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Air France, Lufthansa Test Fly Jets in Ash as European Flight Ban Extended

April 18, 2010

By Gregory Viscusi and Omar R. Valdimarsson April 18 (Bloomberg) — Air France-KLM Group and Deutsche Lufthansa AG were among carriers saying they managed to fly empty aircraft without suffering damage as traffic authorities across Europe extended a flight ban after the eruption of an Icelandic volcano. Air France ’s KLM Dutch unit will operate nine more test flights today after a technical inspection following one late yesterday in Dutch airspace revealed that “the quality of the atmosphere is in order.” Air France plans to fly an empty Airbus A320 in the southwest of France this afternoon. Lufthansa sent 10 aircraft from Munich to Frankfurt to reposition its fleet yesterday. All arrived safely. “We asked the Frankfurt crew to check any damage with the aircraft and the windows,” Wolfgang Weber, a spokesman at Lufthansa, Europe’s second-largest carrier, said today in a phone interview. “There wasn’t even the smallest scratch.” Only 17 percent of 24,000 flights that cross Europe’s airspace on a Sunday will fly today as airports from Dublin to Moscow closed, according to Eurocontrol, the Brussels-based group that oversees regional air traffic. Flights were grounded after April 14 when an eruption at the 1,666-meter (5,466-foot) Eyjafjallajökull volcano spewed dust across thousands of miles of airspace. The disruptions are costing carriers $200 million a day, the International Air Transport Association estimates. Volcanic ash can cause jet engines to fail by melting and then congealing in the turbines. Test flights so far have shown no dangerous particles following the eruption in European airspace, according to airline executives. Air Berlin, British Airways Air Berlin Plc ran two test flights yesterday from Munich to Dusseldorf and from Nuremberg to Hamburg without problems, flying at the permitted 3,000 meters, the carrier said in a statement. The jets showed “no damage whatsoever,” it said. “We’re puzzled why the results of the Lufthansa and Air Berlin test flights had no influence on safety authorities’ decision criteria,” Air Berlin CEO Joachim Hunold said. British Airways Plc , Europe’s third-largest carrier, said it plans to operate a test flight today. The airline extended a cancelation of all flights to and from London through tomorrow. Phone calls to Eurocontrol in Brussels seeking comment went unanswered. The European Commission said today it will set up a group to assess the impact of the volcanic ash cloud on the air travel industry and the economy. EU transport ministers will hold a special videoconference tomorrow on the air travel crisis, Agence France-Presse reported. Ban Extension No planes will operate out of the U.K. until at least 1 a.m. London time tomorrow, the National Air Traffic Service said. German airports will remain closed until 8 p.m. Berlin time, the DFS air traffic control agency said. All French airspace is shut until 8 a.m. tomorrow. Amsterdam’s Schiphol Airport will close until at least 8 p.m. tonight. France’s civil aviation authority banned flying in the previously unaffected south of the country today. All French airports will remain closed until at least 8 a.m. tomorrow. Government ministers are scheduled to meet this afternoon at 4 p.m. to discuss further measures. Airspace in northern Spain was also shut. Rome, Madrid, Athens and Istanbul were the only major European airports still in operation. “We hope to receive permission as soon as possible after that to start up our operation and to transport our passengers to their destinations,” KLM Chief Executive Officer Peter Hartman said in a statement. Asian Routes Airlines in the Asia-Pacific region canceled most Europe- bound flights, with Qantas Airways Ltd. saying it won’t fly to European destinations before April 20 and can’t confirm when service on those routes will resume. Carriers including Air China Ltd., Japan Airlines Corp., Thai Airways International Pcl, Korean Air Lines Co. and Cathay Pacific Airways Ltd. shut down service to Europe, while Singapore’s Changi Airport reported cancelation of 34 arrivals and departures, including Singapore Airlines Ltd. flights to nine European destinations. Haraldur Eiriksson, a meteorologist at the Icelandic meteorological office , predicts little changes in the ash pattern in Europe in at least through April 23. “This could have an ongoing impact on European air travel,” he said. “The forecast hasn’t changed although the height the volcano is spewing the ash into has decreased from 5 to 6 kilometers to less than 3 kilometers and now it can’t be seen on our radars. Due to cloudy weather conditions at the site of the volcano, we can’t say what the exact height of the ash is.” 1821 Eruption Volcanic eruptions may continue for months and curtail European air traffic, said Sigrun Hreinsdottir, a geophysicist at the University of Iceland in Reykjavik. “It could erupt, pause for a few weeks, and then possibly erupt again.” The last eruption of Eyjafjallajökull in December 1821 continued until January 1823. The current blast has sent ash to as high as 7 kilometers (4.5 miles), according to Gudrun Larsen, a vulcanologist at the University of Iceland. The magma had to pierce 200 meters of ice before reaching the air, she said. “We really don’t know if this eruption is going to last as long as the previous one, but we can’t say it’s not a possibility,” Larsen said by telephone. The volcanic ash cloud also led world leaders, including Barack Obama , German Chancellor Angela Merkel and French President Nicolas Sarkozy to cancel plans to attend the funeral of Polish President Lech Kaczynski , killed with 95 others in an April 10 plane crash. Russian President Dmitry Medvedev arrived in a government jet which had clearance to fly at low altitudes. Airline Stocks Fall Airline stocks, including British Airways, Lufthansa, and Ryanair Holdings Plc, fell April 16 as fleets were grounded. El Al Israel Airlines, which has canceled all European flights except to Madrid, Rome and Athens, fell the most in 17 months on the Tel Aviv exchange today. Italy will keep airspace in the north of the country closed until at least 8 a.m. tomorrow and may curtail flights in the south, ENAC, the nation’s civil aviation authority, said in an e-mailed statement yesterday. Exports of Italian products such as mozzarella cheese, flowers, fruit and vegetables worth 10 million euros ($13.5 million) are blocked, the country’s Coldiretti agricultural group said in a statement. Freight Reroutes Deutsche Post AG ’s DHL unit has diverted air freight to southern European airports including Bergamo in Italy to maintain services. DHL has closed its Leipzig-Halle freight hub where at least 50 aircraft land each week, carrying up to 200,000 deliveries, spokesman Stefan Hess said. DHL switched to rail and road for deliveries in northern Europe on April 16. Because of the wind direction, Iceland’s Keflavik airport is open, and North American flights are running on schedule. OAO Aeroflot, Russia’s largest air carrier, is flying to North America via the North Pole to avoid volcano ash over Europe, transportation Minister Igor Levitin told Prime Minister Putin at a meeting today, Interfax said. The U.S.-based Air Transport Association said yesterday that 282 of 337, or 84 percent, of the day’s non-stop flights between the U.S. and Europe were scrubbed. Delta Air Lines Inc., the world’s largest carrier, scrubbed 91 flights yesterday to and from Europe, said spokesman Anthony Black. AMR Corp.’s American Airlines canceled 56 flights between the U.S. and Europe, according to the carrier. American was able to operate flights into and out of Spain and Italy, spokesman Tim Smith said. Karen Pride , a spokeswoman for Chicago’s Department of Aviation, which operates O’Hare International Airport, Midway International Airport and Gary-Chicago International Airport, said 22 flights bound for Chicago from Europe were canceled. The eruption began on March 20 with a lava flow on the eastern flank of the Eyjafjallajökull volcano, according to the Institute of Earth Sciences at the University of Iceland. After a lull, it resumed early on April 14, directly under the icecap that covers most of the mountain. To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net ; Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net

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Jared Bernstein: Recovery Act in Action: A Window Into a Change of Heart

April 1, 2010

For this week’s episode of Recovery Act in action, I spoke to a business owner who started out skeptical about the benefits of the Recovery Act. In fact, he was so concerned that the Act wouldn’t help the economy, he worried that the Recovery Act was “mortgaging the future.” Fast forward to the present, where the Recovery Act has created a wave of new demand for the energy efficient windows his company makes. Based on that demand, his sales have picked up such that he’s added 100 new workers, in occupations ranging from line workers to managers. “He” is Alan Levin, owner and CEO of Northeast Building Products, a Philadelphia-based manufacturer of energy-efficient windows. When the Recovery Act was passed last February, he figured it was another government program that was going to bypass the little guy. A small business like his would never see any of the benefits. “I was skeptical,” Alan told me when I reached him this week. “These numbers people were throwing around — hundreds of billions of dollars — they’re unfathomable. We see ourselves as just a little mom and pop operation and I never imagined a program like this would reach down and help the way it has.” Yet just a few months after the Act went into effect, he was getting calls for new orders generated by two different measures in the Recovery Act. One is a grant program for cities and states to do energy-efficient retrofits of public housing. The other is a program that gives homeowners a tax credit for putting in high-efficiency windows and making other energy-saving improvements to their own homes. That tax credit can put up to $1,500 straight into a homeowner’s pocket, not to mention the savings on energy bills from the windows themselves. The way Alan tells the story, the credit has had a dramatic impact on his industry. “It used to be the contractors wanted to know, ‘What’s your cheapest window?’ Now they’re asking, ‘What’s the most energy efficient window at the best price? They’re looking at value in a way they never have before.” In other words, not only are these programs providing jobs for Alan’s new hires and income for their families, they’re “greening” the market while lowering energy bills for his customers. For middle-class families feeling squeezed, those lower bills provide some much-needed relief to their budgets. In fact, this tax credit is still available, so it’s not too late to take advantage of it yourself (check out this new tool to learn about this and other Recovery Act tax benefits). You can get up to $1,500 to make your home more energy efficient, save yourself some money by cutting down on your energy bills, and maybe even put someone back to work at a business like Alan’s.

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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

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Monsanto May Have Antitrust Edge as Protecting Patents Trumps Competition

March 12, 2010

By Jack Kaskey and William McQuillen March 12 (Bloomberg) — Monsanto Co. , facing antitrust probes into its genetically modified seeds, may benefit from previous court rulings in which intellectual property rights trumped competition concerns, antitrust lawyers say. The Department of Justice and seven state attorneys general are investigating whether the world’s largest seed company is using gene licenses to keep competing technologies off the market. At issue is how the St. Louis-based company sells and licenses its patented trait that allows farmers to kill weeds with Roundup herbicide while leaving crops unharmed. The company’s Roundup Ready gene was in 93 percent of U.S. soybeans last year. “Justice is clearly trying every way it can to see whether Monsanto is exceeding its rights under the patent,” said James Weiss , a Washington-based attorney at K&L Gates LLP who helped defend Microsoft Corp. against a federal antitrust probe. “At the end of the day, they may not be able to do much with it because of the scope of those patents. In almost all the cases, the courts come out on the side of intellectual property.” Yet Monsanto’s seeds are so ubiquitous that they have become like AT&T’s telephone lines before the company’s 1984 breakup or Microsoft Corp.’s Windows operating system in the 1990s, said James P. Denvir , an attorney who represents rival seedmaker DuPont Co. and led the government’s AT&T case. “Both cases involve what I think of as a classic platform monopoly,” Denvir said. “It’s a facility that competitors need access to, to compete against the monopolist.” Monsanto and DuPont, which are suing each other over a biotech seed license, both hired former Justice Department lawyers who have handled high-profile cases. ‘Revolutionizing the Marketplace’ Monsanto’s attorney, Dan Webb , defended Microsoft in 2002 against government antitrust claims. A former U.S. Attorney in Chicago, he also prosecuted Admiral John Poindexter in the Iran- Contra affair. Webb credits Monsanto with “revolutionizing the agriculture marketplace” and said antitrust claims such as those in DuPont’s suit aren’t an uncommon response to patent infringement cases such as Monsanto’s. “The perception among farmers is that DuPont’s complaints about exclusivity are without merit,” said Webb, a Chicago- based Winston & Strawn LLP partner. Denvir, who represents DuPont, said farmers are among the victims. “Clearly, we are too,” he said. “The bigger harm, the more important harm, is to farmers in denying them the best seeds they can get at the lowest possible prices.” Legal Monopoly While patents provide some protection from antitrust claims, giving a company a legal monopoly for a specified time, patent rights can be abused, DuPont lawyers and others said. “The question becomes whether or not somebody in that position has engaged in some bad acts that either got it in that position or are designed to maintain that position or to extend that position to other markets,” said Charles “Rick” Rule, a lawyer at Cadwalader Wickersham & Taft LLP who ran the Justice Department’s antitrust unit under President Ronald Reagan . The Justice Department and Department of Agriculture will hold a workshop on competition in agricultural markets, including biotech seeds, today in Ankeny, Iowa. Christine Varney , who heads the antitrust division now, has signaled she’ll be more aggressive than the Bush administration, Rule said. The department probably is looking at whether Monsanto’s licensing restrictions on seeds have a legitimate business justification, said Rule, who occasionally advises Monsanto and isn’t working with Webb on the antitrust case. Potential for Abuse “When you have that sort of monopoly power, it can lead to abuse, which is what we’ve been experiencing over the past several years,” said Thomas L. Sager , DuPont’s general counsel. Wilmington, Delaware-based DuPont claims Monsanto protects its lead in biotech seeds, including the Roundup Ready seeds sold since 1996, by controlling whether competitors can add their own genetics. Monsanto also has begun switching seedmakers and growers from Roundup Ready soybeans to the newer Roundup Ready 2 Yield version in advance of the original’s patent expiration in 2014. DuPont says Monsanto is using incentives and penalties to switch the industry to the new product in a way that unlawfully extends the Roundup Ready monopoly. ‘Level Playing Field’ “This is about trying to obtain a level playing field so innovators can introduce combinations of choices to the farmer that increase yield and of course feed the world,” Sager said. At least seven states are investigating many of the same claims, as well as whether Monsanto illegally offered rebates to distributors who limit sales of competing seed, according to one person involved in the probe who asked not to be named because he isn’t authorized to discuss it. 3M Co.’s use of rebates to induce retailers to buy more transparent tape and curtail purchases from a smaller supplier was ruled anticompetitive by the U.S. Circuit Court of Appeals in 2003. Monsanto has amended its practices to address some criticisms. The company will help the introduction of generic Roundup Ready soybeans by maintaining foreign import approvals during the transition, a process that will be followed for off- patent biotech seeds in the future, Chief Executive Officer Hugh Grant said in a January interview. Monsanto last year stopped giving rebates to dealers who limited competing seeds’ sales, said Kelli Powers , a spokeswoman. AT&T, Microsoft Parallels DuPont filed its federal antitrust case last year after Monsanto sued to block its rival from adding the Roundup Ready trait to seeds already modified to tolerate Roundup weed killer. “Trait development has been stunted by the inability to get access to the Roundup Ready platform,” Denvir, an attorney with Boies Schiller & Flexner LLP, said in an interview in his Washington office. The firm was founded by David Boies , who led the government’s successful antitrust suit against Microsoft. Roundup Ready is “licensed so broadly that if you want to offer any trait, it has to be somehow combined with that trait.” While Monsanto has promised to allow generic versions of its products to emerge, Denvir said he is unconvinced that will happen without government intervention. Monsanto got its lead in seed biotechnology because it invested in research long before DuPont and other competitors, said Webb, Monsanto’s counsel. The company spent $6 billion on seed research in the 10 years through 2008 and $1 billion a year since then, said Powers, the company spokeswoman. Among the cases relevant to the claims against Monsanto is a 2004 Supreme Court decision that Verizon Communications Inc. and other phone companies didn’t break laws by doing too little to encourage competition, said Rule, the former antitrust division head. Xerox Ruling A Federal Circuit Court of Appeals ruling in February 2000 that Xerox Corp. can’t be sued for using patents to establish or entrench a monopoly also may apply to the Monsanto disputes, he said. The cases reflect how U.S. courts have given intellectual property owners leeway to control licensing to make the property more valuable, encourage the owner to widely license the technology and support further investment, he said. Greg Neppl , with Foley & Lardner, agreed that intellectual property rights often trump antitrust concerns. “The patent concerns are well protected in the law,” said Neppl. “Where the patent rights are clear, the antitrust issues are secondary. The antitrust concerns must respect the patent owner.” Monsanto persuaded U.S. District Judge Richard Webber in September to separate the licensing case from DuPont’s antitrust counterclaim. The seedmaker won an additional incremental victory in January when Webber ruled that DuPont violated the companies’ licensing agreement by combining Monsanto’s Roundup- tolerance gene with a DuPont gene that does the same thing. Counterclaim ‘Clutter’ Patent infringement is “a fair and proper case,” Webb said. “Monsanto will have its day in court and it will not be cluttered with the antitrust counterclaim.” Monsanto shares climbed 50 cents to $71.61 yesterday, paring the decrease since DuPont filed its antitrust case in mid-June to 15 percent. DuPont has climbed 42 percent in the same period. Justice Department probes typically move in tandem with related civil litigation because plaintiffs share information with the government, Neppl said. “The antitrust division today is more willing to look at assertions” of anticompetitive behavior, Rule said. “This is something they have a right to look at. Once they get into an investigation, they are pretty good at making up their own mind.” The case is Monsanto Co. v. E.I. DuPont de Nemours & Co., 09cv686, U.S. District Court, Eastern District of Missouri (St. Louis). To contact the reporters on this story: Jack Kaskey in New York at jkaskey@bloomberg.net ; William McQuillen in Washington at bmcquillen@bloomberg.net .

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Smartphones Eclipse PCs by 2012 as IPhone, Android Take Off: Chart of Day

March 10, 2010

By Ian King March 10 (Bloomberg) — Demand for Apple Inc. ’s iPhone and Google Inc.’s Nexus One will help propel smartphone sales past those of personal computers in two years, Gartner Inc. forecasts. The CHART OF THE DAY shows that smartphone sales will more than triple to 491.9 million units by 2012 from 139.3 million in 2008, according to the Stamford, Connecticut-based research firm. The PC market will expand to 443.1 million units from 290.8 million in the same period, Gartner predicted on March 4. “Smartphones are headed towards that billion-unit category that handsets are in today,” said Jim McGregor , an analyst at research firm In-Stat in Scottsdale, Arizona. “The smartphone is the billion-unit pot of gold that everyone wants.” The rise of the smartphone has prompted the computer industry to respond with their own products in an attempt to retain control over consumer access the Internet. Intel Corp., the largest maker of computer chips, has revived an earlier failed attempt to get its processors into phones. So far, only LG Electronics Inc. has said it will make a phone using an Intel chip. Microsoft Corp., the biggest maker of computer software, unveiled a new version of its Windows mobile phone operating system earlier this month, aiming to hold off gains made by Apple and Google. Apple fired up interest in phones that double as handheld computers with the first iPhone, introduced in 2007. Google, owner of the world’s most visited search engine, has since responded with the Nexus One handset and Android operating system, which is being used by phone makers such as Motorola Inc. To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

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Microsoft’s Windows Outpaces Apple in Customer Satisfaction: Chart of Day

February 1, 2010

By Dina Bass Feb. 1 (Bloomberg) — Microsoft Corp. got a bigger boost in customer satisfaction from its latest computer operating system than rival Apple Inc. did from its most recent upgrade. The CHART OF THE DAY shows that respondents giving Microsoft a positive grade for satisfaction rose to 67 percent in the week after the Oct. 22 release of Windows 7, from 64 percent the day before it went on sale, according to YouGov Plc , a London-based market-research firm. Microsoft’s satisfaction rates rose 14 percent through the end of the year. Apple’s Aug. 28 release of its Snow Leopard software resulted in a boost of 1 point to 65 percent in the first week. Through the end of the year, the increase was 6.9 percent. The percentage of customers satisfied with Microsoft reached 73 percent on Dec. 31, the highest since YouGov started surveying in 2007. Microsoft’s reputation is benefiting from the positively reviewed Windows 7, after some customers held off personal-computer purchases to avoid the product’s predecessor, Vista, said Matt Rosoff , an analyst at Kirkland, Washington- based Directions on Microsoft. “People are saying, ‘Okay, Microsoft got its mojo back,’” he said. “People who were thinking about buying a new PC are more likely to do so now. You’ll see slightly better sales.” Rosoff said the boost is probably also due to the June release of Microsoft’s overhauled Bing Internet search engine. Microsoft’s Windows runs more than 90 percent of the world’s personal computers. The Windows division, Microsoft’s most profitable, accounted for about a quarter of the company’s sales last fiscal year. “We’re encouraged that we’re delivered a version of Windows that meets what our customers want: a simpler PC that fits with their life,” said Tami Reller , a Windows vice president. Apple declined to comment, said Bill Evans, a spokesman for the Cupertino, California-based company. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Microsoft Profit Beats Estimates on Release of Windows 7 Operating System

January 28, 2010

By Dina Bass Jan. 28 (Bloomberg) — Microsoft Corp. , the world’s largest software maker, reported second-quarter profit that topped analysts’ estimates after Windows 7 spurred the first sales increase in a year. Second-quarter net income rose 60 percent to $6.66 billion, or 74 cents a share, beating the 59-cent average estimate of analysts surveyed by Bloomberg. Revenue climbed 14 percent to $19 billion, the company said today in a statement. Personal-computer buyers stepped up orders last quarter as the economy recovered and Microsoft released a new version of Windows. Sales of U.S. PCs running Windows rose about 50 percent over the holiday season, the company said earlier this month, citing data from NPD Group Inc. Microsoft is counting on Windows 7 to trigger a surge of upgrades by consumers and businesses. “Microsoft is in a great position,” sent Brent Thill , an analyst at UBS AG in San Francisco, who recommends buying the shares. “They have one of the best product cycles in the last five years, maybe 10, and it spans across their three biggest divisions.” Microsoft , based in Redmond, Washington, fell 51 cents to $29.16 at 4 p.m. New York time on the Nasdaq Stock Market. The stock climbed 19 percent last quarter, exceeding the 5.5 percent gain by the Standard and Poor’s 500 Index . Today’s earnings report is the first under Chief Financial Officer Peter Klein , who was named to the post in November. Second-quarter sales included $1.71 billion in deferred revenue from previous quarters. Analysts projected total sales of $17.9 billion for the period, which ended Dec. 31. A year earlier, net income was $4.17 billion, or 47 cents a share, on sales of $16.6 billion. No Forecast Microsoft, which stopped giving earnings forecasts in January 2009, didn’t give a specific outlook for profit and sales. Microsoft reiterated an October prediction that it will spend as much as $26.5 billion on operating expenses this fiscal year. PC shipments rose 15 percent worldwide last quarter, according to Framingham, Massachusetts-based IDC, which had predicted 11 percent growth. U.S. shipments were even more surprising. They jumped 24 percent, four times the rate that IDC had projected. Microsoft ’s Windows runs more than 90 percent of the world’s PCs. Many customers skipped the last version of the software, called Vista, raising speculation that buyers will upgrade this time around. Microsoft ’s Bing search engine, released in June, has increased its market share by 2.7 percentage points, according to research firm ComScore Inc. Microsoft had 10.7 percent of the U.S. search market in December, compared with 65.7 percent for Google Inc. and 17.3 percent for Yahoo! Inc. , according to ComScore. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Apple IPad Will Need Content Cool as It Is: Commentary by Rich Jaroslovsky

January 28, 2010

Commentary by Rich Jaroslovsky Jan. 28 (Bloomberg) — With all due respect to Steve Jobs , he chose the wrong name for Apple Inc.’s new iPad. A far better name would be iWonder. As in, it certainly is a consumer-tech wonder. And also as in, I wonder if the content providers who may determine its success are prepared to take full advantage of it? The half-hour or so I spent playing with the iPad at its San Francisco unveiling yesterday was much too short a time to evaluate it authoritatively. What I can say is that it’s fast, beautiful and loaded with potential. The half-inch-thin iPad looks something like an iPod Touch on steroids. While it uses the iPhone/iPod Touch operating system — meaning it runs just about all the 140,000 or so applications already written for those pocket-sized devices — you can sense a little Mac DNA as well in the machined aluminum back. It feels solid and substantial in your hand — and also, at about a pound and a half, is considerably heavier than a typical e-book reader, one of its core functions. Indeed, the iPad is about consumption of media in all its forms, from storing and viewing your photos to watching high- definition movies on the beautiful 9.7-inch touch screen. I was struck by its speed and responsiveness. In the photo application, for instance, I could race through hundreds of photos in a blur. Apps originally written for the iPhone, such as Electronic Arts Inc. ’s car-racing game Need for Speed Shift , looked terrific when expanded to fit the iPad screen. They may look better still once developers begin writing specifically to the new dimensions and the capabilities of the custom Apple- designed chip that powers the unit. Turning the Page Books in the new iBooks application look much more paper- like than they do on devices such as Amazon.com Inc. ’s Kindle or Barnes & Noble Inc. ’s Nook. The process of turning a page is so smoothly animated that if you stop in the middle of the process, you see both the content of the page being turned and that of the new page peeking out from underneath, just as if you were holding a physical book. While Apple is hardly known for the value pricing of its products, the iPad may be the exception. It will be available in six models, with the least expensive — including 16 gigabytes of flash-memory storage and Wi-Fi connectivity — starting at just $499. It and two other Wi-Fi models with more memory go on sale in March. 3G Connectivity A month later, three more iPads will go on sale, adding connectivity over AT&T Inc. ’s 3G wireless network in the U.S. The top-of-the-line model, with both 3G and 64 GB storage, will cost $829. AT&T will offer no-contract data plans costing $14.99 for up to 250 megabytes per month, or $29.99 for an all-you-can- eat plan. At those prices, and if the iPad also fulfills Jobs’s battery-life promises — 10 hours of heavy-duty use, and even longer for lower-impact functions like listening to music — Apple will have delivered a true achievement. Then the question will be whether the publishing industry, which up to now hasn’t been known for forward thinking, will do the same. Will book publishers, for example, get to work producing added-value interactive versions that include author interviews and DVD-style extras to take advantage of the iPad’s multimedia capabilities? Or will they be content to use Apple’s new iBooks store to sell the same plain-vanilla e-books they currently produce, in hopes of simply lessening their dependence on Amazon.com? Life Preserver What about newspaper and magazine publishers? These, after all, are the same geniuses who decided to give away their product for free, then expressed shock when their audiences ended up valuing it no more highly than they did. Will they now recognize the life preserver Apple has thrown them and produce versions optimized for the new platform, with features that will excite their customers and re-engage their advertisers? To a larger extent than with most of Apple’s other products, the iPad’s fate is out of the company’s hands. Without compelling new content, it risks having no reason to be. If that’s the case, it may turn out that Apple’s decision to bring iWork , its Mac productivity suite, to the iPad will be crucial. The three iWork programs — a word processor, spreadsheet and presentation software — will sell for $9.99 each. With them and a Bluetooth keyboard, or perhaps the new combination keyboard-dock that Apple showed off this week, the iPad becomes a sophisticated alternative to inexpensive netbook computers running Microsoft Corp. ’s Windows software. While that might still sell a fair number of iPads, it would signal failure in the ambitious goals Jobs has set out for the device. To be truly “revolutionary,” which was the word he used to describe it, the iPad needs content as cool as it is. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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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

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U.S. Maintains Technological Edge in China Trade From Laptops to Soybeans

January 12, 2010

By Carlos Torres Jan. 12 (Bloomberg) — From growing soybeans to developing software, America is maintaining its technological edge in trade with China, says economist Ken Mayland . American exports to China climbed to a record $7.3 billion in November, due in part to $2 billion in soybean sales, the Commerce Department reported today in Washington. At the same time, the U.S. imported $8.3 billion more technology gear such as computers and semiconductors than it shipped overseas, the biggest gap ever and all accounted for by trade with China. The numbers don’t reflect the origin of intellectual property such as the Redmond, Washington-based Microsoft Corp. software used by companies including Beijing-based Lenovo Group Ltd. to sell laptops in the West, said Mayland. By the same token, the increasing abundance of U.S. crops such as soybeans is a result of research into new seeds and improved methods of cultivation. “It looks like we are losing the tech battle with China, but we are not,” said Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. The figures are “a reflection of who is assembling the product and where it’s assembled, versus where the idea for the product comes from.” The U.S. trade gap widened 9.7 percent in November to $36.4 billion, the highest level since January, Commerce Department report showed today. Imports increased 2.6 percent, reflecting a jump in oil prices, while exports rose to the highest level in a year. Argentine Drought The jump in China’s demand for U.S. soybeans was due in part to a drought in Argentina, according to the Commerce Department. The increase caused the U.S. deficit with the Asian nation to fall 11 percent to $20.2 billion, the lowest level since June. China’s appetite has continued unabated into the new year. Cash premiums for soybeans shipped to export terminals near New Orleans widened yesterday against Chicago futures on rising U.S. sales to China, the biggest importer and consumer. Processors including New York-based Bunge Ltd. and Decatur, Illinois-based Archer Daniels Midland Co. used a record 4.36 million tons last month, the National Oilseed Processors Association reported on Dec. 14. Mill exports of soybean meal surged 93 percent to 981,565 short tons last month, the group said. The USDA said soybean meal shipments jumped last week to 297,200 metric tons, 30 percent higher than the prior four-week average. Lenovo Laptops Lenovo, China’s biggest personal-computer maker, said on Jan. 8 that Windows 7 will boost demand for its products for the next three years as companies and consumers adopt Microsoft’s new operating system. “We’ve seen better business activity across the planet in the commercial space driven by an interest in Windows 7,” President Rory Read said in an interview at the Consumer Electronics Show in Las Vegas. The maker of Thinkpad laptops joined rivals including Dell Inc. and Acer Inc. in predicting Windows 7, introduced in October, will help lift technology demand. To contact the report on this story: Carlos Torres in Washington at ctorres2@bloomberg.net

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Microsoft Introduces Touch-Screen Tablet Computer

January 7, 2010

By Dina Bass Jan. 7 (Bloomberg) — Microsoft Corp. Chief Executive Officer Steve Ballmer introduced a touch-screen tablet computer from Hewlett-Packard Co. and said U.S. sales of PCs running Windows jumped 50 percent over the holidays. The computer will go on sale this year and was one of several machines that Ballmer showed off last night at the Consumer Electronics Show in Las Vegas. The sales growth from the year-earlier period is based on data from U.S. retail outlets monitored by research firm NPD Group Inc. “We’re talking about something that’s almost as portable as a phone and that’s as powerful as a PC running Windows 7,” Ballmer, 53, said of the Hewlett-Packard tablet computer and two others he had on stage. Microsoft has renewed its focus on tablet computers at a time when Apple Inc. may be poised to unveil its own model this month. Microsoft, the world’s largest software maker, wants to highlight the touch-screen features of Windows 7, which went on sale in October. Palo Alto, California-based Hewlett-Packard and other computer makers have sold such devices with Microsoft software since 2002, with little success. “H-P has been a longtime supporter of the category, so in some sense this is just another iteration,” said Roger Kay , an analyst with Endpoint Technologies Associates in Wayland, Massachusetts. “If Apple totally blows the category away, Microsoft and H-P won’t be happy having come out a month in advance with something that’s just OK.” Apple plans to introduce its tablet computer this month, a person familiar with the matter said this week. Touch-Screen Features Ballmer also announced that Redmond, Washington-based Microsoft’s Bing search engine will be the default choice on Hewlett-Packard’s computers worldwide, expanding an agreement that previously covered the U.S. and Canada. The companies also extended the accord to three years from one. Ballmer showed several types of computers that use new features of Windows 7, including an all-in-one PC with a touch screen from Lenovo Group Ltd. and a machine from Asustek Computer Inc. that supports three-dimensional gaming. Microsoft’s focus with these devices is not on Apple, said Robbie Bach , president of Microsoft’s entertainment and devices unit. “The point is the PC ecosystem is very rich and expanding rapidly, with a lot of innovation,” Bach said in an interview. Microsoft fell 14 cents to $30.63 at 9:32 a.m. New York time in Nasdaq Stock Market trading. The shares rose 57 percent last year. Hewlett-Packard, which advanced 42 percent last year, added 15 cents to $52.33 on the New York Stock Exchange. Early Models Even after years on the market, less than 1 percent of notebook computer sales are tablets, Kay said. Hewlett-Packard and Microsoft have gone down this road before. One of Hewlett- Packard’s early models using Microsoft’s touch-enabled operating system was a slate design that could be docked on a desktop computer. Later models from Hewlett-Packard , including one shown this week, have been convertible notebooks with a screen that swivels and can be folded down to create a slate. Those devices are a “hedge,” Kay said. “You were saying to the customer, ‘Here if you don’t really like it, well, it’s a regular notebook.’” Kay said. With the Apple and Hewlett-Packard products, the idea of a slate form is re-emerging in the consumer market, he said. Ballmer also said Microsoft has sold 39 million Xbox 360 consoles since they went on sale in late 2005, up from 30 million at the end of May. A motion-sensing game device, code-named Natal, will be available next Christmas, he said, confirming comments by a video-game executive in July. Microsoft also announced that AT&T Inc. plans to allow its customers later this year to use the Xbox 360 as a television set-top box for its U-Verse service, which provides video over phone lines. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Microsoft Introduces Touch-Screen Tablet Computer

January 7, 2010

By Dina Bass Jan. 7 (Bloomberg) — Microsoft Corp. Chief Executive Officer Steve Ballmer introduced a touch-screen tablet computer from Hewlett-Packard Co. and said U.S. sales of PCs running Windows jumped 50 percent over the holidays. The computer will go on sale this year and was one of several machines that Ballmer showed off last night at the Consumer Electronics Show in Las Vegas. The sales growth from the year-earlier period is based on data from U.S. retail outlets monitored by research firm NPD Group Inc. “We’re talking about something that’s almost as portable as a phone and that’s as powerful as a PC running Windows 7,” Ballmer, 53, said of the Hewlett-Packard tablet computer and two others he had on stage. Microsoft has renewed its focus on tablet computers at a time when Apple Inc. may be poised to unveil its own model this month. Microsoft, the world’s largest software maker, wants to highlight the touch-screen features of Windows 7, which went on sale in October. Palo Alto, California-based Hewlett-Packard and other computer makers have sold such devices with Microsoft software since 2002, with little success. “H-P has been a longtime supporter of the category, so in some sense this is just another iteration,” said Roger Kay , an analyst with Endpoint Technologies Associates in Wayland, Massachusetts. “If Apple totally blows the category away, Microsoft and H-P won’t be happy having come out a month in advance with something that’s just OK.” Apple plans to introduce its tablet computer this month, a person familiar with the matter said this week. Touch-Screen Features Ballmer also announced that Redmond, Washington-based Microsoft’s Bing search engine will be the default choice on Hewlett-Packard’s computers worldwide, expanding an agreement that previously covered the U.S. and Canada. The companies also extended the accord to three years from one. Ballmer showed several types of computers that use new features of Windows 7, including an all-in-one PC with a touch screen from Lenovo Group Ltd. and a machine from Asustek Computer Inc. that supports three-dimensional gaming. Microsoft’s focus with these devices is not on Apple, said Robbie Bach , president of Microsoft’s entertainment and devices unit. “The point is the PC ecosystem is very rich and expanding rapidly, with a lot of innovation,” Bach said in an interview. Microsoft fell 14 cents to $30.63 at 9:32 a.m. New York time in Nasdaq Stock Market trading. The shares rose 57 percent last year. Hewlett-Packard, which advanced 42 percent last year, added 15 cents to $52.33 on the New York Stock Exchange. Early Models Even after years on the market, less than 1 percent of notebook computer sales are tablets, Kay said. Hewlett-Packard and Microsoft have gone down this road before. One of Hewlett- Packard’s early models using Microsoft’s touch-enabled operating system was a slate design that could be docked on a desktop computer. Later models from Hewlett-Packard , including one shown this week, have been convertible notebooks with a screen that swivels and can be folded down to create a slate. Those devices are a “hedge,” Kay said. “You were saying to the customer, ‘Here if you don’t really like it, well, it’s a regular notebook.’” Kay said. With the Apple and Hewlett-Packard products, the idea of a slate form is re-emerging in the consumer market, he said. Ballmer also said Microsoft has sold 39 million Xbox 360 consoles since they went on sale in late 2005, up from 30 million at the end of May. A motion-sensing game device, code-named Natal, will be available next Christmas, he said, confirming comments by a video-game executive in July. Microsoft also announced that AT&T Inc. plans to allow its customers later this year to use the Xbox 360 as a television set-top box for its U-Verse service, which provides video over phone lines. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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

December 30, 2009

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

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Wacom Plans to Raise Touch-Screen Panel Output as Windows 7 Drives Demand

November 26, 2009

By Shunichi Ozasa Nov. 26 (Bloomberg) — Wacom Co. , the world’s biggest maker of electronic pens, aims to increase production of computer touch-screen panels fivefold next year as the release of Microsoft Corp.’s Windows 7 boosts demand from computer makers. The Japanese company aims to raise monthly production of multitouch panels to about 500,000 by mid-next year from 100,000, President Masahiko Yamada said. Higher orders are expected from Lenovo Group Ltd., Toshiba Corp., Fujitsu Ltd. and other computer makers, he said. “We need to increase production to meet the voracious demand,” Yamada said in an interview yesterday. Wacom is competing with Israeli closely held company N-trig for the leading share of the $200 million market for computer panels that allow people to use more than one finger at a time to navigate and perform commands. The global market is expected to grow to $786 million by 2012, driven by the release last month of the Windows 7 operating system that supports touch- screen devices, Yoshiki Yuge , an analyst at Daiwa Securities SMBC Co., said in an Oct. 22 report. Wacom shares rose 3.1 percent to close at 178,500 yen in Tokyo, taking its gain this year to 130 percent. The benchmark Topix index declined 0.5 percent. It started making multitouch panels in August and outsources production to a number of hardware makers. The company, which expects sales to rise 5 percent to 35.5 billion yen ($409 million) in the year ending March, declined to provide a revenue forecast for its panel segment. Wacom, based in Saitama, north of Tokyo, said it has 90 percent of the global market for pens used on touch-screen displays. To contact the reporter on this story: Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

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F-1′s Raikkonen, Dropped by Ferrari, Stuck With $21.5 Million Luxury Home

October 30, 2009

By Kati Pohjanpalo Oct. 30 (Bloomberg) — Kimi Raikkonen , the world’s second- highest paid athlete before being dropped by the Ferrari Formula One team, is having trouble selling a 14.5 million-euro ($21.5 million) second home in his native Finland. “The potential clientele for this price range is very small,” Pasi Saari, the realtor for the property , said in an interview. “It’s the most expensive home for sale in Finland.” Raikkonen’s house in the Nordic nation’s capital of Helsinki has been on the market for about a year, said Saari, whose company, Westatus Oy, is a franchise of a Finnish real estate unit of Danske Bank A/S. So far, about ten potential buyers have balked at the asking price, he said. Raikkonen, who won the Formula One title for Ferrari in 2007, earned $45 million in 2008, second only to golfer Tiger Woods , Forbes business magazine reported June 17. The 30-year- old Raikkonen , known as “Iceman” for his calm nerves, is without a team for the 2010 season that starts in March after Ferrari dumped him for Fernando Alonso . Raikkonen, who currently lives in Switzerland, started in Formula One in 2001. Raikkonen’s spokesman Riku Kuvaja didn’t return calls and a text message sent to his mobile phone. The three-story mansion, completed in 2006, boasts a walled garden, sun-deck, basketball court and deep boat dock. Its eight rooms are decorated in a minimalist, modern style with leather and hardwood. An animal skin rug adorns the black and white master bedroom. The price, 16,111 euros per square meter, compares with the mean price of 2,614 euros per square meter for new one-family homes in the Helsinki metropolitan area, according to second- quarter data published by Statistics Finland on Sept. 11. Bridges to Island Bridges lead to the island where the house, previously owned by Finnish millionaire Jussi Salonoja, is located, 6.3 kilometers (3.9 miles) from the city center. The next-door neighbor is Mika Hakkinen , the 1998 and 1999 Formula One world champion, and across the bay are the residences of Finland’s President Tarja Halonen and Prime Minister Matti Vanhanen . The house has an underground garage for eight vehicles and the sea glimmers through the windows into the sauna area with a wood-paneled hot tub. Black leather sofas line the adjacent room with speakers built into the gray stone wall of the fireplace. The 900 square-meter (9,690 square-foot) home also has a wine cellar, a German kitchen fitted for a professional chef and a lift between floors. “It’s fit for entertaining,” said Saari. “Still, it’s more of a family home than an official residence.” To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

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Microsoft Faces Challenge Shrugging Off `PC Guy’ Image With Windows 7

October 22, 2009

By Dina Bass Oct. 22 (Bloomberg) — Microsoft Corp. will begin selling the Windows 7 operating system today, an effort to reverse three quarters of declining Windows sales and fend off Apple Inc. ’s gains in personal computers. Windows 7 is Microsoft’s best shot to undercut Apple, which has grabbed its biggest share of the home-computer market since the 1990s, said Roger Kay , an analyst at Endpoint Technologies Associates in Wayland, Massachusetts. The program is Microsoft’s first “worthy competitor” to Apple’s OS X, he said. Microsoft, the world’s largest software maker, gets about 25 percent of its $58.4 billion in annual revenue from Windows. The company’s effort to entice consumers to upgrade to new Windows machines is getting a boost from a computer market that is recovering after three quarters of declines. Apple may still be able to make gains because the iPhone and iPod buoy Mac sales, said Al Gillen , an analyst at market research firm IDC. “Right now, there’s a lot of good karma for Windows 7 — that will help Microsoft stem some of the movement to Mac, but that’s only part of the story,” said Gillen , whose firm is in Framingham, Massachusetts. “The other dimension that’s made Mac attractive is the surrounding ecosystem of iPods and iPhones. They’ve done a good job putting together a sexy and interesting story for consumers.” The rebound in the economy may also help Apple, which lost some market share during the recession as customers avoided pricier Macs in favor of Windows PCs, according to researcher Gartner Inc. Apple’s Share Apple will end this year with 8.1 percent of the U.S. home-computer market, down from 10.3 percent in 2008, according to Stamford, Connecticut-based Gartner. By the end of 2010, Apple will rise to 9.9 percent, Gartner predicts. The rest of the market is almost all Windows. The global picture for Windows is brighter, because Apple doesn’t sell in many developing markets, Gartner said. The Mac will have 4.4 percent share at homes globally by the end of 2009, according to the research firm. Customers switching from Windows are a “major part of our growth,” Apple Chief Operating Officer Tim Cook said in an interview this week. The company’s Mac versus PC ads, featuring John Hodgman as the bespectacled face of the Windows personal computer, mocked Vista as being prone to crash and vulnerable to computer viruses. ‘Fantastic Opportunity’ “Whether it’s Windows 7 or Windows 10 or Windows 95 or 2000 or all the Windows, people are just sick of all the headaches that go along with it,” Cook said. “And so I look at their Windows 7 announcement as just another fantastic opportunity to grab more share.” To win over consumers, Microsoft and partners are offering seven days of special deals on Windows 7 machines. For example, Best Buy Co. will offer a package that includes a Hewlett- Packard Co. desktop, netbook, wireless router and home setup, “all for the price of a Mac,” said Tami Reller , a Windows vice president at Redmond, Washington-based Microsoft. “About 96 percent of the world’s computers are PCs and 4 percent are Macs, and thanks to their advertising I guess everybody kind of knows the difference,” Microsoft Chief Executive Officer Steve Ballmer said in a speech last week. “I like 96, they like 4, I guess. You can’t say they don’t have a good business. They actually have a good business, as do we.” Apple’s increasing market share will still leave room for Windows 7 to thrive, IDC’s Gillen said. ‘Tremendous Success’ “While Apple has had arguably tremendous success, it’s a 1 to 2 point shift, not 5 to 10 percent,” Gillen said. “Anything like that does set off alarm bells in Redmond, but it’s not threatening Microsoft’s core business.” About 80 percent of companies surveyed by New York-based brokerage ISI Group plan to switch to Windows 7 in the next two years. Microsoft’s Windows sales will increase 9 percent to $16.3 billion in 2010, the first full year Windows 7 is on sale, compared with a 10 percent drop this year, according to Sarah Friar , an analyst at Goldman Sachs Group Inc. in San Francisco. Microsoft rose 21 cents to $26.58 yesterday in Nasdaq Stock Market trading . The stock has climbed 37 percent this year. Apple, which has more than doubled this year, advanced $6.16 to $204.92. Brand ‘Rehab’ Microsoft can put a new shine on the Windows brand, which was tarnished because of Vista’s shortcomings, said Al Ries , chairman of Ries & Ries, a marketing strategy firm in Atlanta. “Can they rehab the brand? Sure,” he said. “Look at Bill Clinton or Martha Stewart . David Letterman is going to be fine. When you’re the leader, you can make a mistake and come back.” Trina Gratrix, of Covington, Washington, says she can’t afford the Mac she’d like to buy. Windows 7 is making her feel better about the PC in her price range, she said. She plans to buy a new machine in the next few months. “I feel good about what I hear,” said Gratrix, 35. “I don’t feel like I’ll be settling.” Customers report that Windows runs faster and starts up and shuts down more quickly. Users can more easily organize, clean up and find the files they’re looking for. They can, for example, permanently pin items to the task bar at the bottom of the screen. Users can also grab the title bar of a window and shake it to minimize all the other windows. Windows 7 may also make it harder for Apple to target the software in its ads, said Michael Silver , a Gartner analyst, who says he’s hearing positive feedback on Windows 7 from Mac enthusiasts. “If Windows 7 is successful, it’s going to be hard to make fun of that,” he said. “They won’t have Vista to kick around anymore.” To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Video: Microsoft Windows 7 OS Takes Off

October 21, 2009

High hopes for Microsoft’s latest operating system platform, Windows 7. Components communities keep their fingers crossed. (The Trade)

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Jenny Darroch: Don’t Get Too Excited by Green Shoots, They Might Turn Brown

October 20, 2009

Last week, the Dow broke through the psychological barrier of 10,000 and many breathed a sigh of relief. The call went out that the economy was about to emerge from what can be characterized as the darkest financial period in recent history. There certainly are green shoots indicating that the worst of the recession is behind us. When reporting relatively strong third quarter results for Google, CEO Eric Schmidt said, “While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future.” Similarly, Steven Bird of Safeway described his Coffee Index, a measure of consumer confidence (The Los Angeles Times , October 16). When the recession first hit, consumers switched from lattes to coffee and now Bird can see a swing back to lattes again. Likewise, consumers are starting to shift back to premium wines. All signs are that some consumers feel the economy has reached the bottom and we can start to return to some simple pleasures of life. As we frantically look for evidence of economic recovery, we need to take care not to mistake all measures as signals that consumer spending is on the rise again. Take computers as an example. I read in BusinessWeek (October 26) that many consumers have put off buying new computers because they didn’t want to end up with Microsoft Vista. Now that Microsoft has launched Windows 7, a lot of people will be in the market trading in eight-year old machines. The point of this example is not to mistake an increase in the purchase of computers as a signs of economic growth. The National Bureau of Economic Research (NBER) defines a recession as a “significant decline in economic activity spread across the economy, lasting more than a few months”. Gross domestic production (GDP) and employment are seen by NBER as the primary measures of economic activity. When I talk to senior managers, many feel that sales are now flat and no longer declining. This is certainly encouraging news. Add to that encouraging quarterly results with supporting comments by CEOs saying that the bottom of the economic downturn might in fact have been reached. But, predicting economic recovery is quite another story. In the State of California, for example, almost 1 in 5 people are said to be affected by the recession through job loss, or a reduction in hours and/or pay. Those who work for the State of California, fear that more bad news is on the way with State revenues likely to be about $1b less than what was forecast for the current year. Add to that the “Lost Generation” ( BusinessWeek October 19), a generation of college graduates who have not been able to get work and who might consume differently as a result of the impact (both financially and psychologically) the recession has had on them. The point of all of this is that while signs that the recession is drawing to a close might excite us, turbulent times will continue as we find innovative ways to generate growth. As James E. Skinner, the CEO of Neiman Marcus said, the recession “is forcing us to experiment”. Jenny Darroch is on the faculty at the Drucker School of Management. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com

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Video: In-Depth Look – Improvements of Windows 7

October 16, 2009

A Preview – Windows 7 New Features (Bloomberg News)

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Microsoft Stuns With New Windows That Works: Tech by Rich Jaroslovsky

October 16, 2009

Commentary by Rich Jaroslovsky Oct. 16 (Bloomberg) — Windows 7 is here. Thank God. It isn’t often one feels the need to praise the Almighty over a computer operating system, particularly one from Microsoft Corp. Then again, Windows 7 is polished, stable and smooth — in short, everything its unlamented predecessor, Windows Vista, wasn’t. Personal computers preloaded with Windows 7, along with boxed and upgrade versions of the new software, go on sale Oct. 22. While the global economic turmoil makes predictions chancy, Windows 7 deserves to be a hit, and a stimulus to PC sales worldwide. When I first began using Windows 7, my reaction was: This is just like Vista , except that it works. The user interface, called Aero, carries over from Vista, meaning that a computer running Win 7 more or less does things the same way. The more I’ve used the new software, though, the more I’ve concluded my initial reaction was unfair. Windows 7 incorporates enough new features and improvements to be something you’ll want on its own merits, not just because it fixes old problems. An example is what Microsoft calls Aero Peek. In Windows Vista, hovering the cursor over an item in the task bar — the strip across the bottom of the screen that lets you keep track of what’s open — would generate a small image of the window’s contents. In Windows 7, resting your cursor on the small image opens a full-sized one; click your mouse, and the larger window instantly becomes live. See-Through Windows Another nice touch: Move your mouse to the far right of the taskbar, and all the open windows turn transparent to let you see what’s on your desktop. And if you have a bunch of windows open but only want one on the desktop, grab its title bar with the mouse and give it a shake; all the other windows minimize. You can also now permanently pin items to the task bar for fast access — no more fumbling with menus to find the calculator accessory — and jump to frequently or recently used functions and files. A reworked Windows Explorer makes it easier to find and organize files. Other enhancements may be more relevant in the future than they are today. Chief among them is Windows 7’s extensive built- in support for touch screen devices. These days, touch is still a relative rarity on personal computers — but it’s likely to play a much larger role someday. Sticking With Vista One critical decision Microsoft made with Windows 7 was to hew as much as possible to the Vista model for device drivers — the software that allows printers, external hard disks and other add-ons to communicate with the operating system. This is one case where carrying over from Vista is a good thing. Drivers were my own personal hell when I upgraded my home computer to Vista from its predecessor, Windows XP , a couple years back, and the decision to maintain the driver model means I’ve largely already paid my dues on that front. In fact, on the three Windows 7 machines I’m running presently, I’ve only encountered one conflict, involving a several-years-old Hewlett-Packard Co. LaserJet printer/fax. Unlike Vista, which required more memory and better graphics than its predecessor, the new software should run fine on just about any recent-model computer, including many XP machines. The toughest part of upgrading may be deciding which of the multiple flavors of Windows 7 you need. The software comes in both 32-bit and 64-bit versions — they differ in how much memory and computing power you can make use of — and you generally can’t move from 32-bit Vista or XP to 64-bit Windows 7. To see what you’re running if you’re currently using Vista, you can right-click on Computer and choose Properties, or click on your Start button, choose Run and type “winver” without the quotation marks. Various Packages Then there are the various packages: Home Premium ($119.99 for the upgrade version); Professional ($199.99), which adds additional backup, connectivity and compatibility features; and Ultimate ($219.99), which adds more security and multilanguage support. Upgrading a Vista computer is time-consuming, if not labor- intensive. It took me an hour and 27 minutes on a recent-model Hewlett-Packard desktop PC, plus another 15 minutes to reconfigure network and Internet access. An older Sony Vaio took about two hours, though it didn’t require the network fiddling. Neither required much hands-on intervention, and data and most settings came through unscathed. Deferred Pain Windows XP users have a tougher path. For one thing, there’s the matter of those device drivers; if you never upgraded to Vista, you may not have avoided the pain, just delayed it. For another, you’ll need to use an external drive and a Windows 7 program called “Easy Transfer” to offload your data and settings during the process, then put them back where they belong. Finally, you’ll need to reinstall all your programs. Now, where is that Quicken disk? Not surprisingly, other companies see an opportunity to simplify the process, for a price. Laplink Software Inc. is offering a $15 program called PCmover Windows 7 Upgrade Assistant that it says will save your programs and negate the need for an external drive. For $39.99, iYogi , an India-based support provider, will have a Microsoft- certified technician remotely access your computer and migrate your applications, data and settings for you. How good is Windows 7? It still isn’t nearly as elegant or intuitive as Snow Leopard, the current version of Apple Inc. ’s Mac operating system. The upgrade path for XP users is ugly, and any endorsement must be tempered by the knowledge that even Vista didn’t seem so bad when it was first released. Still, there should be huge sighs of relief around Microsoft’s Redmond, Washington, headquarters. The only louder ones will be coming from Windows users. ( Rich Jaroslovsky is a columnist for Bloomberg News. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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Intel Sales, Profit Forecasts Top Analysts’ Estimates as PC Market Revives

October 13, 2009

By Ian King Oct. 13 (Bloomberg) — Intel Corp. , the world’s biggest chipmaker, forecast sales and profitability that topped estimates, indicating that computer demand is returning to pre- recession levels. The shares jumped 6.4 percent. For the fourth quarter, Intel forecast sales of $9.7 billion to $10.5 billion, compared with the $9.5 billion average estimate in a Bloomberg survey . Third-quarter net income dropped to $1.86 billion, or 33 cents a share, the company said today in a statement. Revenue fell 8.1 percent to $9.39 billion. Today’s numbers were all the more impressive because Intel raised its outlook two months ago, said Patrick Wang , an analyst at Wedbush Morgan Securities in New York. Chief Executive Officer Paul Otellini expects the PC market to grow this year, defying analysts’ predictions. “They had a phenomenal quarter once again,” said Wang, who expects the shares to outperform their peers. “They beat expectations on revenue and from a gross-margin standpoint.” Intel rose $1.31 to $21.80 in extended trading. The shares, up 40 percent this year, closed at $20.49 on the Nasdaq Stock Market. Net income was down 7.8 percent from $2.01 billion, or 35 cents a share, in the year-earlier period. In August, Intel said that third-quarter sales would be as much as $9.2 billion, compared with an August prediction of up to $8.9 billion. Profit Margin Gross margin , the percentage of sales remaining after the costs of production, was 58 percent in the third quarter. That compared with Intel’s prediction of about 53 percent. This quarter, it will widen to about 62 percent, the company said. Intel’s report kicked off two weeks of earnings by big U.S. technology companies, including International Business Machines Corp. , Google Inc. and Microsoft Corp. The use of Intel’s chips in everything from laptops to supercomputers makes its sales a barometer of industry demand. “Everyone has been pretty surprised at the strength of technology throughout the downturn,” said Kim Caughey , an analyst at Pittsburgh-based Fort Pitt Capital Group Inc., which owns about $1 million worth of Intel shares. “Whether or not we’re still in a recession, companies and retailers and customers alike are very careful about where they’re spending their money. Clearly they’re still buying computers and all things electronic.” New Windows Microsoft is introducing a new Windows operating system this month — an event that typically triggers a surge in PC orders. The question now is how long that boost will last. Orders for PC parts are ebbing, indicating that Intel’s sales may slow again, said Daniel Berenbaum , an analyst at Auriga USA in New York. PC makers have accumulated inventory, which may curb their demand for Intel’s chips later, he wrote in a report. Gartner Inc. , a research firm in Stamford, Connecticut, expects the PC market to grow in the fourth quarter. For the full year, it predicts a decline in global shipments of 2 percent to 285 million. China’s stimulus program may be helping the market by giving shoppers money to spend on PCs, said Edwin Mok , an analyst for Needham & Co. in San Francisco. He recommends buying Intel shares, which he doesn’t own. “The PC has been one of the bright spots this year,” Mok said. To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

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Ballmer Turns to 14-Year-Old Son to Be Sure Windows 7 Isn’t the Next Vista

October 6, 2009

By Dina Bass Oct. 6 (Bloomberg) — Microsoft Corp. Chief Executive Officer Steve Ballmer says the company got the wrong impression from early positive feedback on Vista and won’t make the same mistake with the software’s successor, Windows 7. Ballmer established a process for gathering feedback from computer makers, and he’s personally surveying customers — along with his teenage son — to make sure Windows 7 works. Early users, including Continental Airlines Inc. , Starwood Hotels & Resorts Worldwide Inc. and the city of Miami, say they are upbeat about the software. “The test feedback has been good, but the test feedback on Vista was good,” Ballmer, 53, said in an interview last week. “I am optimistic, but the proof will be in the pudding.” Ballmer needs a winner. Microsoft has dropped 54 percent on the Nasdaq since he took over as CEO in 2000. For most of the past year, Ballmer ran the Windows business himself, and he’s counting on Windows 7 to restore investor confidence after corporations and consumers snubbed Vista. About 80 percent of companies plan to switch to the software in the next two years, ISI Group, a brokerage firm in New York, said yesterday. “Windows 7 is important for how Microsoft is seen in the marketplace, especially after how Vista was received,” said Ken Allen , a portfolio manager at Baltimore-based T. Rowe Price Group Inc., the seventh-biggest institutional holder of Microsoft shares. “It will be an important year for how Ballmer is viewed as CEO.” Underestimating? Wall Street is underestimating the impact of Windows 7, which debuts on Oct. 22, said Sarah Friar , a Goldman Sachs Group Inc. analyst in San Francisco. Analysts’ profit estimates for Microsoft, the world’s largest software maker, are 3 percent and 5 percent too low for 2010 and 2011, she said. The company’s Windows sales will increase 9 percent to $16.3 billion in 2010, the first full year Windows 7 is on sale, compared with a 10 percent decline this year, she predicts. “We have big expectations for what Windows 7 can do,” Friar said. Others remain unimpressed with Windows 7 and Ballmer. “Ballmer needs to retire — it’s been a huge disappointment from a shareholder’s perspective,” said Dave Stepherson , a fund manager at Hardesty Capital Management in Baltimore, referring to Ballmer’s tenure as CEO. He helps manage $650 million, including Microsoft shares. Windows 7 won’t change things because it doesn’t have any “must-have” features, he said. Microsoft fell 32 cents to $24.64 yesterday in Nasdaq Stock Market trading. The shares have gained 27 percent this year. Of the 35 analysts following the Redmond, Washington-based company, 24 suggest buying the stock, 10 say hold and one says sell, according to data compiled by Bloomberg. Continental Airlines Continental and Starwood say Windows 7 runs faster than Vista. It starts up and shuts down more quickly, and lets users preview the contents of windows by placing their mouse over the entry on the bottom of the screen. It also supports multi-touch navigation, letting users control the software using their fingers. In the past, companies have typically switched to a new version of Windows when buy new PCs, said Heather Bellini , an analyst at ISI in New York. Because Windows 7 runs on older machines, ISI’s survey saw a “significant jump” in companies saying they will put Windows 7 on existing computers. More Responsive Continental says Microsoft is more responsive to suggestions than it was with Vista, when the airline’s proposed features never made it into the software. Windows 7 now offers those options, such as better mobile access to corporate networks, said Eric Craig, managing director of technology at Houston-based Continental, the fourth-largest U.S. carrier. Because Windows 7 can run on older machines, it’s more appealing to budget-conscious customers, Craig said. Continental can use the software on more than 60 percent of the PCs it already has, he said. Microsoft has developed tools that help customers upgrade operating systems and assess whether their applications will work. “We’re all struggling with the economic reset,” Craig said, adding that Ballmer should get a lot of the credit for focusing on the cost of Windows 7. “He really understands the incredible pressures on us to deliver with what we already have.” Vista debuted in 2007 — two years behind schedule and more than five years after the previous version, Windows XP. Vowing never to go that long again between releases, Ballmer reshuffled executives. He put Steven Sinofsky , known for sticking to deadlines with Office releases, in charge of Windows development. ‘Exciting Product’ Even then, Ballmer said he worried that Windows 7 wouldn’t be exciting enough. That changed two summers ago, when he saw a demo of a math feature. Users could handwrite an equation onto a panel, and the software recognized the notation. Ballmer, who went to math camp as a kid, was impressed. “I said, ‘Yep, this product’s going to be an exciting product,’” he said. To gauge the reception to Windows 7, Ballmer is doing his own polling. A test version of the software has been available since January, giving early adopters a chance to try it out. “He asks everyone he talks to, ‘Are they using Windows 7? What are they experiencing?’” said Tami Reller , a Windows vice president. “He’s his own market-research firm.” 14-Year-Old Critic Ballmer says his toughest critic is his 14-year-old son, who has helped find bugs in the software. He put an early version of Windows 7 on his school laptop about 18 months ago, “probably well before he should have,” Ballmer said. With Vista, many computer and software makers didn’t have compatible products out soon enough. To fix that problem, Ballmer has his lieutenants gather feedback from computer makers in a systematic way and act on it. The new approach has won praise from Hewlett-Packard Co. , Dell Inc. and Acer Inc. , the three largest personal-computer makers. “Windows 7 is the first right thing they have done in the recent five years,” J.T. Wang , chairman of Taipei-based Acer, said in an interview in April. Windows still dominates the market, running more than 90 percent of PCs. Even so, Apple Inc. ’s Macintosh has gained market share since Vista debuted. Apple’s share of U.S. PC sales increased to 8 percent in the fourth quarter of 2008 from 5.1 percent in 2006, according to Stamford, Connecticut-based Gartner Inc. Apple Rivalry “We often hear from our customers that they chose Mac because they’re tired of the headaches with Windows,” said Bill Evans, a spokesman at Cupertino, California-based Apple. He said many existing Windows users will have a “painful upgrade” to Windows 7, giving them a reason to buy a Mac. Some customers put off PC purchases altogether after Vista. And makers of netbooks — the cheap laptops that have surged in popularity this year — have opted to use the older Windows XP because it’s less expensive and doesn’t require powerful hardware. Windows revenue has declined in each of the past three quarters. Vista’s failings, coupled with the recession, may actually help Windows 7, said Loren Loverde , an analyst at Framingham, Massachusetts-based research firm IDC. Corporations are now saddled with aging software and computers, so many may be eager to upgrade. ‘Very Responsive’ “We essentially missed an operating system with Vista — very few businesses migrated,” said Mark McBeth, vice president for information technology at Starwood, the third-largest U.S. lodging company. “Microsoft has been very responsive with Windows 7 and we all know why. They’ve got it right this time, and they want to make sure everybody knows.” James Osteen, Miami’s assistant director of information technology, decided to upgrade his existing PCs to Windows 7 — even though budget cuts may force him to stop buying new machines. He estimates Miami’s government offices can save almost $400,000 a year from Windows 7 because it uses less energy and is easier to install. Other customers, such as Sprint Nextel Corp., the third- biggest U.S. mobile-phone operator, say they are holding off on Windows 7 because of the economy. Ballmer’s record as CEO depends on more than just the success of Windows 7, ISI’s Bellini said. He needs to reach beyond the achievements of his predecessor, Bill Gates , she said. Being able to say: “‘I took what someone else did and maintained it’ is not a bad legacy, but it’s not a great legacy,” said Bellini, who recommends buying Microsoft shares. “His legacy should be: What can he build on his own?” To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Goldman, JPMorgan, Intel Give Profit `a Pulse’ After Record Two-Year Drop

October 6, 2009

By Adam Satariano and Beth Jinks Oct. 6 (Bloomberg) — Goldman Sachs Group Inc. , JPMorgan Chase & Co. and Intel Corp. are expected this quarter to lead companies worldwide to the first profit increases in more than two years, ending the longest earnings recession on record. Buoyed by finance and semiconductors, profits at the world’s biggest companies are projected to grow 63 percent in the final three months of 2009, snapping nine straight quarterly declines. In the third quarter just completed, earnings for companies in the S&P 500 Index may drop 23 percent from a year ago, when a lending freeze led to the worst financial crisis since the 1930s, according to analysts’ estimates compiled by Standard & Poor’s and Bloomberg. Alcoa Inc . is the first member of the Dow Jones Industrial Average to report on Oct. 7. “Most management teams are seeing a pulse in their business,” said Lawrence Creatura , a portfolio manager at Federated Clover Investment Advisors, which oversees $407 billion. “Last year at this time markets were rigid with fear, as was the consumer. It’s going to be pretty easy to do better than that even if the economy is firing on one cylinder.” The fourth-quarter may be an “inflection point” that signals a turn in profit, said Creatura, who is based in Rochester, New York. JPMorgan, Goldman Sachs and Intel’s fourth-quarter gains will be marked by easy comparisons to last year, when credit markets seized and banks choking on billions of dollars in real- estate losses stopped lending. U.S. gross domestic product shrank 5.4 percent a year ago and consumer spending stalled. Financials First Analysts project S&P 500 financial companies’ fourth- quarter earnings will more than double from a year ago, when five of the six biggest banks reported a loss of more than $1 billion, according to estimates compiled by Bloomberg. Financial institutions worldwide have reported more than $1.6 trillion in credit losses and writedowns since 2007, Bloomberg data show. Goldman Sachs and JPMorgan, both based in New York, and other banks are benefiting from lower funding costs and more lending. The companies also face fewer writedowns on secured debt as home prices halt their descent, said David Dietze , president and chief investment strategist at Point View Financial Services in Summit, New Jersey. “Real estate is your key collateral behind many of these banks’ loans, and if collateral values start to stabilize, that should help stem the tide of write-offs,” said Dietze, who helps manage more than $100 million. If that happens, “Earnings growth will be phenomenal.” Jobs Picture For the third quarter, the largest financial companies will likely report higher earnings than a year ago, when New York- based JPMorgan took about $5.8 billion of writedowns and credit provisions, and banks began feeling the effects of the September collapse of Lehman Brothers Holdings Inc. Morgan Stanley is expected to post the first gain from continuing operations in a year, while Citigroup Inc. ’s operating loss is expected to shrink, according to analysts. For others it will take longer. The Oct. 2 report of accelerating job losses in the U.S., the world’s biggest economy, signals that unemployment, now at 9.8 percent, will remain a drag on consumer spending. Federal Reserve Chairman Ben S. Bernanke said Oct. 1 that U.S. economic growth will be insufficient to lower the unemployment rate below 9 percent by the end of 2010. United Parcel Service Inc. , the world’s largest package- shipping firm, handles half of all deliveries in the U.S. and is unlikely predict an increase in domestic volume for the final months of 2009 when it reports third-quarter results on Oct. 22, said David Campbell , an analyst at Thompson Davis & Co. in Richmond, Virginia. Production Cycle Farther back in the production cycle profits are turning around, as reflected in rising global stock prices. Improving sales at Intel, the world’s largest semiconductor manufacturer, point to a recovery that extends beyond the thawing financial companies. Semiconductor earnings in the fourth quarter are projected to more than triple from last year, when electronics manufacturers slashed orders. Intel, based in Santa Clara, California, is projected to report fourth-quarter profit almost doubled to 35 cents a share, the average of 26 estimates , after an estimated 23 percent drop in the period just ended. That hoped-for recovery, along with the fact that 72 percent of S&P 500 Index companies exceeded analysts’ average profit estimates for the second quarter, helped lift the benchmark index to a 15 percent July-September gain, the second- straight gain of that magnitude. ‘Some Recovery’ Europe’s Dow Jones Stoxx 600 Index advanced 18 percent last quarter, and the benchmark MSCI Asia Pacific surged 14 percent in the quarter, following a 28 percent gain in the second. “There is some form of recovery taking hold,” said Michael Shinnick , who helps manage $6 billion, including Intel shares, at South Bend, Indiana-based Wasatch Advisors Inc. “There was just an absolute seize-up in the market last year.” U.S. technology demand will begin to increase in the fourth quarter, followed by a global recovery in 2010, research firm Forrester Inc. said Sept. 29. Sales and profit at Microsoft Corp. , the world’s biggest software maker, probably fell to an almost three-year low in the third quarter. Both are projected to resume growth in the final three months of the year, aided by the Redmond, Washington-based company’s release of the Windows 7 operating system. Spotty Turnaround International Business Machines Corp. , reporting on Oct. 15, and Apple Inc. , on Oct. 19, are expected by analysts to post increased third-quarter profit. SAP AG, the world’s largest maker of business-management software, may say net income increased 17 percent in the quarter as cost cuts took hold. Outside of finance and semiconductors, fourth-quarter profit for the S&P 500 Index companies may be spotty. Investors need to be careful that stock prices aren’t overvalued compared to company earnings, said John Carey , portfolio manager at Pioneer Investment Management in Boston. “You always have to compare business results with share prices and be sure that one hasn’t gotten ahead of the other,” said Carey, who helps oversee $200 billion in assets. Consumer demand won’t fully recover until 2011, leading U.S. retailers to slash expenses and inventories. Those moves should help the companies exceed analysts’ pessimistic estimates, said Ken Perkins , president of Retail Metrics LLC, a research firm based in Swampscott, Massachusetts. Lower Costs “Some consumers are carefully dipping their toes in the water, but the job market is a real headwind,” Perkins said. Analysts expect Wal-Mart Stores Inc. , the world’s largest retailer, to post a 15 percent gain in fourth-quarter net income after steady profit in the third for the Bentonville, Arkansas- based merchant. Retailers earn a third or more of their profit in the final three-month period of the year. Last year’s holiday season was the worst in four decades. Consumer products companies will get a break in the fourth quarter as commodity costs and advertising rates have declined and economic contraction has slowed, Ali Dibadj , a New York- based analyst with Sanford C. Bernstein & Co., wrote in a research note Sept. 29. Colgate-Palmolive Co. , the world’s biggest maker of toothpaste, will post a 16 percent gain in third-quarter profit and a 21 percent rise in the fourth quarter, analysts project. Baoshan Iron For steelmakers, “the good news is right around the corner,” said John Wong , a fund manager with CQS UK LLP in London, which manages the New City Natural Resources Fund. The industry is facing easy comparisons this quarter and into 2010 after construction and production collapsed last September. “The fourth quarter year-on-year will look much better, and the first quarter next year will look even better again because first quarter 2009 was a complete disaster,” Wong said. Baoshan Iron & Steel Co. , the world’s third-biggest steelmaker, may earn 0.18 yuan a share in the third quarter, up sixfold from the previous three months, as the government’s stimulus spending boosted prices and demand, according to China International Capital Corp. Profit a year earlier was 0.16 yuan. Ma Guoqiang , president of the Shanghai-based company, said Aug. 31 steel prices will reverse recent declines because there’s “healthy” demand and the global economy is recovering. Toyota Motor Corp ., Honda Motor Co. and Nissan Motor Co., Japan’s three largest automakers, may report lower earnings for the three months ended Sept. 30 as a stronger yen offset gains from government incentives in the U.S., Europe and Japan. Samsung’s Profit Toyota City-based Toyota may post a net loss of 140.5 billion yen ($1.6 billion) in the quarter, according to a Bloomberg survey of three analysts. Honda may report a profit of 2.44 billion yen and Nissan may post net income of 11.8 billion yen, according to the survey. South Korea’s Samsung Electronics Co., the world’s largest maker of televisions, may report third-quarter profit more than doubled to 3.24 trillion won ($2.8 billion) as the weaker won helped increase the value of overseas earnings, according to the median estimate in a Bloomberg survey of 14 analysts The won has lost about 13 percent of its value against the yen in the 12 months ended Sept. 30. Siemens AG , Europe’s largest engineering company, may return to profit after a year-earlier loss, Sanford C. Bernstein analyst Martin Prozesky predicts. Net income at the Munich-based company may reach 1.29 billion euros, he estimates, after a loss of 2.47 billion euros a year earlier. Energy Prices A turnaround will be harder for energy companies. Third- quarter profit at Exxon Mobil Corp., Chevron Corp. and ConocoPhillips , the largest U.S. oil companies, and Royal Dutch Shell Plc and BP Plc , Europe’s biggest, probably fell after the recession sapped fuel demand, leaving crude-oil prices more than 50 percent below the record set in July 2008. Chinese oil demand, one of the forces that spurred last year’s record surge in energy prices and lifted earnings for producers, isn’t going to be as strong as anticipated, said Barry R. James of the James Advantage Funds in Dayton, Ohio. “The amount of consumption they would have won’t be quite as much, plus the rest of the world economy is at stall speed,” said James, who holds Exxon , Chevron and Conoco among the almost $2 billion in investments. Airline revenue probably won’t rise until mid-2010 at the earliest, Helane Becker , an analyst at Jesup & Lamont Securities in New York. Group losses were $1 billion or more for each of the past four quarters. Government Stimulus UPS, based in Atlanta and considered a proxy for U.S. economic health, has had six straight quarters of shrinking domestic volume and may post its seventh in the third quarter as businesses and consumers shipped less, said analyst Campbell of Thompson Davis. “We’re still in a downturn,” Campbell said. “Things have definitely improved, but we’re a few quarters away from growth.” Government stimulus spending will boost companies that depend on public works, analysts say. The U.S. government is spending $787 billion to jumpstart the economy, including $48.1 billion for transportation projects. Analysts expect sales at Caterpillar Inc. , the world’s largest maker of construction equipment to sales to rebound in the final three months of the year. Fourth-quarter earnings per share may jump to 34 cents, excluding some items, from an estimated 4 cents in the just-ended period, during which Caterpillar expanded temporary factory shutdowns and continued to cut other costs, analysts predict. Global Economy Dealers slashed inventories and customers didn’t buy as many bulldozers and excavators this year, marking the worst decline in Caterpillar’s markets since the 1930s. The Peoria, Illinois-based company’s quarterly loss from January to March was its first in 16 years. Dow Chemical Co. , the largest U.S. chemical maker, is benefiting from lower costs for oil- and gas-based raw materials, spending cuts and slowly expanding global demand, said Richard Vanden Boogard , who helps oversee $47 billion at Victory Capital Management. The global economy is recovering faster than most forecasters expected earlier in the year, Vanden Boogard said. Among Europe’s drugmakers, Basel, Switzerland-based Novartis AG probably grew faster than the overall pharmaceutical industry during the third quarter, said Birgit Kulhoff , an analyst at Rahn & Bodmer in Zurich. Profit excluding some items for the period is estimated to rise to $2.22 billion from $2.09 billon a year earlier, according to Bloomberg estimates. Net income at London-based GlaxoSmithKline Plc probably rose to 1.57 billion pounds ($2.5 billion) from 1.03 billion pounds a year earlier. The U.K. company’s respiratory medicines helped drive third-quarter growth, while the impact of patent expirations may have eased, Kulhoff said. “Six months ago, if you tried to envision these headlines, people would say, ‘You are crazy,’ but here we are,” Vanden Boogard said. “The big question is, what are headlines going to be six to nine to months from now? Will they be saying demand is even better? I think it will be better.” To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net Beth Jinks in New York at bjinks1@bloomberg.net

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ESET announces support for Windows 7

September 29, 2009

ESET announces support for Windows 7

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IPhone Stalkerware, Magic Speakers Steal Show: Rich Jaroslovsky

September 24, 2009

Commentary by Rich Jaroslovsky Sept. 25 (Bloomberg) — In the high-tech world, the Demo conference is a rite of passage. Twice a year, nervous developers and entrepreneurs pay for the privilege of standing before several hundred investors, peers, potential competitors and the media to unveil their new products and technologies in presentations that are allowed to last no more than six minutes. Occasionally, stars are born: In years past, Demo provided the launch pad for TiVo Inc. ’s digital video recorder and Palm Inc. ’s seminal Pilot handheld computer. This week’s Demo, in San Diego, seemed to have few such breakthroughs, while showcasing a cascade of apps for Apple Inc. ’s iPhone, add-ons to social media sites like Facebook and Twitter , and online-meeting software that might help save some travel money in tough economic times. While big companies sometimes use Demo for product introductions — Hewlett-Packard Co. was here with Skyroom, a $149 program for high-definition corporate video conferencing and real-time collaboration — the main focus is on smaller outfits that may be aiming their presentations as much at the venture capitalists prowling the aisles as at potential customers. One of the hits was Emo Labs Inc. , which showed off its “invisible speaker” technology, called Edge Motion. Edge Motion replaces the traditional, often tinny cone-and- magnet speakers used in flat-panel televisions, computer displays and laptops with a clear plastic panel that overlays the screen and generates stereo sound based on vibrations at its edges. Clear, Rich The result is clear, rich sound that comes from the video image itself — rather than underneath, next to or even behind the display, which can sometimes be disconcerting when watching movies or TV. The company says it is in talks with device manufacturers but hasn’t yet announced any partnerships. Emo has so far created speakers up to 42 inches (107 centimeters); it isn’t positioning the technology as a replacement for fancy home-theater set-ups, but rather as a way to bring better sound to second TVs, computer displays and the like. Emo’s speaker system was one of few new devices to debut at Demo. Software and Web services dominated the 56 six-minute presentations and 14 90-second “alphapitches” from startups (translation: “Dear early stage investors, please send money”). Buy or Squash? One buzz-generator was Micello Inc. , which is launching an iPhone app best described as “Google Maps for indoor spaces.” Micello is building a database of public venues such as shopping malls, college campuses and convention centers that can be searched — now where is that Cinnabon stand? — and works with other applications like, well, Google Maps. It’s such a natural idea that it ends up raising the question: Is Google Inc. more likely to acquire Micello, or squash it by doing something similar? Another interesting mobile app — and about the only one aimed at users of devices other than iPhone — was Rseven , which calls its service “lifecaching.” The Rseven application provides a backup service that captures, analyzes and saves to a Web site the contents of your mobile phone — text messages, contacts, photos and, most crucially, recordings of your phone calls. (The software provides an audible beep as a warning to the person you’re talking to.) The app is currently available for phones running Microsoft Corp. ’s Windows Mobile software and for Series 60 Symbian phones from Nokia Oyj and Samsung Electronics Co. ; the company says it is working on versions for iPhone and for devices running Google’s Android operating system, though at least in the iPhone’s case, it isn’t clear whether the call-recording functionality would work. Creepy App The champion in the unofficial category of queasy-tech was Date Check, a free mobile application from Intelius Inc. for iPhone, and due next month for Research in Motion Ltd. ’s BlackBerry and for Android phones. The idea behind Date Check — quickly dubbed “stalkerware” among conference attendees — is summarized in the tagline the demonstrators used for their presentation: “Look up before you hook up.” Enter a person of interest’s name, phone number or e-mail address, and the app will conduct a quick, basic background check. “Sleaze Detector” looks for records of sexual offenses and other criminal convictions. “Net Worth” checks property and tax records; “Living Situation” finds other people living at the same address; “Interests” scours social networks and professional and educational references. The quality of the information Date Check reviews can be highly variable, as anyone who has run an online search about themselves can attest, and the app is a bit creepy; it’s almost as easy to imagine ways it could be misused as ways it could be useful. Still, for better or worse, the information is already out there anyway, and Date Check makes it instantly accessible. I’ll leave to others any discussion of whether it does more to take the romance out of technology, or the romance out of romance. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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Dell Pays 68% Premium for Perot to Expand in Health Care Technology Market

September 22, 2009

By Connie Guglielmo and Katie Hoffmann Sept. 22 (Bloomberg) — Dell Inc. ’s proposed $3.9 billion buyout of Perot Systems Corp. reflects the second-largest personal-computer maker’s ambitions in the market for health- care information technology. Dell offered $30 a share in cash yesterday for Perot, 31 times its earnings in 2009, according to Ben Reitzes of Barclays Capital in New York. Hewlett-Packard Co. bought Dallas-based EDS last year for $13.2 billion, 14 times that company’s 2008 earnings, Reitzes said. “The Perot deal offers them plenty of opportunities in the health-care and federal space,” said Paul Roehrig, an analyst at Cambridge, Massachusetts-based Forrester Research Inc. “Dell can build a leaner, commodity-based services offering to be an interesting competitor.” With Perot, founded by former U.S. presidential candidate H. Ross Perot , Dell gains a partner to boost sales of computer services as consumers and companies trim PC purchases to cope with the economic slump. Larger services units helped International Business Machines Corp. and Hewlett-Packard withstand the recession better than Dell, whose sales slumped 22 percent last quarter . Perot, whose customers include the Centers for Disease Control and Prevention, gets about half of sales from hospitals, physicians’ practices and health-insurance companies. President Barack Obama’s plan to expand health-care insurance coverage to virtually all Americans, if passed by Congress, could boost Perot’s health care-related business. Electronic Health Records Tighter budgets for hospitals and a shift to electronic health records also will bolster Perot’s sales, according to Reik Read , an analyst at Robert W. Baird & Co. in Milwaukee. The U.S. economic stimulus bill included $20 billion to upgrade health-care information technology, Read said in a report. Dell’s services business will generate annual sales of about $8 billion and the deal will probably boost profit in fiscal 2012, Round Rock, Texas-based Dell said yesterday. Hewlett-Packard’s services revenue was $22.4 billion in 2008, and IBM’s was $58.9 billion. “It doesn’t necessarily make them a contender to IBM and HP,” said Dane Anderson , an analyst at Stamford, Connecticut- based Gartner Inc. “It’s digestible from a size perspective and brings them to a level where they can compete.” “We’ve had services capability and we’ve been trying to grow that organically,” Paul Prince, chief technology officer for Dell’s enterprise group, said yesterday in an interview. “It’s pretty clear that we felt like customers were looking for a bigger picture, bigger solution at a faster pace than we could have done just by growing it organically.” Services Strategy EDS, the world’s second-largest computer-services provider after IBM, helped Hewlett-Packard increase its services revenue 93 percent last quarter as sales at the PC division fell 18 percent. Perot also was the founder of EDS, established in 1962. “The economy is forcing a lot of companies to rethink their services strategy,” said Alexander Motsenigos, director of global services markets and trends for Framingham, Massachusetts-based IDC. The researcher estimates the 2008 global services market at $806 billion. “Whether it’s going to be successful is a different question.” Perot shares jumped $11.65, or 65 percent, to $29.56 yesterday in New York Stock Exchange composite trading. Dell, which ranks second to Hewlett-Packard in PC sales, fell 68 cents, or 4.1 percent, to $16.01 on the Nasdaq Stock Market. Dell already has worked with Perot in the services market for the past two years, the companies said. Once the acquisition is complete, Plano, Texas-based Perot will become Dell’s services unit, headed by Perot’s current CEO, Peter Altabef . Perot Contracts Perot manages customers’ computer systems, data centers, software and Web sites through multiyear contracts. The company reported sales of $2.78 billion last year. Second-quarter net income rose 3 percent even as revenue slipped 11 percent. The company’s revenue was forecast to decline 9 percent this year, according to the average estimate of analysts in a Bloomberg survey . Dell’s revenue will drop 16 percent, analysts project. Michael Dell, 44, called the purchase a “profound” move. “This isn’t a services acquisition. It’s the right services company for us,” he said yesterday in an audio message to both companies’ employees that was included in a regulatory filing. The deal “illustrates pretty clearly how we’re remaking Dell around a clear vision, on our terms.” Cost Cutting Dell, which lost the PC market lead to Hewlett-Packard three years ago, has relied on cost reductions including job cuts to help prop up profit amid the recession. The company, aiming to save $4 billion a year, already has farmed out 40 percent of manufacturing and said it expects to contract out even more. Still, net income dropped 23 percent last quarter. While Michael Dell has predicted a new version of Microsoft Corp.’s Windows operating system for PCs, due next month, should help boost PCs sales, he also said the company doesn’t expect to see a huge uptick in PC upgrades until 2010. Perot’s Chairman, Ross Perot Jr., may join Dell’s board of directors. Goldman Sachs Group Inc. advised Perot on the transaction, and Morgan Stanley advised Dell. Perot agreed to pay a termination fee of $130 million to Dell if it breaches the agreement. Perot is unlikely to get another bid, given that Dell has an established relationship with the company, the offer is all cash and Dell is paying a “significant valuation premium,” Baird’s Read said. Investors say they aren’t concerned that Dell may have to hold off on other purchases, at least for a while. “They have enough on their plate,” said Kimberly Caughey , investment analyst at Fort Pitt Capital Group Inc. in Pittsburgh, which owns about 230,000 Dell shares. “They need to look at their portfolio and see how they are going to market themselves.” To contact the reporters on the story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net ; Katie Hoffmann in New York at khoffmann4@bloomberg.net

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Washington’s Hip Crowd Swarms POV, Diners Indulge in Jean-Georges: Review

September 21, 2009

Review by Jim O’Connell Sept. 21 (Bloomberg) — The young and the hip line up two- by-two behind chocolate velvet ropes in the lobby of Washington’s new W Hotel, steps from Jean-Georges Vongerichten’s exquisite J&G Steakhouse . The crowds aren’t swarming the hostess stand; they’re waiting for the chance to take the elevator to POV , the terrace bar with the finest view in a city of dramatic scenes. POV’s popularity makes J&G an afterthought where it should be the centerpiece. Another recently opened restaurant, Plume , in the renovated Jefferson Hotel, has the feel of a work in progress. Unlike J&G, it can’t yet be counted among the rising number of world-class kitchens in the nation’s capital. Wolfgang Puck ( The Source ), Alain Ducasse (Adour) and Eric Ripert (Westend Bistro) have each opened restaurants in the past two years, joining in the success long enjoyed by Michel Richard (Citronelle) and Eric Ziebold (CityZen). J&G occupies a stately high-ceilinged room with its own view of the Washington Monument. It offers full flavors and a sense of whimsy not typical in a high-toned and high-priced steakhouse. The fun starts with a boozy amuse bouche, a refreshing raspberry litchi Bellini. Appetizers and desserts are often the most inventive portions of the meal, and here they excel. Sweet corn ravioli ($10) is luscious: Charred corn is mixed into a sort of risotto and finished with basil and butter, so good you regret not ordering two. Shrimp wrapped in bacon ($14), accompanied by avocado and encircled by a sauce of passion fruit and honey mustard, is alternately cool and spicy. Potato Misstep Entrees of filet mignon ($28) and Maryland Blackfish ($28) with nuts and seeds are very good rather than exceptional. The only misstep, the side order of potatoes roesti, is an overcooked form of hash browns that would be at home in any truck-stop Waffle House. For dessert, the poached peach with pistachio ice cream and champagne sabayon is a sweet, crunchy, juicy and creamy bit of all right. Compare that to what you are subjected to upstairs. Yes, the terrace bar has a great view into the windows of the White House’s East Wing and southwest to the Washington and Jefferson monuments and the Virginia countryside beyond. The terrace was a popular, slightly scruffy pleasure when the building was the Hotel Washington, and it served as the set in a scene in Kevin Costner’s 1987 film “No Way Out.” Now it’s gone all clipboards and advance reservations. Without one, you wait in line in the lobby until you’re escorted to the elevator and up to the 11th-floor bar. There you can get baked by the afternoon sun if your timing is off. The bar’s front is decorated with green AstroTurf, maybe to force you to look toward the view. The tuna burger was just awful, and mixology isn’t a strong suit. Drinks are $15 and on consecutive efforts a gin and tonic (just two ingredients) was made wrong. Comic Luxury Six blocks north of the W Hotel, Plume has emerged as part of the swank Jefferson hotel’s 30-month renovation. It’s a place that aspires to formal luxury with sometimes comic results. The claim to fame of the Jefferson, one of the city’s most elegant hotels, is that it was the site of a tryst between presidential aide Dick Morris and a prostitute that became front-page news in 1996. At Plume, the service is fussy where it should be chummy: servers offer a choice of napkin color and place purse stools next to ladies’ chairs. The team-service concept takes on a comical tone, as three people (waiter? maitre d’? wine steward?) each ask whether diners prefer still or sparkling water. Another black-suited gentleman (doorman? bartender? concierge?) asks if we want our plates cleared and when we agree, he leaves, possibly in search of the person assigned to that job. Mixed Bag The dining room, with just 10 tables, is dark and hushed, so quiet it takes on the air of a sparsely attended memorial service. When the food arrives, it’s a mixed bag. My companion found the gunpowder-tea-smoked shrimp ($18) “slimy.” The Maryland crab risotto ($34) was underseasoned and thinly populated with crustacean. There is no denying the foie gras ravioli ($23) is brilliantly conceived and executed, worth a visit by itself. But give the restaurant a few weeks or months to get settled. J&G Steakhouse is at 515 15th St. NW. Information: +1-202- 661-2440; http://www.jgsteakhousewashingtondc.com . POV: +1- 202661-2400. Plume is at 1200 16th St. NW. Information: http://www.jeffersondc.com . ( Jim O’Connell is a reporter for Bloomberg News. Any opinions expressed are his own.) To contact the writer of this story: Jim O’Connell in Washington at joconnell3@bloomberg.net .

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Chip-Market Slump Is Over, Morgan Stanley Says; Hynix, Nanya Shares Rise

September 21, 2009

By Chinmei Sung Sept. 21 (Bloomberg) — The $18.4 billion computer-memory industry’s three-year slump is over and chipmakers led by Samsung Electronics Co. are poised to see a market recovery that may last two years, Morgan Stanley said. Dynamic-random-access memory sales will probably climb 21 percent to $22.4 billion in 2010, the first gain in four years, after chipmakers scaled back production and as personal-computer demand rises, Keon Han , a Seoul-based analyst at Morgan Stanley, wrote in a report today. Chip stocks rose in Seoul and Taipei trading after the broker raised its share-price estimates on Samsung, Hynix Semiconductor Inc. and three Taiwanese chipmakers. Nanya Technology Corp. said today it plans to raise chip prices next month, adding to signs semiconductor makers are recovering from the slump that led to oversupply and record losses last year. DRAM spot prices have more than doubled this year after falling more than 50 percent in 2008 because of an industry glut that was exacerbated by the global recession. “The industry downturn that began in 2007 is over,” Han wrote. “We believe the DRAM industry is now embarking on a sustainable recovery. We have a positive view of DRAM globally on a one- to two-year time horizon.” Hynix , based in Ichon, South Korea, climbed as much as 5.4 percent, headed for the biggest gain in a month on the Korea Exchange. Morgan Stanley more than tripled its share-price estimate on the stock to 23,000 won and raised the investment rating to “equal-weight” from underweight. Suwon-based Samsung, whose business is more diversified than other DRAM makers, fell 0.7 percent in Seoul. ‘Good Shape’ “The DRAM market will be in a good shape this year and next year as demand is improving, while supply addition is limited,” said Im Jeong Jae , a fund manager at Shinhan BNP Paribas Asset Management Co., which manages the equivalent of $27 billion in assets. “Korean chipmakers are set to fully enjoy the recovery because their cost competitiveness against rivals is strengthening.” Nanya Technology, Winbond Electronics Corp. and Inotera Memories Inc. rose in Taipei trading. Morgan Stanley raised its Taiwan DRAM industry view and upgraded the investment ratings on the three stocks. Nanya plans to raise DRAM prices 10 percent to 20 percent during the first half of October, following two increases in September, because of a shortage, said Pai Pei-lin , vice president at the Taoyuan-based company. Clients Complain “Some of our clients complained that our prices are too high, however, we really can’t fulfill all the orders because of the current short supply,” Pai said by phone today. “We will negotiate with whoever can accept the price.” The personal-computer market will return to growth next year, helped by the introduction of Microsoft Corp. ’s Windows 7 operating system, driving up demand for memory chips, Morgan Stanley said. The slump in the market for DRAM chips, which temporarily hold data and help computer processors run multiple programs simultaneously, began after companies overestimated the demand that Microsoft’s Windows Vista would create, prompting semiconductor makers to spend more than 70 percent of their revenue on capital spending in 2007 and boost production by 90 percent, according to Morgan Stanley. Prices of DRAM tumbled to a record in December, according to Dramexchange Technology Inc., operator of Asia’s biggest spot market for semiconductors. The slump forced Germany’s Qimonda AG to file for bankruptcy protection and Asian chipmakers to sell shares and borrow funds to stay in business. Prices have since more than tripled to $1.80 last week, according to Dramexchange. To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net .

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IPhone Apps Take On the Business-Card Blizzard: Tech by Rich Jaroslovsky

September 19, 2009

Commentary by Rich Jaroslovsky Sept. 19 (Bloomberg) — I’ve always had a weakness for the “If they can put a man on the moon” cliché. Sure, it’s got 40 years of wear on it, but it fits so many consumer-technology issues. For instance: “If they can put a man on the moon, why can’t they come up with a painless way to get the information from business cards onto my computer?” If you’re like me, your desk has a growing stack of important contacts, silently reproachful. One of my Bloomberg colleagues is organized enough to keep her stash in a box, alphabetized, with little dividers between each letter — and even she can’t find the time to type the data into her computer. To see if I could provide her — and myself — with some relief from the guilt, I tried out two applications for Apple Inc. ’s iPhone that make use of its built-in camera and connectivity to scan and process cards. I also tested several desktop business-card scanners — compact, easily portable units that plug into a computer’s USB port. The requirements here are straightforward. Any solution has to be able to capture a physical image of the card and translate the information on it into computer text, a process known as optical-character recognition, or OCR. The text needs to be properly categorized so a name is recognized as a name, an e- mail address as an e-mail address, and so forth. Then the information needs to be saved or exported in the format of the most popular contact managers, notably Microsoft Corp. ’s Outlook on Windows PCs, and Address Book on Macs. Fast, Simple, Accurate Finally, and most important, any solution has to be fast, simple and accurate enough so that using it and correcting the inevitable mistakes still take less effort than just typing in the information yourself from scratch. To put the various scanning solutions to the test, I dipped into my pile for a dozen or so cards of various types, some basic and some a bit unusual — one from a Russian government official, for instance, and another from a well-known California photographer, printed on translucent paper. The best overall solution I found was the CardScan Executive ($259 from the Dymo unit of Newell Rubbermaid Inc., includes software for both Windows and Mac). Installation was straightforward for both hardware and software. Most cards averaged no more than two to three errors, although the software did get tripped up by large or unusual logos, and occasionally misread critical fields: In one case, the domain “mid.ru” became “micl.ru,” and the name “Petroff” became “Petroli.” Set-Up Issues In second place was WorldCard Mac ($199.95 from Taiwan’s Penpower Technology Ltd., includes Windows as well as Mac software). My expectations for this compact unit weren’t high, based on set-up issues that included a ridiculously short USB cable, scanty documentation and software installation messages evidently written by someone not versed in the English language. Yet its error rate was close behind the CardScan Executive, and it handled the translucent paper flawlessly. Its main shortcomings included making “.ru” into “.m,” and failing to distinguish between the end of an e-mail address and the start of a Web address, so “.edu” became “eduweb.” The convenience champion was CardSnap ($15.99 from Beach House Software, or 99 cents in a “lite” version that handles fewer fields), an iPhone application available from Apple’s iTunes App Store. CardSnap works best with the camera in the current iPhone 3Gs model; Beach House urges users of older iPhones to buy the $34.99 Clarifi case from Griffin Technology Inc., which includes a built-in close-up lens. Returned for Review To use CardSnap, you take a photo of each card, adjust the photos with fingertip gestures and submit them to CardSnap, which processes and returns them to you for review. Beach House says the process usually takes less than 24 hours, though I got results back in as little as six or so hours. With CardSnap, I could deal with cards on the spot, without waiting to get back to my desk and computer, but the results were variable. A couple of cards came back perfect; others, not so much. One Google contact’s title was truncated, as was the street on which the company’s headquarters are located. A Microsoft executive came back with just a first name — nothing else. BizSnap ($4.99), another iPhone app, didn’t fare as well. Unlike CardSnap, its OCR system returned immediate results. Unfortunately, they were too often unusable. Gibberish Several cards yielded no information whatsoever. With others, common terms were turned into gibberish — “Dsllu.” instead of “Dallas,” for instance — or fields were misread so that a lawyer with the Texas law firm Baker Botts wound up with the name “Ross Avenue,” the street where the firm’s offices are located. Further, the process of correcting problems was unusually laborious. Instead of just retyping information using the iPhone’s onscreen keyboard, you have to cut and paste text from the scan into the appropriate field. Finally, it took several days to get the IRISCard Pro 4 scanner ($149 from Belgium-based Image Recognition Integrated Systems Group ) to work on either a Mac or a Windows PC. On the Mac, the software installed properly but the scanner failed to recognize when it was being fed a business card; on the PC, running Windows Vista, I encountered the dreaded Microsoft “blue screen of death” each of the three times I installed the software. An IRIS support technician said the software provided with the unit was out of date, though he said it was highly unlikely that it was responsible for the crashes. He provided a link to a new version, which installed properly. Once it was finally running, the IRISCard performed well in handling cards from different countries. But it seemed to have trouble recognizing company and institutional names. The name of the Palo Alto Weekly newspaper was rendered as “wtlkly” and the card of an American University official was missing the “American University.” My conclusion: Business cards, a humble vestige of the 17th century, remain largely unconquered by the technological wonders of the 21st. Meanwhile, I’m already onto my next imponderable: If they can put a man on the moon, why can’t they make an instant-on computer? ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net

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Video: In-Depth Look – Operating Options

September 11, 2009

Apple’s Snow Leopard vs. Microsoft Windows 7 (Bloomberg News)

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Video: In-Depth Look – Operating Options

September 11, 2009

Apple’s Snow Leopard vs. Microsoft Windows 7 (Bloomberg News)

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Dell Profit, Sales Exceed Estimates as PC Maker Trims Manufacturing Costs

August 27, 2009

By Connie Guglielmo Aug. 27 (Bloomberg) — Dell Inc. , the second-largest maker of personal computers, reported sales and profit that beat estimates after cutting manufacturing costs and attracting buyers with low-priced notebooks. The shares rose 6.7 percent. Excluding some costs, profit was 28 cents a share in the second quarter. Analysts had predicted 22 cents on average, according to a Bloomberg survey. Chief Executive Officer Michael Dell has offloaded some manufacturing under a plan to save $4 billion a year. He’s also trying to reach consumers by getting Dell PCs into more retailers. While the company lost PC market share last quarter, it’s winning buyers for low-cost notebooks and scaled-down portables called netbooks. Shipments rose 10 percent from the previous quarter, Dell said. “PC sales were stronger than expected in the month of July,” said Dinesh Moorjani , an analyst with Broadpoint AmTech in San Francisco. He recommends buying the shares. Dell, based in Round Rock, Texas, rose 98 cents to $15.65 at 4 p.m. New York time in Nasdaq Stock Market trading . Dell accidentally posted the earnings report on its Web site before the market closed. Net income declined to $472 million, or 24 cents a share, from $616 million, or 31 cents, a year earlier, the company said in a statement. Sales fell to $12.8 billion last quarter. Analysts anticipated $12.6 billion. ‘Demand Improvements’ Dell said it’s seeing “seasonal demand improvements” this quarter in its consumer and federal-government businesses, though it expects slower orders from business customers in the U.S. and Europe. Business spending likely won’t pick up until 2010, with U.S. information-technology buyers showing the first signs of recovery, the company said. Michael Dell, 44, told analysts at a meeting last month that there has been a “pretty significant deferral” of spending in 2009, particularly by business customers, which account for about 80 percent of the company’s revenue . Demand for a new version of Microsoft Corp. ’s Windows operating system, due Oct. 22, may help drive new PC purchases, especially among customers who skipped the previous Windows, Dell said. PCs account for more than half of Dell’s sales. “As these machines age, the cost just goes exponential for companies to keep older machines,” he said last month. “So at some point, it becomes really counterproductive.” Long Run The company has predicted annual sales growth of 5 percent to 7 percent “over a longer time horizon,” without being more specific. “Corporations cannot defer IT spending forever,” Moorjani said. He has boosted his estimates for Dell’s fiscal year revenue, betting that PC orders will rebound. The new version of Windows, along with demand for faster storage and server computers, could “trigger corporate hardware upgrades,” he said. In the second quarter, Dell ’s worldwide PC shipments fell 17 percent, pushing its market share down 2 percentage points to 13.6 percent, according to Stamford, Connecticut-based Gartner Inc. Hewlett-Packard Co. , which took the PC market lead from Dell in 2006, expanded its share to 19.6 percent. To counter the PC slump, Dell is expanding its services and storage business and offering more consumer products. It’s also going after small and medium-sized businesses with new leasing options. Last week, the company said it’s working on a wireless device for China Mobile Ltd., the world’s biggest carrier by users. That could pit Dell against Research In Motion Ltd. ’s BlackBerry and Apple Inc. ’s iPhone. The company is looking into why today’s results were posted before the scheduled after-market time. Chief Financial Officer Brian Gladden said he didn’t know what happened to cause the mistake. To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net .

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Banks Added 10,000 Branches During Boom, But Left Inner Cities Behind

August 17, 2009

DALLAS — Banks expanded at a breathtaking pace over the past five years, adding more than 10,000 full-service branches, but barely 1 in 10 were in inner-city, minority neighborhoods, another sign the financial spending spree skipped over substantial parts of the country. The discrepancy means millions of people who don’t live near a bank have had to hand over $2, $5 or $10 at a time – sometimes even more – in service fees to nonbank outlets to conduct basic transactions such as cashing checks or paying bills that most bank customers take for granted. Nearly six branches were added every day, with bank offices racing to exclusive neighborhoods such as University Park in Dallas, Midtown West in Manhattan and Music Row in Nashville, Tenn., as well as the fast-growing exburban communities surrounding Sacramento, Calif., Phoenix and Cincinnati. “It’s crazy, and they’re building another one!” said Mary Morgan, pulling into a parking spot at a JPMorgan Chase branch in University Park. Up the road, Comerica just cleared a lot to build a bank. A half-mile away, a financial institution is replacing a restaurant, she said. “It’s stupid,” Morgan said. “How can the market be that big?” Meanwhile, bank growth either declined or remained stagnant across wide swaths of the nation’s inner cities, with branches closing in Cleveland, Pittsburgh and elsewhere. Data from the Federal Deposit Insurance Corp. shows that the nation’s 99,000 banks generally followed the money. About two-thirds of all neighborhoods have a median household income higher than the national average; about two-thirds of the new bank branches were in those neighborhoods. An Associated Press analysis, however, found that branches weren’t added at a proportionate rate in minority neighborhoods. About one-third of the neighborhoods analyzed are predominantly minority, according to the Census Bureau; only about 1 in 10 new bank branches showed up in those areas. The AP study was reviewed by the American Bankers Association and is consistent with other federal studies. “It’s like the proverbial ambulance chasers,” said Charles O’Neal, a vice president at the Dallas Black Chamber of Commerce. “They’re all chasing the same dollar and they get little return. Meanwhile, on this side of town, folks are literally spending sleepless nights trying to figure out where do we go to find a financial institution that will be responsive to their needs.” Bank officials say they are following the growth of customers to continue providing services because most people choose banks based on branch locations. Bank watchdogs, however, say less-regulated financial institutions are filling the void and expanding at the expense of vulnerable, inner-city residents. As a result, they are relying on high-cost lending businesses for services traditionally provided by bank branches. “When you don’t have banks going into poor communities, you’re going to wind up with places where there are a lot of predatory products,” said Kathleen Day, a spokeswoman for the Center for Responsible Lending, a Washington-based advocacy group. “It’s not always the case – payday lending seems to target black and Hispanic neighorhoods regardless of income level or bank location – but it’s a real problem.” Even in a digital age when banking is done online, the 99,000 bank branches are important barometers of economic health for thousands of communities. People in neighborhoods without banks are more likely to spend more of their money for basic financial transactions. About 30 million people cash checks at businesses that aren’t banks, according to MSG CPA, a New York-based accounting and consulting firm. There are more than 13,000 check-cashing outlets, handling about $80 billion annually. Customers use the businesses to cash paychecks, pay utility bills, buy money orders and take out payday loans, often at rates that exceed fees charged by banks or even credit card charges. Under the Community Reinvestment Act, banks are encouraged to offer services in poor and minority neighborhoods. The vast majority of banks receive outstanding or satisfactory grades from regulators. The grades are important when banks apply to open new branches or acquire other banks. James Ballantine, a senior vice president with the American Bankers Association, said banks that don’t comply can be required to enter into agreements with regulators, fined or even lose their charter. Even so, small and large banks alike focused most of their efforts on wealthy and fast-growing neighborhoods as the housing boom reached its zenith. Banks now receiving billions in federal bailout loans led the charge, according to the AP’s analysis. The largest banks added nearly 6,800 branches between 2004 and 2008. Fewer than 900 of those branches wound up in minority neighborhoods. Nearly 18 percent of those full-service bank branches were in minority neighborhoods in 2004, according to the FDIC. By last year, that number had dipped to 16 percent as banks worked harder at pursuing customers in distant, mostly white suburbs. Among the findings in the analysis: _Fueled by explosive growth and its acquisition of Bank One Corp., JPMorgan Chase added 2,566 branches during the five-year period. Only 342 were in minority neighborhoods. In 2004, nearly 30 percent of Chase’s branches were in minority areas. By 2008, that number had dropped nearly half, to 16 percent. Christine Holevas, a bank spokeswoman, said most of the bank branches were added by acquisitions of other banks. Chase took over Bank One in 2004, adding 1,800 branches. The bank increased its number of branches again in 2004 when it acquired 300 Bank of New York locations. The acquisitions effectively reduced the bank’s presence in minority neighborhoods. Its most recent federal grade, issued in 2007, was “outstanding.” _Citigroup added 272 new branches between 2004 and 2008, the overwhelming majority in white neighborhoods. Only two dozen were created in minority neighborhoods, according to federal figures. The bank still has 28 percent of its banks in minority areas. Elizabeth Fogarty, a bank spokeswoman, said Citi makes a strong effort to serve poor and minority communities. _Fifth Third Bancorp increased its presence in minority neighborhoods by more than half, expanding from 60 offices to 95 branches. Still, only 7 percent of its 1,356 branch offices are in minority areas. Stephanie Honan, a bank spokeswoman, confirmed the figures. She said the company has a small percentage of its branches in minority neighborhoods because of acquisitions over the past two years. She said the company has decided to not close or consolidate branches in minority neighborhoods for the next three years. The company, she said, “is committed to expanding our presence in minority areas and making the best use of our branch distribution to serve our markets effectively.” Perhaps no place illustrates the expanding chasm as well as Dallas, a major financial center. The typical family living in the University Park section has an annual income of $200,000. The neighborhood, just north of downtown, is 97 percent white. Two percent of its residents are poor. Since 2004, banks have added 16 new branches. The area now has 43 banks, or one for every 475 people. The market apparently isn’t as big five miles away, where the typical south Dallas family earns about $17,000 annually. The neighborhood is 98 percent black. Half the people who live there are poor. In 2004, its residents could choose between a Bank of America branch and a Washington Mutual branch. By 2008, only the Bank of America branch remained, leaving the neighborhood with one bank for every 9,300 people. It’s a community of small, frame houses, some neat and tidy with security bars on the windows and doors; others are weathered, with peeling paint and tiny, weed-choked yards. The bank stands in the shadow of the State Fair of Texas, the giant Ferris wheel looming above the parking lot. The lack of financial services often takes a back seat to worries about crime, fear of unemployment, or simply having a place to live and food to eat. George Murphy, 68, owns M&W Barber & Beauty Shop, a small business in the heart of the neighborhood. The lack of banks isn’t a problem for him because it only takes 30 minutes to walk to one, and a bus is also available. “I don’t deal with checks,” he said. “My business is cash only.” Even so, the line is long at the Ace Cash Express, less than two miles away. The sign reads, “No Bank Account Necessary.” Customers can have their paychecks automatically loaded on a prepaid Visa card for a fee. William Bates, 70, sits out front on his motorized scooter, waiting for his wife to get a money order. “Twenty-five or 30 years ago,” he said, “there weren’t no banks or nothing over here.” ___ Bass reported from East Dover, Vt. ___ On the Net: Center for Responsive Lending: http://www.responsiblelending.org/ JPMorgan Chase & Co.: http://www.jpmorganchase.com Citigroup Inc.: http://www.citigroup.com Fifth Third Bancorp: http://www.53.com Dallas Black Chamber of Commerce: http://www.dbcc.org/

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Closures & Layoffs: GM More Layoffs Forthcoming

August 5, 2009

Correction: In the week of April 26 we incorrectly reported that Ply-Gem Windows was closing a plant in Rocky Mount, VA. In fact, Ply-Gem is moving work to that facility from other locations that are closing. The Bank of New York Mellon is closing…

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Ned Goldreyer: Walking the Last Mile to Recovery

August 4, 2009

Hours of highly focused circular logic uncorrupted by the distractions of research or informed discussion have at last revealed the answer to our present fiscalamity.

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Dow Average Posts Best Two-Week Rally Since 2000 as Energy Producers Gain

July 24, 2009

By Matt Townsend July 24 (Bloomberg) — U.S. stocks rose, completing the Standard & Poor’s 500 Index’s best two-week rally since March, as energy producers climbed on a gain in oil and Federal Reserve Chairman Ben S. Bernanke said the central bank is “winding down” emergency measures established to end the financial crisis. Exxon Mobil Corp.

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Microsoft Profit Drops 29% as PC Slowdown Weighs on Revenue; Shares Slump

July 23, 2009

By Dina Bass July 23 (Bloomberg) — Microsoft Corp. fell as much as 8.8 percent in late trading after reporting a 29 percent profit drop and sales that missed analysts’ estimates, a sign that demand for Windows and Office software is still declining. Fourth-quarter net income was $3.05 billion, or 34 cents a share, compared with $4.3 billion, or 46 cents, a year earlier, the Redmond, Washington-based company said today in a statement.

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Microsoft Profit Declines 29% as PC Slowdown Weighs on Quarterly Revenue

July 23, 2009

By Dina Bass July 23 (Bloomberg) — Microsoft Corp. , the world’s biggest software maker, reported a 29 percent drop in profit and sales that missed analysts’ estimates, a sign that expense reductions weren’t enough to make up for declining sales of personal- computer software.

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