience of their ‘in network’ doctors, how can they ever be relied on to be there for you when you really need them? And moreover, why does a service that is mediocre at best (really it’s closer to being completely worthless) become more and more exorbitant each year. What the hell are we paying for? Taking care of those around us is a great responsibility, one that we take seriously. I would expect the same from those providing services to us in this area. We are the customers in this situation, but who do I have to go to when I have a lack of service? I don’t believe that my public representatives will take this any less seriously when it is their turn to provide us with health care.

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Google’s Free Navigation App Takes a Wrong Turn: Tech by Rich Jaroslovsky

January 8, 2010

Commentary by Rich Jaroslovsky Jan. 8 (Bloomberg) — Where in the world am I? I thought I knew. From all outward appearances, I was at Pennsylvania Station in New York City. But according to Google Inc.’s free mapping and navigation software, running on a Droid smartphone, I was on Cheapside, a street in London. The map even helpfully located nearby Underground stations. When Motorola Inc. , Verizon Wireless and Google launched the Droid in November, shares fell in TomTom NV and Garmin Ltd. , which make dedicated navigation systems. The reason: The mapping application in Google’s Android mobile operating system offered spoken, turn-by-turn directions — for free. Navigation is also a major feature of Google’s newly unveiled Nexus One phone, which I’ll take a look at shortly. After using the app on the Droid in the New York-New Jersey metropolitan area for the last couple of weeks, I’ve encountered enough quirks — hello, London! — to conclude that I might not give up a dedicated navigation system just yet. The best way to use the Droid for navigation is with the optional $29.99 mounting bracket that attaches to windshield or dashboard. The phone senses when it’s in the holder, and Android automatically switches to a special car interface that includes large buttons for maps and navigation. On a few occasions, though, my phone would revert to its usual desktop, requiring me or my passenger to find the icon for the car interface and re-launch it. A Bit Fussy The Droid provides multiple ways to input your destination, including touch screen, physical keyboard and the surprisingly accurate Google voice-search feature that is built into Android. I found the app’s interface a bit fussy, requiring a number of pokes and prods, and in no case should it be used by a driver when the car is moving. I also had issues with the app display. For a smartphone, the Droid’s screen is a pleasure — super-bright, with a higher resolution than that of Apple Inc. ’s iPhone, for which, by the way, TomTom makes an app whose price it halved last month to $49.99. But the Google app’s map display and the Droid screen’s 3.7-inch size made it much harder to see than the 4.3-inch display on the stand-alone Garmin Nuvi 855 nav system I used for comparison purposes. Once underway, the app delivered its driving instructions in a robotic but clear voice. I found the system gave me plenty of advance notice of forthcoming turns, including street names, and usually picked good routes. Missed Turn When I deliberately missed a turn, though, the Droid tended to take longer than the Nuvi to recalculate its directions, so I missed what would have been a logical alternative route because the phone was still thinking while I passed a key intersection. Then there were the app’s occasional bouts of confusion, including the Cheapside episode. Motorola refers accuracy questions to Google. Google says its maps use a variety of sources to determine location, including global positioning satellite, cellular-tower locations and even Wi-Fi, though the application will provide active navigation and directions only if it has an accurate GPS signal. Google says the accuracy of the various signals varies from one device to another, and can’t be ascribed to its software. A One-Way Street Whoever’s to blame, it’s still disconcerting to be directed to turn the wrong way down a one-way street, something that has happened perhaps twice in five years with the built-in navigation system in my car. With the Google app, it happened within a week. The Nuvi, by the way, avoided the mistake. Another annoyance: Incoming phone calls took over the screen completely, hiding the map. On the other hand, when I arrived at my destination, not only did the phone announce it, but the view switched automatically to a Google street-view photograph, particularly nice if you’re in an unfamiliar locale. Google labels the navigation app as “Beta,” a designation that it traditionally maintains far longer than most other software companies. In this case, the label is well-warranted. Google Navigation offers a lot of functionality at a price that can’t be beat, but there are still bugs in the system. Oh, and to get to Penn Station from Cheapside, head toward the Thames, take a right, and _ keep going. ( 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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Motorola Introduces Another Android-Based Phone to Take on Apple’s IPhone

January 7, 2010

By Hugo Miller and Ian King Jan. 7 (Bloomberg) — Motorola Inc. , the largest U.S. mobile-phone maker, added another device to its lineup based on Google Inc. ’s Android software, aiming to find a hit product that rivals Apple Inc. ’s iPhone. The phone, called the Backflip, has a flip-out qwerty keyboard and a touch pad on the back of the display, Co-Chief Executive Officer Sanjay Jha said yesterday at the Consumer Electronics Show in Las Vegas. The Backflip will be available in the Americas, Europe and Asia in the first quarter. The company plans to introduce at least 20 new models this year, he said. “As we rejuvenate our portfolio to focus on the smartphone section, where the majority of the growth and profitability is, I feel relatively comfortable that we’re headed in the right direction,” Jha said in an interview. Jha, 46, joined Schaumburg, Illinois-based Motorola from chipmaker Qualcomm Inc. in 2008. He faces the challenge of reviving Motorola’s phone business, which has struggled to match the popularity of the iPhone and other smartphones. Under his guidance, Motorola introduced the Droid and the Cliq last year, its first two phones based on the Android operating system. Android’s share of mobile-phone Web browsing in North America climbed to 12.4 percent in December and eclipsed Research In Motion Ltd. ’s BlackBerry for the first time in November, according to San Francisco-based research firm Quantcast. The iPhone was the leader, accounting for 65 percent. AT&T Phones The Backflip has a 3.1-inch (7.9 centimeter) touch-screen display, Wi-Fi access, a 5-megapixel camera and the company’s Motoblur social-networking software. Motorola didn’t give any details on pricing. Jha said the phone will be available with multiple carriers worldwide, without naming any. Separately, AT&T Inc. said yesterday that it will offer a new Motorola phone based on Android in the first half of this year, without giving further details. Motorola released the Droid in November through Verizon Wireless. While the device got positive reviews, it now has to compete with Google’s own Android phone, the Nexus One. That phone, introduced this week, is available for $179 with a contract from T-Mobile USA Inc., which also sells the Cliq. “The Droid has been a hit, but we believe its cheaper cousin, Cliq, has been a disappointment for T-Mobile,” Tero Kuittinen , an analyst at MKM Partners in Greenwich, Connecticut, said this week in a report. The Nexus One “could push the Cliq into early retirement,” said Kuittinen, who recommends selling Motorola shares. Nexus One Google, based in Mountain View, California, designed the Nexus One with Taiwan’s HTC Corp., which was the first manufacturer to sell Android-based devices in 2008. Motorola’s third-quarter revenue dropped 27 percent to $5.45 billion as the company scaled back its product line. Its phone business, which last had a hit product with the Razr in 2004, has been unprofitable since 2006. Motorola rose 11 cents to $7.97 yesterday on the New York Stock Exchange. The stock climbed 75 percent in 2009, its best year in a decade. To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

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Intel Vulnerable as Consumers Shift to Phones to Browse the Web

January 6, 2010

By Ian King Jan. 6 (Bloomberg) — Intel Corp. ’s position as the gateway to the Internet will come under attack in 2010 as more consumers start going online via phones, tablets, e-readers and scaled- down laptops. Qualcomm Inc. , Marvell Technology Group Ltd. and Freescale Semiconductor Inc. are among the chipmakers demonstrating new kinds of Internet devices at this week’s Consumer Electronics Show in Las Vegas. Their goal: persuade consumers to ditch their Intel-powered personal computers as the primary way of going online. “The next billion users that are going to connect to the Web aren’t going to be connected by the PC,” said Henri Richard , head of sales at Austin, Texas-based Freescale. “It’s going to be a multitude of devices.” Intel , the world’s largest chipmaker, makes more than 80 percent of PC processors — the brains of computers. It aims to use its Atom product, which runs small laptops known as netbooks, to break into chips for wireless devices, a market IDC estimates will increase 14 percent to more than $46 billion in 2010. Its rivals are heading in the other direction: using phone chips to woo users of PCs and consumer electronics. While the PC will remain the main way for people to go online, portable devices are chipping away at that dominance — with mobile phones leading the charge. Qualcomm , Freescale, Marvell and Texas Instruments Inc. are using chip technology developed by ARM Holdings Plc . Reaching a Billion By 2013, the number of phones regularly being used to access the Web will exceed 1 billion for the first time, a fivefold increase from 2006, according to Framingham, Massachusetts-based IDC. Over the same time period, the number of Internet-connected PCs will rise to 1.6 billion from 754 million, according to IDC. “The push right now is to connect everyone and everything, and that’s why we’re seeing a plethora of devices,” said Jim McGregor , an analyst at Scottsdale, Arizona-based research firm In-Stat. “In terms of sheer numbers and usability, you can’t compete with a handheld. Everything migrates to a mobile.” The Consumer Electronics Show will reveal which phone-chip makers have made progress persuading computer and consumer- electronics companies to use their components. Qualcomm, the world’s largest maker of phone chips, will show off a so-called smartbook made by Lenovo Group Ltd., China’s biggest computer maker. That device will run on San Diego-based Qualcomm’s Snapdragon chip. Freescale will demonstrate similar small laptops based on its products, and Marvell will introduce products based on a new range of faster processors. Apple Tablet? Apple Inc. , maker of the iPhone, also is planning to unveil a tablet computer this month, a person familiar with the matter said this week. Yesterday, Google Inc. introduced a touch-screen phone called the Nexus One. It makes more sense to use smartphone technology to build tablets, e-readers and handheld computers, rather than relying on PC chips, said Sehat Sutardja , chief executive officer of Santa Clara, California-based Marvell. Smartphones offer the right mix of processing speed, low power consumption and touch screens, making them easy to convert into Internet devices, he said. “A touch-screen smartphone is actually a small tablet PC,” said Sutardja, whose company supplies the main chip for Research In Motion Ltd. ’s Blackberry. “The time for tablet devices is now.” Armada Chips In October, Marvell released a new line of chips called Armada. Those products can run fast enough to bring PC-level computing to e-readers and tablets, Sutardja said. Internet devices have previously failed to catch on with consumers because the chips that ran them were either too slow to make them useful or drew too much power, draining batteries, he said. At CES, Intel CEO Paul Otellini plans to demonstrate mobile devices based on its chips. “We remain committed to delivering the benefits of Intel architecture to handhelds and consumer electronics and believe that these devices will continue to become smarter with PC-like performance, computer and Internet capabilities,” said Claudine Mangano, a spokeswoman for the Santa Clara-based company. “This is Intel’s strength.” Intel lost 1 cent to $20.87 yesterday in Nasdaq Stock Market trading. The shares added 39 percent in 2009. Qualcomm gained $1.13 to $48.07, and Marvell rose 40 cents to $21.43. Intel’s challenge in pushing into phones and mobile devices is creating less power-hungry chips with similar performance. The company’s rivals on the phone side are trying to gauge how quickly that will happen. Intel chips will continue to draw three to four times as much power as Marvell’s products, Sutardja said. ARM , though, doesn’t expect phone chips to have an edge for long. ‘Smart Company’ “Intel’s a smart company and in the next couple of years they’ll have the same type of power and performance,” said Bob Morris , director of mobile computing for Cambridge, England- based ARM. In the meantime, ARM chipmakers can gain an edge with electronics companies by selling chips that are cheaper than Intel’s, he said. They also can use Google’s free Android software, which works with ARM designs. Electronic-book readers, fueled by the success of Amazon.com Inc. ’s Kindle and Sony Corp. devices, are opening up another market for chips. For the first time, CES will have an area devoted to e-readers on the show floor. That market will double next year to about 11 million units and then double again by 2013, according to Vinita Jakhanwal , an analyst at El Segundo, California-based ISuppli Corp. As readers become more popular, they could become more general-purpose Internet devices, Freescale’s Richard said. His company makes the processors that power both the Kindle and Sony products, which account for about 75 percent of market sales. For now, the black-and-white screens of e-readers may make them unfit for broader applications, said ISuppli’s Jakhanwal. Until color displays are introduced, consumers won’t accept e- readers as Web browsers, she said. To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net .

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Palm’s Pre, Pixi Are Said to Be Debuting on Verizon’s Network This Month

January 5, 2010

By Amy Thomson and Ari Levy Jan. 5 (Bloomberg) — Palm Inc. ’s Pre and Pixi will be offered this month by Verizon Wireless, the second U.S. wireless carrier to sell the devices, according to a person familiar with the matter. Verizon, the biggest U.S. mobile-phone service, will introduce the models this week at the Consumer Electronics Show in Las Vegas, said the person, who declined to be named because the announcement hasn’t been made public. The Pre and Pixi, currently sold in the U.S. only by Sprint Nextel Corp. , will include some changes such as additional memory, the person said. “This is Palm’s second chance to shine after what’s been a real lackluster performance,” said Maribel Lopez , founder of Lopez Research LLC, a San Francisco-based consulting and research firm. Palm has “to prove that this platform has legs and they can do something with it.” Palm is seeking to entice new customers after reporting its 10th straight quarterly loss last month. Chief Executive Officer Jon Rubinstein had said in December that the company planned to announce new service-provider partners in the near future. Ehud Gelblum , a Morgan Stanley analyst who initiated coverage of Palm yesterday, recommended the stock, citing the likelihood of additional carrier agreements. Derick Mains , a spokesman for Sunnyvale, California-based Palm, declined to comment, as did Brenda Raney , a spokeswoman for Basking Ridge, New Jersey-based Verizon Wireless. Verizon’s Lineup The price of the Palm phones will be determined this week, said the person familiar with the matter. At Verizon, Palm will be competing with smartphones such as Research In Motion Ltd.’s Storm 2 and Motorola Inc.’s Droid, which uses Google Inc.’s Android operating system. The Droid sells for $200 on Verizon’s Web site, while the Storm 2 costs $20 less. Verizon Wireless is co-owned by Verizon Communications Inc. and Vodafone Group Plc. AT&T Inc., which has exclusive rights to Apple Inc.’s iPhone, may start selling Palm’s phones in the first half of the year, Gelblum said. Additional carriers in the U.S. and abroad will more than double Palm’s base of potential subscribers to 406 million from 149 million currently, the New York-based analyst said. Palm rose 29 cents to $10.32 yesterday in Nasdaq Stock Market trading. The shares more than tripled in value last year. Verizon Communications, down 2.3 percent in 2009, added 15 cents to $33.28 yesterday. To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net ; Ari Levy in San Francisco at alevy5@bloomberg.net .

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Billionaires Make Their Predictions For 2010

January 4, 2010

to own in 2010. All but one who abstained recommended a different investment. Among their picks: high-end art, real estate, distressed debt, cash, gold and stocks. Stanford professor Cheriton, who made his billions from a chunk of Google stock he’d been

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Microsoft’s Windows Needs a Swift Kick in the Boot-Up: Rich Jaroslovsky

December 31, 2009

Commentary by Rich Jaroslovsky Dec. 31 (Bloomberg) — It took about 20 years before television viewers no longer had to wait for their sets to warm up. Yet here we are, 30-plus years into the personal computer era, and the instant-on PC remains elusive. That may be about to change. Today’s tech consumers have grown accustomed to always-on smart phones and efficient netbooks they can leave for hours in “sleep” mode without rebooting. As a result, they are losing patience with the spinning logos, hourglasses, and twiddling thumbs that define the experience of booting up most Windows PCs. And they are showing a growing interest in hardware and software that speed up the process, or can even sidestep it. By most accounts, Windows 7, the current version of Microsoft Corp. ’s operating system, is quicker off the mark than its predecessor, Windows Vista. Microsoft cites its efforts with partners such as Lenovo Group Ltd. to optimize Windows boot-up times, and its work on power management that it says makes Windows’ sleep mode the moral equivalent of instant-on. Still, making Windows faster isn’t the same thing as making Windows fast; starting a PC can take anywhere from less than one minute to more than 10, depending on its hardware and the version of Windows it’s using. And leaving computers in indefinite sleep runs counter to the U.S. government’s best advice on saving energy. So if you’re impatient for a better solution — and after all, impatience is what this is all about — here are three ways to get closer to the goal: Windows Add-On — Run an instant-on operating system in addition to Windows. A number of programs aim to work around Windows’ slow boot times by simply not booting Windows. Instead, these programs — some of which come installed on new computers from Dell Inc ., Hewlett-Packard Co. , Asustek Computer Inc. and Acer Inc. , among others — launch a stripped-down desktop that allows you to surf the Web, handle any e-mail you can view in a browser and perform other basic tasks. Windows is there, but only to be summoned when needed. I’ve been using one such program, HyperSpace from Phoenix Technologies Ltd. , on a Samsung NC10 netbook for the last couple of weeks. If it’s a quick start you’re looking for, HyperSpace provides it. Press the power button, and within 15 seconds, the Linux- based HyperSpace presents you with a customizable screen including a browser, a notepad application, RealNetworks Inc. ’s RealPlayer media software and news, weather and stock information. I could jot a quick note, view videos from YouTube and even make calls using Skype , all without ever launching Windows. Less Satisfying The experience became a little less satisfying, though, once I hit the icon on the HyperSpace desktop to launch Windows. For one thing, you can’t load Windows in the background, so using HyperSpace doesn’t eliminate waiting for it to boot, just delays it. Moreover, while the two systems exist side by side, jumping back and forth between them can pose problems. I found the speed of the switch to be highly variable: Sometimes it was quite brisk; other times, especially when running off of the Samsung’s battery, I faced long, uncomfortable pauses where nothing seemed to be happening on the screen. Do I keep waiting? Do I click again? If you’re like me, you may find yourself doing fewer and fewer things within the Windows environment. Which may be good for your productivity — but can’t possibly be good news for Microsoft. Solid-State Drives — Switch to a solid-state drive. Conventional hard drives are mechanical devices, and it takes time to locate and access your data on a spinning platter. Solid-state drives, by contrast, have no moving parts; information is stored on microchips, and is instantly accessible. As a result, SSDs are faster and use 80 percent less power, according to Samsung, which along with Intel is a major supplier of the drives. I’ve been using a Dell Latitude E4300 notebook computer outfitted with a 256 gigabyte Samsung SSD. No messing around with multiple operating systems here. Instead, it is pure Windows — at light speed. Using Windows 7, the Latitude rockets from zero to ready for action in a mere 20 seconds. As an added benefit, just about every other function gets a speed boost too. Programs launch in the blink of an eye, and the computer shuts down in five seconds. Stiff Price Alas, the speed comes at a stiff price. There’s still a vast gulf between SSDs and mechanical drives: Putting an SSD in the Latitude adds about $700 to its price, compared with a conventional hard disk of similar capacity. In other words, solid state is the way to go, but only if you’ve got the dough. — Get rid of Windows. There are more operating-system alternatives to Windows today than at any point in the last two decades. And the options are increasing. Most obviously, there’s Apple Inc. ’s OS X. The current version, Snow Leopard, boots 10 percent to 15 percent faster than Windows 7, according to most tests. While that’s good, no one would describe a Mac as “instant on.” And its advantages come at the cost of higher prices and less hardware selection than its PC equivalents. For those with less money in their wallets and more adventure in their souls, there’s Ubuntu , a free, consumer- oriented Linux environment from Canonical Ltd. with startup times comparable to HyperSpace. And lurking in the wings is Google Inc. , which is promising its own operating system, Chrome OS, for 2010. Chrome OS was designed with instant-on in mind. At its public debut this summer, Google executives showed a netbook reaching its log-in screen seven seconds after powering up, and said they were working to bring that down even more. All these developments put Microsoft on notice that it is going to have to move more quickly — literally — to retain its dominant position. Speaking for computer users everywhere, I can’t wait. ( 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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Microsoft Needs a Swift Kick in the Boot-Up: Rich Jaroslovsky

December 30, 2009

Commentary by Rich Jaroslovsky Dec. 31 (Bloomberg) — It took about 20 years before television viewers no longer had to wait for their sets to warm up. Yet here we are, 30-plus years into the personal computer era, and the instant-on PC remains elusive. That may be about to change. Today’s tech consumers have grown accustomed to always-on smart phones and efficient netbooks they can leave for hours in “sleep” mode without rebooting. As a result, they are losing patience with the spinning logos, hourglasses, and twiddling thumbs that define the experience of booting up most Windows PCs. And they are showing a growing interest in hardware and software that speed up the process, or can even sidestep it. By most accounts, Windows 7, the current version of Microsoft Corp. ’s operating system, is quicker off the mark than its predecessor, Windows Vista. Microsoft cites its efforts with partners such as Lenovo Group Ltd. to optimize Windows boot-up times, and its work on power management that it says makes Windows’ sleep mode the moral equivalent of instant-on. Still, making Windows faster isn’t the same thing as making Windows fast; starting a PC can take anywhere from less than one minute to more than 10, depending on its hardware and the version of Windows it’s using. And leaving computers in indefinite sleep runs counter to the U.S. government’s best advice on saving energy. So if you’re impatient for a better solution — and after all, impatience is what this is all about — here are three ways to get closer to the goal: Windows Add-On — Run an instant-on operating system in addition to Windows. A number of programs aim to work around Windows’ slow boot times by simply not booting Windows. Instead, these programs — some of which come installed on new computers from Dell Inc ., Hewlett-Packard Co. , Asustek Computer Inc. and Acer Inc. , among others — launch a stripped-down desktop that allows you to surf the Web, handle any e-mail you can view in a browser and perform other basic tasks. Windows is there, but only to be summoned when needed. I’ve been using one such program, HyperSpace from Phoenix Technologies Ltd. , on a Samsung NC10 netbook for the last couple of weeks. If it’s a quick start you’re looking for, HyperSpace provides it. Press the power button, and within 15 seconds, the Linux- based HyperSpace presents you with a customizable screen including a browser, a notepad application, RealNetworks Inc. ’s RealPlayer media software and news, weather and stock information. I could jot a quick note, view videos from YouTube and even make calls using Skype , all without ever launching Windows. Less Satisfying The experience became a little less satisfying, though, once I hit the icon on the HyperSpace desktop to launch Windows. For one thing, you can’t load Windows in the background, so using HyperSpace doesn’t eliminate waiting for it to boot, just delays it. Moreover, while the two systems exist side by side, jumping back and forth between them can pose problems. I found the speed of the switch to be highly variable: Sometimes it was quite brisk; other times, especially when running off of the Samsung’s battery, I faced long, uncomfortable pauses where nothing seemed to be happening on the screen. Do I keep waiting? Do I click again? If you’re like me, you may find yourself doing fewer and fewer things within the Windows environment. Which may be good for your productivity — but can’t possibly be good news for Microsoft. Solid-State Drives — Switch to a solid-state drive. Conventional hard drives are mechanical devices, and it takes time to locate and access your data on a spinning platter. Solid-state drives, by contrast, have no moving parts; information is stored on microchips, and is instantly accessible. As a result, SSDs are faster and use 80 percent less power, according to Samsung, which along with Intel is a major supplier of the drives. I’ve been using a Dell Latitude E4300 notebook computer outfitted with a 256 gigabyte Samsung SSD. No messing around with multiple operating systems here. Instead, it is pure Windows — at light speed. Using Windows 7, the Latitude rockets from zero to ready for action in a mere 20 seconds. As an added benefit, just about every other function gets a speed boost too. Programs launch in the blink of an eye, and the computer shuts down in five seconds. Stiff Price Alas, the speed comes at a stiff price. There’s still a vast gulf between SSDs and mechanical drives: Putting an SSD in the Latitude adds about $700 to its price, compared with a conventional hard disk of similar capacity. In other words, solid state is the way to go, but only if you’ve got the dough. — Get rid of Windows. There are more operating-system alternatives to Windows today than at any point in the last two decades. And the options are increasing. Most obviously, there’s Apple Inc. ’s OS X. The current version, Snow Leopard, boots 10 percent to 15 percent faster than Windows 7, according to most tests. While that’s good, no one would describe a Mac as “instant on.” And its advantages come at the cost of higher prices and less hardware selection than its PC equivalents. For those with less money in their wallets and more adventure in their souls, there’s Ubuntu , a free, consumer- oriented Linux environment from Canonical Ltd. with startup times comparable to HyperSpace. And lurking in the wings is Google Inc. , which is promising its own operating system, Chrome OS, for 2010. Chrome OS was designed with instant-on in mind. At its public debut this summer, Google executives showed a netbook reaching its log-in screen seven seconds after powering up, and said they were working to bring that down even more. All these developments put Microsoft on notice that it is going to have to move more quickly — literally — to retain its dominant position. Speaking for computer users everywhere, I can’t wait. ( 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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Bears Beat Slumping Vikings 36-30, Giving New Orleans Saints Top …

December 28, 2009

“ Distressed Debt ” via Industry-News.org in Google Reader : – 20 newly delinquent loans led to a material increase in U.S. commercial real estate loan (CREL) CDO delinquencies to 3.83% for January 2009, up from 2.72% in December 2008, …

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Krugman: 'Reasonably High Chance' Economy Will Contract Next Year …

December 27, 2009

Distressed Commercial Real Estate – Google Blog Search : News Search Results for Distressed Commercial Real Estate : The outlook was grim, but our worst fears were not realized: The economy did not collapse during the year that wasn’t …

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Sydney, Taiwan Airports Tighten Security After Attempted Detroit …

December 26, 2009

Commercial Real Estate Finance Basics December 25, 2009. Distressed Commercial Real Estate – Google Blog Search : Commercial Real Estate Finance Basics. By Brian and Jeff On December 25, 2009 Under Commercial Real Estate Loans […] …

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Suspected Terrorist Tried to Blow Up Detroit-Bound Jet, U.S. …

December 25, 2009

Commercial Real Estate Finance Basics December 25, 2009. Distressed Commercial Real Estate – Google Blog Search : Commercial Real Estate Finance Basics. By Brian and Jeff On December 25, 2009 Under Commercial Real Estate Loans […] …

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Obamas Send Holiday Wishes to Troops at War, Ask Americans to …

December 25, 2009

Distressed Commercial Real Estate – Google Blog Search : Structuring Commercial Real Estate Workouts: Alternatives to Foreclosure. By admin on December 25, 2009. Continue reading here: Structuring Commercial Real Estate Workouts: …

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Walmart Open Christmas Day? NO! Ignore Rumors, Hours Listings, Etc.

December 25, 2009

For those wondering, ‘is Walmart open Christmas Day?,’ the answer is no. Walmart, along with most other major retailers , closed its doors last night, Dec. 24, 2009, and will reopen tomorrow morning, Dec. 26. Rumors today are rampant that Walmart is open, fueled by an error-filled blog post making that claim and ranking high in Google search results. That same blog post also claims K-Mart and Best Buy are also open, which is not true. These retail stores are closed today for Christmas Day 2009 , along with Target and many others. Many other bloggers followed suit stating that Walmart is open today, even though it is not, citing that original (incorrect) post as a source. This added to the confusion today online and helped the rumor spread even further. Other bloggers are posting some places that are open Christmas Day .

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Structuring Commercial Real Estate Workouts: Alternatives to …

December 25, 2009

Distressed Commercial Real Estate – Google Blog Search : Structuring Commercial Real Estate Workouts: Alternatives to Foreclosure. By admin on December 25, 2009.

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Seeing Public Subsidy (Not Public Option) Investors Flock to Health Insurers

December 21, 2009

Investors are seeing the Senate’s version of health care reform as a massive public subsidy for insurance companies — and as a result, are sending the sector’s stock prices shooting up, up, up. Stripped of a government-run insurance plan, the bill would give tens of millions of Americans no option but to start paying hefty premiums to private companies. The rise in stock prices has been particularly striking in the period since Sen. Joe Lieberman (I-Conn.) said on October 27 that he would filibuster a Senate health care reform bill if it included a public option – a threat that caused Senate leaders to cave without much of a fight. Here’s a quick breakdown of major health insurance company stock performance from Oct. 27 to Friday’s market close: Coventry Health Care, Inc. is up 31.6 percent; CIGNA Corp. is up 29.1 percent; Aetna Inc. is up 27.1 percent; WellPoint, Inc. is up 26.6 percent; UnitedHealth Group Inc. is up 20.5 percent; And Humana Inc. is up 13.6 percent. By comparsion, the Dow Jones Industrial Average is only up 2.3 percent during that time; the NASDAQ Composite is up a (relatively) paltry 1.4 percent. Reuters noted the big bump Monday morning, after the bill passed the first critical test in the Senate : “All in all, relative to the last version of health reform issued by the Senate, things have turned out pretty well for the health insurance industry,” said Carl McDonald, an analyst at Oppenheimer. “In particular, all versions of a government-run health plan have largely been eliminated.” Thanks to Lieberman’s threat, health insurance companies dodged a major competitor that could have lowered margins, siphoned off customers and impacted profits. Source: Google Finance Get HuffPost Business On Facebook and Twitter !

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French court orders Google to pay $430,000 fine

December 20, 2009

French court orders Google to pay $430,000 fine

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UnitedHealth, WellPoint Win Delay on Health Insurer Tax in New …

December 19, 2009

admin wrote a new blog post: Commercial real estate on shaky foundation 5 hours, 24 minutes ago. “ Distressed Debt” via Industry-News.org in Google Reader : Optimism about a national economic recovery, fueled by rising stock prices and …

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Manufacturing Counties Lead Surprise Job Comeback: AP

December 7, 2009

CONOVER, N.C. (MIKE BAKER — AP) – As record numbers of orders flow through Legacy Furniture Group’s manufacturing plant, workers toil between towers of piled foam and incomplete end tables precariously stacked five pieces high. With a 10 percent sales growth this year, Legacy has quickly forgotten the recession’s low point in March, when weak order volumes forced the company to implement four-day work weeks. In November alone, the company that specializes in furniture for the medical industry added a half-dozen employees to its staff of 35. These days, everyone is clocking overtime and the 40,000-square-foot factory is starting to feel awfully cramped. “We’re starting to stack people instead of stacking furniture,” jokes co-founder Todd Norris as he navigates rows of hand-sanded chair frames. Legacy’s recent success highlights a trend: Counties with the heaviest reliance on manufacturing income are posting some of the biggest employment gains of the nation’s early economic recovery. This is a big change from just half a year ago, when some economists worried that widespread layoffs by U.S. manufacturers might be part of an irreversible trend in that sector. The Associated Press Economic Stress Index, a monthly analysis of the economic state of more than 3,100 U.S. counties, found that manufacturing counties have outperformed the national average since March. The Stress Index calculates a score from 1 to 100 based on a county’s unemployment, foreclosure and bankruptcy rates. The higher the number, the greater the county’s level of economic stress. The top 100 manufacturing counties with populations of more than 25,000 saw their Stress score drop slightly over the spring and summer quarters, largely due to improvements in the unemployment rate. By comparison, the national average of similar counties saw county Stress score increases of about 7 percent over the same time. Economists say these counties may always have high rates of idled workers as technology replaces workers on the assembly line and companies find cheaper labor elsewhere. And manufacturing counties did have an average Stress score of 11.9 in September, while the top counties dedicated to hospitality were at 9.2. But the early improvements in unemployment rates and manufacturing activity illustrate that there are, at the very least, signs of stability. U.S. manufacturers increased production by an average of 1.1 percent each month through July, August and September, before falling slightly, by 0.1 percent, in October, according to federal data. Economists cite a range of potential explanations for the early resurgence, including the “Cash for Clunkers” program to stimulate car buying, a weak U.S. dollar to aid exports, the use of temporary workers, the need to replace depleted inventories, and stimulus money that is taking root. All of which raises the question of whether the trend will last. Here in Catawba County, where native hardwoods and access to power have made the region a historical hub for furniture manufacturing, the unemployment rate dropped from a peak of 15.6 in March to 13.6 percent in September. Elkhart County, Ind., meanwhile, saw such a startling surge in layoffs one year ago that President Barack Obama made a stop there in the opening weeks of his presidency. The unemployment rate there, driven by job cuts at RV manufacturers, spiked in March at 18.9 percent, but has fallen steadily ever since — to 15 percent in September. The nation’s overall jobless rate has been going the other way, climbing from 8.5 percent to 10.2 percent. “Manufacturing jobs are here to stay, and they’re coming back,” said Derald Bontrager, president and chief operating officer of Middlebury, Ind.-based RV maker Jayco Inc., which recalled or hired 200 laid-off workers over the summer to help ramp up production after an unexpected sales boom overwhelmed all-time-low inventories and left the producer unable to meet demand. They’re still trying to catch up. The Carolina furniture makers who have been hiring since June may also have cut too many jobs at the base of the recession, says Scott Volz, a consultant who helps the companies recruit managers. Some of those businesses have also successfully refocused on specialties — such as high-end upholstery or quick turnarounds on custom furniture — instead of trying to compete directly with cheap Chinese imports. Heath Cushman, 32, of Taylorsville, lost his job at a sock plant in 2008 and was out of work for nine months. His unemployment check was worth more than the low-paying jobs available back then to a graphic designer with a decade of experience. “I have a house, a son, a wife, a car payment like everybody else,” he said. “Nine dollars an hour, even if it was 60 hours a week, probably wouldn’t have cut it.” He was considering a long commute, or a move to a city like Charlotte, then he landed a job at Legacy making what he called a “generous” wage. Any doubts he had about a future in the manufacturing industry vanished as company executives excitedly described their future plans. Executives are now moving operations to a larger facility nearby and plan to add some 50 employees. Mike Walden, an economist at North Carolina State University, said manufacturing tends to be one of the sectors that leads the way out of recession, as factories ramp-up to meet pent-up demand. But he questioned whether the new jobs would stick around for long. “As we’ve seen this spurt in manufacturing production over the last six months, those factories have to go out and bring back some laid-off workers,” Walden said. “In five years, however, those same workers may be back out the door.” Not all manufacturing workers are going back to similar jobs: Other industries that frequently seek cheap labor overseas, such as customer service, are also sponging up bargain employees where layoffs have occurred. In western North Carolina, widespread manufacturing layoffs were a theme that predated the recession — largely due to foreign competition. Yet Catawba County has been able to find some new employers eager to tap the available work force: Target Corp. opened a distribution hub in August, Apple Inc. is building an East Coast data center just 30 miles down the road from a similar Google Inc. server farm that opened last year as county recruiters brand the region as a “data corridor.” Justin Pennell worked through the early part of the recession building equipment used by the furniture makers. But the 26-year-old’s job in Lenoir was so unstable that he would frequently go weeks without work and have to draw unemployment. In January, with the industry idling, he started searching elsewhere and soon took a job at Target, where he now maintains trucks and machines, with a steady 40-hour work schedule. “It’s a lot better,” Pennell said, “knowing that I’m going to make a certain amount per week, versus wondering where it’s coming from the next.” ___ Associated Press Writer Mike Schneider contributed to this report from Orlando, Fla.

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Darling Weighs Levy on U.K. Bankers' Bonuses, Scrapping Tax Cut …

December 6, 2009

“ Distressed Debt” via Industry-News.org in Google Reader : provide the protection they need, a recent survey shows. advertisement Respondents to a recent survey about the Asia-Pacific distressed debt market in 2010 were optimistic about distressed debt …. Industry-Partners technology-based platform provides industry networking, educational outreach and capital market intelligence for residential and commercial real estate , private equity and fund management marketplace. …

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Video: Google CEO Schmidt Discusses Obama Jobs Summit: Video

December 3, 2009

Dec. 3 (Bloomberg) — Eric Schmidt, chief executive officer of Google Inc., talks with Bloomberg Television about the U.S. labor market and the Obama administration’s jobs summit. (Source: Bloomberg)

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Video: Schmidt Says Google-News Corp. in Friendly Conversations: Video

December 3, 2009

Dec. 3 (Bloomberg) — Eric Schmidt, chief executive officer of Google Inc., talks with Bloomberg’s Pimm Fox about the possibility that News Corp. will list its stories on Microsoft Corp.’s Bing search engine. Schmidt, speaking from Washington, also discusses the Obama administration’s economic policies, Google’s revenues from its mobile business and the outlook for the media industry. (Source: Bloomberg)

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Rob Fishman: Prize of the Meritocracy

December 2, 2009

Goldman Sachs is a meritocracy . Then they admit it, the booming-but-beleaguered bankers, whose website says it loud and clear. And why not? Everyone in America knows what a meritocracy is. Rule by the worthy, not the rich, regal or related. As at Goldman Sachs, where your “opportunity to contribute…will be directly connected to your ability to excel.” Of course, as Michael Young, author of that obscure classic , The Rise of the Meritocracy , once wrote, “the most influential books are always those that are not read.” If from the grave , Young has second-guessed that supposition, he need Google no further than the aforementioned advert. Had Goldman’s copywriter read Young, he would have steered far clear of the locution, and in so doing, left the public’s worst fears about his employer unconfirmed. But then, his bonus probably dwindled this year to the low six-figures. Young coined the word “meritocracy” in 1958, in a futuristic story set in 2034. There, “the world beholds for the first time the spectacle of a brilliant class, the five per cent of the nation who know what five per cent means.” A simple formula reigns supreme: IQ + effort = merit. To be merely intelligent or industrious is not enough; only those with both succeed. In the new Age of Meritocracy, “all persons, however humble, know they have had every chance.” Your opportunity to contribute, in other words, is directly connected to your ability to excel. Goldman Sachs is by its own and all accounts a textbook meritocracy. Long before C.E.O. Lloyd Blankfein was doing God’s work , he was growing up in the projects, and, on a scholarship, attending Harvard at age 16 . Silver spoons don’t earn gold medals, grit and brains do. If IQ + effort = merit, and IQ + effort = Goldman, then Goldman = merit. Or in the plain English of Vanity Fair : “Goldman is better.” And not because they’re plutocrats (“Government Sachs”) or oligarchs (“Goldmine Sachs”), but because they’re the smartest and savviest. Meritocracy at its apotheosis. But that’s only half the story, half of Michael Young’s story. As he writes in a foreword to Rise of the Meritocracy , many readers have “neglected, or not noticed, the fact that the book is satirical.” It is not only an argument for meritocracy, but a counterargument against it: “another story, showing how sad, and fragile, a meritocratic society could be.” In the language of fifty years later, the story of subprime loans, health care crises, and populist rage. “If the rich and powerful were encouraged by the general culture to believe that they fully deserved all they had,” Young continues, “how arrogant they could become, and, if they were convinced it was all for the common good, how ruthless in pursuing their own advantage.” “I think a strong Goldman Sachs,” says Blankfein, “is good for the country.” Whether it’s God’s work or only Goldman’s, it’s clearly the province of the meritorious. Kids these days are told, in the words of one Harvard instructor, that investment banking “is the only valuable way to finish your education. You’ll work with the smartest people and the most exciting, high-profile clients.” For off-the-charts IQs and outstanding efforts, the destination’s no longer NASA; it’s Goldman. And therein lies the same conundrum that Young introduces, in the so-called “Chelsea Manifesto, of”—believe it or not—”2009″: Were we to evaluate people, not only according to their intelligence and their education, their occupation and their power, but according to their kindliness and their courage, their imagination and sensitivity, their sympathy and generosity, there could be no classes. Who would be able to say that the scientist was superior to the porter with admirable qualities as a father, the civil servant with unusual skill at gaining prizes superior to the lorry-driver with unusual skill at growing roses? Imagine what they’d call the original meritocrat if he wrote that today! The fear today is that Goldman has lost its lorry-drivers, employing only those adept at gaining superior prizes. As Bethany McLean writes , the Goldman of old, who refused to partake in hostile takeovers, is gone. In its stead is a belief that Goldman “cares about one thing and one thing only: making money for itself.” As one Wall Street executive tells McLean: “Why do you have a business? Because you have a customer. You have to make an appropriate profit. But is it possible that Goldman has changed from a firm that had customers to a company that is just smart as shit and makes a shitload of money?” More and more these days, we see intellect and ingenuity employed to lucrative ends, IQ + effort = $$$. In this story, Buffett, Blankfein and Bloomberg are not so much antiheroes as provillains, rags-to-riches cases who bear out the meritocracy, and in so doing, reveal its inadequacy. The problem with Goldman is not false advertising. Like the civil servant, it’s an inability to smell the roses.

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Bomb Responsible for Russian Train Derailment Killing 26 …

November 28, 2009

Here is an interesting post from ourceexcerpt% Read the original here here: What is pricing structure for commercial real estate brokers … Industry-News.org finds the best stories around the globe and distributes them to our readers. … “ Distressed Debt” via Industry-News.org in Google Reader : companies in industries such as steel, coal, telecommunications, foreign investment and textiles. He specializes in leveraged buyouts and distressed businesses. …

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Secret Service Says It Is `Embarrassed' by Security Breach at …

November 27, 2009

“ Distressed Debt ” via Industry-News.org in Google Reader : The decision by the Dubai government to seek a six-month debt standstill for its largest subsidiary Dubai World shouldnt necessarily come as a surprise to most real estate …

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Terrorism Is Suspected in Fatal Russian Train Derailment, Vesti …

November 27, 2009

“ Distressed Debt” via Industry-News.org in Google Reader : By Elinor Comlay and Jonathan Stempel – Analysis NEW YORK (Reuters) – Dubai’s debt woes could further unhinge an already fragile U.S. commercial real estate , as it illustrates …

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Bank of America Says Pay for Desoer, Price Amended After …

November 27, 2009

“ Distressed Debt ” via Industry-News.org in Google Reader : after Dubai asked banks to allow its investment vehicle Dubai World to suspend for six months payments on debt of $59 billion. This comes as big bets on Persian Gulf real estate …

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Transactional Funding Helps Real Estate Investors Close More Short …

November 22, 2009

” Distressed Debt ” via Industry-News.org in Google Reader : money, credit or assets! FOR IMMEDIATE RELEASE PRLog (Press Release) – Nov 22, 2009 – Transactional funding gets real estate investors the money they need to close more short …

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Transactional Funding Helps Real Estate Investors Close More Short …

November 22, 2009

” Distressed Debt ” via Industry-News.org in Google Reader : money, credit or assets! FOR IMMEDIATE RELEASE PRLog (Press Release) – Nov 22, 2009 – Transactional funding gets real estate investors the money they need to close more short …

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Rajaratnam’s Request to Unseal Accuser Khan’s Criminal Case Is Postponed

November 20, 2009

By Joel Rosenblatt Nov. 21 (Bloomberg) — A court hearing to determine whether a 2001 criminal case against the chief accuser of Galleon Group founder Raj Rajaratnam will be unsealed was delayed for two weeks. Rajaratnam’s lawyers filed a request in federal court in San Jose, California, seeking access to documents in the case involving former Intel Corp. executive Roomy Khan , who once worked at Galleon. A hearing on the request originally scheduled for Nov. 23 was moved to Dec. 7, according to Elizabeth Garcia, a clerk for U.S. District Judge James Ware , who is handling the San Jose case. Garcia didn’t say why the hearing was delayed. Rajaratnam’s lawyer, Stephen Mansfield , told a judge in a court filing that prosecutors won’t oppose the unsealing. Mansfield didn’t return a call or e-mail seeking comment yesterday. Prosecutors in Manhattan are relying on Khan, 51, to help them build a case against Rajaratnam, 52, who was arrested on insider-trading charges on Oct. 16. From 2004 to 2007, Khan conspired with at least eight people to trade on secret tips gleaned from company insiders and others, prosecutors said. In addition to pleading guilty in that case, Khan was convicted in 2001 in federal court in San Jose for leaking secrets to a person at Galleon. Lawyers for Rajaratnam have argued he was unaware of the 2001 case against Khan. The public disclosure of the documents will counter a suggestion in media reports of a prior scheme between Khan and Rajaratnam, they said. Jack Gillund , a spokesman for the U.S. Attorney’s office in San Francisco, said on Nov. 19 that he would “neither confirm nor deny” Mansfield’s claim that prosecutors wouldn’t oppose efforts to unseal Khan’s case. Hilton, Google Khan allegedly passed on to Rajaratnam and others proprietary details in 2007 about pending takeover bids for Hilton Hotels Corp. and Kronos Inc. , plus a tip that Google Inc.’s earnings would be lower than expected, according to court documents. Khan, who is one of five people to plead guilty in the Galleon case, started cooperating with the government in its current insider trading probe of hedge funds in November 2007, according to court documents. Rajaratnam has denied wrongdoing and is free on $100 million bail. Khan is free on $500,000 bail in the current case. The case is U.S. v. Roomy Kahn, 01-cr-20029, U.S. District Court, Northern District of California (San Jose). To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net .

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Facebook Common Stock Value Jumps 42% to $9.5 Billion on Private Market

November 18, 2009

By Brian Womack Nov. 19 (Bloomberg) — The price of Facebook Inc. stock on exchanges for private companies has jumped as much as 42 percent in the past four months as membership of the site topped 300 million users and the company turned cash flow positive. Facebook shares are currently selling for about $21 each at SecondMarket, said Adam Oliveri , managing director at the New York-based company. That’s up from $14.77 in July. SecondMarket and Santa Monica, California-based SharesPost Inc. are among services that allow current and former Facebook employees to sell shares. Facebook, the most-popular social networking site, may sell stock through an initial public offering in the next 12 to 18 months, said Paul Bard , an analyst at Renaissance Capital LLC , which has specialized in IPO research since 1991. “The fact that the stock on these private exchanges moved — I’m sure that has to do with the fact that people think a deal is coming sooner rather than later,” said Bard, whose firm is based in Greenwich, Connecticut. At $21 each, Facebook’s common shares are valued at about $9.5 billion, Oliveri said. Facebook also has preferred shares, which are typically owned by venture capital investors. When companies have IPOs, preferred stock holders can convert their holdings to common shares, allowing them to sell them on the public market. Following Google A Facebook IPO may attract the same level of attention as Google Inc. ’s share sale in 2004, Oliveri said. Google sold 19.6 million shares for $1.67 billion in August 2004, giving the company a market value of $23 billion. The stock closed at $576.65 yesterday on the Nasdaq Stock Market. “The perception is that that the company is going to IPO, and it’s going to be the next kind of Google IPO situation where you’re going to have massive interest,” Oliveri said. “Investors are coming out of the woodwork, trying to figure out a way to get exposure.” Larry Yu , a spokesman for Palo Alto, California-based Facebook, declined to comment. The company said in September that it has more than 300 million users and that it is generating positive cash flow. In the past 60 days, SecondMarket has handled about a dozen transactions of Facebook shares, with the most recent occurring last week, said Mark Murphy, a SecondMarket spokesman. On SharesPost, buyers have offered $20 for Facebook shares on the site, up 35 percent from three months ago, the company said. The last transaction was 15,000 shares sold for $12 each in August, according to SharesPost. ‘A Barometer’ Private companies such as Facebook and Twitter Inc. can use these private markets to gauge how much interest there is in their stock, said Scott Sweet, senior managing partner of IPO Boutique, a Web site in Tampa, Florida, that tracks IPOs. “It’s a barometer,” Sweet said. “You get virtual channel checks on the appetite on IPOs.” Facebook Chief Executive Officer Mark Zuckerberg , who started the company in 2004 while he was a student at Harvard University, said in May that he expects the company to have an IPO, though he wasn’t focused on it. “It’s something we’ll do when we’re ready for it,” Zuckerberg, 25, said on a conference call at the time. “It’s something we don’t see on the immediate horizon.” Digital Sky A $200 million investment in Facebook by Russia’s Digital Sky Technologies in May is also boosting expectations for an IPO, Oliveri said. At the time of the investment, Digital Sky said it would offer to purchase at least $100 million of additional Facebook stock from current and former employees whose shares had vested. In July, Digital Sky offered to pay $14.77 for each common share of Facebook, giving the company a valuation of $6.5 billion. Digital Sky Technologies’ $200 million investment, which consisted of preferred stock, valued Facebook at $10 billion. In 2007, Microsoft Corp. bought a 1.6 percent stake in Facebook that valued the company at $15 billion. After shareholders decide to sell to another party on services such as SecondMarket and SharesPost, the company is alerted and often has the right to buy the shares first. The U.S. Securities and Exchange Commission allows trading in shares of private companies, as long as investors meet certain criteria , such as having an annual income of more than $200,000 or a minimum net worth of $1 million, said Tom Kim, a lawyer specializing in executive compensation in Palo Alto, California. Transaction Volume Shares of venture-backed private companies are often kept at an outside law firm, and money is held in escrow until the stock has been transferred to the new owner, Oliveri said. SecondMarket said it has handled about $75 million of private company share transactions since last year, when it started the service. Employees of private companies have been able to sell their shares for years, Kim said. There were instances of Google shareholders selling their stock prior to its IPO, he said. Even so, the new exchanges make the process easier. “People are holding shares in Twitter or in Facebook and they want to unload some of the shares, maybe even 50 percent of what they own,” said Kim, who has helped manage some transfers of Facebook shares. “They don’t need 5 million shares.” Until July, Facebook’s common shares on SecondMarket had followed the rise and fall of the Nasdaq Stock Market, Oliveri said. While they have gained 42 percent on SecondMarket since July, the Nasdaq Composite Index has climbed 19 percent. The rising value of Facebook’s shares doesn’t necessarily mean the company is about to go public, said Lise Buyer , founder of Class V Group , an IPO advisory firm in Portola Valley, California. Offering Liquidity “The fact that they offered employees liquidity just a few months ago suggests that an IPO is not right around the corner,” said Buyer, who helped run Google’s IPO. “People who are buying it here clearly believe that when there is an IPO, it will be at an even higher valuation than the last round paid. But I don’t think it suggests anything at all about that timing.” Eighteen U.S. companies had IPOs in September and October, more than at any time in almost two years, according to data compiled by Bloomberg. The IPO market dried up last year, after Lehman Brothers Holdings Inc. filed for bankruptcy and the global economy fell into recession. “There’s a lot of speculation that the IPO market might recover next year,” SharesPost CEO Greg Brogger said. “It almost certainly will be better than this year because it almost couldn’t be worse.” — With assistance from Michael Tsang in New York. Editors: Jonathan Thaw , Nick Turner To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

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China’s Anti-Google Model Endangers 10% Growth: William Pesek

November 18, 2009

Commentary by William Pesek Nov. 18 (Bloomberg) — If China , now the third-biggest economy, is so mighty, why do its leaders fear the Internet? I never thought I would be asking this question 11 years after Bill Clinton’s visit to Beijing. There, I watched the former U.S. president mix it up with local students after a speech carried live on television in China. George W. Bush , his successor, enjoyed similar transparency in a 2002 visit. Not Barack Obama . His forum with students in Shanghai this week ran into China’s other Great Wall — censorship. Call it the anti-Google model. Its persistence is a bigger problem than China’s leaders and many investors realize. It makes 10 percent growth harder to achieve. At 8.9 percent, its economy is just about there. As impressive as it is, though, China’s boom isn’t driven by healthy doses of fresh job growth at startup companies. It’s fueled by massive government stimulus, lax lending and China’s undervalued currency. That’s fine for the moment, considering the global economy is in crisis. The question is how China thinks it can compete in an information-based global economy while censoring search engines provided by Google Inc. and Yahoo! Inc. Sadly, this story cuts both ways. The quest for the almighty yuan often has companies conspiring with China to control information. Criticism Works That gets us to the most important moment yet of Obama’s five-city Asia tour: Telling China’s leaders that criticism is a vital part of being a competitive nation and that he disagrees with censorship of cyberspace. The media looked elsewhere. Oh no, Obama bowed to Japan’s Emperor Akihito ! Oh no, he didn’t get a climate-change deal in Singapore! Oh no, he didn’t get a currency deal with China! The key moment was largely ignored. “Unrestricted Internet access is a source of strength, and I think, should be encouraged,” Obama said, adding that the criticism he gets in the U.S. “makes me a better leader because it forces me to hear opinions that I don’t want to hear.” If only China’s leaders allowed the nation of 1.3 billion to hear more critical opinions. Why they don’t is clear enough. Free expression would mean doing more to fight corruption; rounding up and jailing fewer dissidents; offering greater rights and protections to workers; and demanding that companies stop raping the environment. Greater Openness Greater openness would put more pressure on local governments to perform. It would force public officials to slow the acceleration in the gap between rich and poor. It would nudge executives to improve corporate governance, and stimulate debate about whether a weak yuan does more to hold China back than propel it forward. Yes, messy stuff all around that most leaders would prefer to avoid. And yet progress on these fronts and more are needed for China to reach its potential. The key is accountability, and that’s just the problem. The cult of GDP prevails in China. The deal is this: We will make you richer, you won’t question the government. Hence the importance of 10 percent gross domestic product growth. It’s the Communist Party’s plan for survival and it has worked masterfully. Ever since joining the World Trade Organization in 2001, China hasn’t looked back. Nor has it looked forward enough under President Hu Jintao . Sure, China has been savvy about doling out billions of dollars to developing nations and scoring energy contracts. Yet it hasn’t evolved very much in terms of coping with the Internet and the cheap yuan. Weight of Technology Clinton’s Beijing debate on live TV in 1998 convinced many that technology and the Internet would change China. The idea was that its leaders would wilt under the sheer weight of technology. In reality, China is having its way with the Internet. On June 4, the 20th anniversary of the Tiananmen Square crackdown, China even blocked Twitter Inc. China is among the oldest civilizations, and you would be hard-pressed to find anyone who thinks China isn’t a rising superpower. Obama finds himself treading carefully with a nation that holds almost $800 billion worth of U.S. debt. And yet so much time and energy goes into controlling what is said about China, and counterproductively so. The undervalued yuan, meanwhile, is becoming a bubble all its own to complement the nation’s frothy asset markets and $2.3 trillion of reserves. The yuan is giving China an economic advantage that is fueling hard feelings globally in the short run and dimming longer-term prospects. The quality of growth matters as much as the quantity. A stronger currency would increase the purchasing power of Chinese consumers, accelerating the shift from exports to domestic demand-led growth. It would boost pressure on companies to become more globally competitive and create more incentives for entrepreneurs to do their thing. Those would-be innovators need unfettered access to information to hone their skills. By not allowing it, China’s leaders are hurting the private sector’s development and the nation’s, too. Bravo to Obama for highlighting this most self- inflicted of economic wounds. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Shankar Tells Galleon Judge Two People Gave Him Tips for Insider Trades

November 17, 2009

By David Glovin and Linda Sandler Nov. 17 (Bloomberg) — Gautham Shankar , a former trader at New York-based Schottenfeld Group LLC who pleaded guilty to insider trading in the Galleon Group case, told a judge he got secret tips from two people, according to a transcript of his guilty plea. Shankar, 35, was part of a chain of inside information in the case centering on Galleon Group founder Raj Rajaratnam that yielded $53 million in illicit profits, the government has said. Shankar’s tips on three occasions came from an individual identified in government documents only as “Tipper X,” a friend of Roomy Khan , now the government’s star witness in the case. Shankar in turn passed on the tips to others at the Schottenfeld trading firm, including Zvi Goffer , a former Galleon employee who sought tips and paid for them, according to government documents. A transcript of Shankar’s comments, made during an Oct. 20 guilty plea, became publicly available today. Prosecutors say Shankar in 2007 learned from Tipper X proprietary details about pending takeover bids for Hilton Hotels Corp. and Kronos Inc., plus a tip that Google Inc.’s earnings would be lower than expected. Shankar in turn passed on the tips to Schottenfeld colleagues including Goffer, according to court documents. Illegal Gains This insider trading ring that overlapped with Rajaratnam’s circle generated $33 million in illegal gains, according to the U.S. Securities & Exchange Commission, which has a civil case against the participants. Shankar, who lives in New Canaan, Connecticut, is currently unemployed, it said. Shankar is one of five people who pleaded guilty in the case involving Rajaratnam in which the government so far has charged 20 individuals. Also cooperating in the investigation are Ali Far and Richard Choo-Beng Lee , co-founders of San Jose, California-based hedge fund Spherix, as well as Steven Fortuna and Roomy Khan . Their guilty pleas were made public on Nov. 5. According to the criminal case, Goffer, who founded Incremental Capital LLC, is the leader of an insider trading ring of 14 that was charged Nov. 6. He passed along tips about takeovers that he got from Arthur Cutillo , an attorney at Ropes & Gray LLP, to Shankar and others, prosecutors said. The criminal case is U.S. v. Shankar, CHECK U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net ; Linda Sandler in New York at lsandler@bloomberg.net .

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Don McNay: President Obama’s Entrepreneurial Mindset

November 16, 2009
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Obama Gets Earful on 5-City Economic Road Show: William Pesek

November 16, 2009

Commentary by William Pesek Nov. 16 (Bloomberg) — Heard about the next cold war? It doesn’t involve Russia, China or even the forces of communism, but Japan. The nation’s new government is pulling away from the U.S. and telling officials in Washington what they can do with their policy ideas. At least that’s the impression one gets reading the media these days. Don’t believe the hype. The theory that Yukio Hatoyama’s Democratic Party of Japan is blowing off the U.S. is as fanciful as it is wrong. Those losing sleep over the state of this vital economic and security relationship aren’t thinking through how much Hatoyama needs Barack Obama , and vice versa. The U.S.-Japan dynamic is indeed changing. Yet think of it more as evolution than confrontation. This story is about more than Tokyo and Washington. It’s about the rise of China and a vibrant region amid deepening U.S. troubles. Look no further than Obama assuring Asia-Pacific leaders yesterday in Singapore that he’ll take “serious steps” to reduce a $1.42 trillion budget deficit that’s spooking world markets. Japan holds $731 billion of Treasuries, and the rest of Asia holds trillions more. The days of the U.S. lecturing Asia to emulate its policies are over. It’s now about reassuring creditors that the largest economy won’t let them down. Neither, in the post-Lehman Brothers, post-Guantanamo Bay world, is the U.S.’s political clout what it once was. Ten years ago, a presidential visit to Asia was a show-stopper. Today, it often gets no more attention than Chinese leaders jetting in. Dollar Concerns Obama wants to rebuild influence after eight years of neglect under George W. Bush . As he swings through Tokyo, Singapore, Shanghai, Beijing and Seoul, Obama is promising broader engagement in a region where countries have been forging partnerships that don’t include the U.S. Many in Asia still want strong U.S. involvement as a counterweight to China, which next year may surpass Japan’s economy. They just don’t want the U.S. lecturing them. “The size of China makes it impossible for the rest of Asia, including Japan and India, to match it in weight and capacity in about 20 to 30 years,” Singapore’s Minister Mentor Lee Kuan Yew said in Washington last month. “So we need America to strike a balance.” Those comments crystallized the thinking in many Asian capitals. China isn’t just attracting much of the world’s investment, but also getting much of the attention. Many observers have dropped the word “nascent” from descriptions of China as an economic superpower. Long Way to Go China still has a long way to go. It’s a developing nation that must continue raising living standards even as it maintains a weak currency, censors Google and limits human rights. The undervalued yuan is running afoul of the U.S. and Asian neighbors . Also, today’s stimulus efforts could be setting China up for a bad-loan crisis a few years from now. Yet the drift of the Bush years was good to China. It allowed the third-biggest economy to go on a commodity-buying binge and score big points with developing nations with trade agreements and financial aid. Japan lost traction in Asia, too, as China’s growth trumped its return to deflation. Japan was all but ignored during a recent panel discussion I chaired at Insead Business School in Singapore. When I mentioned Japan, the audience seemed decidedly uninterested. It seemed like a cue to pull out the Blackberrys or take a bathroom break. That’s become a common experience in this region. Tuning Out Japan It’s not clear Japan’s new leaders understand the extent to which investors are tuning out their economy. Here, increased focus on the region will help. It’s a logical and healthy shift, considering China is now Japan’s biggest trading partner. The shift in Japan’s stance should come as no surprise and doesn’t necessarily bode poorly for the U.S. Japan is a stable democracy and the second-biggest economy — why shouldn’t it seek a more equal relationship with the U.S.? A major failure of the Liberal Democratic Party, which until September ruled Japan almost uninterrupted for 54 years, was leaving the nation subservient to the will of Washington. The LDP thought it could flex its muscles by being in lockstep with the U.S. and visiting Tokyo’s Yasukuni Shrine, which critics say glorifies Japan’s wartime militarism. Hatoyama is less interested in hollow gestures than real global clout and independence from the West. Hatoyama’s campaign rhetoric raised expectations at home. That was amply on display last week in Okinawa, where 20,000 people took to the streets to protest America’s massive military presence as the U.S. and Japan reassess a half-century old security alliance. That doesn’t mean Hatoyama’s DPJ can afford to lose Japan’s U.S. alliance. It would be a grave mistake in a region colored by North Korea’s nuclear weapons, China’s military ambitions and the continued importance of the U.S. consumer. You can already see signs Hatoyama and Obama are working to reduce temperature levels. The relationship will change, as it should. Fears of a worsening rift between the world’s No. 1 and No. 2 economies just don’t stand up to realities on the ground. ( William Pesek 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: William Pesek in Tokyo at wpesek@bloomberg.net

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Recession Intensifies GenX Discontent At Work: Generation X Vs. Baby Boomers, GenY

November 15, 2009

CHICAGO — They’re antsy and edgy, tired of waiting for promotion opportunities at work as their elders put off retirement. A good number of them are just waiting for the economy to pick up so they can hop to the next job, find something more fulfilling and get what they think they deserve. Oh, and they want work-life balance, too. Sounds like Gen Y, the so-called “entitlement generation,” right? Not necessarily, say people who track the generations. In these hard times, they’re also hearing strong rumblings of discontent from Generation X. They’re the 32- to 44-year-olds who are wedged between baby boomers and their children, often feeling like forgotten middle siblings – and increasingly restless at work as a result. “All of a sudden, we’ve gone from being the young upstarts to being the curmudgeons,” says Bruce Tulgan, a generational consultant who’s written books about various age groups, including his fellow Gen Xers. This isn’t the first time Gen Xers have faced tough times. They came of age during a recession and survived the dot-com bust of 2000. In recent years, though, more members of the generation – stereotyped early on as jaded individualists – had families or began settling down in other ways. It was time, they thought, to enjoy the rewards of paying some dues. “We were starting to buy into the system, at least to some extent,” Tulgan says, “and then we got the rug pulled out from under us.” Now, in this latest recession, nearly two-thirds of baby boomer workers, ages 50 to 61, say they might have to push back their retirement, according to a recent survey from Pew Research. Meanwhile, on the other end of the age spectrum are Gen Yers, who are often cheaper to hire and heralded for their coveted high-tech knowledge, even though many Gen Xers consider themselves just as technologically savvy. “It’s so annoying,” says Lisa Chamberlain, another Gen Xer who wrote the book “Slackonomics: Generation X in the Age of Creative Destruction.” “First, it was always the baby boomers overshadowing everything. Then there was this brief period in the mid-’90s where Gen X was cool. “Now it’s, ‘What are the new kids doing?’ It’s like ‘Yo, hello, the Google guys are Gen Xers.’” They can sound a little whiny. But there’s also some evidence that Gen Xers really are being taken for granted at work. One survey done this year for Deloitte Consulting LLP, for instance, found that nearly two-thirds of executives at large companies were most concerned about losing Gen Y employees, while less than half of them had similar concerns about losing Gen Xers. The assumption is often that Gen Yers are the least loyal and most mobile, says Robin Erickson, a manager with Deloitte’s human capital division. However, she points out that a companion survey of employees found that only about 37 percent of Gen Xers said they planned to stay in their current jobs after the recession ends, compared with 44 percent of Gen Yers, 50 percent of baby boomers and 52 percent of senior citizen workers who said the same. Everyone surveyed worried about job security. Gen X and Gen Y were most likely to complain about pay. But a “lack of career progress,” was by far the biggest gripe from Gen Xers, with 40 percent giving that as a reason for their restlessness, compared with 30 percent of Gen Yers, 20 percent of baby boomers and 14 percent of senior workers. Gen Yers, meanwhile, were more likely than the other generations to cite “lack of challenges in the job” as a reason they would leave, while baby boomers more often chose “poor employee treatment during the downturn” and a “lack of trust in leadership.” The Deloitte study warns of a “resume’ tsunami” once economic recovery begins, especially among Gen Xers, and notes that many executives were largely unaware of employee complaints unrelated to money. Such findings don’t surprise Rich Yudhishthu, a 37-year-old Gen Xer who’s a business development consultant from Minneapolis. “The lack of promotional opportunities has pretty much killed job loyalty within a generation,” he says. Liza Potts, a 35-year-old professor at Old Dominion University in Norfolk, Va., agrees, but also notes that the disillusionment took hold for many of her peers as far back as childhood. “Many of my friends had hoped to have jobs like their parents – places they would stay forever that would take care of them like they did their parents. But then we saw that start to crumble for our folks,” she says, recalling friends whose fathers and mothers got laid off from companies such as IBM or had to relocate. Now worried about their own foreclosures, debt and unemployment, her generation is left to do the soul-searching their parents did. “Is there still time to become something different? Must we just accept where we are? Is there time to innovate elsewhere?” asks Potts who left her own career in the software and Internet industry for a life in academia. It’s meant less money, she says, but also more freedom to choose her work hours and projects. In Chicago, 40-year-old real estate agent Adon Navarette has taken on extra jobs to make it, from consultant for an energy supply company to starting his own health and wellness business. He’s heard his peers sniping about other generations, but also thinks their experience with other rough economic patches makes them resilient, too. It’s a pivotal moment, he says. “What’s going to define me as a Gen Xer is how I come out of this. What’s going to define me is, ‘What have I done to allow myself to take advantage of the market when the market turns around?’” he says. Sometimes, it means working for less money. Jon Anne Willow, co-publisher of ThirdCoastDigest.com, an online arts and culture site in Milwaukee, is among employers who’ve recently been able to hire more experienced candidates for jobs traditionally filled by 20somethings. They’re hungry to work, she says. And as she sees it, that gives her fellow Gen Xers and the baby boomers she’s hired a distinct advantage over a lot of the Gen Yers she’s come across. “When the dust settles, they’ll be exactly as they were before and we’ll just have to sift through them and take the ones that actually get it and hope the rest find employment in fast food,” she quips. Spoken like a truly jaded Gen Xer. ___ On the Net: Pew: http://pewresearch.org/ ___ Martha Irvine is an AP national writer. She can be reached at mirvine(at)ap.org or via http://twitter.com/irvineap

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Insider Trading Is `Systemic’ in Hedge Fund Industry, SEC’s Khuzami Says

November 12, 2009

By Joshua Gallu and Peter Cook Nov. 12 (Bloomberg) — U.S. Securities and Exchange Commission Enforcement Director Robert Khuzami said the recent insider-trading cases among hedge funds including Galleon Group reflect “systemic behavior” in the industry. “You have funds whose business model consisted of vigorous attempts to collect information from corporate insiders and to utilize that information to trade,” Khuzami said today at the Bloomberg Washington Summit. The cases point to “a more systemic approach to the problem and therefore more dangerous.” The SEC sued billionaire Raj Rajaratnam and his New York- based hedge fund Galleon Group LLC, and added more than a dozen people and firms in the past month in a broader crackdown on insider trading. The lawsuits, based in part on wiretaps and years of data-mining, allege that hedge-fund managers and traders obtained tips, at times in exchange for payment, on corporate deals and earnings that generated as much as $53 million in illegal profits. Aspects of hedge-fund operations are giving the agency’s enforcement division “concern,” Khuzami said, referring to the use of algorithmic trading, dark pools and the lack of a corporate culture oriented toward compliance with regulations. Since the arrests were announced, the SEC has seen an “uptick” in individuals coming forward with information on misconduct, Khuzami said, adding that people trading on confidential information “should be worried.” Rajaratnam and his accomplices were part of a network that shared confidential tips on at least 10 companies, including Google Inc., Hilton Hotels Corp. and Intel Corp., investigators said Oct. 16. The lawsuits name witnesses who cooperated with authorities. Undercover Techniques Khuzami, 53, said prosecutors will continue using undercover techniques including informants and front businesses to attract wrongdoing and wiretaps to “ferret out” misconduct. The SEC has endorsed legislation that would let the agency pay whistleblowers for information leading to a case. Khuzami, a former federal prosecutor who joined the agency in March, is reorganizing the division to add front-line investigators, speed inquiries and create specialized units after the agency was faulted for missing Bernard L. Madoff’s Ponzi scheme. He’s also seeking to bolster his attorneys’ powers by gaining greater access to grand-jury evidence and expanding deal-making and cooperation with informants. The SEC is looking “closely” at laws in the 2002 Sarbanes-Oxley Act, which let the SEC punish executives for misconduct at firms even when they aren’t involved in the wrongdoing. Sarbanes Oxley was enacted to combat corporate fraud after accounting scandals at Enron Corp. and WorldCom Inc. shook investor confidence. To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net .

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Google Made `Strategic’ AdMob Purchase to Expand IPhone Ads, Schmidt Says

November 11, 2009

By Brian Womack Nov. 11 (Bloomberg) — Google Inc. Chief Executive Officer Eric Schmidt said his company’s $750 million purchase of AdMob Inc. will expand sales of ads that appear in applications on smart phones such as the iPhone. “AdMob is clearly the best of its ilk for applications monetization,” Schmidt said yesterday in an interview at Google’s headquarters in Mountain View, California. “We think that’s as strategic as search monetization, which, of course, we’re very good at.” Together, AdMob and Google will be the largest mobile- advertising company, with about 30 percent to 40 percent of the market, according to Karsten Weide , an analyst with researcher IDC in San Mateo, California. The purchase will allow advertisers to get their brands in front of consumers who use games, personal-finance tools and music programs on the iPhone and devices using Google’s Android software, Schmidt said. “One the key success points for the iPhone was this enormous development of apps, and particularly free apps, which are advertising supported,” said Schmidt, 54. “Now that we have our Android platform coming out, and really with some serious partners behind it, it will also be important to have that be true for Android as well as the others.” Smart-Phone Apps Google, owner of the world’s most popular search engine, is using stock to buy AdMob. After the deal is completed, the company plans to use cash to buy back $750 million of Google shares, Schmidt said. That would prevent the transaction from diluting investors’ holdings. The iPhone, which Apple Inc. started selling in 2007, now has more than 100,000 applications. Google’s Android, a smart- phone operating system that was first offered on phones last year, has more than 12,000 programs. Verizon Wireless, the biggest U.S. wireless carrier, released a new line of Android phones called Droid last week. AdMob ads appear within applications such as local business finder Yelp and music game Tap Tap. The ads typically are displayed as a banner at the top or bottom of the screen, and are also displayed on mobile Web sites. In June, Google started testing ads on applications, sharing revenue with the creator of the program. Google also sells ads that appear when people search the Web on their phones for things like books, flat-screen televisions and vacations. Sales of smart phones climbed 27 percent worldwide in the second quarter, even as total mobile-handset sales dropped 6.1 percent, according to researcher Gartner Inc. in Stamford, Connecticut. Mobile Revenue “Our mobile revenue is growing faster than our regular revenue,” Schmidt said. “All of the signs indicate a great success in this space.” Google rose $4.25 to $566.76 yesterday on the Nasdaq Stock Market. The stock has jumped 84 percent this year. AdMob is Google’s biggest acquisition after YouTube, bought for $1.65 billion in 2006, and DoubleClick Inc., a $3.2 billion takeover announced last year. Schmidt said he doubts purchases the size of AdMob will become the norm, adding that Google will probably make an acquisition every month or so. “There are relatively few companies that are worth that kind of money,” Schmidt said. “We are actively talking to lots and lots of potential small companies to help complete our vision.” Google is hiring again after the company cut back during the recession, Schmidt said. The company had about 19,665 workers at the end of the third quarter, down from more than 20,000 last year. “We are absolutely planning to increase our headcount and we’re aggressively trying to find the best talent as we did historically,” Schmidt said. “We are back in business — hiring people.” To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net

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