mountain

Silicon Valley Companies Gear Up for Acquisitions Amid Improving Economy

April 3, 2010

By Ryan Flinn, Serena Saitto and Tim Mullaney April 4 (Bloomberg) — Silicon Valley companies looking to put their cash to work may drive a wave of mergers this year, bankers and venture capitalists say. Companies are eager to make acquisitions because many of them have cut research budgets, says Robert Ackerman , founder and managing director of Allegis Capital in Palo Alto, California. That means they’re not as able to fall back on their own ingenuity to fuel growth. More businesses are relying on acquisitions to find their next new product or service, he says. “The product cabinet is bare, but the market continues to move forward,” Ackerman said. “Wherever you see innovation sprint ahead, companies will have a product deficit, and will look to fill it.” Google Inc. , based in Mountain View, is currently one of California’s most acquisitive companies, buying at least five businesses in 2010. It agreed to buy Picnik Inc. last month, acquiring online photo-editing tools. Its purchase of DocVerse provided it with software that lets people share documents over the Internet. The value of the deals wasn’t disclosed. The state’s largest single deal this year was Shiseido Co.’s purchase of San Francisco-based Bare Escentuals Inc. for about $1.7 billion. California deal-making plummeted after 2007, when more than 2,670 transactions totaled almost $254 billion. So far this year, there have been about 530, worth $16.7 billion. That’s a higher number than in the first three months of 2009, although the value was greater in that year-ago period, at about $30 billion. McAfee, Tibco Local acquisition targets include Santa Clara’s McAfee Inc., Tibco Software Inc. in Palo Alto and Cupertino-based ArcSight Inc., according to Brent Thill , an analyst at UBS AG in San Francisco. McAfee and ArcSight both make programs that protect data, which could be more valuable as cyber threats mount. Tibco’s software helps programs of all kinds share information. Goldman Sachs Group Inc. also cited San Francisco’s Salesforce.com Inc. and Palo Alto-based VMware Inc. as possibilities — though those companies aren’t the most likely targets, the firm says. Salesforce.com makes online customer- relationship software, while VMware sells so-called virtualization programs, which help computers run more than one operating system. Representatives from all the targets declined to comment or didn’t respond to messages. Deal Volume In Northern California, there were 45 deals involving venture-backed startups during the first three months of 2010, according to the National Venture Capital Association. That was the highest number in any quarter in at least five years. More than 50 companies in California have at least $1 billion in cash and equivalents, which they could use for acquisitions. They’re led by a Bay area trio: San Francisco’s Wells Fargo & Co. , with $68 billion; Cisco Systems Inc. in San Jose, with $39.6 billion; and Cupertino-based Apple Inc. , with $24.8 billion, according to Bloomberg data. “There’s a lot of cash on people’s balance sheets, so I think it’s a great time for startups,” said Kate Mitchell , managing director at Scale Venture Partners in Foster City, California. “They see that the faster, better, cheaper venture- backed companies are still growing, and they’re not spending on R&D, so they can be accretive.” The value of deals in California topped out at $378.1 billion in 2000 during the Internet bubble, when there were more than 2,200 transactions. It took five years for the number of deals to surpass that earlier peak, and the dollar amount has never come close to recapturing the dot-com era’s glory. Internet Bust While the latest recession was the worst economic slump since the Great Depression, it actually wasn’t as devastating to California deal-making as the dot-com collapse. After having easy access to venture money and initial public offerings in the late-1990s and 2000, money dried up. The M&A industry hit bottom in 2002, when just 1,505 transactions accounted for $95.3 billion. The deals crept back up over the next four years, peaking again in 2006 and early 2007. There were 665 in the first quarter of 2007, valued at $59.8 billion. That’s more than three times the number reported last quarter. Tor Braham , head of technology mergers and acquisitions for Deutsche Bank AG in San Francisco, says mergers are ready to surge again for two reasons. Pressure’s On? “Private-equity funds have raised a lot of money before the financial crisis and there’s pressure on them to spend it before those commitments expire,” he said. Also: “Sellers want to get their deals done this year, before the expected increase in capital gains tax rate.” Private-equity firms raised $538 billion in 2006 and $587 billion in 2007, just before the recession, according to the Private Equity Council in Washington. Capital-gains taxes, meanwhile, could rise above 20 percent for people earning more than $250,000 under budget proposals before Congress. In the first quarter, Deutsche Bank advised Techwell Inc. in its $370 million takeover by Intersil Corp. The bank also worked with Nimsoft Inc. in its $350 million acquisition by CA Inc., and Francisco Partners on its sale of Numonyx BV to Micron Technology Inc. for about $1.3 billion. Even as mergers pick up, it may take until next year to get back to 2007 levels, Braham says. “Mergers-and-acquisition activity in the technology industry was very quiet in the first quarter,” he said. Matt Murphy , a partner at Kleiner Perkins Caufield & Byers in Menlo Park, is more bullish. The number of acquisitions this year will be close to the 2007 level, he says. “It feels like there is pent-up demand.” Mobile technology is one area where the big companies want to bulk up, leading to more acquisitions, Murphy says. “M&A is definitely picking up,” he said. “This is going to be a big year.” To contact the reporters on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net ; Serena Saitto in New York at ssaitto@bloomberg.net ; Tim Mullaney in New York at tmullaney1@bloomberg.net

Read the full article →

Bill Moyers: Dr. King’s Economic Dream Deferred

April 2, 2010

Forty-two years ago, on April 4, 1968, Dr. Martin Luther King, Jr., was assassinated, gunned down in Memphis, Tennessee. To those of us who were alive then, the images are etched in painful memory: One day, Dr. King is standing with colleagues, including Ralph Abernathy and Jesse Jackson, on the balcony of the Lorraine Motel; the next, he’s lying there mortally wounded, his aides pointing in the direction of the rifle shot. Then we remember the crowds of mourners slowly moving through the streets of Atlanta on a hot sunny day, surrounding King’s casket as it was carried on a mule-drawn farm wagon; and the riots that burned across the nation in the wake of his death, a stinging, misbegotten rebuke to his gospel of non-violence. We sanctify his memory now, name streets and schools after him, made his birthday a national holiday. But in April 1968, as Dr. King walked out on that motel balcony, his reputation was under assault. The glory days of the Montgomery, Alabama, bus boycott and the 1963 March on Washington were behind him, his Nobel Peace Prize already in the past. A year before, at Riverside Church in New York, he had spoken out — eloquently — against the war in Vietnam. King said, “A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death,” a position that angered President Lyndon Johnson, many of King’s fellow civil rights leaders and influential newspapers. The Washington Post charged that King had, “diminished his usefulness to his cause, to his country, and to his people.” With his popularity in decline, an exhausted, stressed and depressed Martin Luther King, Jr., turned his attention to economic injustice. He reminded the country that his March on Washington five years earlier had not been for civil rights alone but “a campaign for jobs and income, because we felt that the economic question was the most crucial that black people and poor people, generally, were confronting.” Now, King was building what he called the Poor People’s Campaign to confront nationwide inequalities in jobs, pay and housing. But he had to prove that he could still be an effective leader, and so he came to Memphis, in support of a strike by that city’s African-American garbage men. Eleven hundred sanitation workers had walked off the job after two had died in a tragic accident, crushed by a garbage truck’s compactor. The garbage men were fed up — treated with contempt as they performed a filthy and unrewarding job, paid so badly that forty percent of them were on welfare, called “boy” by white supervisors. Their picket signs were simple and eloquent: “I AM A MAN.” A few weeks into their strike, which had been met with opposition and violence, Dr. King arrived for meetings and addressed a rally. Ten days later, he returned to lead a march through the streets of Memphis that ended in smashed windows, gunshots and tear gas. Upset by the violence, he came back to the city one more time to try to put things right. The night before his death, King made his famous “Mountaintop” speech, prophetically telling an audience, “Longevity has its place. But I’m not concerned about that now. I just want to do God’s will. And He’s allowed me to go up to the mountain. And I’ve looked over. And I’ve seen the Promised Land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the Promised Land!” The next night he was dead. Twelve days later, the strike was settled, the garbage men’s union was recognized and the city of Memphis begrudgingly agreed to increase their pay, at first by a dime an hour, and later, an extra nickel. That paltry sum would also be prophetic. All these decades later, little has changed when it comes to economic equality. If anything, the recent economic meltdown and recession have made the injustice of poverty even more profound, especially in a society where the top percentile enjoys undreamed of prosperity. Unemployment among African-Americans is nearly double that of whites, according to the National Urban League’s latest “State of Black America” report. Black men and women in this country make 62 cents on the dollar earned by whites. Less than half of black and Hispanic families own homes and they are three times more likely to live below the poverty line. The non-partisan group United for a Fair Economy has issued a report that features Martin Luther King, Jr., on the cover with the title, “State of the Dream 2010: Drained.” Dr. King’s dream is in jeopardy, the report’s authors write, “The Great Recession has pulled the plug on communities of color, draining jobs and homes at alarming rates while exacerbating persistent inequalities of wealth and income.” Nor will a recovery ameliorate the crisis. “A rising tide does not lift all boats,” United for a Fair Economy’s report goes on to say, “because the public policies, economic structures, and unwritten rules of racism form mountains and ridgelines, and hills and valleys that shape our economic landscape. As a result, a rising economic tide fills the rivers and reservoirs of some, while leaving others dry and parched.” This is a perilous moment. The individualist, greed-driven free-market ideology that both our major parties have pursued is at odds with what most Americans really care about. Popular support for either party has struck bottom, as more and more agree that growing inequality is bad for the country, that corporations have too much power, that money in politics has corrupted out system, and that working families and poor communities need and deserve help because the free market has failed to generate shared prosperity — its famous unseen hand has become a closed fist. It is hard to overstate the consequences of choosing more of the same — the very policies that have sundered our social contract. But hear the judgment of Nobel Laureate Kenneth Arrow, echoing Martin Luther King, Jr.’s life and martyrdom. “The vast inequalities of income weaken a society’s sense of mutual concern,” Arrow said. “…The sense that we are all members of the social order is vital to the meaning of civilization.” Bill Moyers is managing editor and Michael Winship is senior writer of the weekly public affairs program Bill Moyers Journal , which airs Friday night on PBS. Check local airtimes or comment at The Moyers Blog at www.pbs.org/moyers .

Read the full article →

U.S. Softens Tone to China Over Google, Seeking Support for Iran Sanctions

April 1, 2010

By Jeff Bliss April 2 (Bloomberg) — The Obama administration has softened its tone in responding to cyber attacks that may have originated in China, betting that playing down the dispute will help the U.S. obtain the Asian superpower’s cooperation on foreign-policy goals, security experts said. That calculation may yield short-term benefits such as Chinese support for additional sanctions against Iran and reining in North Korea, though in the longer term it could wind up endangering U.S. economic leadership, said Tom Kellermann , a former World Bank security official. “The U.S. is in a very difficult position,” said Kellermann, a vice president at Core Security Technologies Inc., a Boston-based security-software company. President Barack Obama needs “help from China.” Mountain View, California-based Google Inc. , owner of the world’s most popular search engine, disclosed in January that it had been the target of cyber attacks that resulted in the theft of intellectual property and the infiltration of e-mail accounts belonging to people active in Chinese human-rights causes. U.S. authorities began an investigation and Secretary of State Hillary Clinton urged China to do so, too. The U.S. response falls short of actions that could deter future attacks such as threatening sanctions or at least complaining to the World Trade Organization, Kellermann said. Currency, Trade Complicating the U.S. posture are long-standing issues such as North Korea’s nuclear program, China’s position as the No. 1 holder of U.S. debt, the trade imbalance between the two nations and the U.S. push for a revaluation of the Chinese currency, the security experts said. Still, the U.S. has much to lose if it doesn’t take a stronger stand on network breaches, said John Bumgarner, chief technology officer of the Norwich, Vermont-based U.S. Cyber Consequences Unit , which produces threat assessments for the government and business. “If we don’t watch out, the long-term gains will be enormous for China,” Bumgarner said. Cyber infiltrations over the past few years have resulted in the theft of software code that has allowed the Chinese to avoid research-and-development costs and sell cheaper products, Kellermann said. China has denied involvement in computer attacks. Google officials have said that while they are certain the attacks originated in China, they haven’t determined who was behind them. Hong Kong Move Last week, after a two-month clash with China over censorship, Google shut its mainland Chinese search engine and redirected users to its Hong Kong site. Google on March 31 blamed the Chinese government-controlled firewall for blocking service on the search engine, which has been restored. At a March 24 congressional hearing, Alan Davidson , Google’s director of public policy, pressed for new trade rules for countries that censor the Internet. This week, the Office of the U.S. Trade Representative issued a report saying that the absence of stated Chinese censorship rules has made it difficult for Internet companies to function there. A report released March 25 by Mountain View, California-based Symantec Corp., the biggest maker of security software, said that 28 percent of targeted cyber attacks last month originated in China. Jay Nancarrow, A Google spokesman, declined to comment specifically on the U.S. response. Taiwan Arms Chinese and U.S. ties deteriorated after the Obama administration announced Jan. 29 that it would sell arms to Taiwan, a move Chinese Foreign Minister Yang Jiechi said March 7 had “seriously damaged” relations. China protested again after Obama met in February with the Dalai Lama , the Tibetan spiritual leader. China viewed the actions as an affront to Chinese sovereignty. More recently, the administration has tried to ease tensions. Deputy Secretary of State James Steinberg on March 29 reaffirmed the U.S. views that Taiwan shouldn’t be independent and Tibet is part of China. U.S. officials are pressing China to support more sanctions against Iran over its nuclear program. Russia and China have used their veto power in the United Nations Security Council to block the U.S.- and European-led sanctions effort. Iran Talks Clinton said last week that China was beginning to ease its policy. Susan Rice , the U.S. ambassador to the UN, said on CNN on March 31 that China would join talks on drafting tougher sanctions on Iran. While Clinton said in a Jan. 21 speech that she expected “Chinese authorities to conduct a thorough review” of their Internet policies, she has distanced herself from the Google dispute. “This is really between Google and China,” she said in an interview with Bloomberg Television in Moscow on March 19. The State Department’s role is to promote the “notion of maintaining and expanding Internet freedom,” not to advocate for a specific company, Michael Posner , assistant secretary for democracy, human rights and labor, said on Bloomberg Television yesterday. The U.S. may be disappointed if it is hoping that the soft- pedal approach will compel China to cooperate on Iran, said Carolyn Bartholomew , vice chairwoman of the U.S.-China Economic and Security Review Commission, a Washington-based group created by Congress. “In the early 1990s it was we couldn’t push them on human rights because we needed their cooperation on North Korea,” she said. “It took a good 15 years before we started getting any sort of cooperation.” For Related News and Information: To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .

Read the full article →

U.S. Softens Tone to China Over Google, Seeking Support for Iran Sanctions

April 1, 2010

By Jeff Bliss April 2 (Bloomberg) — The Obama administration has softened its tone in responding to cyber attacks that may have originated in China, betting that playing down the dispute will help the U.S. obtain the Asian superpower’s cooperation on foreign-policy goals, security experts said. That calculation may yield short-term benefits such as Chinese support for additional sanctions against Iran and reining in North Korea, though in the longer term it could wind up endangering U.S. economic leadership, said Tom Kellermann , a former World Bank security official. “The U.S. is in a very difficult position,” said Kellermann, a vice president at Core Security Technologies Inc., a Boston-based security-software company. President Barack Obama needs “help from China.” Mountain View, California-based Google Inc. , owner of the world’s most popular search engine, disclosed in January that it had been the target of cyber attacks that resulted in the theft of intellectual property and the infiltration of e-mail accounts belonging to people active in Chinese human-rights causes. U.S. authorities began an investigation and Secretary of State Hillary Clinton urged China to do so, too. The U.S. response falls short of actions that could deter future attacks such as threatening sanctions or at least complaining to the World Trade Organization, Kellermann said. Currency, Trade Complicating the U.S. posture are long-standing issues such as North Korea’s nuclear program, China’s position as the No. 1 holder of U.S. debt, the trade imbalance between the two nations and the U.S. push for a revaluation of the Chinese currency, the security experts said. Still, the U.S. has much to lose if it doesn’t take a stronger stand on network breaches, said John Bumgarner, chief technology officer of the Norwich, Vermont-based U.S. Cyber Consequences Unit , which produces threat assessments for the government and business. “If we don’t watch out, the long-term gains will be enormous for China,” Bumgarner said. Cyber infiltrations over the past few years have resulted in the theft of software code that has allowed the Chinese to avoid research-and-development costs and sell cheaper products, Kellermann said. China has denied involvement in computer attacks. Google officials have said that while they are certain the attacks originated in China, they haven’t determined who was behind them. Hong Kong Move Last week, after a two-month clash with China over censorship, Google shut its mainland Chinese search engine and redirected users to its Hong Kong site. Google on March 31 blamed the Chinese government-controlled firewall for blocking service on the search engine, which has been restored. At a March 24 congressional hearing, Alan Davidson , Google’s director of public policy, pressed for new trade rules for countries that censor the Internet. This week, the Office of the U.S. Trade Representative issued a report saying that the absence of stated Chinese censorship rules has made it difficult for Internet companies to function there. A report released March 25 by Mountain View, California-based Symantec Corp., the biggest maker of security software, said that 28 percent of targeted cyber attacks last month originated in China. Jay Nancarrow, A Google spokesman, declined to comment specifically on the U.S. response. Taiwan Arms Chinese and U.S. ties deteriorated after the Obama administration announced Jan. 29 that it would sell arms to Taiwan, a move Chinese Foreign Minister Yang Jiechi said March 7 had “seriously damaged” relations. China protested again after Obama met in February with the Dalai Lama , the Tibetan spiritual leader. China viewed the actions as an affront to Chinese sovereignty. More recently, the administration has tried to ease tensions. Deputy Secretary of State James Steinberg on March 29 reaffirmed the U.S. views that Taiwan shouldn’t be independent and Tibet is part of China. U.S. officials are pressing China to support more sanctions against Iran over its nuclear program. Russia and China have used their veto power in the United Nations Security Council to block the U.S.- and European-led sanctions effort. Iran Talks Clinton said last week that China was beginning to ease its policy. Susan Rice , the U.S. ambassador to the UN, said on CNN on March 31 that China would join talks on drafting tougher sanctions on Iran. While Clinton said in a Jan. 21 speech that she expected “Chinese authorities to conduct a thorough review” of their Internet policies, she has distanced herself from the Google dispute. “This is really between Google and China,” she said in an interview with Bloomberg Television in Moscow on March 19. The State Department’s role is to promote the “notion of maintaining and expanding Internet freedom,” not to advocate for a specific company, Michael Posner , assistant secretary for democracy, human rights and labor, said on Bloomberg Television yesterday. The U.S. may be disappointed if it is hoping that the soft- pedal approach will compel China to cooperate on Iran, said Carolyn Bartholomew , vice chairwoman of the U.S.-China Economic and Security Review Commission, a Washington-based group created by Congress. “In the early 1990s it was we couldn’t push them on human rights because we needed their cooperation on North Korea,” she said. “It took a good 15 years before we started getting any sort of cooperation.” For Related News and Information: To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .

Read the full article →

China Spat Is Least of Google’s 2010 Woes as Microsoft-Like Slowdown Looms

March 30, 2010

By Ari Levy, Brian Womack and Joseph Galante March 31 (Bloomberg) — Google Inc.’s feud with the Chinese government may be the smallest of its challenges as the search leader contends with slowing growth, regulatory scrutiny and a shift in ad spending. While Mountain View, California-based Google has the biggest share of online search at home and in Western Europe, it has been leapfrogged by social network Facebook Inc. as the most popular U.S. Web site. Google’s ventures in mobile, video and display ads have failed to match the success of search, and regulators may thwart efforts to expand through acquisitions . As sales gains diminish, some investors are concerned that Google has begun to resemble Microsoft Corp., which generates billions of dollars in cash from its mature flagship business yet has struggled to conquer new markets. Google’s sales increased 9 percent last year after almost doubling in 2005. “They were the new kid on the block and everyone thought they were great,” said Daniel Morgan , a money manager at Synovus Financial in Atlanta, which oversees about $7.5 billion, including 27,720 Google shares, Bloomberg data shows. “That kind of euphoric, love-at-first-sight status has changed.” Last week, after a two-month dispute with China over censorship issues, Google shut its mainland Chinese search engine and redirected users to its Hong Kong site. Google was second in the Chinese search market, behind Baidu Inc. Google shares, which doubled last year, have dropped 8.6 percent in 2010, the sixth-biggest decline among the 75 technology stocks in the Standard & Poor’s 500 Index. The stock is 24 percent below its peak of more than $740 in 2007. Google spokeswoman Jane Penner declined to comment. Facebook Rivalry One of Google’s biggest challenges comes from Palo Alto, California-based Facebook. This month, Facebook surpassed Google as the most visited Web site in the U.S., accounting for more weekly visits than Google.com, according to research firm Hitwise. Facebook’s gains at Google ’s expense weren’t lost on Levi Strauss & Co. The closely held maker of blue jeans and Dockers pants is advertising on Facebook this year for the first time, while its budget for search, Google’s mainstay, is staying about the same as last year, said Megan O’Connor, director of digital marketing. Earlier this month, the San Francisco-based company sponsored events at the South by Southwest music festival in Austin, Texas. Levi advertised across Facebook for two weeks leading up to the event, targeting 18- to 34-year-olds who identified themselves as music fans, O’Connor said. “We are looking at social as a new place for us to spend,” O’Connor said. Starbucks, JetBlue The same goes for advertisers including Starbucks Corp. and JetBlue Airways Corp ., which are eager to get their marketing messages in front of Facebook’s 400 million users and like Levi are spending more on social media while holding steady on search. “Facebook is not an experiment for us anymore,” said Chris Bruzzo , vice president of brand, content and online at Seattle-based Starbucks. “It is a key part of how we go to market.” Ford Motor Co. also is boosting spending on social networks at a faster pace than search. “We provide a platform for marketers to create an authentic, two-way connection with their customers that has not been possible at scale before,” Facebook spokesman Brandon McCormick said. To catch up in social media, Google added a social- networking feature called Buzz to its Gmail e-mail, letting users share photos, comments and clips from its YouTube site. The site drew criticism over privacy, prompting Google to scale back some of Buzz’s features. Dealmaking Google, with almost $25 billion in cash and marketable securities, also bought Aardvark, a site that lets users pose questions and receive answers online. And its Orkut social network has gained wide followings in India and Brazil. Even with rising competition, Google will benefit as advertisers shift spending to the Web, where consumers are spending more time, said Jeff Donlon , an analyst at Manning & Napier Advisors Inc. “Google will keep making improvements to search and display, allowing advertisers to get a higher return on their investment,” said Donlon, whose Fairport, New York-based firm manages more than $25 billion and owns about 1 million Google shares. Mobile, Display Ads Google has also made headway in efforts to expand into mobile and display advertising, where rival Yahoo! Inc. took an early lead. In mobile, Google is taking on Apple Inc.’s iPhone with its Android operating system. Some 6.8 million Android- powered phones were sold in 2009, accounting for 3.9 percent of the global market, according to researcher Gartner Inc. Most analysts remain bullish on Google. Of analysts surveyed by Bloomberg, 32 have “buy” ratings, eight rate it a “hold,” and none recommends that investors sell the stock. By contrast, 15 analysts rate Yahoo a “buy,” 21 have it as a “hold,” and one has a “sell.” To bolster mobile advertising, Google announced plans in November to buy AdMob Inc. for $750 million. The U.S. mobile-ad market may more than triple to as much as $3 billion by 2013, according to a Sanford C. Bernstein & Co. report last year. Android Gains “They need to show how they’re going to monetize things like Android, where they seem to be taking good mobile market share,” said Richard Parower , manager of the $533 million Seligman Global Technology Fund at J.W. Seligman & Co. in New York, which holds Google stock. “How can they turn that into operating profits?” Google spent a combined $4.9 billion on YouTube and DoubleClick through 2008 to increase sales of ads in videos and help customers create and measure Web advertising campaigns. Those deals may generate $2 billion to $3 billion in sales next year, Citigroup Inc. analyst Mark Mahaney said. As ambitious as Google’s expansion efforts may be, the high end of that range represents less than 10 percent of Mahaney’s forecast for total sales. Microsoft too has tried with mixed results to expand beyond its main market, business software, into such areas as video games, online search and mobile operating systems. Parallels to Microsoft don’t end there. Google has been piling up cash faster than it can find ways to spend it. Its cash and marketable securities surged 54 percent to $24.5 billion at the end of 2009 from a year earlier and made up 60 percent of total assets, up from 50 percent. Meanwhile, research and development costs rose only 1.8 percent to $2.8 billion. Hemmed In That means Google is spending about 12 cents of every sales dollar on research and development, comparable with 15 cents for Microsoft. Jack Evans , a spokesman at Redmond, Washington-based Microsoft, declined to comment. Microsoft’s sales surged during the 1990s, lifted by the growing adoption of personal computers and new versions of the Windows operating system. Revenue climbed 46 percent in fiscal 1996 as users embraced Windows 95. By 2002, the pace of growth had slipped to 12 percent. At Google, sales growth has slowed in each of the past seven years, to 9 percent in 2009 from 409 percent in 2002. Also like Microsoft, Google faces regulatory obstacles to efforts to break into faster-growing markets. The Federal Trade Commission is investigating whether the AdMob deal would squelch competition in the mobile ad market. The U.S. Justice Department also has raised antitrust concerns over a proposed $125 million legal settlement between Google and a group of publishers and authors. The agreement, if approved by a judge, would create the world’s largest digital library. In Europe, Google is under scrutiny for possible privacy, antitrust and intellectual property violations. “Google has enjoyed an extended period of unfettered growth,” said Jonathan Zuck , president of the Association for Competitive Technology, a Washington trade group that represents technology companies. “Between Washington and Brussels, it’s clear that they’re now in a time where their explosive growth will be under greater scrutiny.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Brian Womack in San Francisco at bwomack1@bloomberg.net ; Joseph Galante in San Francisco at jgalante3@bloomberg.net

Read the full article →

Google Now Blames Search Disruption on Chinese Firewall, Reversing Stance

March 30, 2010

By Brian Womack March 30 (Bloomberg) — Google Inc. , after earlier blaming a service disruption in China on changes to its search engine, now says the country’s government-controlled firewall caused the blockage. Service in China is now back to normal — without Google making any changes on its end — suggesting that the earlier disruption was caused by the firewall, the company said today in a statement. Google has clashed with China since January, when the company said that it would no longer censor search results there. Last week, Google started redirecting mainland Chinese users to its Hong Kong site, where officials typically don’t help China censor Web-search results. The company said earlier that its own changes prevented many users in China from carrying out Web searches on its Hong Kong site beginning yesterday. Users whose searches included phrases such as “Beijing Olympics” and “Beijing Metro” received error messages. The company had blamed the glitch on a series of letters that it added to the Web addresses of Google search pages — a change it now says it made a week ago. Those letters, “rfa,” are blocked by China’s so-called Great Firewall, Google said. “The Great Firewall was associating these searches with Radio Free Asia , a service that has been inaccessible in China for a long time — hence the blockage,” Google said earlier. Other Google services, including YouTube and Blogger, have been consistently blocked in mainland China, according to the company. Its general Web, images and news search features remain available, Google has said. Google, based in Mountain View, California, rose $4.26 to $566.71 at 4 p.m. New York time on the Nasdaq Stock Market . The shares have fallen 8.6 percent this year. To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net

Read the full article →

Alan Schram: Where Did Inflation Go?

March 28, 2010

For those concerned about incipient inflation resulting from the gargantuan monetary expansion we had over the past 18 months and the budget deficits we are still running, the lack of inflation is confounding. One explanation is that the Consumer Price Index is inaccurate and misleading. For example, a third of the consumer price index is Owners’ Equivalent Rent, an artificial addition put into the CPI in 1980. In the go-go years of housing, real estate prices were up much more than the Owners Equivalent Rent, and the actual cost of living went up by about 7%. The CPI did not reflect that. Remove housing costs from the CPI, and inflation is back. In January the CPI was up 5.8% on an annualized basis, excluding owners-equivalent rent. Another important explanation is that historically, inflation lags growth in the money supply by at least a year. By that measure, we should expect inflation by the end of 2010. This happens because in a recession, demand falls and business activity declines. Businesses cut prices and reduce their borrowings. The Fed expands the money supply aggressively as a way to counter the recession. Inflation is the result of money supply growing at a higher rate than the goods and services in the economy. Right now commodity prices are starting to rise again, and it seems businesses are done lowering prices. The economy hasn’t caught up yet with the past decline. The slack left over from the recession is keeping inflationary pressures in check. This is why inflation lags. During the early stages of the business cycle, government deficits actually coincide with lower interest rates. Currently, the Federal Reserve set short term interest rates at almost zero. But this is temporary. Companies have become much more lean and competitive with the wave of streamlining that was forced on them by this deep recession. And as the economy begins to recover, both business and individual borrowing will increase, putting upward pressure on interest rates and fueling inflation. And if low interest rates trigger higher housing prices, inflation will be demonstrably higher. It isn’t all bad. Higher inflation might shrink the mountain of debt: Nonfederal government debt, now about $27 trillion, is almost four times as large as federal government debt (about $7.2 trillion). After all, it worked before. In 1946, post World War II, US national debt was 122% of GDP. Ten years of 4% average inflation later, it was half that. Inflation seems subdued now, but in light of the political constraints facing Social Security, Medicare and other entitlement spending, it is an inescapable certainty. At some point we will have to deal with the pernicious effects of a credit system flush with cash. Either we sharply reduce the growth in government spending or witness a steep rise in inflation. Alan Schram is the Managing Partner of Wellcap Partners, a Los Angeles based investment firm. Email at aschram@wellcappartners.com.

Read the full article →

Google May Have to Intensify Monitoring of Keywords Following Ruling by EU

March 23, 2010

By Stephanie Bodoni March 23 (Bloomberg) — Google Inc. may have to more aggressively monitor the use of trademarked terms as keywords that link Internet searches to advertisements after a European Union court ruling today. Google doesn’t breach LVMH Moet Hennessy Louis Vuitton SA or other brand owners’ trademarks by selling protected keywords, the European Court of Justice in Luxembourg said. At the same time, Web companies may be liable for trademark breaches in ads if they knew of or had control over ad data, the court said. The ruling raises questions about whether Google, the owner of the most popular internet search engine, will have to alter the business model that drove sales to $23.7 billion last year. The company stores ad content on its systems, which the court today said may make Google liable for trademark breaches if national judges find it plays an “active role” in creating the promotions. “Google is totally dependent upon advertising and anything that might undermine their existing model is bad,” said Alex De Groote , a media analyst at Panmure Gordon & Co, adding the ruling sets an important precedent. “LVMH is a branded luxury goods company, so its own trademark, its own brand, is absolutely sacrosanct for them.” The decision is the first time the EU’s top court has ruled on the rights of companies such as LVMH to prevent search engines in the 27-nation region from distributing protected names as keywords. It doesn’t change how Mountain View, California-based Google sells the ads, which made up 97 percent of revenue last year. Monitor Ads Instead, Google may have to monitor ads linked to searches for terms that are trademarked to avoid the risk that national judges will rule against it. That may be a large workload for Google and other online companies. About half of all online searches involve brands or specific products, said Alexander Wisch , a media analyst at Standard & Poor’s Equity Research in London. The court said Internet hosts may be able to benefit from an exemption under the EU’s e-commerce law if their role in processing potentially infringing data is neutral. In the case of Google, its role played “in the drafting of the commercial message which accompanies the advertising link or in the establishment or selection of keywords is relevant,” said the court. The decision left it to national courts to analyze on a case by case basis whether the role played by Google is “of a mere technical, automatic and passive nature.” Leaving the decision as to who can and who can’t benefit from the liability exemption to national judges could be “dangerous for Google and other online service providers because it can lead to different readings of the ECJ judgment in different countries,” said Stijn Debaene , a partner at Field Fisher Waterhouse LLP in Brussels. EBay Dispute The decision may have implications for other online service providers, such as EBay Inc. , which last month in a dispute with LVMH was ordered by a French court to pay 200,000 euros ($270,000) for reserving misspelled versions of brand names. LVMH will use the ruling “to show that online referencing services such as Google and EBay do play an active and not a passive role,” said Pierre Gode, vice-president of Paris-based LVMH. “Our objective is not to cause a bloody combat or to break up the Internet, we just seek an access with intelligence,” Gode said. More Lawsuits Advertisers may face more lawsuits by LVMH and other brand owners after the court said that advertisers who buy protected keywords for ads on search engines without identifying whose products they sell will be liable for trademark breaches. This part of the ruling may force Google to “tweak their business model,” said Nicola Dagg , an intellectual property lawyer at Allen & Overy LLP in London. “Google will have to put forward a formula,” an alert to advertisers that they need to clearly show what products they sell, Dagg said. It will be “a very close judgment call for them” to take care they can’t be sued if keywords they sell lead to trademark breaches. France’s highest appeals court in 2008 sought guidance in three cases, one involving LVMH, on whether Google’s use of keywords breaches companies’ rights under the region’s trademark rules. LVMH accused Google of violating the luxury-goods maker’s trademarks by linking users who search for “Vuitton” and “LV” to Web sites selling counterfeit fashion accessories. Protected Trademarks In some countries, mainly in Europe, Google blocks names from being chosen as keywords once it’s received proof that they are protected trademarks. This isn’t the case in about 190 countries , including the U.K., Ireland and the U.S., following a change of its policy in June to give users more choices. The ruling “puts the onus on brand owners to police and notify Google,” said Tom Carl, a trademark lawyer at Taylor Wessing LLP in London. Google, owner of the most-used Internet search engine, and LVMH have been fighting for seven years in France over Internet searches linked to trademarks. Google is appealing a Paris court’s 2006 ruling in favor of LVMH claims that the U.S. search engine provider breached its trademarks. LVMH sued Google in 2003 and the Paris Central Court three years later ordered Google to pay 300,000 euros for trademark infringement. Today’s cases are C-236/08 Google France v. Louis Vuitton Malletier; C-237/08 Google France v Viaticum; C-238/08 Google France v CNRRH, Pierre-Alexis Thonet. To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

Read the full article →

Google May Have to Intensify Monitoring of Keywords Following Ruling by EU

March 23, 2010

By Stephanie Bodoni March 23 (Bloomberg) — Google Inc. may have to more aggressively monitor the use of trademarked terms as keywords that link Internet searches to advertisements after a European Union court ruling today. Google doesn’t breach LVMH Moet Hennessy Louis Vuitton SA or other brand owners’ trademarks by selling protected keywords, the European Court of Justice in Luxembourg said. At the same time, Web companies may be liable for trademark breaches in ads if they knew of or had control over ad data, the court said. The ruling raises questions about whether Google, the owner of the most popular internet search engine, will have to alter the business model that drove sales to $23.7 billion last year. The company stores ad content on its systems, which the court today said may make Google liable for trademark breaches if national judges find it plays an “active role” in creating the promotions. “Google is totally dependent upon advertising and anything that might undermine their existing model is bad,” said Alex De Groote , a media analyst at Panmure Gordon & Co, adding the ruling sets an important precedent. “LVMH is a branded luxury goods company, so its own trademark, its own brand, is absolutely sacrosanct for them.” The decision is the first time the EU’s top court has ruled on the rights of companies such as LVMH to prevent search engines in the 27-nation region from distributing protected names as keywords. It doesn’t change how Mountain View, California-based Google sells the ads, which made up 97 percent of revenue last year. Monitor Ads Instead, Google may have to monitor ads linked to searches for terms that are trademarked to avoid the risk that national judges will rule against it. That may be a large workload for Google and other online companies. About half of all online searches involve brands or specific products, said Alexander Wisch , a media analyst at Standard & Poor’s Equity Research in London. The court said Internet hosts may be able to benefit from an exemption under the EU’s e-commerce law if their role in processing potentially infringing data is neutral. In the case of Google, its role played “in the drafting of the commercial message which accompanies the advertising link or in the establishment or selection of keywords is relevant,” said the court. The decision left it to national courts to analyze on a case by case basis whether the role played by Google is “of a mere technical, automatic and passive nature.” Leaving the decision as to who can and who can’t benefit from the liability exemption to national judges could be “dangerous for Google and other online service providers because it can lead to different readings of the ECJ judgment in different countries,” said Stijn Debaene , a partner at Field Fisher Waterhouse LLP in Brussels. EBay Dispute The decision may have implications for other online service providers, such as EBay Inc. , which last month in a dispute with LVMH was ordered by a French court to pay 200,000 euros ($270,000) for reserving misspelled versions of brand names. LVMH will use the ruling “to show that online referencing services such as Google and EBay do play an active and not a passive role,” said Pierre Gode, vice-president of Paris-based LVMH. “Our objective is not to cause a bloody combat or to break up the Internet, we just seek an access with intelligence,” Gode said. More Lawsuits Advertisers may face more lawsuits by LVMH and other brand owners after the court said that advertisers who buy protected keywords for ads on search engines without identifying whose products they sell will be liable for trademark breaches. This part of the ruling may force Google to “tweak their business model,” said Nicola Dagg , an intellectual property lawyer at Allen & Overy LLP in London. “Google will have to put forward a formula,” an alert to advertisers that they need to clearly show what products they sell, Dagg said. It will be “a very close judgment call for them” to take care they can’t be sued if keywords they sell lead to trademark breaches. France’s highest appeals court in 2008 sought guidance in three cases, one involving LVMH, on whether Google’s use of keywords breaches companies’ rights under the region’s trademark rules. LVMH accused Google of violating the luxury-goods maker’s trademarks by linking users who search for “Vuitton” and “LV” to Web sites selling counterfeit fashion accessories. Protected Trademarks In some countries, mainly in Europe, Google blocks names from being chosen as keywords once it’s received proof that they are protected trademarks. This isn’t the case in about 190 countries , including the U.K., Ireland and the U.S., following a change of its policy in June to give users more choices. The ruling “puts the onus on brand owners to police and notify Google,” said Tom Carl, a trademark lawyer at Taylor Wessing LLP in London. Google, owner of the most-used Internet search engine, and LVMH have been fighting for seven years in France over Internet searches linked to trademarks. Google is appealing a Paris court’s 2006 ruling in favor of LVMH claims that the U.S. search engine provider breached its trademarks. LVMH sued Google in 2003 and the Paris Central Court three years later ordered Google to pay 300,000 euros for trademark infringement. Today’s cases are C-236/08 Google France v. Louis Vuitton Malletier; C-237/08 Google France v Viaticum; C-238/08 Google France v CNRRH, Pierre-Alexis Thonet. To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

Read the full article →

Google’s Retreat Reminds Companies Asia Strategy Is More Than Just China

March 23, 2010

By Frederik Balfour March 23 (Bloomberg) — Google Inc. ’s retreat from China, where U.S. executives say the business climate is becoming less welcoming, may hasten moves by foreign companies to look beyond the world’s fastest-growing major economy for expansion in Asia. Google rerouted its Chinese Web site and today began directing traffic to Hong Kong, fulfilling a pledge to stop censoring searches as required by China. The move follows an American Chamber of Commerce report released in Beijing yesterday that said some U.S. businesses are losing Chinese sales because of rules to support home-grown technology. While China still “is the biggest game in town,” more recently “I see a lot of U.S. companies looking for alternatives,” Susan Schwab , U.S. Trade Representative between 2006 and 2009, said in an interview in Hong Kong last week. General Electric Co. , L’Oreal and New Balance are among companies with longstanding operations in China that are expanding in countries such as Vietnam and Indonesia. Asia’s emerging markets outside China are home to more than 2 billion people and have growth rates that are gaining on the world’s most populous country. Rising costs in China are increasing the need to diversify. VF Corp. , the owner of North Face outdoor apparel and Lee and Wrangler jeans, decided to “push our sourcing strategies and vendors outside China,” said Thomas Nelson, vice president of global product procurement. Indonesia now accounts for 8 percent of the Greensboro, North Carolina-based company’s $2 billion of global sourcing, double the amount three years ago, he said. ‘China-Plus-Two’ Cuts in tax rebates for exporters, accelerating inflation, stricter labor laws, a shortage of workers in coastal manufacturing hubs and assumptions that China’s currency will appreciate, making exports more expensive, are all adding incentives for companies to look elsewhere. “A China-plus-one, or China-plus-two strategy is definitely an essential component of any large brand-buying operation due to rising labor costs and shortages in China,” said Judith Mackay, Asia apparel and license compliance manager at New Balance. The closely held Boston, Massachusetts-based maker of athletic shoes, plans to find sub-contractors in Indonesia to augment four plants in China and one in Vietnam. Indonesia was Asia’s third-fastest growing economy after China and India last year, and with 248 million people, is the world’s fourth-largest population. Vietnam, with 90 million people, had the region’s fourth-fastest pace of growth. Ford, GE Ford Motor Co. Chief Executive Officer Alan Mulally said March 18 it’s “absolutely” important not to focus solely on China and to pursue growth in Asian countries. Ford has invested $1 billion in Thailand in a venture with Mazda Motor Corp. and on March 10 launched its first made-for-India model, the Figo, as part of an $840 million investment there. GE’s energy arm sees “huge” potential in selling equipment to producers of geothermal power in Indonesia, the company’s Kuala Lumpur-based Southeast Asian president Stuart Dean said in a phone interview. GE’s $61 million wind-turbine plant in Haiphong, Vietnam, is set to open this year as is Intel Corp.’s $1 billion chip test and assembly plant in Ho Chi Minh City. French cosmetics maker L’Oreal is spending $50 million to expand its Jakarta manufacturing facility to produce mass market cosmetics under its Garnier and L’Oreal Paris brands. Google, based in Mountain View, California, has less to lose in China than many multinational companies. Google derives about $600 million, or 2.5 percent of sales in China, compared with $10.7 billion , or 24 percent, for Melbourne-based Rio Tinto Group, the world’s third-largest mining company. Four Rio executives went on trial in Shanghai this week charged with accepting bribes. Cyber Attacks Google said Jan. 12 that it was the subject of a cyber attack originating in China. Hackers stole intellectual property from Google and targeted e-mail accounts of human-rights activists, it said. Facebook Inc., which last week overtook Google as the most visited Internet site in the U.S., has avoided a misstep in China, where its site is blocked. The social networking company last week said it would open its first Asian operations center in Hyderabad. Google also has a hub in the southern Indian city. The company controls 88 percent of the market for Web searches in India, a country of 1.2 billion people where the economy has expanded at an average pace of 8.5 percent in the past five years, compared with China’s 9.8 percent. Chinese Rules Chinese government rules to encourage home-grown technology are causing companies to cry foul, the American Chamber of Commerce said. Three ministries posted a notice in November requiring sellers of everything from computer software to office equipment to accredit their products for inclusion among companies offering equipment with “indigenous innovation” to the Chinese government. Twenty-eight percent of 203 members responding to the chamber’s survey said they are losing business because of the policy. Foreign companies are concerned the rules may extend beyond the 599 billion yuan ($87.8 billion) government- procurement market to orders from state-owned enterprises, which last year had combined revenue of 22.5 trillion yuan. “Many foreign companies are starting to believe that the future China business opportunity is shrinking,” said James McGregor , a senior counselor in Beijing at APCO Worldwide, a public affairs company. To contact the reporter on this story: Frederik Balfour in Hong Kong at fbalfour@bloomberg.net

Read the full article →

Google’s Looming China Exit Adds Pressure to Gain Ground in Japan, Korea

March 21, 2010

By Brian Womack and Mary Childs March 22 (Bloomberg) — Google Inc. ’s looming withdrawal from China adds to pressure to expand in South Korea and Japan, where the Web-search company has won a fraction of the popularity it enjoys in the U.S. and Europe. There is little doubt that Google’s Chinese search engine will be shut down after a two-month standoff with Chinese authorities, said Ben Schachter , an analyst at Broadpoint AmTech Inc. in San Francisco. An announcement from Google may come as soon as today, the China Business News reported last week. A pullout would sideline Google in China, a country that JPMorgan Chase & Co. estimates would account for $600 million of the company’s sales this year. While Google’s market share has topped 75 percent in the United Kingdom, Germany and France, the company handles less than 50 percent of searches in Japan and 8 percent in South Korea, according to research firm ComScore Inc. “These are growth markets,” said Andy Miedler , an analyst at Edward Jones & Co. in St. Louis. He recommends buying Google shares and doesn’t own any. “We want them to take chances to invest in these areas because they often offer higher growth potential.” Google, based in Mountain View, California, said Jan. 12 that it was the subject of a highly sophisticated cyber attack that originated in China. Hackers stole intellectual property from Google and targeted e-mail accounts of human-rights activists, the company said. Google responded to the attacks by threatening to stop censoring its search results in China, a plan that the country’s government has called “irresponsible.” Slower Progress China was one of the largest Asian markets where Google was making inroads, said Clay Moran , an analyst at Benchmark Co. in Boca Raton, Florida. The company’s market share in China increased to 36 percent in the fourth quarter from 31 percent in the previous three months, according to Beijing-based researcher Analysys International. “In Asia, Google’s progress has been slower,” Moran said. “But they were doing fairly well recently in China and beginning to gain some share and gain a little momentum, so clearly this will be a setback if they are to leave.” Google shares have fallen 5.2 percent on the Nasdaq Stock Market since the company announced it may pull out of China. That compares with a 4 percent gain by the Nasdaq Composite Index. The stock declined $6.40 to $560 on March 19. Jill Hazelbaker , a Google spokeswoman, didn’t return calls seeking comment. Baidu’s Reign Google’s departure would force Chinese Internet users to rely more on Baidu Inc. ’s search engine, which filters results deemed inappropriate by authorities. That company held 58.6 percent of the country’s online search market last quarter, compared with 35.6 percent for Google, according to Analysys. Advertisers also would have fewer options in the country, providing a boost to Baidu and other Chinese Internet companies, including Tencent Holdings Ltd. and Alibaba.com Ltd. Baidu could use Google’s exit to win more business outside of China as well, said James Hawkins, a Singapore-based managing director of digital advertising for the agency DGM Asia. That’s because Baidu could work on campaigns that span China and the rest of the world, whereas Google could not. “If you look at the big advertisers — your Apples, your Dells, your H-Ps , Sony — their No. 1 market is China,” he said. “If Google aren’t there, they’ll have to seek other opportunities. I am sure Baidu will be as pleased as punch.” Offshore Servers Chinese users may still be able to reach Google’s offshore servers, even if the company pulls out of the country. The key will be whether China lets people access Google.com, Hawkins said. China currently blocks important media sites that aren’t policed internally, said Robert Faris, director of research at the Berkman Center for Internet and Society at Harvard University. That includes YouTube, Twitter, Facebook and Blogger, he said. Google has performed better in the U.S. and Western Europe because its search technology was first built for the Roman alphabet and not Chinese characters, said Colin Gillis , an analyst at BGC Financial LP in New York. Google has since invested in search technology for characters used in China, Korea and Japan. Asia accounts for about 10 percent of Google’s $23.7 billion in annual revenue , he said. In South Korea, Google had 8 percent of the Web-search market in February, according to Reston, Virginia-based ComScore. The leader there is Seongnam, South Korea-based NHN Corp. ’s Naver, which has 51 percent. ‘An Underdog’ “Google is an underdog,” said Schachter, who recommends buying Google shares and doesn’t own any. “That’s not a position they’re used to being in.” Google is also lagging behind in Taiwan, where its market share slipped to 27 percent in February from 28 percent a year earlier, according to ComScore. The company had 32 percent of the Hong Kong market. Taking a stand against censorship in China may enhance Google’s reputation in other parts of Asia, said Whit Andrews , an analyst at research firm Gartner Inc. in Stamford, Connecticut. “Google can say, ‘We won’t censor, and we’ve given up an enormous opportunity,’” Andrews said. “It is not unreasonable to assume that some users attach to Google greater value because of its moral stance against censorship.” Efforts to gain traction have paid off for Google elsewhere in Asia, including Japan, where it took the top spot from Yahoo Japan Corp. Google had 48 percent of Web searches in Japan in February, up from 40 percent a year earlier, according to ComScore. Yahoo had 43 percent. Japan, India “Japan is clearly a large market and they are gaining share,” said Aaron Kessler , an analyst at Kaufman Brothers LP in San Francisco. He recommends buying Google stock and doesn’t own it. “That’s a key market for them.” Google is dominant in India. The site commanded 88 percent of the search market in February, according to ComScore. Google will lose out on the world’s biggest Internet market by users by leaving China. The number of Web surfers in the country will more than double to 840 million by 2013 from 2009, according to New York-based EMarketer Inc. “It’s an area that any investor would want to be in,” Broadpoint AmTech’s Schachter said. “To lose that potential — that’s really a problem.” To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net ; Mary Childs in New York at Mchilds5@bloomberg.net .

Read the full article →

How To Start Your Own Bank

March 19, 2010

Starting a bank sounds like an impossible Gilded Age enterprise more befitting of a Rockefeller than today’s small business owner, especially in these dour economic times. But it’s not as impossible as one might think — or as risky. According to Smart Money.com , “the three-year failure rate for new banks is less than one in 1,000,” which, compared with a “60 percent failure rate for new restaurants,” is not so horrible. The profits are not too shabby either. The site reports: “6,770 community banks earned $67 billion over the past five years.” Based on a recent Wall Street Journal interview , even Former Federal Reserve Chairman Alan Greenspan says that he would start a bank — if he were 50 years younger. Inspired by the Move Your Money campaign , the Huffington Post is investigating different options to make banking more local and personal. For enterprising individuals, one way to make your banking experience more individual could be to start your own. Here are some tips on how to get started. Identify a Need One of the first things any prospective small business owner must assess is the need for her business in the community. Being a bank owner is no exception. When starting Global Trust Bank in Mountain View California, James Wall says that the surrounding community needed to be analyzed to see if it presented a need. “The community banks in the general geography are all gone,” said Wall, president and CEO of Global Trust Bank. Global Trust was situated in Silicon Valley and many of the small banks in the area have recently been bought up by big conglomerates. That’s left a hole in the banking community which Wall and his partners were only too happy to fill. Global Trust Bank opened on December 3, 2008. “The customer has the ability to walk in the door and meet face-to-face with the senior executives and get decisions made on the spot” says Wall. “It’s one-stop shopping for very high-quality personal service.” Capital and Regulation Generally banks need about $12 to 20 million in capital to get started. Many community banks are able to raise that money locally. Mike Schultz, the CEO of Harmony Bank in New Jersey, found that 90% of the capital he raised came from within the community. In Harmony Bank’s case, the board of directors was made of up of business leaders from within the community including a 40 year-old law firm, a construction company and an accounting firm. Once capital is assembled, the process is hardly finished. The application to the regulatory agencies is an arduous process, especially in the aftermath of the financial crisis. Specifically, community bank applications have slowed since the recession. “Turning this downturn, the regulators have gotten much more strict in their review of applications,” says Wall. “It’s probably harder today to get a bank approved than it would have been a couple of years ago.” Once the regulatory approval process is over, however, the bank is free to go into business. Benefits to Community Banking Richard Whitsell, president & CEO of Fresno First Bank, has started three community banks — or as they call them in the industry, Denovo banks (from the Italian for new). Whitsell used to work at Bank of America but, after a long career there, he needed a change. “[I wanted to] get closer to real banking, and making real decisions and having an impact on the community in which we live,” Whitsell reflects. Currently Whitsell has 22 employees. He sits on the same floor as the bank’s transactions and enjoys having a direct impact on the community he resides in. “We really do create an economic force in the communities that we serve,” says Whitsell.

Read the full article →

Google Says Viacom Secretly Put Clips on YouTube While Pressing Complaints

March 18, 2010

By Andy Fixmer and Brian Womack March 18 (Bloomberg) — Google Inc. ’s YouTube said Viacom Inc. secretly uploaded clips to its video-sharing Web site while complaining the Internet company violated its copyrights. “It hired no fewer than 18 different marketing agencies to upload its content to the site,” Zahavah Levine, YouTube’s chief counsel, said on the company’s blog. “It deliberately ‘roughed up’ the videos to make them look stolen or leaked.” Viacom disputes YouTube’s claims, saying only a small number of videos were uploaded with permission. The company amended a complaint in U.S. district court to exclude as many as 250 clips that were either put on YouTube with its permission or under “fair use” rules, according to Michael D. Fricklas , general counsel. The company found one instance of an employee adding a video to the site as part of a “viral” campaign, he said. “They are complaining about a small number,” Fricklas said in an interview. “When those videos were identified, we amended our complaint and removed them.” Viacom’s case involves 63,000 clips, he said. YouTube and Viacom made the assertions as the companies seek favorable rulings from U.S. District Court Judge Louis Stanton in Manhattan in a copyright infringement lawsuit that was filed in 2007. Documents were unsealed by the court today. Viacom and YouTube sent letters to Stanton in December outlining arguments they will make in motions for summary judgment. Viacom, the New York-based owner of MTV Networks and the Paramount movie studio, will try to show copyrighted videos were posted on YouTube without authorization, including clips from “The Daily Show With Jon Stewart ,” ”South Park” and “MTV Unplugged.” Safe Harbor YouTube will argue it is protected by the safe-harbor provision of the federal Digital Millennium Copyright Act , which states an Internet service provider isn’t liable for infringement if it removes material when notified by the copyright owner. YouTube will also argue the law protects it “against claims arising from material uploaded to their systems by users,” Andrew Schapiro , an attorney for YouTube, said in his letter to Stanton dated Dec. 28. Viacom is suing YouTube for $1 billion in damages. YouTube, based in San Bruno, California, was acquired by Google in 2006 for $1.65 billion. Google, based in Mountain View, California, gained 92 cents to $566.48 at 3:54 p.m. New York time in Nasdaq Stock Market trading . The stock had dropped 8.8 percent this year before today. Viacom, controlled by Chairman Sumner Redstone , added 20 cents to $31.29 in New York Stock Exchange composite trading and had gained 4.6 percent in 2010 before today. Revenue Sharing YouTube is also being sued in New York federal court by the London-based Football Association Premier League Ltd., which claims the site infringed its copyrights on broadcasts of British soccer matches. Entertainment companies, including Sony Corp. and CBS Corp., have made deals with YouTube to have their videos displayed in exchange for a share of advertising revenue. The Viacom case is Viacom International Inc. v. YouTube, 07-2102, Southern District of New York (Manhattan). The soccer case is The Football Association Premier League Limited v. YouTube, 07-3582, Southern District of New York (Manhattan). To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net Brian Womack in San Francisco at bwomack1@bloomberg.net

Read the full article →

Wen’s Rejection of Stronger Yuan Draws `Head in Sand’ Retort From Grassley

March 14, 2010

By Bloomberg News March 15 (Bloomberg) — China’s Premier Wen Jiabao rebuffed calls for the yuan to appreciate, risking a further downturn in relations with the U.S. where lawmakers and economists say his stance is hampering a global recovery. “I don’t think the renminbi is undervalued,” Wen said yesterday at a press conference in Beijing marking the end of China’s annual parliamentary meetings, using another term for the yuan. “We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency.” U.S. lawmakers, including Senator Charles Schumer , are proposing that China be hit with stiffer tariffs to compensate for the unfair export advantage they say comes from an undervalued currency. Economist Paul Krugman estimates that global growth would be about 1.5 percentage points higher if China stopped restraining the value of the yuan, and after Wen’s comments said the U.S. should consider putting a 25 percent surcharge on Chinese goods. “Chinese officials are alone in their refusal to acknowledge that the yuan is undervalued,” Senator Charles Grassley , an Iowa Republican, said in a statement responding to Wen’s remarks. “If they choose to stick their heads in the sand, we’ll have to find another way to address this problem because it’s been going on for far too long.” Yuan Forwards Fall Non-deliverable yuan forwards fell 0.2 percent to 6.6425 per dollar as of 11:45 a.m. in Hong Kong today, the biggest decline in more than a month. The contracts indicate that traders are betting the currency will gain about 2.8 percent in the next 12 months. Wen also urged America to “take concrete steps to reassure investors” about the safety of dollar assets, repeating concerns that he expressed a year ago, sparked by a growing U.S. fiscal deficit . The U.S. currency has climbed about 7 percent from last year’s Nov. 25 low, according to the Dollar Index, a six- currency gauge of the greenback’s value. Treasury Department figures show China’s holdings of Treasury securities dropped for a second month in December to $894.8 billion. Only Japan holds more Treasuries. Wen, 67, echoed central bank Governor Zhou Xiaochuan’s comments that China needs to be cautious in ending crisis policies, which have included pegging the yuan at about 6.83 per dollar since July 2008 as the global financial crisis took hold. One-Off Revaluation The premier reiterated that the nation will keep the yuan “basically stable” and maintain a moderately loose monetary policy and a proactive fiscal stance. He said it’s “essential” for the timing of any policy changes to be appropriate. “This is a sign that there will be no one-off revaluation in coming months,” said Lu Ting , an economist at Bank of America-Merrill Lynch in Hong Kong. “China’s top policy makers do have their own currency reform plans but coercion from other countries will do disservice to this cause.” A bipartisan group of U.S. senators including Schumer, a New York Democrat, wrote Commerce Secretary Gary Locke last month, saying imports from China are being subsidized by that nation’s intervention in the currency market. Grassley, in his statement, said the U.S. should consider bringing a case against China’s currency policy at the World Trade Organization. ‘Strong Supporter’ The Chinese premier said that pressure for currency gains can amount to trade “protectionism,” adding that “I’m a strong supporter of free trade.” Protectionism affecting China will backfire because much of the nation’s trade involves foreign-invested exporters, Wen said. The yuan rose 21 percent against the dollar between July 2005 and July 2008, before the government halted its advance to protect exporters. The dollar and the yuan have strengthened against the euro this year, pushing up the cost of Chinese exports in the European Union, the Asian nation’s biggest market. Krugman, a Nobel Prize-winning economist, wrote in a March 14 New York Times editorial that China’s currency policy “seriously damages the rest of the world” and said Wen “absurdly” called the yuan fairly valued. A 25 percent surcharge on Chinese imports would force China to take action to revalue the yuan, he said. ‘Take a Stand’ “I don’t propose this turn to policy hardball lightly,” Krugman wrote. “But Chinese currency policy is adding materially to the world’s economic problems at a time when those problems are already very severe. It’s time to take a stand.” Ballooning sovereign debt and high unemployment around the world could send the global economy into a second, or “double dip” downturn, Wen said. In China, inflation, combined with wide income gaps and official corruption, could lead to social instability “and even affect the government’s hold on power,” he said. Policy makers have made managing “inflation expectations” a key task for this year. February’s gain in consumer prices was 2.7 percent, compared with Wen’s target of about 3 percent for the year. Zhou said yesterday that while the increase was a little higher than forecast, it hadn’t altered the central bank’s plans. China’s goal is to grow without stoking inflation and while adjusting an economic model that has led to an “‘unbalanced, uncoordinated and unsustainable” expansion, Wen said. Officials will maintain “appropriate and sufficient” liquidity and keep interest rates at “reasonable” levels, he added. Tibet, Taiwan Wen blamed strains in China’s relationship with the U.S. on President Barack Obama’s meeting with the Dalai Lama and American arms sales to Taiwan. He expressed hope for an improvement in “our most important diplomatic relationship.” Asked about increasing dissatisfaction among foreign businesses in China over the investment climate, the premier sought to reassure international investors. In January, Mountain View, California-based Google Inc. said it may close down its Chinese Web site because of alleged cyber attacks and China’s ongoing online censorship. “China will unswervingly pursue the policy of opening up to the outside world,” Wen said. “Foreign businesses are welcome to come to China to set up businesses according to the law.” — Michael Forsythe , Eugene Tang , Li Yanping , Kevin Hamlin . With assistance from Ryan Donmoyer in Washington. Editors: Paul Panckhurst , Bill Austin To contact the reporter on this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

Read the full article →

Areva’s Lauvergeon Builds Jet-Proof Nuclear Reactors to Beat Westinghouse

March 5, 2010

By Carol Matlack March 5 (Bloomberg) — Anne Lauvergeon , chief executive officer of Areva SA , the world’s biggest nuclear reactor builder, is getting close to the payoff on a decade-long bet. In 2001, when she engineered the three-way merger that turned Paris-based Areva into a one-stop shop selling nuclear technology, fuels and services to the world, some found the idea far-fetched. The U.S. hadn’t ordered a nuclear plant since the 1979 Three Mile Island accident. And after Chernobyl in 1986, business dried up just about everywhere outside France. There are 436 reactors operating in the world today, just 20 more than in 1990, according to the International Atomic Energy Agency . Lauvergeon says she was undeterred by the nuclear drought, Bloomberg BusinessWeek reports in the March 15 issue. She put Areva’s engineers to work on a new technology called the Evolutionary Pressurized Reactor. The EPR, now under construction in three countries, is designed to produce 1650 megawatts, more than any existing reactor. It is also loaded with safety features such as a reinforced concrete shell designed, post-September 11, to withstand a direct hit by a jumbo jet. Now the 50-year-old CEO is rolling out the EPR just as the nuclear industry awakens from its slumber. Worldwide, hundreds of reactors are being planned and 53 are being built, three of them EPRs, according to the World Nuclear Association . On Feb. 16, President Obama awarded the first of an expected $54 billion in federal loan guarantees to help U.S. utilities build a new generation of nuclear plants. Fuel Pellets At lunch in Areva’s executive dining room overlooking the Paris Opera, Lauvergeon says the EPR will grab one-third of the global market for new reactors over the next 20 years. That, along with the company’s other holdings — from African uranium mines to factories that turn out everything from fuel pellets to reactor vessels — will seal Areva’s place as the industry’s No. 1 player, she says. Areva’s 2009 revenue was 8.5 billion euros ($11.5 billion), excluding a transmission and distribution business the company sold off. (Areva’s biggest competitor in the reactor business is Toshiba Corp. ’s Westinghouse Electric LLC, according to Roger W. Gale , CEO of GF Energy, a nuclear-industry consulting firm. Areva built 91 of the 426 reactors operating worldwide, and Westinghouse built 78, according to the companies.) “I was always convinced that nuclear had a future,” Lauvergeon adds between bites of broiled monkfish with chanterelles. Behind Schedule And yet, she may be asked to leave the table before Areva can cash in on its bet. Despite repeated public denials by the government of President Nicolas Sarkozy , French media outlets such as the magazines L’Express and Challenges have reported that she may soon be replaced. Sarkozy has asked François Roussely, former CEO of Paris-based utility Electricité de France SA , for a review of Areva and the rest of France’s nuclear sector, with a report due in April. Lauvergeon’s prototype EPR, under construction in northern Finland, is three years behind schedule; its cost has gone from $4.1 billion to $7.2 billion, according to the company. Because Areva agreed to a fixed-price contract, it must eat those overruns, which has sapped profits. Adding to its woes, a contract to supply four reactors to Abu Dhabi slipped through Areva’s fingers in December. South Korea’s Korea Electric Power Corp. won the deal with a bid of $20 billion, a price Lauvergeon says was below Areva’s. Price Tag The heads of French oil group Total SA and Electricité de France , which teamed with Areva on the Abu Dhabi bid, have questioned whether Areva erred in risking its future on a top- of-the-line reactor and not developing a lower-cost option. “You need to have a product line that corresponds to countries’ needs,” EDF CEO Henri Proglio said at a press conference last month. Lauvergeon counters that Areva’s customers deserve the best available technology. Her difficulties underscore the biggest challenge facing nuclear power: its price tag. Even as fears about energy independence and global warming have led policymakers and environmentalists to give nuclear a second look, construction costs for reactors have risen twice as fast over the past decade as those for conventional power plants, according to IHS Cambridge Energy Research Associates Inc. Building a nuclear plant has become a “bet-the-farm risk,” ratings agency Moody’s says in a report warning that utilities embarking on such projects could face a rating downgrade. Although a government loan guarantee might ease financing concerns, “it doesn’t address the big risk” that regulators won’t let utilities raise rates enough to offset the cost, says Jim Hempstead, a Moody’s analyst who oversaw the report. Half an Eiffel Tower Lauvergeon says she’s certain the technology will have a place in the energy mix even as solar, wind, and other alternatives take off. Areva has a head start on its chief rivals, Westinghouse and a partnership between General Electric Co. and Hitachi Ltd . Both have reactors with advanced safety features in the works, but Areva’s projects are further along. The first concrete was poured during 2009 for the first two of Westinghouse’s new models, says Vaughn Gilbert , a Westinghouse spokesman. That milestone was reached on Areva’s EPR in Finland in 2005, according to the company. Construction hasn’t begun on the GE-Hitachi project, says Edward Glascock, a spokesman for GE-Hitachi Nuclear Energy. Areva can benefit from lessons learned on EPRs under construction in Finland, France, and China, says Michael J. Wallace , chief operating officer at Constellation Energy Group . Loan Guarantees Electricité de France is building an EPR in the Normandy village of Flamanville. At the foot of a windswept cliff overlooking the English Channel, workers in yellow vests pour concrete into molds bristling with reinforcing rods for a circular wall that will encase the new reactor. The containment structure will include enough steel to build half an Eiffel Tower and about twice the concrete of existing nuclear plants. Such added protections were key in convincing Baltimore- based Constellation to go with an EPR for an expansion of its Calvert Cliffs plant in southern Maryland, says Wallace. The company is in advanced talks to obtain federal loan guarantees, with an eye toward opening the facility by 2015. Despite the cost, some $10 billion, “once that investment is made, we’ll have a highly reliable plant,” says Wallace. Lauvergeon, who’s fluent in English, regularly meets with U.S. industry groups and politicians in U.S. states where Areva operates. Last July she joined then-Virginia Governor Tim Kaine to break ground on a joint-venture factory, with Northrop Grumman Corp ., to supply components for U.S. plants built by Areva and others. ‘Public Relations’ To garner support for the EPR among potential subcontractors, Lauvergeon organized “supplier days” last year in Maryland and Ohio and the company says she’s planned more such events this year in other states. Last summer she invited high school students from Idaho — home to a planned Areva uranium enrichment plant — to visit similar facilities in France. Compared with its rivals, “Areva is more attuned to the public relations side of things,” says Adrian Heymer , senior director for strategic programs at the Nuclear Energy Institute, a trade group in Washington. Trained as a physicist at the Ecole des Mines de Paris , Lauvergeon worked at the French atomic energy agency in the 1980s before joining the staff of former President François Mitterrand, where her job involved visiting foreign officials in preparation for summit meetings. She then became a partner at what is now called Lazard Ltd. In 1999, then-President Jacques Chirac tapped her to run Cogema, a state-owned nuclear fuel business. ‘Bunker Mentality’ She says she was dismayed by what she calls the French industry’s “bunker mentality,” and persuaded Chirac to fuse the state’s nuclear holdings into a single company, with the government retaining a majority stake. Her plan put Areva in position to capitalize on the renaissance, says Gale, the nuclear-industry consultant. Customers are drawn to Areva because, unlike rivals GE and Westinghouse, “nuclear is the only thing they do,” Gale says. “They live and breathe it.” Even so, Lauvergeon is hedging her bets. In February she bought Ausra, a Mountain View, California-based solar startup, and she has added wind and biomass projects to Areva’s portfolio. Renewables account for only about $1 billion of Areva’s $58 billion order backlog, according to company filings, but Lauvergeon says the company someday could get more than a third of its revenue from such activities. Areva sells generators, replacement parts, and management services to utilities worldwide, and says it controls 40 percent of the market for nuclear fuel. “Even if there were zero construction” of reactors, Lauvergeon says, “we would live very well.” To contact the reporter on this story: Carol Matlack in Paris carol_matlack@businessweek.com

Read the full article →

Video: Ex-Googlers Become Angel Investors, Seeding 200 Startups: Video

February 26, 2010

Feb. 26 (Bloomberg) — Since going public six years ago, Mountain View, California-based Google has generated more than $170 billion for its employees and investors. Many of the millionaires the company has produced are active angel investors, with more than 40 ex-Googlers investing in about 200 fledging companies since 2005, according to Bloomberg BusinessWeek’s March 8 issue. Bloomberg’s Gigi Stone and Mark Crumpton report. (Source: Bloomberg)

Read the full article →

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

February 23, 2010

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

Read the full article →

Child Obesity Rate Doubled in U.S. Before Showing Signs of Easing Off

February 16, 2010

By Molly Peterson Feb. 16 (Bloomberg) — The rate of childhood obesity and chronic health problems doubled in the U.S. from 1988 to 2006 with fewer cases toward the end of the study consistent with a recent leveling off, researchers found. Children ages 8 to 14 showed an obesity rate of 15.8 percent at the end of 2006, compared with 8.3 percent in a similar period that ended in 1994, according to a study published online today in the Journal of the American Medical Association . The overall rate of chronic childhood health conditions including obesity, asthma and behavioral or learning problems increased to 26.6 percent from 12.8 percent during the same years. The report comes a week after first lady Michelle Obama began a nationwide campaign against childhood obesity, urging American youths to get more exercise and develop healthier eating habits. Another study published by the U.S. Centers for Disease Control and Prevention in January reported the rise in U.S. obesity levels for children, while high, may have leveled off in the decade ended in 2008 at about 17 percent. “We can speculate that because of the increased attention to obesity in recent years, children may actually be making better food choices, have better nutrition, exercise more and spend less time in front of the television and the computer with video games,” said Jeanne Van Cleave, the report’s lead author. Not Permanent For most of the 5,001 children tracked in today’s research, the chronic health conditions weren’t permanent, Van Cleave, a pediatrician at MassGeneral Hospital for Children in Boston and Harvard Medical School, said in an interview. “Half of all children in the U.S. will have a chronic condition during childhood,” she said Feb. 12 in a telephone interview. “But a lot of these conditions resolve over time.” Today’s study analyzed data collected during six-year periods from three consecutive groups of children who participated in a U.S. Bureau of Labor Statistics survey that began in 1979. The study began tracking the first group in 1988, the second in 1994 and the third in 2000. For all of the groups combined, less than 38 percent of the children who had chronic conditions at the beginning of the observation period still had them after six years. “Many conditions in children tend to wax and wane,” Neal Halfon, director of the University of California at Los Angeles’ Center for Healthier Children, Families and Communities, said in an interview. “Even those that get better can, down the line, end up having problems because of the nature of the issues.” Plateau Another study from CDC found U.S. obesity rates may have hit a plateau toward the end of the decade ended in 2008. That study found about 17 percent of children ages 2 to 19 were obese, with the heaviest boys ages 6 to 19 continuing to gain weight over the decade while others leveled off. “The leveling off really speaks to increased attention to childhood obesity recently,” Van Cleave said. President Barack Obama signed an executive order Feb. 9 directing federal departments to come up with a plan within 90 days on how to make federal nutritional and health data more accessible to the public. The same day, Michelle Obama announced a new federal Web site, www.LetsMove.gov , that emphasizes physical activity and more healthful meals in schools. The site also offers tips to help parents choose more nutritional foods for their children. Highlight “I think she’s trying to highlight that it’s not just all about eating or exercise,” Halfon, who co-authored an editorial that accompanied the study in the journal, said of the first lady’s initiative. “It’s about having places where people can exercise. It’s not just about individual behaviors, but about the systems we have in place — the health system, the education system, the nutrition system.” Companies such as Orexigen Therapeutics Inc. of La Jolla, California, Vivus Inc. of Mountain View, California, and San Diego-based Arena Pharmaceuticals Inc. are developing weight- loss drugs. Orexigen has said it plans to seek U.S. approval of its Contrave medicine in the first half of 2010. In December, Arena Pharmaceuticals submitted an application for its obesity drug lorcaserin and Vivus submitted an application for its treatment Qnexa. Japanese-based Shionogi & Co. is also developing a weight loss drug. Today’s study was funded by the Robert Wood Johnson Foundation and the CDC. To contact the reporter on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net

Read the full article →

MySpace CEO Leaves Less Than Year After Joining News Corp.’s Internet Unit

February 10, 2010

By Adam Satariano Feb. 11 (Bloomberg) — Owen Van Natta , the former Facebook Inc. executive brought in to revive News Corp. ’s MySpace social networking unit, will step down after less than a year. Mike Jones and Jason Hirschhorn , executives who joined the company at about the same time as Van Natta, will assume his responsibilities as co-presidents, New York-based News Corp. said yesterday in an e-mailed statement. Van Natta, 40, was named chief executive in April 2009 to rejuvenate MySpace. Earlier that month, News Corp. hired former AOL chief Jonathan Miller to oversee its digital operations. Facebook, which had 112 million U.S. users in December, passed MySpace as the top domestic social networking site in 2009. “In talking to Owen about his priorities both personally and professionally going forward, we both agreed that it was best for him to step down at this time,” Miller said in the statement. News Corp. , controlled by Chairman and CEO Rupert Murdoch , fell 30 cents to $12.61 yesterday in Nasdaq Stock Market trading . The Class A shares advanced 51 percent last year. MySpace, based in Beverly Hills, California, faces the June expiration of a $900 million, multiyear advertising partnership with Mountain View, California-based Google Inc. Van Natta, who had said MySpace’s health doesn’t hinge on the advertising deal, steered away from direct competition with Facebook, seeking to make the company a hub for music, games and other entertainment. MySpace bought the digital music services iLike and imeem while he was CEO. MySpace’s hiring of Hirschhorn as chief operating officer and Jones as chief product officer was announced three days after Van Natta was appointed CEO. Jones, Hirschhorn Jones founded Userplane, a video service acquired by AOL in 2006 when Miller was CEO of the online company, then part of Time Warner Inc. He had remained at AOL as senior vice president until 2008, when he started a company that aggregates media content from across the Web based on user preferences. Hirschhorn once led Sling Media Inc.’s entertainment group. The company created consumer applications for the Slingbox device that allows users to watch television on mobile phones and computers through the Web. News Corp. reported fiscal second-quarter results on Feb. 2. The company said the profit contribution from its digital media group including MySpace shrank by $32 million from a year earlier, principally due to lower search and ad revenue at MySpace, according to a conference call transcript. “It’s not where we want it,” Murdoch said on the call. Murdoch purchased MySpace’s parent company in 2005 for $580 million as part of an effort to add more online advertising to his traditional media outlets of television and newspapers. The site was the most-popular social-networking service, allowing users to create unique pages that held music, blog postings, pictures and comments from friends. Van Natta left Palo Alto, California-based Facebook in February 2008 just before it surpassed MySpace in worldwide users. He went on to become CEO at Playlist Inc., which lets people upload music and share play lists. To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

Read the full article →

Facebook Games Lead Payment Startups to $3.6 Billion Virtual Goods Market

February 4, 2010

By Ari Levy and Joseph Galante Feb. 4 (Bloomberg) — Facebook games “FarmVille” and “Café World” have Silicon Valley startups racing to create new ways to pay for virtual goods, a market that may reach $3.6 billion by 2012. Kwedit Inc., based in Mountain View, California, will announce today that gamers can buy virtual currency if they promise to pay later at 7-Eleven stores or send in money through the mail. Boku Inc. lets players purchase goods with their mobile phones, while Offerpal Media Inc. allows users to get virtual cash by signing up for services such as Netflix Inc. Companies that let consumers pay in new ways present a challenge to established payment processors, such as EBay Inc.’s PayPal and credit-card issuers MasterCard Inc. and Visa Inc. , said Atul Bagga , a ThinkEquity LLC analyst in San Francisco. He estimates that U.S. virtual-goods sales will almost double to $1.6 billion this year and reach $3.6 billion in three years. “There are so many kids who are playing these games and they don’t have access to credit cards,” said Bagga, who covers gaming companies. “If you make the process seamless, it’s definitely going to help, and mobile plays a big part.” Games on social networks gained popularity in the U.S. last year, prompting Electronic Arts Inc. to purchase Playfish Inc., maker of “Pet Society” and “Restaurant City,” for $400 million. Zynga Inc., creator of “FarmVille” and “Café World,” raised $180 million in private capital in December. Asian Market The market for virtual goods is more established in Asia. Tencent Holdings Ltd. , a game company in Shenzhen, China, has a stock market value of more than $33 billion. Shanda Games Ltd. , a smaller competitor in Shanghai, is valued at about $2.5 billion. Closely held Facebook Inc., the world’s largest social- networking site, is testing its own payments model that would allow users to buy credits in different games. Palo Alto, California-based Facebook would take a cut of those sales. Payment startups such as Kwedit may expand into new areas, such as e-commerce transactions or online music and video purchases, said Justin Smith, founder of Inside Network, which tracks social games and virtual payments. First they must prove that their business models work with virtual goods and enough people prefer them to credit cards and PayPal, Smith said. Kwedit is introducing products today aimed at U.S. consumers without checking or savings accounts — a number pegged at 17 million by the Federal Deposit Insurance Corp. Of Zynga’s more than 200 million users, less than 1 percent buy virtual goods, the company said in November. Some of those people would purchase items if they could, Kwedit says. ‘Ton of Revenue’ “There is a group of players out there who would pay if they could pay,” said Danny Shader , Kwedit’s chief executive officer, who previously sold Good Technology Inc. to Motorola Inc. and Accept.com to Amazon.com Inc. “We can drive a ton of revenue to the Zyngas of the world.” A player on “FarmVille” can already purchase game currency using a credit-card or PayPal account. That lets them buy items such as virtual chicken coops, helping them advance in the game. With Kwedit’s service, users would have the option of getting currency in exchange for a promise to pay at a 7-Eleven, send in a check, or have a friend or relative pay for them. If the player never pays up, Kwedit stops extending credit, and no money is lost because the cash is virtual. Phone Payments Boku’s mobile service is available on Playfish games, including “Pet Society.” San Francisco-based Boku, which raised $25 million in venture capital funding last month, allows players to buy virtual goods by entering their mobile-phone number instead of a credit card. Wireless carriers charge game companies a 20 percent to 50 percent fee per transaction, versus less than 5 percent credit- card companies typically impose, Bagga said. Even so, social- game companies are more willing to accept those higher fees than traditional retailers because there’s no cost to produce virtual goods, said Boku co-founder Ron Hirson . “It was a great place for us to be able to bring mobile payments,” Hirson said. Even with competitors emerging, credit cards and PayPal still dominate virtual-goods payments, accounting for about half of U.S. sales in social games, according to ThinkEquity’s Bagga. PayPal charges a fee of 5 cents, plus 5 percent of the sale, for merchants doing transactions of less than $10, said Sam Shrauger, a vice president of the San Jose, California-based company. That compares with 30 cents, plus about 2 percent to 3 percent, for larger purchases. Wal-Mart Partnership PayPal is looking at ways to make virtual purchases more efficient for game makers and users, Shrauger said. It teamed up with Green Dot Corp. in October to allow consumers to load PayPal accounts with cash at stores such as Wal-Mart Stores Inc. , CVS Caremark Corp. and Walgreen Co. “We’ve been playing in that world for quite a while and see it as a pretty big growth area for us,” Shrauger said in an interview. “It’s not going to slow down. In fact, it’s probably going to grow even more quickly.” Will Valentine , a spokesman for San Francisco-based Visa, said the company is working to encourage customers to use their cards in more places. Erica Harvill, a spokeswoman for Purchase, New York-based MasterCard, said the company is trying to make credit cards easier to use online. Another payment method is used by Fremont, California-based Offerpal and Mountain View, California-based TrialPay Inc. They allow players to get game currency by signing up for services such as a subscription to Netflix or Blockbuster Inc. “There’s a few guys out there, but nobody has emerged yet as the heir apparent,” said Todd Dagres , a general partner at venture firm Spark Capital in Boston. He is looking for investment opportunities in the payments market. “There’s going to be a bunch of competition.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Joseph Galante in San Francisco at jgalante3@bloomberg.net

Read the full article →

Jamie Lee Curtis: Fix the Income

January 30, 2010

How did this happen. When did it happen? Was it the crash or the Mad(off) men or the shock and awe of the (don’t bet on the) banks and the bailout (rages)? What happened to the good old days? They were never that good, as each successive generation supplanted the one before. “Here Son, stand on my shoulders, reach for the stars.” Higher and higher till you retired. A gold watch and a fixed income, yours for life. When did that change? What happened? A financial Mt. Everest that once was scaled has now let loose a tirade of snow and ice, slippery and treacherous, and we are all struggling for a foothold and purchase as we are pulled closer and closer to the edge. Many we have watched go over it. Makes me think of Touching the Void , the stunning filmed re-enactment of the true story of Joe Simpson and Simon Yates in the Peruvian Andes. After reaching the peak and during the descent, Simpson breaks his leg. As rescue is impossible they decide that Yates will attempt to lower Simpson down. As Yates was attempting to lower Simpson 300 feet at a time, the gradient went into a vertical drop and he was propelled over a cliff. While Yates was being pulled slowly toward the edge, his footholds slipping and no response coming from his partner hanging below, as a measure of self-preservation as there was no other option, he cut the rope. Simpson survived falling hundreds of feet into a crevice, causing more damage to his shattered body. When deep within the crevice with no way of possibly climbing up out of it Simpson makes the only choice he can. To climb down, deeper into the crevice. Dragging his broken body inches at a time, down darker and darker there was a crack of light through the ice and eventually he was able to make his way to it and out of the crevice. Now in the bitter cold and in abject pain he made his way, crawling, dragging himself miles down the mountain, over the frozen ground. In the pitch black of night in a howling storm he knew that he was near the base camp because he smelled shit. He had in fact crawled through what was their latrine area and was finally able to call out for help. His companions, who thought he was dead, and were leaving in the morning, of course saved him and they all survived. I thought of this today as I heard another story of a broken dream of a financial life cut off. Another small business closing its doors, employees joining the growing unemployed and another dream gone. Cut off. Dropped. Fired. We are all crawling through shit. I am a lucky one. I anticipated. Probably because I am a child of show-off business and therefore know firsthand how dismissive Hollywood can be as a business, how fickle and ageist and chauvinistic and homophobic. I have seen lives destroyed, as people’s careers were deemed dispensable and were disposed of. SAG sends off the sagging. I saved and lived way below my level and am fine. I will be fine. I am thinking about the millions of workers who were cut loose by their partners, their government, their businesses, their bosses, their schools, institutions. The rope has been cut. One lost job creates another. Who is going to FIX THE INCOME? Who is going to allow people to age with dignity and safety, that there will be a cushion, a soft seat for them to grow old on, to care for them, to help them to assist the living? Messages from the good old days? In Britain during the Blitz, the tube stations had a poster that the Government placed there, Keep Calm and Carry On. A simple message of hope and perseverance while the bombs dropped. I was given a replica for my 50th birthday. It makes sense. Carry on. Keep moving; but how can we tell that to a worker in Detroit with three kids who has to decide if he will buy his daughters medicine or food? The shuttered storefronts, the unemployment lines. The economy grew, but not in jobs. How can you fix the income? By keeping with the same team? By holding steady? By carrying on? By keeping calm? The Main Street that is often referred to in speeches needs repairs. There are potholes and cracks in the infrastructure. How about we start by fixing them? And our crumbling schools. And the crumbling infrastructure of our country. Fix the income and we will fix America.

Read the full article →

JOAN HARNED Earns NAR Short Sales and Foreclosure Certification

January 29, 2010

Buyers and Sellers Benefit from REALTOR® Expertise in Distressed Sales. Joan Harned with TEAM BLACK BEAR at Keller Williams Mountain Properties is your Short Sales & Foreclosure Resource! FOR IMMEDIATE RELEASE PR Log (Press Release) – Jan 29, 2010

Read the full article →

Charles Gasparino: Volcker Is Finally Getting His Due, at Least Till He Gets Snubbed Again

January 25, 2010

It can’t be easy being Paul Volcker. One of the great economists of the modern era, Volcker is best known as the Fed chairman who slayed slagflation in the late 1970s and early 1980s. He was hired by President Obama to provide economic advice and some adult supervision in an administration that featured as other advisers people like the Marxist-sympathizing Van Jones. But then, when he offered his ideas about regulating the banking industry in a post-bailout era, Volcker was routinely ignored, that is until the president, witnessing the horror (for him and his followers at least) of the election of Scott Brown, a Republican, to fill the Senate seat once held by the late Teddy Kennedy, and the vanishing act of his far left agenda, including socialized medicine. And just like that, presto, the grumpy old man who refused to lower interest rates 30 years ago — acts that Obama would presumably oppose given his support for the reappointment of the current, easy-money loving Fed chairman Ben Bernanke — Volcker is back in vogue. Last week, he was seen alongside the president (with Treasury Secretary Tim Geithner standing warily in the background) as Obama unveiled the broad outlines of a financial plan Volcker has been advocating for months now; something that if Obama lives up to his words would make it difficult if not impossible for government-protected banks to mix their risk taking activities like trading esoteric bonds if they want to be protected by taxpayers as Too Big To Fail. On the surface, it would seem like a victory for Volcker and a commonsense move by the White House. After being shunned for months, his ideas like calling for the separation of commercial banking (which includes government protected deposits) and risk-taking investment banking activities denigrated by Geithner and Larry Summers, Obama’s economic advisers and Wall Street mouthpieces, Volcker had won the day. He finally convinced the president of the mountain of evidence that one of the leading contributing factors to the 2008 financial crisis was the a federal law passed in 1999 that allowed risk taking to be combined with commercial banking activities. But Obama’s last minute conversion to Volckerism is, I suspect, less about commonsense and more about politics. As unemployment remains high and Wall Street is now handing out billions in bonuses just a year after being bailed out, the president can call investment banks “fat cats” all he wants. Obama’s policies of the past year: Promised taxes on small businesses to pay for his expansionist government, and protecting banks have led to a dual economy. Unemployment in the construction industry is at around 20% because businesses are hording cash to pay for higher taxes when the financial types who caused the 2008 meltdown and the current Great Recession feast. And now the president is paying the price. Volcker, at 82, may feel as though this is his last act in a long and storied career to do something great, but for my money, there is something unctuous about the great Paul Volcker being used by the president as a political prop. This is, of course, the man who refused to bend to political pressure in the early 1980s, when the Federal Reserve, under his rule, jacked up interest rates to nose bleed levels in an effort to squeeze out inflation but squeezing the economy. His rationale was simple: The short term pain was worth the long term gain of lower inflation, which usually benefits lower income people the most by making goods and services they need more affordable. He was right, and for that, we’re all thankful. But this is a crusade where Volcker isn’t leading the charge. The final proposal (which could come in days, along with I am told further limits on how much “leverage” or borrowing banks may engage in to trade, and new capital requirements) will be hammered out by Obama’s political team, not Volcker. That’s probably one reason my sources on Capitol Hill tell me there’s still a dearth of information on the final product. In other words, they’ve been given no guidance as to how these “reforms” will actually work. “We’ve been directed to a website with a press release covering the president’s announcement last week,” said one Republican staffer. For that reason, look for a watered down proposal that does little to address the notion that banks shouldn’t be able to take risk on the backs of taxpayers. Already, senior officials at Goldman and JP Morgan are telling analysts and investors that the rules will be easily evaded. They’re designed, the Goldman folks assure anyone who asks, to prevent so-called proprietary trading, where Goldman itself comes up with an idea of how to gamble with its own capital, but not trading that begins when a customer makes and order and then the trader follows through with his own bet. For the life of me, I can’t figure out the difference between the two since the firms in both instances are risking their own capital, but Wall Street is making a case that the difference is huge and the firms are flooding Washington as I write this column to influence the legislation. How much of this jockeying for control of the final product Volcker will stand before just calling it quits, is, of course, a matter of debate. For the past year or so, I’ve been reporting that Volcker has been ignored by Obama, shunned as the crazy old man with the wild-ass idea of reimposing something like the Depression-era law known as Glass-Steagall, which formally separated commercial banking from risk-taking investment banking ideas. Ironically, he received a better reception from some of his contacts on Wall Street for this plan, who gave him their ideas on how best to make such a separation of risk taking and commercial work given the realities of the modern financial industry. Goldman Sachs, of course, isn’t a commercial bank like Citigroup. It doesn’t have branch offices, and it doesn’t hold checking accounts, and yet under the president’s approach to regulation, the firm is protected like Citigroup as too systemically important to fail even as it trades just about every esoteric bond in creation. Through it all, Volcker accepted all the snubs, that is, until last week when the president woke up and realized he was right, and there was Volcker standing next to the president getting his due, until, that is, he gets snubbed again.

Read the full article →

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

January 23, 2010

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

Read the full article →

Google Founders Sergey Brin, Larry Page File to Sell 5 Million Shares Each

January 22, 2010

By Brian Womack Jan. 22 (Bloomberg) — Google Inc. founders Larry Page and Sergey Brin have adopted five-year trading plans to sell about 5 million shares each, reducing their combined ownership of stock outstanding to 15 percent from 18 percent. With the reduction in shares, Brin and Page’s voting power in the company would drop to 48 percent from 59 percent, according to a filing with the U.S. Securities and Exchange Commission. Based on today’s closing stock price, each would get about $2.75 billion from selling the shares. “They are both as committed as ever to Google and are integrally involved in our day-to-day management and product strategy,” Google said in an e-mailed statement. “The majority of their net worth remains with Google.” Page and Brin, who met at Stanford University in 1995 before starting Google, participated in a similar plan announced in 2004 that let them sell 7.2 million shares each. The founders are tied for No. 11 on the Forbes 400 list of richest Americans. Google had its initial public offering in 2004. Google , based in Mountain View, California, fell $32.97, or 5.7 percent, to $550.01 at 4 p.m. New York time on the Nasdaq Stock Market. The shares more than doubled last year. To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net

Read the full article →

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

January 19, 2010

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

Read the full article →

Google Says It’s Holding Talks With China Amid Dispute Over Cyber Attacks

January 18, 2010

By Mark Lee Jan. 18 (Bloomberg) — Google Inc. said it has begun talks with the Chinese government about the company’s plan to stop censoring results from its search engine, after saying it may quit the country because of cyber attacks. Google will hold more talks with Chinese authorities “in the coming days,” it said in an e-mailed statement today. The operator of the world’s most-popular search engine last week said it plans to operate an unfiltered search-engine service in China — a move that may lead to the company closing down its offices in the country — pending talks with the government. The Mountain View, California-based Internet company said its computer system faced a series of “highly sophisticated” attacks that originated in China. “The key swing factor is the negotiation between Google and the Chinese government,” Credit Suisse Group AG analysts Wallace Cheung and Sharon Jing wrote in a report today. “Next week will be crucial for resolution of the issue,” said the analysts. An exit from China would leave Google, whose revenue growth slowed during the U.S. recession, on the sidelines of the world’s biggest Internet market by users. The number of Chinese Web users will grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That’s up from 396 million last year. Blog Posting Google said Jan. 12 in a blog posting that it had been subjected to cyber attacks that originated from China and had targeted Chinese human rights campaigners’ Gmail e-mail accounts. It wanted to reach an agreement with the Chinese government to allow unfiltered Internet searches, and would be removing restrictions in coming weeks, the company added. China said it welcomed global Internet companies provided they obey laws that restrict their content. The Chinese service started by Google in 2006 limits search results to comply with the Chinese government’s rules to restrict access to information censors deem inappropriate. Its Google.cn Chinese-language site is still operating in compliance with local regulations, Google said in today’s statement. Local online operator Baidu Inc. will pick up “the lion’s share” of Google’s search business should the U.S. company leave, Nomura Holdings Inc. analyst Jin Yoon wrote in a Jan. 13 report. Tencent Holdings Ltd., operator of China’s biggest online chat service, and Sohu.com Inc. also will gain, Yoon said. Google’s China operations may be “officially terminated” in February, leading the government to block the company’s main site, Credit Suisse’s Cheung and Jing wrote. “Post Google’s China shut down, China government is likely to frequently block the Google.com Web site,” they wrote, without saying who gave them the information. “Without stable Web site access, Google will likely lose traffic and even revenue” to Baidu and other search-engine providers. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

Read the full article →

Google Pledge to Stop China Censoring Spurs Increase in Tiananmen Searches

January 17, 2010

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

Read the full article →

Google in China, Obama’s Bank Tax: Week in Review

January 16, 2010

Jan. 15 (Bloomberg) — Google Inc.’s computer attacks from China and President Barack Obama’s proposal to tax the biggest financial firms lead a selection of the week’s top stories. Google said it was one of at least 20 companies targeted in a “highly sophisticated” cyber attack ,” and announced it will stop censoring Web-search results in China. Yahoo! Inc. was also targeted . Click here for more on Google and China. Obama said the proposed tax on as many as 50 of the largest financial firms will recoup money spent to rescue those companies. The tax may cost JPMorgan Chase & Co. and Bank of America Corp. more than $1.5 billion each per year. Bloomberg columnist David Reilly comments on taxing bankers’ bonuses , while Mark Gilbert’s Hedge Fund Guy seduces Warren Buffett. Ann Woolner discusses the gay marriage debate . Read Bloomberg BusinessWeek’s cover story, “ Apple vs Google: Why They Can’t Be Friends .” Click on the VIDEO tab above for the video of the week, an interview with former Merrill Lynch & Co. Chief Executive Officer John Thain. Read the story here . Following is a selection of stories from the past week, chosen by senior editors at Bloomberg News. Merkel Says Greece Means Euro Faces ‘Difficult’ Time Jan. 14 (Bloomberg) — German Chancellor Angela Merkel said Greece’s mounting budget deficit risks hurting the euro, saying the currency faces a “very difficult phase.” California Creditors Dread IOUs With Aid Plea Failing Jan. 13 (Bloomberg) — California’s hopes are fading for federal help in closing a projected $19.9 billion deficit that has caused the lowest-rated state’s borrowing costs to rise 24 percent since September. Hedge Fund Lender Reaps Returns on Fallen Companies Banks Shun Jan. 12 (Bloomberg) — Hedge fund manager Michael Tennenbaum, at age 74, plans to race down a giant slalom course on Vail Mountain in Colorado in March at the Directors’ Invitational Ski Classic, an annual event that pits pro skiers against business executives. Tennenbaum, who’s competed in the classic for 20 years, finds battling the gates on a slalom run almost as thrilling as his style of investing: making loans to money-losing companies. UBS’s Gruebel Says Stopping Client Redemptions ‘Imperative’ Jan. 11 (Bloomberg) — UBS AG Chief Executive Officer Oswald Gruebel said it’s “imperative” that the largest Swiss bank halt withdrawals by wealthy clients after six quarters of net outflows. Indonesia Pays More Than Philippines in Bond Sale Jan. 13 (Bloomberg) — Indonesia sold $2 billion of 10-year bonds at a higher yield than last week’s sale by the Philippines, after scaling back the offering and cancelling plans to sell 30-year debt. DragonWave in Talks With AT&T, Verizon to Supply Gear Jan. 12 (Bloomberg) — DragonWave Inc. Chief Executive Officer Peter Allen said he’s confident the Canadian wireless equipment maker has a good chance to win business from the largest U.S. mobile-phone companies this year. Miep Gies, Dutch Woman Who Found Anne Frank Diary, Dies at 100 Jan. 11 (Bloomberg) — Miep Gies, the Dutch woman who helped hide Anne Frank’s family from the Nazis and discovered the teenage girl’s now-famous diary, has died. She was 100. Beatty Would Sleep With Any Woman, Because ‘You Never Know’ Jan. 11 (Bloomberg) — Warren Beatty’s new biographer estimates that the notorious lothario has slept with almost 13,000 women, an impressive figure to everyone except perhaps Wilt Chamberlain and Hugh Hefner. The top 10 most-read stories on Bloomberg.com for the past week (excluding daily market coverage): 1. China Ends U.S.’s Reign as Largest Auto Market 2. Google May Exit China After Ending Self-Censorship 3. Dubai’s First Foreclosure May Open Floodgates in Worst Market 4. Bank Profits Means Stocks at 15% Discount to S&P 500 5. Iran Says U.S., Israel May Be Behind Killing of Nuclear Expert 6. Obama Plans to Raise $120 Billion From Banking Fees 7. Federal Reserve Seeks to Protect U.S. Bailout Secrets 8. Blankfein Response Was ‘Troublesome,’ Angelides Says 9. Bernanke Bond Spread Most Since 2007 Shows Decoupling 10. U.S. Has Contingency Plan for Dealing With Iran, Petraeus Says # # # # -0- Jan/15/2010 18:14 GMT

Read the full article →

Digital Sauna Hot, Koreans Cool at Consumer Show: Tech by Rich Jaroslovsky

January 15, 2010

Commentary by Rich Jaroslovsky Jan. 15 (Bloomberg) — I’ve been to a lot of political conventions. Last week was my first Consumer Electronics Show. They have more in common than I would have thought. On the surface, both are about big, public performances designed to sell to a mass audience, whether it’s presidential candidates or 3-D televisions. The more interesting stuff at both venues often isn’t what gets the full-court, prime-time exposure, but what happens on the margins: the networking and the discovery of potential stars. As I roamed the vast Las Vegas Convention Center, some of the most arresting examples of attractive design came from Korean companies. Amid all the hoopla about 3-D TV, which will require more content and some cessation of various format wars before it takes off, I found myself impressed with new flat panel sets from LG Electronics Inc . These are so unbelievably thin — barely a quarter of an inch — they make the plasma screen in my den look as thick as an encyclopedia. Also striking was a line of distinctive Windows netbooks, which I had begun to think was a contradiction in terms, and tablets from Yukyung Technologies Corp., under its Viliv brand. One model included a swiveling screen and touch screen; another was a palmtop with a solid-state disk drive that weighed less than a pound. Finally, Insprit Inc. was showing its Inbrics MID M1, a slim smartphone based on Google Inc. ’s Android operating system with a sliding physical keyboard and a distinctive black-and- white look. Eye-Fi Wandering through the South Hall — or was it the North Hall? — I stumbled upon the booth belonging to Eye-Fi Inc. , a Mountain View, California-based company that makes Wi-Fi-enabled memory cards for cameras. It was demonstrating a new product, the Eye-Fi Pro X2, which effectively offers endless memory. The Pro X2 is an 8-gigabyte SD card that allows you to wirelessly upload your pictures straight from your camera to more than 25 sharing Web sites, including Facebook, Yahoo! Inc. ’s Flickr, Google’s Picasa and Apple Inc. ’s MobileMe. Even better, it will wirelessly transfer your video and image files to your laptop without need for a router. And once your files are safely off-loaded, the card automatically frees up space so you can start filling it again. At $149.99 on Amazon.com, the card isn’t cheap. But it’s another step toward the trend of connectivity in devices that you might not expect to be “Internet-enabled.” Hey, if you can get a (usually mediocre) camera into every smartphone, why not Wi-Fi in every decent camera? Keeping Tabs Speaking of connectivity, another item that caught my eye was the $11,000 mPulse infrared sauna from Sunlighten in Overland Park, Kansas. My interest was piqued not for the obvious sybaritic reasons (well, OK, not only for the obvious sybaritic reasons) but for one of its options: a wristwatch monitor that measures heart rate, calories burned and other relevant information and automatically and wirelessly uploads it to a personal wellness Web site. The technology for always-on personal-health monitoring will likely grow in importance as sensors become ever less obtrusive, online access becomes more ubiquitous and government pressures grow on the health-care system to focus on preventive efforts in order to hold down costs. Meanwhile, you can always just sit back in the 7-foot-by-6- foot enclosure and enjoy the integrated stereo system, or watch a video on the built-in 7-inch color screen. Who says health- care reform can’t be fun? Speaking of video, Sezmi Corp. , a Belmont, California-based startup, was demonstrating its cable- and satellite-alternative TV service, which it’s currently testing in Los Angeles and plans to roll out to additional markets this year. Technology Mash-Up The service is essentially a mash-up of broadcast and Internet technologies. Sezmi has deals with a number of popular cable channels, including USA Network, Discovery, CNN and Comedy Central, to encrypt their feeds and broadcast them over the air to customers, who get them via an indoor antenna box. At the same time, the service provides a library of movies and TV shows for rent or purchase that are delivered over the Internet. Sezmi’s DVR-like set-top box, which can store up to one terabyte of content, ties everything together with a common interface. Each user can have his or her own profile on the box, which will also recommend programs based on individual preferences and viewing habits. What makes Sezmi attractive is that the consumer won’t need to know or care how the content is delivered — just that it’s there. Deals to Cut The cost of the Sezmi hardware may depend on deals it cuts with telephone companies and other resellers; the service will charge $4.99 a month for broadcast, video-on-demand and some Web content, or $24.99 for Sezmi’s full slate of cable channels. Finally, although I sadly missed the actual event, the best marketing ploy had to belong to Marvell Technology Group Ltd. , whose chips power e-readers and smartphones. To highlight its role in digital content, it brought in the most recognizable name associated with the “other” Marvel — the one without the extra l, the comic-book company recently acquired by Walt Disney Co. That would be Stan Lee , the legendary creator of Spider- Man, Iron Man and the X-Men, who was autographing posters. Seldom has a spelling error been so cleverly deployed. ( 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

Read the full article →

Yahoo Said to Be Targeted by China Cyber Attack Similar to Google Incident

January 14, 2010

By Brian Womack and Ari Levy Jan. 14 (Bloomberg) — Yahoo! Inc. , owner of the No. 2 search engine in the U.S., was targeted by a Chinese attack similar to the one that affected Google Inc. , according to a person familiar with the matter. Google said this week that at least 20 other companies were targeted in a series of “highly sophisticated” attacks in December. Yahoo was one of those companies, said the person, who declined to be identified because the information isn’t public. Google said this week that it’s notifying the other companies, which spanned such industries as finance, technology, media and chemicals. Google declined to identify them. The Chinese attacks also included hackers going after human-rights activists via their Gmail e-mail accounts, Google said. The popularity of Yahoo’s e-mail service could have made it a target, said Danny Sullivan , editor-in-chief of the Search Engine Land site in Redding, Connecticut. “People are looking for places to communicate, and communicate without the Chinese authorities restricting them.” Yahoo, which said it “stands aligned” with Google in condemning the attacks, doesn’t disclose attacks on its computer systems. Yahoo sold its Chinese business in 2005, though it has a stake in the country’s Alibaba Group. “ 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 said in a statement. Adobe Attacked 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. Google , the most popular search engine, said this week it would end self-censorship of its product in China. Depending on how the government reacts, the Mountain View, California-based company said it may have to close its site and shut down offices in the country. The Chinese government said global Internet companies are welcome in the country provided they obey laws that restrict their content. “The Chinese government administers the Internet according to law and we have explicit stipulations over what content can be spread on the Internet,” Jiang Yu , a Foreign Ministry spokeswoman, said at a regular briefing in Beijing today. A separate Chinese government official today defended the nation’s right to censor the Internet. ‘Protecting Security’ “Effective guidance of public opinion on the Internet is an important way of protecting the security of online information,” Wang Chen, director of the State Council Information Office, said in a question-and-answer session with reporters, a transcript of which was posted on the office’s Web site today. Wang’s remarks suggest China will not grant Google’s request to allow unfiltered Internet searches, said Duncan Clark , the Beijing-based chairman of BDA China, a telecommunications and Internet consulting company. “Google.cn is toast,” Clark said in an interview. “Just keep pressing refresh on your browser and see what happens.” An exit would leave Google on the sidelines of an Internet market that’s larger than the U.S. population. The number of Chinese Internet users should grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That’s up from 396 million, or 30 percent of the population, last year. Google and Yahoo were criticized by U.S. lawmakers in 2006 for complying with the Chinese government’s restrictions on the Internet. Yahoo co-founder Jerry Yang said in 2005 that a court order obliged the Sunnyvale, California-based company to hand over user records. That move led to the conviction of a Chinese journalist. Yahoo fell 3 cents to $16.87 at 9:35 a.m. New York time on the Nasdaq Stock Market. Google dropped 28 cents to $586.81. To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net Ari Levy in San Francisco at alevy5@bloomberg.net

Read the full article →

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

Read the full article →

Google’s Threat to Exit China Disheartens Users Who Find `No Substitute’

January 13, 2010

By Bloomberg News Jan. 14 (Bloomberg) — Google Inc. users in China gathered to place flowers and candles outside the Beijing office after the company said it may withdraw from the world’s biggest Internet market. “Life will be difficult without Google,” said Yao Lina, 30, an accountant working for a heavy industry company. “Google’s functions for translations and searching for pictures and video clips are very unique and helpful and I am afraid there’s no substitute for that.” Google said Jan. 12 it may quit the Chinese market after discovering attacks originating from China on the e-mail accounts of human-rights activist using the Mountain View, California-based company’s Gmail service. A series of “highly sophisticated” attacks on Google and at least 20 other companies last month, as well as limits on free speech, led to the decision, Google said in a statement on its Web log. Dozens of people gathered outside Google’s office building in the Tsinghua Science Park in western Beijing, where freezing temperatures were forecast to fall to as low as minus-13 degrees Celsius (8.6 degrees Fahrenheit) yesterday. The card on one bouquet of freshly-cut flowers placed outside the offices read “Google — Waiting for your comeback.” “I was shocked this morning to hear the Google announcement,” said a 27-year old man, who only gave his surname Xue, as he stood outside Google’s Beijing office. “I hope the government won’t shut down the site.” Baidu Lead Google had a 35.6 percent share of the Chinese search market in the fourth quarter, trailing leader Baidu Inc. ’s 58.4 percent share, according to researcher Analysys International. Allen Ren, who works for a consulting company in Shanghai, said he prefers Google to Baidu Inc.’s service because he thinks the U.S. company’s search results are more reliable. “I will feel a little bit strange if I cannot use Google,” Ren said. Cai Yiyi, who works for an Italian exhibition company, also said she primarily uses Google to search the Internet. “Baidu isn’t as sophisticated as Google and will generate some junk search results,” the 24-year-old said. “That will cause me some inconvenience.” — Feiwen Rong in Beijing and Shidong Zhang , Alfred Cang , Irene Shen and Stephanie Wong in Shanghai. Editors: John Liu , Young- Sam Cho To contact Bloomberg News staff for this story: Feiwen Rong at +86-10-6649-7563 or frong2@bloomberg.net ; Stephanie Wong in Shanghai at +86-21-6104-7029 or swong139@bloomberg.net

Read the full article →

Obesity Epidemic May Have Hit Plateau in U.S., Researchers Find

January 13, 2010

By Nicole Ostrow Jan. 13 (Bloomberg) — The number of U.S. adults and children who are considered obese may have leveled off over the past decade particularly among women, even if millions of Americans are still overweight, researchers found. About 36 percent of women were obese in 2008, little changed from 1999, according to a study published today by the Journal of the American Medical Association . About 32 percent of men were classified as obese in 2008, compared with 28 percent in 1999, with most of the increase occurring in the early part of the decade. The number of people who are obese has more than doubled in the past 30 years to 72 million, according to the U.S. Centers for Disease Control and Prevention. People who are overweight or obese have a greater risk of diabetes, heart attacks and strokes, said the Atlanta-based CDC . “We may have halted the progress of the obesity epidemic,” said William Dietz , director of the CDC’s Division of Nutrition, Physical Activity and Obesity, in a telephone interview yesterday. “We haven’t reversed it.” “The challenge here is what do we need to implement to drive these numbers the other way,” said Dietz, who was not involved in the study. Obesity for adults is defined as having a body mass index greater than 30, which is equivalent to about 186 pounds for a person who is 5 feet, 6 inches tall. The index represents weight in kilograms divided by height in meters squared. Health Impact The surge in obesity has undermined progress made in other public health areas such as heart disease, according to a study presented in November by University of Texas researchers in November. The advances include cholesterol-lowering drugs called statins, introduced in the late 1980s, and programs that the CDC said have cut smoking rates to 21 percent in 2008 from 37 percent in 1970. Companies such as Orexigen Therapeutics Inc. of La Jolla, California, Vivus Inc. of Mountain View, California, and San Diego-based Arena Pharmaceuticals Inc. are developing weight loss drugs. Orexigen has said it plans to seek U.S. approval of its Contrave medicine in the first half of 2010. In December, Arena Pharmaceuticals submitted an application for its obesity drug lorcaserin and Vivus submitted an application for its obesity treatment Qnexa. Japanese-based Shionogi & Co. is also developing a weight loss drug. Adults and Children The researchers analyzed data from the National Health and Nutrition Examination Survey from 2007 and 2008 for two studies published today, one on adults and another on children. In the adult study, height and weight measurements were looked at from 5,555 men and women ages 20 and older. In the children’s study, heights and weights were analyzed on 3,281 children ages two through 19 and 719 infants and toddlers from birth through two years old. While obesity was considered to be a body mass index of more than 30, overweight for adults was defined as having a BMI of 25 to 30. The researchers in the adult study found that overall, 33.8 percent of Americans were obese in 2007-2008, while 68 percent were considered either overweight or obese. Somewhat more men, about 72 percent, were classified as either overweight or obese compared with about 64 percent of women, the study showed. “It appears that the rapid increases we saw in the 1980s and the 1990s are at the very least slowing down,” said Cynthia Ogden, an author on both studies and an epidemiologist at the CDC, in a Jan. 12 telephone interview. “The prevalence still remains very high and obesity still continues to be a significant health concern in the U.S. We still have work to do.” Children and Teens In the study on children, the researchers found that about 32 percent of children ages 2 to 19 were at risk for being overweight or obese, similar to the findings reported in 2008 by the CDC. About 17 percent of the children were considered obese and almost 12 percent were considered the heaviest kids. The heaviest boys ages six to 19 continued to gain weight over the decade, the only children’s group that didn’t level off during the study period, said Ogden, who was lead author on the children’s study. J. Michael Gaziano , a preventive cardiologist at the Veterans Administration Boston Health Care System and Brigham and Women’s Hospital in Boston, said today’s findings are “silver linings to the cloud, but the cloud is still large.” There isn’t a consensus on how to manage and lose weight, and the government needs to invest more heavily in developing strategies that help people lose weight over the long term, said Gaziano, who wrote an editorial accompanying the studies in the journal. Dietz, the CDC official, said the agency has targeted six behaviors to help reduce obesity: physical activity, breast feeding, fruit and vegetable intake, reduction in TV time, reduction in high-calorie foods and reduction in sweetened beverage intake. The agency is also working with states to combat the obesity epidemic, according to its Web site. The studies were sponsored by CDC. For Related News and Information: To contact the reporter on this story: Nicole Ostrow in New York at nostrow1@bloomberg.net .

Read the full article →

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 .

Read the full article →

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 ;

Read the full article →

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

Read the full article →

Silicon Valley’s Worst Office Glut in 5 Years Means Real-Estate Bloodbath

January 5, 2010

By Dan Levy Jan. 5 (Bloomberg) — Silicon Valley is beset by the biggest office property glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents. More than 43 million square feet (4 million square meters) — the equivalent of 15 Empire State Buildings — stood vacant at the end of the third quarter, the most in almost five years, according to CB Richard Ellis Group Inc. San Jose, Sunnyvale and Palo Alto have 11 empty office buildings with about 3 million square feet of the best quality space. “There is a bubble bursting in much the same way as the residential market burst,” said Jon Haveman, principal at Beacon Economics, a consulting firm in San Rafael, California. “None of those towers will fill up anytime soon.” Unemployment in the San Jose-Sunnyvale-Santa Clara metro area that includes Silicon Valley was 11.8 percent in November, down from the August record of 12.1 percent, according to California’s Employment Development Department. Applied Materials Inc. and Sun Microsystems Inc. in Santa Clara and Adobe Systems Inc. in San Jose announced more than 5,000 job cuts since October amid falling sales of computer chips, software and equipment. Commercial property foreclosures will at least double in 2010 and job growth won’t return for two years after that, held back by U.S. consumers who are saving more and “getting back in line with sustainable spending habits,” Haveman said. Domino Effect Bloated inventory and tight lending standards will curtail office construction in pockets around California for “the next several years,” said Jack Kyser, founding economist of the Kyser Center for Economic Research at the Los Angeles Economic Development Corp. “That means there won’t be jobs for construction workers and hence no tax revenue from sales of construction materials,” Kyser said. “It is the ultimate domino effect.” About 21 percent of Silicon Valley’s Class A office space is vacant, as is 20 percent of low-rise so-called flex or research and development space for offices or manufacturing, CB Richard Ellis said. More than 4 million square feet of speculative office projects opened since 2007 as developers anticipated that companies would move from flex space into new towers, according to CB Richard Ellis. Empty Class A offices totaled 13 million square feet and vacant flex space was 30.5 million square feet as of Oct. 1, the Los Angeles-based broker said. “Many of these assets have lost half their value,” said Dan Fasulo, managing director of New York-based research firm Real Capital Analytics Inc. “That’s a bloodbath.” Start of Shakeout Silicon Valley is in the “early innings” of a commercial property shakeout, said Erik Doyle, president of Cornish & Carey Commercial, a property brokerage in Santa Clara. The number of jobs in the information-technology sector that includes software and Web portals fell more in the prior year than in any industry except construction and mining, state data show. Some technology companies are taking the opportunity to upgrade their space. Palo Alto-based Facebook Inc., the most popular social-networking Web site, signed a 135,000-square-foot office lease and a 265,000-square-foot flex lease. Solar-panel maker Solyndra Inc., which filed Dec. 18 for a $300 million initial public stock offering, broke ground on a new plant in Fremont in September. Tenant Pressure Property owners are feeling pressure from tenants who want to lease for at least 10 percent less than published rates, said Michael Grado, a CB Richard Ellis broker. That makes this market worse than the dot-com bust after 2000 because back then defunct Internet companies continued paying rent despite a 60 percent vacancy rate, he said. Asking rents averaged $34.56 a square foot for Class A space in the third quarter, 21 percent less than a year earlier. The rate for flex space was $14.16 a square foot, down 16 percent, according to CB Richard Ellis. “You’ll see buildings turn over,” said Grado, whose listings include Riverpark Tower II, a 318,372-square-foot empty high-rise completed in July and owned by Foster City-based Legacy Partners Commercial Inc. Riverpark II is the second-largest 100 percent vacant Class A office property in Silicon Valley. Oracle Corp. ’s 381,000-square-foot tower at 488 Almaden Boulevard is the biggest, acquired in the 2008 takeover of BEA Systems Inc. Both properties are in downtown San Jose. Moffett Towers, a complex in Sunnyvale with 1.6 million square feet, has partially leased only one of its six buildings. Owner and developer Jay Paul Co., based in San Francisco, completed them in 2008. Cyclical ‘Churn’ Legacy is showing the building to prospective tenants, said Lisa Morrissey, vice president of marketing. Deborah Hellinger, an Oracle spokeswoman, and Matt Lituchy, a senior vice president at Jay Paul Co., didn’t return telephone messages seeking comment. Silicon Valley may need new industries to emerge from the property slump, according to Doug Henton, director of Collaborative Economics Inc. in Mountain View, California. Clean technology and social-networking are driving what little job growth exists amid a cyclical “churn” where layoffs at large companies lead to new jobs at start-ups, he said. “We’re at the end of the bubble,” said Steve Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto. “It will take a long time to get the momentum going.” To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net .

Read the full article →

The 40 Best Performing Stocks Of The 2000s (RANKINGS)

January 3, 2010

During the last ten years, which have been variously referred to both as ” the big zero ” and as a ” lost decade ,” there were still a few winners. If your portfolio contained any of the below stocks in the last decade, you should probably consider yourself lucky. Just how lucky? Topping the below list, which was compiled by Bespoke Investment Group , of the best performing stocks in the Russell 3000 during the last decade is diet food provider Medifast . The stock began the decade priced 19 cents and ended at $30.58 — a 16,209% increase. In keeping with Warren Buffett’s longtime love of consumer staples companies, the below list contains more than a few firms that cater to Main Street. In a decade that saw two recessions and rising energy and health care costs, companies like Green Mountain Coffee Roasters , clothier J oS. A Bank and health-conscious soda maker Hansen Natural all managed to become big winners. (A quick note: this list only includes stocks that were publicly traded on December 31, 1999. So there are a few very prominent big gainers that didn’t make the cut. Google, for one, would have earned 619 % over its 2004 IPO price. We’ve included the top 40 below.) (Data courtesy of Bespoke Investment Group ) Get HuffPost Business On Facebook and Twitter !

Read the full article →

Obesity Becomes Shionogi Gamble in Search for Another Crestor Blockbuster

December 22, 2009

By Kanoko Matsuyama Dec. 22 (Bloomberg) — Persistence may pay off for Shionogi & Co. as it struggles to turn a promising scientific advance into a best-selling diet pill. The Japanese company, discoverer of the blockbuster cholesterol medicine Crestor, plans to stick with velneperit, an experimental obesity drug, after one of two key studies failed and Merck & Co. , Johnson & Johnson and GlaxoSmithKline Plc abandoned similar treatments. Shionogi is betting on a world market with the potential to expand 20-fold to $10.5 billion by 2018, according to estimates by London-based Datamonitor Plc. Even if it should eventually gain regulatory approval, velneperit may not be enough to offset the potential drop in annual sales when Crestor loses patent protection in 2016, said Gareth Powell , a fund manager in London. “I’ve not been impressed with the drug,” said Powell, who invests in health-care stocks for Polar Capital Partners Ltd., the manager of $2 billion of assets. “If they relied on this as the sole replacement of Crestor, I’d be pretty nervous.” Powell’s holdings don’t include Shionogi shares. Analysts at Barclays Plc in London and at Mitsubishi UFJ Securities Co. and Mizuho Securities Co. , both of Tokyo, are omitting the product from revenue estimates for Osaka-based Shionogi. The drugmaker needs velneperit and AIDS treatments it is developing with Glaxo to make up for the revenue plunge foreseen for Crestor, which now accounts for a quarter of Shionogi’s 223 billion yen ($2.5 billion) in annual sales, when the cholesterol drug loses patent protection in less than seven years. Side Effects Drugmakers have failed to find a weight-loss formula without side effects. Wyeth, now a unit of New York-based Pfizer Inc., pulled its fen-phen diet pill in 1997 and put aside $21 billion to settle a decade of litigation after the drug combination was linked to heart and lung damage. Paris-based Sanofi-Aventis SA dropped its weight-loss drug Acomplia, which the company had expected to generate $3 billion a year, in October 2008 after European regulators deemed that the risks of the pill outweighed its benefits. The drug had failed to win backing from a U.S. Food and Drug Administration panel in June 2007 over reports of suicide risks. Merck, of Whitehouse Station, New Jersey, and Pfizer stopped developing drugs similar to Acomplia. For drugmakers, the allure of the weight-loss market is hard to resist. The world had at least 400 million obese adults in 2005, a figure that may jump 75 percent to 700 million by 2015, according to the Geneva-based World Health Organization . Overweight and obese people face greater risk of heart attacks, strokes and diabetes than those with less body mass, according to the U.S. Centers for Disease Control and Prevention, based in Atlanta. Damped Sales Product withdrawals and failed treatments in the pipeline have hurt global sales of obesity drugs, which totaled $514 million last year, Datamonitor said. The number of obese adults in seven markets, including the U.S. and U.K., will climb at least 14 percent to 143 million in the decade to 2018, and assuming that a quarter of them will be treated for a year at $1 a day, the market could swell to $10.5 billion, the research company said. Velneperit is a gamble, as the latest tests showed that patients taking the drug shed 4.6 percent of their weight. While that compared with 1.2 percent for those given a placebo, medicines from Orexigen Therapeutics Inc. of La Jolla, California, and Vivus Inc. of Mountain View, California, have advanced further in development and yielded more weight loss. Without Velneperit Shionogi rose 1.1 percent to close at 1,949 yen in Tokyo trading. The stock has dropped 18 percent in the past 12 months, compared with a 6.4 percent gain for Japan’s benchmark Topix Index . For now, Shionogi is commanding growing sales and profit without help from its obesity drug, said Yasuhiro Nakazawa , an analyst at Mitsubishi UFJ Financial Group Inc. in Tokyo. The drugmaker’s operating profit will climb more than 20 percent annually through March 2013, Nakazawa said. He is one of 13 analysts, among 17 tracked by Bloomberg, who recommend buying Shionogi shares, citing sales led by Crestor . Shionogi, which discovered Crestor, sold rights to the drug to AstraZeneca Plc’s forerunner Zeneca Group in April 1998. In October, Shionogi halted its search for a partner to help develop velneperit outside Japan, as the company planned to carry out more studies to achieve a stronger result on the drug’s efficacy, President Isao Teshirogi said at an analysts’ briefing in November. Promising Test The company announced in February the outcome of two clinical tests, in the second of three stages required by regulators. One shows some promise: 35 percent of patients on a restricted diet who took velneperit for 54 weeks lost more than 5 percent of their weight, almost three times the proportion for those who were given a dummy pill. In the other test, there was little weight-loss difference between patients taking the drug and those on placebo. “The efficacy just wasn’t all that exciting,” Polar Capital’s Powell said. Shionogi is conducting new trials of velneperit in combination with an older medicine, Xenical from Basel, Switzerland-based Roche Holding AG. The Japanese company expects results around November 2010, pushing back by one year what had been its schedule to enter the final stage of development. The delay means the drug may not reach the market in time to help make up for Crestor’s patent expiration, said Hiroshi Tanaka , an analyst at Mizuho Securities in Tokyo. Advanced Drug Testing Besides the obesity pill, only one drug originating from Shionogi is in advanced stages of patient studies in the U.S., the world’s largest pharmaceutical market. The company is working with Glaxo on an HIV treatment that blocks an enzyme the virus uses to hijack healthy cells. Alpharetta, Georgia-based Sciele Pharma Inc., owned by Shionogi, has at least two drugs in advanced development: a spray to prevent premature ejaculation, and Adrenamate, a treatment for anaphylaxis, a potentially deadly allergic reaction. Shionogi said it is sticking with velneperit because the treatment shows more promise than Merck’s MK-0557. In one study involving dieting patients, Merck’s drug showed the test subjects regained some weight after finishing treatment. When combined with weight-loss medicines sold by Abbott Laboratories of Abbott Park, Illinois, and Roche, the drug didn’t show as much benefit as those products alone. Velneperit works by blocking a receptor called neuropeptide Y5, which plays a role in food cravings. ‘Can do Better’ “Merck tried everything it could and gave up,” Takuko Y. Sawada, Shionogi’s head of drug development, said in an interview from its laboratory in Osaka. The Japanese company “can do better” because of differences in the way velneperit shows its effect on weight management, Sawada said. Merck ended development of MK-0557 for obesity in 2005. The weight loss after one year of treatment wasn’t clinically meaningful, Ian McConnell , a Merck spokesman, said in an e-mail. Glaxo, Johnson & Johnson and Novartis also stopped testing drugs in the same class as MK-0557. “The human response to food is extremely complex,” McConnell said. “It appears that interfering with one pathway may not have a dramatic effect because there could be other pathways serving as backup systems that compensate for the change caused by the drug.” Terminated Project Melinda Stubbee, a spokeswoman for London-based Glaxo, said its project was no longer active. Ernie Knewitz , a spokesman for New Brunswick, New Jersey-based J&J, said development of its drug stopped several years ago. Eric Althoff , a spokesman at Basel, Switzerland-based Novartis, said its project was terminated. All three didn’t elaborate. Targeting Y5 alone probably can’t reduce body weight by much more than 5 percent because humans eat as a form of protection, said Herbert Herzog , head of the neuroscience research program at the Garvan Institute of Medical Research in Sydney. “As soon as you are starving and your body feels like your energy level is low, it’s driving you toward feeding,” Herzog said. “You are not programmed not to eat.” The U.S. FDA published guidance for the industry in February 2007 on developing medicines for weight loss. Products must meet at least one of two benchmarks. The first requires a minimum difference of 5 percentage points between weight loss from the drug and that from a placebo; otherwise, at least 35 percent of the group taking the drug must lose no less than 5 percent of body weight and the effect must be seen in twice as many patients as those on placebo. Rival Drugs Arena Pharmaceuticals Inc. , of San Diego, and Vivus plan to submit their respective obesity treatments, lorcaserin and Qnexa, to the FDA this year. Orexigen has said it will present its medicine, Contrave, in the first half of 2010. Most of those drugs combine at least two proven treatments to get around the need to eat. Contrave mixes an antidepressant with a narcotic. “Appetite is a fundamental function that humans can’t survive without,” said Kazuhiko Tatemoto, who co-discovered neuropeptide Y. “There are many pathways that control appetite so if you deactivate one, others get activated.” To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net .

Read the full article →

LinkedIn Joins ESPN, Skype in Shift From Free to `Freemium’ to Spur Sales

December 18, 2009

By Ari Levy and Greg Bensinger Dec. 18 (Bloomberg) — LinkedIn Corp., Walt Disney Co. ’s ESPN , Skype Ltd. and other Web sites, which reeled in users with free content, are now boosting sales by adding features that customers have to pay for. LinkedIn introduced a product last month that helps recruiting agencies scour the networking site for job candidates. In June, ESPN merged its online magazine with its Insider service, which costs $6.95 a month. Skype has added features such as voice mail and calling plans that allow users to dial land-line phones for a monthly fee. The shift reflects a desire by Web site owners to reduce their dependence on online advertising. Instead, they’re attracting visitors with free content and then selling them premium services or subscriptions, a model known as “freemium.” U.S. consumers will spend $8.55 billion on Web content such as games, music and dating in 2010, up 13 percent from this year, according to Forrester Research Inc. “They’re finding things that are valuable to people that they’re willing to pay for,” said Charlene Li , an analyst with Altimeter Group LLC in San Mateo, California. “Diversity in terms of revenue stream is always healthier because they’re never dependent on a single stream.” Recruiter Services LinkedIn said in October that it’s ahead of financial targets for this year. While users can create personal profiles for free, the Mountain View, California-based company introduced paid subscriptions in 2005. Those services give recruiters more access to job candidates and provide business professionals with ways to communicate with one another. Prices range from $24.95 to $499.95 a month. “Professionals have consistently shown a high willingness to pay for unique value-added tools and content,” said LinkedIn Chief Financial Officer Steve Sordello . The company doesn’t disclose its revenue or the percentage of users who pay for the service. A feature called LinkedIn Recruiter, introduced in November, makes it easier to search for workers and send messages over the site. Prices vary depending on the number of subscriptions and job listings included. Spending for online content in the U.S. will increase 9.3 percent a year on average through 2013, reaching $10.8 billion, according to Cambridge, Massachusetts-based Forrester . While new revenue opportunities are emerging, advertising will remain the biggest source of growth, Forrester predicts. Ad sales will rise 17 percent a year on average to $47.4 billion in four years, the company estimates. ESPN Online ESPN, the sports cable-TV network and Web site owned by Burbank, California-based Disney, started charging for ESPN Insider in 1998. Subscribers have more than doubled since 2005 and number in the hundreds of thousands, according to ESPN spokeswoman Kristie Chong. Sports content also has allowed the Milwaukee Journal- Sentinel , owned by Journal Communications Inc., to charge for a service called Packer Insider. Started in 2001, the feature focuses on the National Football League’s Green Bay Packers. Pandora Media Inc., a music service that lets people listen to songs online for free, added a $36-a-year product in May that features better audio quality and no ads. The company still generates more than 90 percent of its revenue from ads targeting customers who use the site for free, said Peter Rip , a general partner at Crosslink Capital in San Francisco. ‘Huge Difference’ “When you pay a subscription on Pandora, you get a higher- quality digital music feed,” said Rip, whose firm is the biggest investor in Pandora. “You can hear a huge difference when it goes through your home stereo system.” Variety , the Hollywood trade publication owned by London- based Reed Elsevier Plc, started requiring some visitors this month to sign up for a subscription after they browse two pages. The freemium news model has worked for News Corp. ’s Wall Street Journal, which has more than 2 million paid customers, according to its site. The subscription costs about $100 a year. The newspaper’s success hasn’t been replicated by competitors. That’s because so much news is available for free and charging for it reduces readership, making the pages less attractive to advertisers, said Steve Hasker, president of Nielsen Co. ’s media and advertising products group in New York. Of the top 25 newspaper sites visited by Internet users in the U.S., only the Wall Street Journal charges for access to stories, according to ComScore Inc., a research firm in Reston, Virginia. New York Times Co. abandoned its last paid-content effort in 2007. Expect Free “We’ve trained people to expect news content, and increasingly video and audio, for free,” Hasker said. Advertisers want “eyeballs and large audiences.” Like LinkedIn, Monster Worldwide Inc. seeks to attract users with free content — job listings and career advice — while charging recruiters. Monster, the world’s largest online- recruiting company, introduced a Power Resume Search feature in October that costs 30 percent more than the previous product, Chief Executive Officer Salvatore Iannuzzi said on a conference call that month. New York-based Monster, seeking to reverse five straight quarters of declining sales, raised the price because the new product uses “semantic search” technology that understands job-seekers’ qualifications better than old algorithms that hunted for keywords. The old and new products aren’t comparable, Iannuzzi said. Online Games The growing popularity of video games on social-networking site Facebook Inc. has led to surging revenue at Zynga Game Network Inc., maker of “Mafia Wars” and “FarmVille.” Zynga, started in San Francisco in 2007, lets users play for free. The company makes money from microtransactions, which allow players to buy virtual goods like a sawed-off shotgun or wheelbarrow to use in the games. Zynga received a $180 million investment this week from investors led by Digital Sky Technologies, partly owned by Russian billionaire Alisher Usmanov . More than 1 million of Zynga’s 230 million monthly active users buy virtual goods, the company said. Sales may jump 69 percent to $355 million next year, according to Justin Smith, founder of the industry- tracking Web site Inside Social Games. “People will pay for content totally depending on their necessity for content and the ability to get it free online,” said Ellen Siminoff , a former Yahoo! Inc. executive and co- founder of education Web site Shmoop University Inc. in Mountain View. “The key thing is the uniqueness of the content.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Greg Bensinger in New York at gbensinger1@bloomberg.net .

Read the full article →

John Hope Bryant: When Leaders Screw Up

December 11, 2009

When leaders screw up, more often than not, their immediate response is so often what I would call a classic fear-based model; huddle up, hunker down, ride it out.

Read the full article →

Obama Confronts Limits on Job Creation Powers as Employment Summit Opens

December 3, 2009

By Nicholas Johnston Dec. 3 (Bloomberg) — President Barack Obama will show the limits of his ability to attack unemployment as he hosts a job- creation summit at the White House today. The forum will assemble economists, union heads and business leaders such as Eric Schmidt , chief executive officer of Mountain View, California-based Google Inc. , and Fred Smith of Memphis, Tennessee-based FedEx Corp . With the nation’s unemployment rate at a 23-year high of 10.2 percent, Obama will solicit feedback on job-creation proposals such as incentives to make homes more energy efficient, increased access to financing for small business and tax credits for companies. None of those measures will be a substitute for economic growth, said Rose Wang , a forum participant who is chief executive officer of Binary Group Inc. , an Arlington, Virginia- based technology consulting company. “We’re not hiring until we see some new contracts coming in,” Wang said. “I’m a believer in revenue growth and until I see a real trend picking up, I will be very concerned in terms of spending money.” The companies that will be represented at the White House, including Dallas-based AT&T Inc. , Chicago-based Boeing Co. and New York-based Pfizer Inc. , provide a snapshot of the nation’s employment woes, having cut more than 36,000 jobs this year, according to data compiled by Bloomberg. ‘Sense of Urgency’ Valerie Jarrett , a senior White House adviser, said the president “feels a sense of urgency” about unemployment and the summit is part of an “ongoing effort to jumpstart the economy and create jobs.” She said other forums would be organized around the country. At the same time, Jarrett said the administration is constrained by a budget deficit that reached a record $1.4 trillion in the fiscal year that ended Sept. 30 and is projected to be $1.4 trillion again this year. “There are definite limitations to what the federal government can do,” she said in an interview. The U.S. economy grew at a 2.8 percent annual pace in the third quarter; the unemployment rate is expected to remain at 10.2 percent for November and may continue to rise in 2010, according to a Bloomberg survey. “I think the unemployment rate will peak sometime next summer, on a monthly basis around 11 percent,” Mark Zandi , chief economist with Moody’s Economy.com, said in an interview. Stimulus Obama earlier this year pushed through Congress a $787 billion economic stimulus package that his administration said would hold unemployment below 8 percent. An analysis by the nonpartisan Congressional Budget Office said the stimulus generated between 600,000 and 1.6 million jobs and lowered the nation’s unemployment rate by between 0.3 and 0.9 percentage points, even as that rate rose into double digits. “You’re in a position of a doctor that prescribed aspirin and says ‘this will bring down your fever’ and instead of 105 you have 101, but you still have a fever,” said Alan Blinder , a Princeton University economist and former Federal Reserve vice chairman who will be among the 130 participants in today’s forum. Jarrett said the topics of the six breakout sessions “telegraph” the policy areas the administration is exploring to promote job growth, including encouraging investment in energy efficiency, infrastructure, and job retraining. Export Growth David Ickert, vice president of finance for Air Tractor Inc. , will be attending the session on export growth. He said his Olney, Texas-based company makes airplanes for agriculture and fire-fighting and would be helped by simplified trade rules and access to financing for exports. Wang of Binary Group said she would also press for better financing access, including through the Small Business Administration, a strategy Obama endorsed Oct. 21. Administration officials have also suggested that tax credits to offset some of the costs of hiring are under consideration, as well as direct aid to state or local governments. “Providing more help to state and local governments would make sense,” Zandi said. “If they don’t get it they will be cutting jobs, a lot of jobs. I think that would be an easy very effective step.” No Timetable Jarrett said there is no timetable for determining which of the options will be submitted to Congress as policy proposals. Summit attendee Robert Greenstein , executive director of the Center on Budget and Policy Priorities in Washington, said he expects Obama to make recommendations before his State of the Union Address early next year. Republicans said any proposals would meet resistance in Congress, where concerns have grown about the deficit after Obama announced this week that he will seek $30 billion in new spending in Afghanistan and is pushing health-care legislation that is projected to cost almost $900 billion over 10 years. Republican lawmakers criticized the first economic stimulus measure as ineffective and said the administration inflated the program’s success after an investigation by a Congressional watchdog found “significant reporting and quality errors” in a tally of jobs created or saved. “The White House claimed that if we passed the trillion- dollar stimulus, unemployment would stay below 8 percent and jobs would be created immediately,” said Republican House Leader John Boehner of Ohio, who is holding a competing jobs forum today with lawmakers and economists. To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net

Read the full article →

News Corp. Joined By Rivals Considering Pulling Their Stories From Google

November 24, 2009

By Greg Bensinger and Brian Womack Nov. 24 (Bloomberg) — Publishers of the Denver Post and the Dallas Morning News may pull some of their stories from Google Inc. ’s news site, a move that would emulate News Corp.’s Rupert Murdoch . News Corp. is considering blocking Google’s search engine from displaying its news articles and is talking to Microsoft Corp. about displaying stories on its Bing site, people familiar with the situation said yesterday. MediaNews Group Inc., the Post’s publisher, will block Google News when it starts charging readers in Pennsylvania and California for online content next year, Chief Executive Officer Dean Singleton said in an interview. Morning News owner A.H. Belo Corp. may also introduce online subscription fees and also block Google, Executive Vice President James Moroney said. “The things that go behind pay walls, we will not let Google search to, but the things that are outside the pay wall we probably will, because we want the traffic,” Singleton said. Newspaper publishers, grappling with a collapse in the print-ad market, are considering Web-site charges and are pushing back against Google, which displays headlines and excerpts from stories on its free news site . News Corp. , whose Wall Street Journal already charges for online subscriptions, has also said that it plans more paid-for content. While newspapers have complained about Google using their news to attract users and boost revenue, fewer than 1 percent have opted out of the service, Josh Cohen, head of Google’s news division, said in an interview. Value in Traffic “There’s value in that traffic and I think publishers recognize that value,” Cohen said. “The reason they’re not opting out is they’re getting something from that relationship.” Google Chief Executive Officer Eric Schmidt said in an interview this month that his company, owner of the most popular Internet search engine, would like to keep news providers on its site. “We do worry about it, and we think it would be a bad outcome” for newspapers to leave Google, Schmidt said. “We would encourage them to stay in our program.” Gabriel Stricker , a Google spokesman, declined to comment yesterday on any talks between News Corp. and Microsoft, as well as the other newspapers potentially opting out of Google News. Murdoch, News Corp. ’s chairman and CEO, said in an interview on Sky News Australia this month that he may remove the company’s content from Google searches. The company’s newspapers include the Times of London and the New York Post. MediaNews, based in Denver, will block Google News from the content it puts behind a so-called pay wall early next year at newspapers in Chico, California, and York, Pennsylvania, Singleton said. Paid Models A.H. Belo, based in Dallas, hasn’t decided if it will block Google News and any action isn’t “imminent,” said Moroney, who is also publisher of the Morning News. Blocking Google would be part of a larger strategy, he said. A.H. Belo is considering models for charging for some of its Web content and plans to implement a pay wall within six months at either the Morning News, Rhode Island’s Providence Journal or Riverside Press-Enterprise , published in Riverside, California, Moroney said. That may require Web readers to go directly to the newspaper’s site to read stories, he said. “This is traffic that’s not being monetized to any great degree,” Moroney said. “It’s akin to a person who drops into town, buys one copy of your newspaper and leaves town again and yet you spend a whole bunch of time building your business around that type of customer.” Google, based in Mountain View, California, rose $12.39 to $582.35 in Nasdaq Stock Market trading yesterday. A.H. Belo gained 2 cents to $4.40 on the New York Stock Exchange. MediaNews is closely held. Google Criticisms Google News gathers stories from the Web and displays their headlines, photos and the first few lines with links to the full articles on the original publishers’ Web sites. Google has also faced international criticism from media companies over the service. In 2007, Belgian newspapers won a copyright suit blocking Google from linking to their articles on Google News. Fewer than 100 publishers have completely blocked their content from Google News search results, Cohen said. “You can point back to the traffic that we’re sending and the fact that so few of those publishers have opted out as a pretty strong case that there’s value being delivered back to these publishers,” Cohen said. Moroney said more publishers are “focused on attracting the really engaged consumers who come multiple times and stay for lots of minutes every time” rather than the casual online reader who happens upon a news site by chance. U.S. newspaper publishers lost 28 percent of their print and online ad revenue in the third quarter from a year earlier, the Newspaper Association of America reported this month. To contact the reporters on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net ; Brian Womack in San Francisco at bwomack1@bloomberg.net

Read the full article →

Teracent: Google Acquires Display Ad Specialist

November 23, 2009

MOUNTAIN VIEW, Calif. — Google Inc. has snapped up another startup in its quest to sell more visual advertising on the Web. The acquisition of Teracent Corp., a 3-year-old startup, provides Google with more tools for customizing the online billboards known as display advertising. Selling more display advertising is a high priority for Google, which makes most of its money from short text messages posted alongside search results and other Web content. Google started the expansion into display advertising last year after completing its $3.2 billion acquisition of the online ad service DoubleClick. The push poses a threat to Yahoo Inc., which is the Internet’s biggest seller of display ads. Teracent’s technology automatically tweaks the look of an ad so the images are more likely to grab the targeted audience. The changes are based on factors such as a Web page’s content, the time of day and the user’s location. Google didn’t disclose the financial terms of the deal, which was announced Monday. Google’s dominance of the more lucrative Internet search market has left it with plenty of money to mount its challenge in display advertising. The company ended September with about $22 billion in cash. Convinced the economy is on the improving, Google’s management is back on the acquisition prowl. The company is in the process of buying AdMob, a startup specializing in ads for mobile devices, for $750 million. Teracent, which is based in San Mateo, Calif., was started in 2006 by Vikas Jha, a former engineer at one-time Google rival Inktomi. Google is based in nearby Mountain View.

Read the full article →

Vivus Erection Drug Avanafil Helps Men in 30 Minutes, Company Study Says

November 18, 2009

By Rob Waters Nov. 18 (Bloomberg) — Vivus Inc ., an unprofitable biotechnology company, said its experimental impotence drug helped men achieve erections in as little as 30 minutes in a study, or about twice as fast as Pfizer’s Inc.’s Viagra. Data showing the drug, called Avanafil, acts quickly will help Vivus seek U.S. permission to enter the $3.7 billion erection-drug market in 2011, said Chief Executive Officer Leland Wilson . Vivus shares rose as much as 12 percent. Wilson said he may introduce Avanafil in early 2012. As many as 322 million men worldwide may have erectile dysfunction by 2025, according to an Oct. 19 report by the American College of Physicians. Avanafil will grab market share because it works faster than the market-leading Viagra, which takes an hour to produce results and Eli Lilly & Co.’s Cialis, which takes about two, Wilson said in a telephone interview. “Patients want on-demand therapy because when the mood is right, the mood is right,” Wilson said. “We’ve shown efficacy in 30 minutes and no one else has done that.” Vivus jumped 48 cents, or 5.6 percent, to $9.05 at 10:06 a.m. New York time in Nasdaq Stock Market composite trading, after earlier touching $9.60. The company had risen 61 percent in the year before today. Avanafil could bring in $350 million by 2015, grabbing about the same market share as Levitra, said Jason Butler , an analyst for JMP Securities in New York, in a telephone interview yesterday. The key, he said, will be for Vivus to find a partner willing to spend money on promotion. Viagra, Cialis, Levitra In 2008, Viagra, made by New York-based Pfizer, the world’s biggest drugmaker, had about half of the erectile-dysfunction market. Cialis, made by Indianapolis, Indiana-based Eli Lilly & Co . had 40 percent and Levitra, made by Germany-based Bayer AG 10 percent. “This is a hugely promotion-driven market,” he said. “Viagra and Cialis win because they have sales reps that call on doctors every day of the week and they spend a huge amount on advertising.” Vivus won U.S. approval for its first erection product Muse in 1996, two years before Viagra was cleared for sale. Muse, a product designed to push erection-boosting medicine into the urethra, was quickly displaced by the little blue pill Viagra. Muse had revenue of $18.05 million last year. Vivus also is competing to introduce a new weight-loss drug for obesity patients with Arena Pharmaceuticals Inc. and Orexigen Therapeutics Inc. , both based in San Diego. The Mountain View, California-based company has said it will seek permission from the Food and Drug Administration to sell the treatment, Qnexa, by the end of the year. Partnership Needed While Vivus needs to form a partnership with a major drugmaker to market its erectile dysfunction pill, Wilson said he may wait to make a deal until the company has completed its clinical trials and submitted its application to the FDA. “As we move forward, it will increase our value,” he said. The Vivus study compared three doses of Avanafil to placebos in 646 patients with erectile dysfunction , a condition that affects 15 to 30 million U.S. men, according to a National Institutes of Health Web site. Before the late-stage study, 12 to 14 percent of men achieved erections that allowed them to have sexual intercourse. Men taking the lowest 50-milligram dose got erections 40 percent of the time, while those taking either the 100 milligram or 200 milligram doses achieved erections 57 percent of the time, according to a Vivus statement. Men taking placebos were able to have sex 27 percent of the time. Visual Distortions None of the patients had visual distortions such as those reported rarely by some Viagra and Cialis patients who said the drug added a blue tinge to their vision, Wilson said. The visual changes on those pills cleared up within a few hours, according to an Indiana University study reported April 13. About 85 percent of patients taking the Vivus drug completed the 16-week study. The most-common side effects were headaches, experienced by 7 percent of the men, facial flushing, experienced by 4.6 percent and nasal congestion, experienced by 2.3 percent. Patients in the study were men older than age 18 who had erectile problems for at least six months and excluded those taking nitrate heart medicines. Men using these medicines are also warned not to take the erectile dysfunction drugs on the market. Trials are under way for patients whose erection difficulties are linked to their diabetes , one of the most common causes of impotence, and for men who had surgery for prostate cancer, Wilson said. Viagra works within 30 minutes to 2 hours, according to prescribing information on the drug’s label. The median time to effectiveness is 60 minutes. Cialis, when taken as needed, can work within 30 minutes to 6 hours, according to prescribing information , with effectiveness achieved after a median of 2 hours. The drug can also be prescribed for daily use. To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net .

Read the full article →

The Garibaldi Group/CORFAC International Announces Lease Signings Totalling 18,000 Square Feet at the Warren Office Center

November 16, 2009

WARREN, N.J., Nov. 16, 2009 (GLOBE NEWSWIRE) — The Garibaldi Group/CORFAC International is pleased to announce it has facilitated several new leases and a long term renewal at 34 Mountain Boulevard, Warren, New Jersey, a two story colonial multi-tenant office complex. The Warren Office Center is owned by joint venture between Meritage Properties LLC and Accordia Realty Ventures, LLC.

Read the full article →

Tweets Steer Venezuelans Through Caracas Traffic in BlackBerry Revolution

November 14, 2009

By Daniel Cancel Nov. 13 (Bloomberg) — Venezuelans’ BlackBerrys buzz with urgent news on Twitter : an accident in La Trinidad industrial zone, a tie-up at the old toll booth on the mountain, a mudslide onto the Prados del Este highway. Tweets flag potholes, warn of flooded roads and divulge police checkpoints on weekend nights. Politics laps into the Twitter alerts that Caracas drivers use to navigate traffic- choked streets, as posters rage at the government and stalled infrastructure projects. Caracas motorists, burning the world’s cheapest gasoline and driving twice as many cars as roads can handle, may be global leaders in using Twitter Inc.’s social networking Web site to outflank traffic. Their 9,598-strong group forum, called Trafico , shows growth of 10 percent a week. Venezuela’s per- capita use of smart phones outpaces Europe’s, according to Research in Motion Ltd. , BlackBerry’s manufacturer. “There’s a big supply of texts and mobile devices and a lot of demand for traffic reports since traffic’s unbearable,” said Juan Nagel, an economist at economic consulting firm ODH Grupo Consultores in Caracas, who has studied the city’s traffic problems. “Even though the state’s on top of you and regulating everything, Venezuelans are very entrepreneurial.” Trafico Explosion The explosion of Trafico is fueled by crosscurrents in Venezuela’s economy. President Hugo Chavez , pushing for what he calls a revolutionary socialist society, has raised taxes on luxury goods and denounces consumerism. Some Venezuelans, boxed in by currency controls, inflation and low interest rates, are spending more on consumer goods rather than put depreciating bolivars in the bank. Cars in particular are a hedge against 29 percent annual inflation. Secondhand models often fetch higher prices. New car sales plunged 57 percent in October on import restrictions and slashed dollar allocations for paying suppliers abroad. Public transit projects, including an express-bus system and extensions of the Caracas subway , have been on hold since oil revenue plunged more than 50 percent in this year’s first half, worsening traffic along torn-up streets. Smart-phone marketing in Venezuela plays to Chavez’s currency controls. Venezuelans are allowed $400 annually for online purchases, and Web ads for BlackBerrys suggest spending the quota on devices sold for precisely that price. ‘Irrational Consumption’ “There’s irrational consumption in Venezuela because of inflation,” said Asdrubal Oliveros , a director at economic consulting firm Ecoanalitica in Caracas. “It’s great to borrow but horrible to save. Venezuelans also have a very high brand awareness and the BlackBerry has become a symbol of status and fashion.” This year, 7 percent of mobile phones sold in Venezuela will be smart phones, compared with 5 percent in all of Latin America, said Omar Salvador , an analyst at telecommunications research firm Pyramid Research in Cambridge, Massachusetts. Smart phones are expected to rise to 12 percent of sales in 2010, he said. With smart phones constituting about 19 percent of mobile phones sales globally, there’s potential in Venezuela for both growth and more competition for Waterloo, Ontario-based RIM, the market leader, Salvador said. RIM doesn’t provide country-specific figures on market share, said Alex Zago, the company’s market intelligence manager for Latin America. RIM shares have climbed 54 percent this year to $62.69 on the Nasdaq Stock Market. Market Penetration “Venezuela has the penetration of smart phones we see in countries like the U.S. and Canada,” he said. That’s feeding the growth of Trafico, which has generated about 23,000 messages since it began in 2007. “God! Kilometer zero of the Pan-American highway is a disgrace,” a tweeter using the name Elnicota wrote Nov. 5. “Diosdado, Chavez, stop politicizing everything,” the poster said, referring to Public Works Minister Diosdado Cabello and the president. “What chaos in the city, the country has slipped from their hands,” Edichi06 wrote. Caracas Congestion Caracas is among the worst dozen cities for traffic in the world, said Lee Schipper, a researcher at the Center for Global Metropolitan Studies at the University of California, Berkeley. The population of 3.2 million makes Caracas the 94th-biggest metropolitan area in the world, according to the Times Atlas of the World. Radio reports on Caracas traffic consist of a single helicopter reporter providing half-hour updates on several commercial stations. Live traffic-tracking options on Google Inc.’s Google Maps and on GPS systems don’t work in Venezuela. Trafico users, by contrast, learned Nov. 5 that the central university entrances and a road were closed in the Las Mercedes neighborhood. During rainstorms early this year, a user warned of street flooding, embedding a linked photo of a floating car for emphasis. Knockoffs of Twitter traffic pages are cropping up in Caracas. El Universal newspaper has one with 4,945 followers and copycat-named TraficoCCS has 2,981. Outside Venezuela, Trafico Costa Rica is the most similar site, Twitter searches show. It has 1,045 followers. Posts on the U.S.’s Commuter Feed Web site are posted only about three times a day per city. Its creator, Ron Whitman, 28, said activity has fallen off since the Los Angeles-based site started in March 2008. Commuter Feed warns twitterers not to tweet while driving. In Caracas, with speeds averaging 11 to 15 kilometers an hour (7 to 9 miles per hour), drivers have enough down time to tweet en route, Nagel said. The city has 1.3 million registered vehicles using roads built to handle 30 percent of that volume, according to a 2007 report from the Venezuelan Civil Engineering Society. “This isn’t the First World, where people are texting while doing 40,” Nagel said. “This is Venezuela.” To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net .

Read the full article →

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

Read the full article →

Second Suicide Bomb in Two Days Strikes Pakistan’s Peshawar, Killing Three

November 9, 2009

By Anwar Shakir and Paul Tighe Nov. 9 (Bloomberg) — Pakistan police killed a suspected terrorist planning an attack in the capital, Islamabad, as at least 12 people died in a suicide bombing in the northeastern city of Peshawar. The attacker was killed at a police checkpoint late yesterday, the official Associated Press of Pakistan reported , citing Bin Yameen, deputy inspector-general of police in Islamabad. Security forces are hunting for two accomplices who escaped in a car, he said. A suicide bomber blew himself up in a cattle market yesterday in Peshawar in North West Frontier Province. The Tehreek-e-Taliban carried out the attack, Ummaer Khan, a spokesman for the group, said by phone. Militants in Pakistan have killed more than 300 people in bombings and attacks since the army last month began its biggest offensive aimed at driving pro-Taliban fighters from the South Waziristan tribal region bordering Afghanistan. The army is targeting Tehreek-e-Taliban, which Pakistan blames for 80 percent of terrorist attacks on its territory. The would-be bomber in Islamabad was killed when he jumped from a car and tried to attack the police post, Yameen said, according to APP. “A big terrorist bid was foiled,” he said. The Peshawar bombing killed Abdul Malik, a local official, Mian Iftikhar Hussain , the minister of information in North West Frontier Province, said yesterday. Malik was a former Taliban supporter who became an anti-militant mayor, Agence France- Presse reported. ‘Barbaric’ Bombing Pakistan’s Prime Minister Yousuf Raza Gilani ordered an inquiry into the attack on the market, describing the bombing as “barbaric,” according to APP. Troops are clearing areas around Sararogha, Raghzai and Sagar Langer Gel after driving militants from the towns, the army said yesterday. Pakistan says it wants to complete its operation in South Waziristan before winter starts in the region next month. Taliban fighters are fleeing into South Waziristan’s mountains, the army said last week. The Taliban says its forces are falling back deliberately to draw soldiers into the region and engage them in a long war. The capture of Taliban-controlled towns may have limited strategic value unless soldiers pursue militants into their mountain hideouts, ex-army brigadier Javed Hussain , a former Special Forces commander, said last week. To contact the reporters on this story: Anwar Shakir in Karachi at ashakir1@bloomberg.net ; Paul Tighe in Sydney at ptighe@bloomberg.net .

Read the full article →

← Previous Entries

Next Entries →