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Wednesday, July 30, 2008

The 3D Internet Will Change How We Live

Last summer, several hundred thousand very real dollars disappeared into a Ponzi scheme in the popular virtual world, "Second Life." The owner of the "bank" behind the scheme fled, and hasn't been seen since last October. There were no investigations, lawsuits or arrests.

Second Life users had invested "Linden Dollars" in the scheme, hoping to make money. Linden Dollars are purchased with real cash, and can be converted to real money on an exchange run by Linden Lab, the company behind Second Life.

After the debacle, the angry mob surrounding the virtual bank's ATMs appeared to consist mainly of hookers, mafia enforcers, skateboard punks and theme-park mascots. Though these computer-generated "avatars" represented real people in front of computer screens, some of whom lost real money, you're forgiven for not caring. It was as bizarre as it was tragic.

The picture is changing though – faster than you think. Real-life rules are starting to be applied to virtual worlds. Second Life banned unlicensed "banks" earlier this year, after previously banning casinos and simulated child pornography. Users cheered.

Virtual worlds may look like toys for the geekiest of geeks, but they have quietly slipped into the mainstream. Second Life reports that over the last two months, 1.2 million accounts were logged in for over 65 million total hours.

Other virtual worlds, like the PG-13 rated "There," China's forthcoming "HiPiHi," youth-oriented "Barbie Girls" and teen-oriented "Habbo Hotel" attract millions more. Big technology players are involved too. Sony is developing a 3D environment for its popular PlayStation 3 called "Home," and Google recently launched its own world, "Lively."

Dozens of major brands and organizations, including MTV, Playboy, CBS, Cisco, Toyota, L'Oréal and the American Cancer Society have significant virtual-world presences. IBM has made a particularly strong commitment to virtual worlds, and regularly holds meetings on a sprawling, privately firewalled Second Life campus.

Washington is paying attention. Earlier this year Rep. Ed Markey (D., Mass.), chairman of the House Subcommittee on Telecommunications and the Internet, presided over a hearing on virtual worlds. The hearing was simulcast into Second Life, where Rep. Markey was represented by an avatar.

The financial marketplace, of course, hasn't missed this opportunity – $345 million was invested in 39 virtual world-related companies in the first half of 2008. Last year, Gartner Research predicted that 80% of all active Internet users will have a virtual-world presence by 2011.

Bandwidth and processing power are constantly growing, leading to several convergent trends. First, interfaces are moving closer to reality. Over the last 30 years, we have gone from punch cards to typed commands to drag-and-drop folders to Windows Vista's 3D panels. Second, hardware that makes 3D immersion possible – from motion-control devices like Nintendo's Wiimote to $90 Webcams that track face and body movements – is now reaching average consumers' homes.

Finally, we are becoming an increasingly networked society. Eighty-two percent of American homes now have Internet access, up 11% percent from 2006.

The allure of the 3D Internet is easy to see. What auto maker would be content to put 2D pictures of a new SUV on its Web site when it can offer buyers a virtual, first-person drive down a snowy mountain road? What sculptor will want to display 2D photographs of her work when she can invite collectors on a guided tour of her virtual sculpture garden?

No privately held virtual world is going to end up in sole possession of the 3D Internet, just as no early 2D "walled garden" network provider like Prodigy, Compuserve or AOL owns the 2D Web today. A number of industry groups are working on open 3D standards. As soon as one of these gains widespread acceptance, anyone will be able to build a virtual world that is connected to any other similarly coded virtual world – just like HTML now allows anyone to create a 2D Web page that is connected to any other 2D Web page.

If current trends hold, the Internet will evolve into a 3D space, and virtual worlds will become an integral part of human communication. Real life will never be the same.

By: Benjamin Duranske
Wall Street Journal; July 17, 2008

Icahn Finalizes Proposed Slate for Yahoo

Little Progress Seen In Full Acquisition Of Firm by Microsoft

Yahoo Inc. and its opponents dug in for battle as investor Carl Icahn finalized his proposed slate of Yahoo directors and Microsoft Corp. pressed its own case for why a deal with the Internet company would benefit Yahoo shareholders.

The back-and-forth among the three parties, which included differing accounts of a proposal to break up Yahoo that the company rejected over the weekend, is part of the lead-up to an Aug. 1 meeting of Yahoo shareholders that will include a vote on Mr. Icahn's proposal to install a new Yahoo board.

But as the tension between Mr. Icahn and Yahoo escalates, there are few signs of progress on the option shareholders appear to want most: a full acquisition of Yahoo by Microsoft. That option, which Microsoft had spent the early part of this year pursuing, is no longer being seriously considered, people familiar with Microsoft's thinking say.

Instead, Microsoft executives are focused on buying Yahoo's Internet search business, a far-cheaper option and one that could boost Microsoft's efforts to counter Google Inc.'s steady growth.

Microsoft submitted its latest proposal for such a deal Friday. Mr. Icahn, who wanted his directors to control the remainder of Yahoo, helped deliver the offer to Yahoo. Yahoo's board rejected it Saturday but said it would be interested in selling the whole company.

By pushing for an outright purchase, Yahoo could be increasing its chances for keeping its board in place and fending off Mr. Icahn's assault. Investors continue to prefer a full acquisition to a more-complex deal for the search business of the sort Microsoft proposed in recent days. While Microsoft has focused on alternatives to a full purchase, Yahoo is keeping the notion alive by reminding shareholders that it told Microsoft it is open to such a deal and could complete it before the shareholders meeting.

"Yahoo definitely has the upper hand," said activist investor Eric Jackson, who represents a loose group of shareholders that collectively own 3.2 million Yahoo shares. But the momentum could shift, he said, if Mr. Icahn comes up with another offer.

One large Yahoo shareholder said in an interview Monday that while he preferred a full acquisition, he believes that Microsoft's latest search deal is a good start and that the Yahoo board ought to be replaced if it couldn't execute it.

In a letter to Yahoo shareholders Monday, Mr. Icahn continued to try to garner support for selling the search business to Microsoft, and he promised to fast-track discussions over that deal if his nominees were elected. The investor, who controls funds that own nearly 5% of Yahoo, accused Yahoo of distorting the facts in issuing its rejection of Microsoft's latest offer. He said that by his calculation, the value of the search sale to Microsoft, combined with the remainder of the company and other aspects of the deal, would be valued at close to $33 a share to Yahoo shareholders. The offer included a cash payment to Yahoo as well as an equity investment and a loan to the company.

A critical piece of Microsoft's offer was its guarantee of revenue that would be paid to Yahoo after it bought the search business. Under the proposal, Microsoft guaranteed to Yahoo from $19.5 billion to $26.5 billion over the next 10 years, according to people familiar with the situation. In return, Yahoo would need to guarantee that its Web site, which feeds traffic to the search business Microsoft would buy, would continue growing at a certain level, these people say.

Yahoo, in a letter to shareholders and in filings with the Securities and Exchange Commission, Monday disputed the value of the proposed deal and reiterated a laundry list of problems with the proposal.

In particular, the company said Microsoft's revenue guarantees were below expectations for its own business, called the proposal's estimation of cost savings "unrealistic" and said a recently struck agreement with Google can generate higher operating income. Mr. Icahn still "lacks a plan that makes sense for Yahoo stockholders," Yahoo Chairman Roy Bostock and Chief Executive Jerry Yang wrote in a joint letter.

Microsoft chimed in with a statement Monday, disputing Yahoo's account of talks last week, specifically Yahoo's contention that on Friday, Microsoft gave it an unreasonable deadline of 24 hours to agree to a deal. Microsoft said the offer wasn't an "ultimatum" but rather an attempt to see if Microsoft's offer was sufficient to "form the basis for the parties to engage in negotiations over the weekend on a letter of intent and more detailed term sheets."

Microsoft also addressed a dispute over whether the proposed deal would require changes to Yahoo's board and top management. Microsoft said its proposal "did not include changes to Yahoo's governance." A person close to Yahoo said "governance was a part of the offer," which was discussed in multiple calls between Yahoo, Microsoft and Mr. Icahn.

Sandeep Aggarwal, senior Internet analyst at investment bank Collins Stewart LLC, said Mr. Icahn probably can win a few seats with the search deal on the table but is unlikely to replace the entire board if Microsoft is unwilling to buy the whole company. "Convincing investors to vote in a new board because Microsoft will do a potential search deal is not going to be as easy as changing the board for a full acquisition," he said.

Mr. Yang prepared Yahoo employees for the proxy fight to intensify in a company-wide email Monday. "Proposals and attacks by Microsoft and Carl Icahn leading up to our meeting are likely to get even more contentious," he wrote.

By: Jessica Vascellaro and Robert Guth
Wall Street Journal; July 15, 2008

Yahoo Announces New Board - Formal Announcement

Jerry Yang Last Days ?

Yahoo! Inc., a leading global Internet company, announced today that it has reached an agreement with Carl Icahn to settle their pending proxy contest related to the Company's 2008 annual meeting of stockholders.

Under the terms of the settlement agreement, eight members of Yahoo!'s current Board of Directors will stand for re-election at the 2008 annual meeting: Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson and Jerry Yang. In view of the settlement agreement with Mr. Icahn, and the termination of the proxy contest, Robert Kotick has decided not to stand for re-election to the Board at the 2008 annual meeting.

Following the 2008 annual meeting, the Yahoo! Board will be expanded to 11 members. Carl Icahn will be appointed to the Board and the remaining two seats will be filled by the Board upon the recommendation of the Board's Nominating and Governance Committee from a list of nine candidates recommended by Mr. Icahn, which includes the eight remaining members of the Icahn slate of nominees and Jonathan Miller, currently a partner in Velocity Interactive Group and former Chairman and CEO of AOL.

As part of the settlement agreement, Mr. Icahn, who owns an aggregate of 68,786,320 shares, or 4.98% of Yahoo! common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo! shares in support of the Board's nominees.

"We are gratified to have reached this agreement, which serves the best interests of all Yahoo! stockholders," said Yahoo! Chairman Roy Bostock. "We look forward to working productively with Carl and the new members of the Board on continuing to improve the Company's performance and enhancing stockholder value. Yahoo! is a world-class company with an extremely bright future, and collaborating together, I believe we can help the Company achieve its ambitious goals."

"This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers," said Yahoo! Co-founder and Chief Executive Officer Jerry Yang. "No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen."

Mr. Icahn said, "I am very pleased that this settlement will allow me to work in partnership with Yahoo!'s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."

In response to Mr. Kotick's decision to step down from the Board, Mr. Bostock said, "I would like to personally thank Bobby for his dedicated service to Yahoo! these past 5 years. Bobby has been a valuable resource to our Board and the Company and we are grateful for his contributions. He wanted to help see the Company through this recent chapter, but made it clear to me that once the proxy contest was resolved, he was eager to focus his efforts on his work as CEO of the newly merged Activision Blizzard and his other business and civic pursuits."

The Company intends to file the full text of the settlement agreement later today with the Securities and Exchange Commission, and will also file and mail to its stockholders, supplemental proxy material.

Forward-Looking Statements

This press release (including without limitation the statements and information in the quotations in this press release) contains forward-looking statements that involve risks and uncertainties concerning Yahoo!'s strategic and operational plans. Actual results may differ materially from those described in this release due to a number of risks and uncertainties. The potential risks and uncertainties include, among others, the expected benefits of the commercial agreement with Google may not be realized, including as a result of actions taken by United States or foreign regulatory authorities and the response or acceptance of the agreement by publishers, advertisers, users and employees; the implementation and results of Yahoo!'s ongoing strategic initiatives; the impact of organizational changes; Yahoo!'s ability to compete with new or existing competitors; reduction in spending by, or loss of, marketing services customers; the demand by customers for Yahoo!'s premium services; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!'s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; Yahoo!'s ability to protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content and distribution; general economic conditions and changes in economic conditions; potential continuing uncertainty arising in connection with Microsoft's various proposals to acquire all or part of Yahoo!; the possibility that Microsoft or another person may in the future make other proposals, or take other actions which may create uncertainty for our employees, publishers, advertisers and other business partners; and the possibility of significant costs of defense, indemnification and liability resulting from stockholder litigation relating to such proposals. More information about potential factors that could affect Yahoo!'s business and financial results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Yahoo!'s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as amended, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, which are on file with the Securities and Exchange Commission ("SEC") and available at the SEC's website at www.sec.gov. All information in this release is as of July 21, 2008, unless otherwise noted, and Yahoo! does not intend, and undertakes no duty, to update or otherwise revise the information contained in this letter.

Monday, July 28, 2008

Taking It Personal When Spam Lands

The first rule of online marketing is that the more personal you can make a pitch, the better. Turns out the opposite may be true: A recently published study found that the more personalized a message, the less likely a recipient is to respond.

Researchers from the University of Illinois and Northern Illinois University studied the way people responded to emails from a fictional film-review Web site.

The volunteers wrote a review for the site and filled out an online profile. Only people who gave the site permission to contact them with future promotions were included in the study.

The researchers found that there is a fine line between helpful and creepy.

While some degree of personalization, like addressing someone by name, made people more likely to respond to emails from the site, messages that used more information -- something like "as an action-movie fan, we thought you'd be interested in joining others in San Francisco" -- was the email equivalent of a pushy salesperson, says Debra Zahay, one of the study's authors.

The study found that over time a business could start to personalize emails, but not until it had a longstanding relationship with a customer. Otherwise it is like talking about marriage on the first date -- while it shows you are serious, it is also a little freaky.

"As academics we like to have really technical terms," says Tiffany Barnett White, another of the study's authors. "But really it's just the creep-out factor."

Changes in Fast-Growing States May Sway Election

More Younger Voters Favor Democrats In Colorado, Nevada

Some of the nation's fastest-growing states are undergoing demographic changes that could transform Republican strongholds into swing states in 2008 -- and even trend toward Democrats in the long run.

Many of the new voters in these states -- younger, with a higher mix of minorities -- typically lean toward Democrats, polls and voting statistics show. "The youthful, new minority populations of the fast-growing battlegrounds reflect much of America's future," says William Frey, a demographer at the Brookings Institution, a Washington think tank.

The shifts are particularly noteworthy in Colorado and Nevada, both of which President Bush carried in 2004. They are high on the target list this year for Barack Obama's campaign. A similar population shift has been seen in New Hampshire, the North's fastest-growing swing state, which President Bush won in 2000 but narrowly lost in 2004.

Both presidential candidates are reacting to the shift, making these fast-growing states key battlegrounds this year. The campaign of Illinois Sen. Obama, the presumptive Democratic nominee, has outlined a strategy that involves competing in a handful of southern states that usually lean Republican, including Georgia and North Carolina. Meanwhile, Arizona Sen. John McCain, the presumptive Republican nominee, has been visiting Nevada in a bid to keep what once was a reliably red state from turning blue.

Demographics, of course, aren't destiny; they're just one ingredient in a cocktail of factors that could tip an election one way or the other. Issues like the war in Iraq or the ailing economy and high gas prices will be among the driving factors for voters in swing states and elsewhere. Also, the decades-long migration of Americans to fast-growing states in the Sunbelt and Mountain West has slowed as a slumping housing market discourages many from moving.

Even so, the number of Democratic newcomers is now large enough to challenge the Republican status quo in some areas. "The Sunbelt in the West is probably quite competitive," says Mark Gersh, a voter analyst for the Democrats. Democrats are "probably going to focus more on New Mexico, Nevada and Colorado" -- their best chances in the region -- to capitalize on minorities and young voters energized by Sen. Obama.

The latest Wall Street Journal/NBC News poll showed that, nationwide, likely voters between 18 and 34 prefer Sen. Obama to Sen. McCain, 53% to 40%. That dynamic is making Colorado, once staunchly Republican, increasingly friendly territory for Sen. Obama -- a big reason why the upcoming Democratic National Convention will be held in Denver.

Since 2000, Colorado's voting-eligible population has increased 13%, the fifth-largest increase in the country. The under-35 population has increased about 9%, while the share of white residents has declined 3.5 percentage points since 2000. In 2004, George W. Bush won 52% of the votes while John Kerry took 47%. But also that year, Democrat Ken Salazar was elected to the U.S. Senate, becoming the first Democratic senator elected in Colorado since 1992, and the Democrats swept to control of the state legislature. Two years later Gov. Bill Ritter, a Democrat, succeeded a retiring Republican governor in a landslide victory.

Nevada, another long-time Republican stronghold, has been among the fastest-growing states of the past decade. Between 2000 and 2007, about 350,000 people moved to Nevada from another state, including unemployed manufacturing workers from the North and neighboring Californians pushed out by rising real-estate prices in the late 1990s and first half of this decade. Many of the newcomers are Democrats. As of June, the state had 559,814 registered Democrats and 487,685 registered Republicans. Eight years ago, the state was almost evenly split, with 386,202 Democrats and 384,459 Republicans, according to the Nevada Secretary of State.

While some of the fastest-growing states are attracting minorities, that doesn't automatically translate into a boon for Democrats. Many Hispanics, for example, can't vote because they are too young or aren't citizens. Others don't vote even though they're eligible to do so. If past patterns hold, in 2008 only 19 out of 100 Hispanics will vote, compared with 40 blacks out of 100 and 52 whites, according to an analysis of Census data by Mr. Frey.

Still, over the long run, a growing Hispanic population bodes well for Democrats. Voter participation remains low in states that have only recently started adding large numbers of immigrants, including Georgia and North Carolina. But it's rising in states where the immigrant populations are long-established. In New Mexico, for example, Hispanics make up 40% of the population and 30% of the voting population.

New Hampshire is the only fast-growing swing state in the North, and much of its population rise is a result of Boston's sprawl, which has reached over the border. The state has seen a massive population turnover, as natives leave and newcomers move in. Roughly six out of 10 New Hampshire residents were born in another state; about a quarter of the people who are eligible to vote this year weren't New Hampshire voters in 2001, according to an analysis by Kenneth Johnson, senior demographer at the University of New Hampshire's Carsey Institute.

Demographic changes also are occurring in slow-growing swing states such as Ohio and Michigan, which are losing young people to other states and not attracting as many immigrants. But it's harder to gauge the political impact. Many of these states' older populations were reliably Republican in the 1980s and 1990s. But with the economy stumbling and voter dissatisfaction rising, some of these voters may move to Sen. Obama.

President Bush won Ohio in 2000 and 2004 with 50% and 51% of the vote, respectively. Meantime, Michigan, beset by economic woes, went Democratic. Former Vice President Al Gore won in Michigan in 2000 and Massachusetts Sen. John Kerry prevailed in 2004, each with 51% of the vote.

By: Conor Dougherty and Sara Murray
Wall Street Journal; July 12, 2008

Friday, July 18, 2008

Google Push to Sell Ads On YouTube Hits Snags

Video Site Is Key To Diversification; The Lawsuit Factor

Wringing ad revenue from YouTube is proving to be a challenge for Google Inc.

Although users of the popular video-sharing site view clips more than one billion times on most days, the site hasn't been as popular with big corporate advertisers. World-wide revenue from YouTube ads has fallen short of Google's expectations this year, and is likely to total about $200 million for the full year, according to two people familiar with the matter.

YouTube is critical to Google's campaign to extend its advertising reach far beyond text ads tied to Web searches, its revenue powerhouse. Google wants to sell more video ads and display ads on YouTube and elsewhere. It also wants to crack the television, radio and newspaper ad markets. Its target: the 90% of global ad dollars that don't currently flow to the Internet.
Tim Armstrong, an advertising executive at Google, says a sketch drawing -- stick figures and all -- is guiding the Internet giant toward a new ad model. WSJ's Kevin Delaney reports. (July 9)

"Most advertisers are still testing the waters on YouTube," says Sean Muzzy, media director at Neo@Ogilvy, a digital ad agency owned by WPP Group's Ogilvy & Mather. Some big advertisers, he says, haven't been comfortable that their ads might appear next to amateur videos. Google Chief Executive Officer Eric Schmidt has acknowledged that the company hasn't yet found the best formats for video advertising.

Copyright litigation has complicated the YouTube ad push. Viacom Inc. sued Google last year in connection with clips of television shows and films posted without authorization by YouTube users. Although Google says it hasn't broken copyright laws, it significantly cut back on the number of clips it would sell ads against, so as not to sell them against infringing material, according to one person familiar with the matter.

Tim Armstrong, Google's head of advertising and commerce in North America, is helping to lead the diversification push. When he dug into complaints from salespeople about Google's system for selling YouTube ads, he uncovered another part of the problem: a sales system hamstrung by inefficiencies.

Some YouTube advertisers, for example, had to pore over three separate legal contracts. Before Google salespeople around the country could propose certain deals to YouTube advertisers, they first had to get approval to do so from a temporary worker in California. And lacking a fully automated billing system for YouTube, Google staffers had to calculate some bills manually.

By May, Mr. Armstrong and his colleagues had identified some 105 problems with YouTube's ad sales, according to one person familiar with the matter. The ad difficulties extended beyond YouTube. In its successful search-ad business, Google recently counted 24 separate internal systems for helping advertisers come up with search terms to have their ads displayed alongside. "Barnacles started to build up on the outside of the process," says Mr. Armstrong.

Twenty months after Google bought YouTube for more than $1.7 billion, Mr. Armstrong and his colleagues have begun to untangle the problems with its advertising operations -- which generated 98% of Google's revenue in the first quarter. The initiative is code-named "Project Spaghetti."

The effort could affect how successful Google is at expanding beyond advertising tied to online searches. If Google is to maintain its torrid growth rate in the years ahead, it needs to tap other forms of ad revenue.

In the first quarter, Google's U.S. ad sales were up 31% from the year-earlier period to $2.5 billion. (Google doesn't break out revenue by category of ads.) That growth rate would thrill most companies, but for Google, it's a slowdown. In the first quarter of 2007, U.S. ad sales jumped 49%. Still, Google exceeded analysts' estimates for revenue and profit in the first quarter, partly because of strength outside the U.S. Google's shares have dropped about 25% from their November closing high of $741.79.

It isn't the first time Google has wrestled with advertising problems. Six years ago, it changed its sales model for so-called search ads: When Google users conduct a Web search, ads related to the search words pop up next to the results. Google began charging advertisers only when users clicked on the ads, not every time they appeared on a user's screen.

That new advertising model was hobbled initially by overlapping sales databases and disparate billing systems. In 2002, Google launched "Project Drano" to overhaul the operation. Problems instituting a new system -- many ad campaigns were inadvertently shut down -- "nearly killed" Google, said Mr. Schmidt, the chief executive, in a 2005 interview. It took Google about six months to get it right, and the search-ad business exploded. (Google has a deal with MySpace to sell ads on that social-networking site, which is owned by News Corp., owner of Dow Jones & Co., publisher of The Wall Street Journal.)

Mr. Armstrong, who is 37 years old, describes Project Spaghetti as an effort to fix the plumbing behind all of Google's ad initiatives. The inefficiencies, he says, are a product of Google's rapid growth and its innovation. Streamlining the systems and developing new ad formats, he says, should eventually improve the company's bottom line.

Mr. Armstrong, a seven-year Google veteran, says the company's traditional search-ad business is still gaining market share, and has plenty of room for growth. Nevertheless, he's been working for several years to develop ways to sell ads in other media, believing that Google could help advertisers better reach target consumers and measure the results.

In 2005, Google began trying to broker ads sales for magazines. To branch into radio advertising, in 2006 Google bought dMarc Broadcasting Inc. of Newport Beach, Calif., which ran an online system for advertisers to buy radio time. Google tested placing TV ads on a small cable system near its headquarters, then signed an ad deal with satellite-TV provider Dish Network Corp.

Big Ambitions

Google's 2006 acquisition of YouTube signaled that it had big ambitions for online video advertising. YouTube's revenue was only about $15 million that year, Bear Stearns analysts estimated. But Google believed YouTube would be attractive to traditional TV advertisers and others.

Mr. Armstrong and his team had to persuade skeptical advertisers to start spending chunks of their ad budgets on Google's new offerings. At a September 2007 meeting of Google ad executives in New York, Eileen Naughton, who heads Google's display and video ad sales, illustrated the magnitude of the challenge with photos of Mount Everest and Sherpas.

Last fall, Mr. Armstrong says, he began to realize that internal problems were interfering with progress. Newly acquired companies such as YouTube and dMarc Broadcasting had their own sales systems, and Google was building others piecemeal. The end result was overlap and inefficiency.

In March, after salespeople complained that selling YouTube ads was taking longer than it should, he kicked off Project Spaghetti. In order to get a closer look at the problems, he moved that month to a cubicle in the middle of a YouTube ad team, two floors above his New York office. He says he was determined to find out exactly how YouTube ad sales worked.

In May, Google held "weeds days" for YouTube -- it wanted to get everyone into the "weeds," or details, of the ad-sales process. The result was the list of about 105 fixes, says one person familiar with the matter. Mr. Armstrong characterizes some of them as very minor.

One of the top five suggested short-term fixes was to allow ad salespeople to discount YouTube ads by 10% without securing management approval, the person familiar with the matter says. Another was to eliminate a requirement that a certain temporary worker -- she's referred to only as Miriam in an internal presentation -- had to sign off on YouTube ad proposals, which created a bottleneck. Mr. Armstrong says that step now has been largely automated, and the worker only gets involved later in the process. He declines to comment on discounting policies.

Project Spaghetti, Mr. Armstrong says, should be completed by the end of the third quarter. But even if the internal problems are ironed out, Google still has to persuade advertisers to spend more on its new ad offerings.

One complaint from mainstream advertisers is that YouTube -- where clips uploaded by users range from raunchy to heartwarming -- lacks enough content alongside which they want to run their ads. New Line Cinema, for example, created an ad campaign on YouTube last summer to promote its movie "Hairspray." The ads performed well, New Line said, but it had a hard time finding enough YouTube videos where it wanted to put the ads.

General Motors Corp. has been a regular buyer of Google search ads. More than a year ago, it experimented with advertising its Cadillac brand on YouTube. Since then, it hasn't significantly boosted its YouTube ad buying, says Mike Devereux, GM's executive director of digital marketing and customer relationship management. He says GM is watching Google's ad-diversification plan closely. "As they get their platform ready for other media, we will get there with them," he says.

Mr. Schmidt, Google's CEO, said earlier this year that "it's taken longer than I thought for us to find the right combinations" of YouTube advertising formats. He added that he believed it "will ultimately be very, very successful for us and the industry."

The Viacom suit has complicated matters. Fearful of fueling allegations that it is profiting from copyright infringement, Google will only sell ads against YouTube clips that have been posted or approved by media companies and other partners -- roughly 4% of the total, says one person familiar with the matter. A Google spokeswoman declined to comment on how the litigation has affected where ads are placed. Last week, the federal judge overseeing the Viacom case ordered Google to turn over some data about YouTube users and viewing records, stirring privacy concerns.

Google plans to begin accepting "preroll" and "postroll" ads, which will run before and after some YouTube video clips, according to one person familiar with the matter. The plan under consideration, this person says, would give companies that post video clips the option to sell such ads, and share the revenue with Google. YouTube has long forsworn such ads because consumers don't like them. But advertisers consider them highly effective.

Google began offering Internet display ads several years ago, but they haven't gained as much traction as many at Google had expected. The display ads bring in a few hundred million dollars annually, according to one person familiar with the matter.

Acquiring DoubleClick

Google is hoping that its recent $3.2 billion acquisition of Internet ad services company DoubleClick Inc. will boost display-ad sales. Internet publishers pay DoubleClick to insert ads onto their Web sites as users visit the sites. DoubleClick also offers a system to ad agencies for managing and tracking online ads. Google wants to leverage DoubleClick's relationships with Web publishers and ad agencies to sell more display ads.

In radio and TV, where Google collects commissions for brokering ad sales, the company still doesn't reach enough top markets and consumers, some advertisers say. Sales of TV ads generated around $25 million in revenue for Google last year, while sales of radio and newspaper ads brought in even less, says one person familiar with the results.

Others in the ad industry are skeptical about whether Google's forays into these advertising categories will ever be as profitable as the company's stronghold, search ads, where it holds a major lead over rivals.

"They will do some good business, but not at the [profit] margins" the company has with search ads, said Maurice Lévy, chairman and chief executive of advertising giant Publicis Groupe SA, late last year.

Mr. Armstrong says it will take Google another five or 10 years to realize its advertising vision. He says advertisers are getting on board, but he acknowledges that the company's main rivals have adopted similar approaches. "The next five years of the Internet is about execution," he says.

By: Kevin Delaney
Wall Street Journal; July 9, 2008

Wednesday, July 16, 2008

Automakers Hurting in New Economy

Being in the auto-parts business these days has a bit of a gerbil-on-a-treadmill quality to it. Companies are tasked with keeping up with the altered needs of consumers and the drastic production changes from the big auto makers, as well as the need to reduce costs.

Investors are pessimistic about the future of a number of these companies, particularly after Tuesday's report on consumer confidence from the Conference Board showed that consumers who plan to buy cars in the next six months fell to 4.8 percent, one of its lowest readings in history.

The news was the latest in a series of factors causing investors to revalue the debt issued by some of the auto-parts makers. American Axle & Manufacturing Holdings Inc., which recently settled a labor dispute, has struggled mightily, as it is one of General Motors Corp.'s biggest suppliers of parts related to light trucks -- where GM and others are scaling back.

In the past month, American Axle's bonds, which carry a coupon of 7.875 percent and are due in 2017, have fallen by 11 cents to trade at 75 cents on the dollar, according to KDP Investment Advisors of Montpelier, Vt. They trade with a yield of 12.65 percent, or about 8.6 percentage points above comparable Treasurys.

The bonds have become quite expensive to insure, as well. The cost of insuring $10 million in bonds against default for five years rose to $900,000 Wednesday, compared with $730,000 on June 20, according to Phoenix Partners Group. The consumer-confidence data were responsible for part of the repricing of such risk.

Similarly, TRW Automotive Holdings Corp.'s credit-default swaps reflect a cost of $583,000 to insure a similar amount of debt, compared with $342,000 a month ago, according to Markit Group in London. That company's bonds trade at about 90 cents on the dollar, but the company's geographic diversity and its main product, automotive safety systems, "continue to enjoy favorable trends in demand and content per vehicle," according to KDP.

American Axle shares hit their lowest level since 2001 earlier in the week, but Wednesday, they ended up 42 cents, or 4.4 percent, at $10.08 after the company said it will be cutting white-collar jobs as well as blue-collar jobs.

"We're reaching a point with the price of oil where you are really changing the structure of industries," said Bruce McCain, chief investment strategist at Key Private Bank. "The automotive industry is under that sort of threat: a major shift in terms of what buyers of those products or services are going to do longer-term, and shrinkage in capacity and profitability."

By: David Gaffen
Wall Street Journal

Sharper Image Lives - As a Brand

Retailer Sharper Image was left for dead in February. Now, four months later, the bankrupt purveyor of air purifiers and nose-hair clippers is coming back to life.

This time, though, it won't have stores with $5,000 massage chairs where customers can relax. Instead, Sharper Image will live on as a virtual brand name, its moniker rented to other retailers that want to spruce up the appeal of a vacuum cleaner, pet robot or pair of sunglasses.

Leading the revival are the country's two largest retail liquidators, Hilco Organization and Gordon Brothers Group LLC. Historically, these companies have served as a stockroom Grim Reaper, squeezing the last few dollars from a dying retailer's inventory.

But over the past 15 months, the two have moved aggressively into the brands themselves. So far, they have spent a combined $250 million on brand acquisitions, largely via bankruptcy-court auctions. Last fall they acquired furniture chain Bombay Co. In recent months, Hilco has purchased fashion brands Ellen Tracy and Halston.

In their largest acquisition to date, Hilco and Gordon Brothers had to beat back eight other bids for Sharper Image. They paid about $49 million, including roughly $33 million for the Sharper Image brand name. The companies partnered with brand-management firms Windsong Brands LLC and Bluestar Alliance on the deal.

The San Francisco-based retailer, which started in the late 1970s as a quirky catalog company that sold jogging watches, grew into a national chain, cornering the market on Ionic Breeze air purifiers and other high-tech gadgets. The store made it into the film "When Harry Met Sally ..." when Meg Ryan and Billy Crystal tested a home karaoke machine. Sales tumbled in the last few years after a Consumer Reports article questioned the safety and effectiveness of the air purifiers.

"The store always generated a lot of foot traffic. But some brands are retailers, and some are better as wholesalers. Sharper Image is better as a wholesaler," says Hilco Consumer Capital Chief Executive James Salter. He adds that the brand will probably need a $5 million investment to analyze new products and market the name to product makers and other retailers who might use it.

Mr. Salter envisions Sharper Image products being sold around the world via infomercials, Web sites and catalogs. Or they could be set up in the aisles of a Target or Best Buy. One possibility: a Sharper Image treadmill with a computer and GPS system that would allow a user to race against others around the world in real time.

Mr. Salter says the high-tech name could generate annual retail sales of $1 billion. That would be a huge leap from its sales of $375 million in 2007 - and from its sales in any recent years. A branding company typically earns 2 percent to 3 percent of a brand's revenue in royalties.

Hilco and Gordon Brothers are by no means the first to pursue a brand-licensing investment strategy. Publicly traded companies like Iconix Brand Group Inc. and Cherokee Inc. are leading players in an increasingly crowded field.

Sharper Image's new buyers take inspiration from such exhumed brands as Polaroid, which was bought out of bankruptcy in 2001 by a private-equity firm. Today, Wal-Mart Stores Inc. and Target Corp. do a brisk business selling an array of Polaroid products, including digital cameras and LCD television sets.

The strategy is not without risks. Nexcen Brands Inc., a publicly traded brand-management firm that owns fashion label Bill Blass and interior-design brand Waverly, recently told its shareholders that it faces a cash squeeze and is laying off workers and selling off assets to raise capital.

But dormant brands are more valuable than ever as mass-merchant retailers look for new ways to lure customers into their stores. Kohl's Corp. this month announced a licensing agreement to revive and sell the Hang Ten surfing brand in its stores. Earlier this year, Wal-Mart relaunched the Ocean Pacific apparel brand, which is owned by Iconix.

Mr. Salter says that earlier this year Hilco spent about $17 million for Ellen Tracy, a women's clothing line, and that it expects to double its return. One deal already in place is a five-year contract with G-III Apparel Group Ltd. to sell Ellen Tracy coats.

But before Sharper Image's new owners reinvent the brand, they're spending the summer winding down business at the remaining 80 stores of what was once a 180-store chain.

On a blisteringly hot day in Manhattan earlier this month, Gordon Brothers principals Bradley Snyder and Stephen Miller - the duo that led the Sharper Image acquisition - stopped in at the chain's flagship store on 57th Street. With the store's air conditioning broken, Mr. Snyder tried to cool off in front of a Vornado art-deco-style fan marked down from $130 to $100. He also explained the sensitivity of this particular closeout sale.

"No bright orange signs. You can't be too schlocky," said Mr. Snyder, standing underneath signs proclaiming "Nothing Held Back" and "Entire Store 20-40 percent Off." "You want to move the merchandise, but you can't impair the brand."

Phone Giants Roll Out 'Three Screen' Strategy

Video Programming And Ads to Be Served On TV, Cellphones, Web

The nation’s largest phone companies sell packages of wireless phone service, Internet access and pay TV to consumers. Now they’re taking integration one step further, airing video programming—and selling ads—across all three platforms.

Content and advertising deals used to be struck separately for each platform. But Verizon Communications Inc. and AT&T Inc., for instance, have cut deals with media companies that allow them to distribute programming—from “Saturday Night Live” clips to user-generated video—to cellphone, broadband and TV customers. Recently, the phone companies have begun to sell ads across all three screens. They’re also rolling out features that link the units, such as Web-based transcripts of cellphone voice mails.

This integration, still in its early stages, is part of a broader plan to generate revenue from new services as wireless growth—the engine of the telecom industry—is beginning to slow. Both AT&T and Verizon, the majority owner of Verizon Wireless (Vodafone Group PLC of the United Kingdom owns the rest), are pursuing this “three-screen” strategy—showing ads and content on the screens of cellphones, computers and TV sets.

In May, AT&T tapped regional wireless executive Brian Shay to head a new division devoted to “converged services.” In addition to handling content-licensing discussions, Mr. Shay will develop technology to display ads on all the platforms, beginning with a rollout of a mobile ad-serving system in the fourth quarter, according to people familiar with the matter.

Last year, Verizon promoted longtime wireless executive John Harrobin to lead a new three-screen content-and-advertising unit. He negotiated a recent deal with General Electric Co.’s NBC Universal to show three- to five-minute “Saturday Night Live” clips on cellphones, on FiOS TV’s on-demand service, and soon on the carrier’s broadband portal. Verizon has begun running ad campaigns on the three platforms, including a recent Burger King campaign. “This is the beginning of much more cross-platform activity,” says Mr. Harrobin.

One hurdle: Phone companies’ nascent TV services and Web portals may not have enough users yet to draw major advertising campaigns. And the phone companies have to compete with other groups that want to sell ads and deliver content across multiple channels. Microsoft Corp., for instance, aims to become a one-stop shop for advertisers to buy spots on the Web, on mobile phones, in videogames and on TV. Cable-TV operators too are making significant investments in wireless, partly to position themselves to deliver content for TV, broadband and mobile.

For the phone companies, the effort comes as growth in wireless-subscriber numbers—which in recent years has more than offset declines in traditional landline subscriptions—is slowing as the cellphone market nears saturation. Ad revenue could provide a fresh source of growth. The telcos also believe that customers who consume content or services across multiple platforms will be less likely to switch providers.

But some marketers are skeptical that phone companies have any real reach beyond their large mobile-subscriber base. While Verizon has 67 million cellphone customers (and will have 80 million or more if its acquisition of Alltel Corp. is approved), it served just 1.2 million FiOS TV subscribers in the first quarter. AT&T, similarly, has more than 71 million cellphone users but only 379,000 U-verse TV customers. Both have millions of broadband customers, but their portals, att.net and verizon.net, draw relatively few visitors.

“Integration of anything depends on the weakest link of the integration. It is like a stereo system: If you have a $10,000 stereo but 100-buck speakers, you have a 100-buck sound,” says Rob Norman, chief executive of GroupM Interaction Worldwide, part of WPP Group PLC. GroupM encompasses all WPP’s media businesses, including media-buying agencies MindShare, Mediaedge:cia, Maxus and MediaCom, which represent nearly $50 billion in annual global ad spending.

For that reason, some Madison Avenue executives say advertisers looking to buy space in different media might be better off sticking with separate companies that specialize in each platform, at least for now. In the long run, they say, phone companies could gain an advantage by creating sophisticated ad-targeting systems that adjust which ads run each time a user views them in a different medium.

The phone companies have had some success. Burger King’s three-screen ad campaign with Verizon earlier this year built on the fast-food company’s “Whopper Freakout” TV ads, in which customers were told the burger had been taken off the menu and their reactions were filmed. (The ads were part of an effort to demonstrate customers’ loyalty to the burger, which is still on the menu.) Brian Gies, vice president of marketing impact at Burger King Holdings Inc., says the results were positive, but didn’t give details of how often the ads were viewed or clicked on. Burger King hasn’t done any similar deals since.

Among the “Saturday Night Live” clips Verizon offers is one from Weekend Update, a fake newscast featuring a fast-talking travel reporter who utters the phrase “just kidding” with annoying frequency. J.B. Perrette, president of digital distribution for NBC Universal, says “Saturday Night Live” was a natural choice for the multiplatform strategy because the material can be presented in short bites. “It hits the sweet spot of the digital consumer,” he says.

The next challenge will be developing new technologies that link all three platforms, says John Donovan, AT&T’s chief technology officer. For instance, the company is working on a system to coordinate digital purchases so that when a customer buys a movie on his laptop, it’s instantly available for streaming to his cellphone and on-demand on his TV.

“That part of innovation is the easiest to conceptualize but the hardest to produce,” Mr. Donovan says.

By Amol Sharma
Wall Street Journal; June 26, 2008

Thursday, July 10, 2008

Zell Looks to Tribune Real Estate to Generate Cash

Tribune Co. Chief Executive Sam Zell told employees he wants to "maximize value" of the company's "underutilized" real estate in Los Angeles and Chicago, paving the way for a potential sale of the office complexes in those cities as Tribune struggles under a heavy debt load.

Tribune, owner of a host of television stations and newspapers, is consulting with real-estate companies to find ways to squeeze more value from its landmark Tribune Tower in Chicago and its Times Mirror Square complex in Los Angeles.

While it is no surprise that Mr. Zell, a real-estate magnate, would introduce such an idea, there is a symbolic aspect to these edifices, which represent once-powerful newspaper empires. Mr. Zell himself called them "iconic." This, therefore, provides Zell with a unique opportunity to benefit from these historic landmarks

The business is struggling, but Mr. Zell is partially dismantling it. He has agreed to sell Newsday, a suburban New York daily, and he is cutting staff, among other money-saving steps, at his other newspapers.

The Hartford Courant and Baltimore Sun disclosed deep newsroom cuts Wednesday, and all Tribune papers will slash page counts in coming months. The Courant will cut about 57 newsroom jobs, or 25% of the staff, through buyouts and layoffs, according to a memo to employees. The Sun will eliminate about 100 positions through buyouts, layoffs and attrition.

Tribune could fetch hundreds of millions of dollars from a sale of the buildings that house the Chicago Tribune and Los Angeles Times newsrooms. But a more likely outcome are moves that would allow Tribune to wring revenue out of the properties without selling them. Tribune said it wants to maintain a stake in the buildings and be able to occupy them for at least five years. Similar things have happened across the country. Many Philadelphia apartments and Minneapolis apartments have historic significance.

To generate cash short of outright sales, real-estate experts said, Tribune could move staffers to less-expensive locations and find tenants for the resulting free space. Or the company could reap a windfall by selling the buildings and then leasing office space from the new owners.

Mr. Zell led an $8.2 billion deal in December to take the company private, leaving it with $13 billion in debt as advertising revenue deteriorates. Last month, Tribune agreed to sell almost all of Newsday for $650 million. It also is auctioning its Chicago Cubs baseball team and related assets, which are expected to fetch as much as $1 billion.

Analysts say the asset sales should help Tribune clear roughly $1 billion in debt and interest obligations this year. Next year and beyond, however, the margin for error will be thinner. Mr. Zell already has made staff cuts at Tribune, and more are expected as the company's papers pare page counts to equalize news content with advertising.

Revenue from real-estate deals is likely to be relatively small. Mr. Zell said in an employee memo that the Chicago and Los Angeles office buildings are an important part of the company's history, but they need to be put to better use. "As employee-owners, it's in our best interests to maximize the value of all our assets," Mr. Zell said.

A sale now would seem inopportune, as prices for commercial real estate sour. And the prewar buildings, particularly the hulking, low-rise Los Angeles complex, may have limited value to commercial-office tenants accustomed to modern high-rises. Even so, real-estate experts said, the Tribune assets likely would command premium prices.

Tribune could fetch at least $150 million for the Tribune Tower and at least $ 235 million for the Los Angeles complex, estimates Sam Chandan, chief economist for real-estate research company Reis Inc.

By: Shira Ovide
The Wall Street Journal; June 26, 2008

Red Hat Gets Solid Start

Red Hat Inc.'s fiscal-first-quarter profit rose 6.6% as the company recorded what Chief Executive Jim Whitehurst called a “solid start to the fiscal year.” Excluding one-time items, the Raleigh, N.C., open-source software company said it earned 18 cents a share in the quarter ended May 31, the second quarter in which Mr. Whitehurst was leading the company. By that measure, the earnings report was in line with the average forecast by analysts surveyed by Thomson Financial. Analysts' estimates usually exclude one-time items. Shares of Red Hat, which closed in regular New York Stock Exchange trading at over $20 were down after hours. Red Hat's business model revolves around getting companies to adopt free open-source operating systems, such as the popular server operating system Linux, and then selling upgrades and services. In April, Red Hat said it dropped plans to develop a more consumer-friendly open-source operating system. The company's Linux software is widely used for high-end computer servers, and search engine optimization.

Condo Coercion

In a showdown that could foreshadow potential problems for residential condominium owners, the controlling owner of a Tampa, Fla., complex is threatening to terminate the condo association in a bid to buy out residents for less than they paid and turn the 396 unit complex back into rental units.

Chicago-based Providence Management Corp., which owns all but some 30 units in the Portofino complex, has called a meeting to vote on a termination plan. The dispute stems from the real estate downturn but also is the unintended consequence of a Florida amendment, which was made to help damaged condo projects dissolve after natural disasters. While a unanimous vote used to be required to terminate a condo association, now an 80% majority is enough, though 10% opposition can veto the move.

In the Portofino case, Providence controls 92% of the votes, so termination is effectively guarenteed. The management company also believes its condo declaration agreement clearly spells out a voluntary termination process. The contract says the controlling owner can buy units from owners who opposed termination at fair market value. These days, that's less than what the units sold for originally.

Some Portofino residents have agreed to sell, but a handful are resisting, contending that they can't be required to sell at a loss. Raymond Burger, a Tampa lawyer for some of the holdouts, says such voluntary terminations are rare and there is no case law in Florida that supports a developer's ability to force a sale. He is seeking a state government ruling on the validity of the condo declaration and hopes to get an injunction against the Portofino condo vote.

Tuesday, July 8, 2008

Palm Beach Newspapers Set to Cut 22% of Staff

The company that owns the Palm Beach Post plans to cut 300 jobs, or 22% of its work force, at four publications. Palm Beach Newspapers Inc. employs 1,350 at the Post, Palm Beach Daily News, Florida Pennysaver and La Palma. The publications are owned by Cox Newspapers, a subsidiary of closely help Cox Enterprises Inc. Post publisher Doug Franklin said a prolonged slump in advertising revenues, increased Internet competition and “an overall difficult economic environment” made the cuts necessary.

Rates Improve For Some Loans On Pricey Homes

Months after Congress moved to lower borrowing costs for homeowners in a number of high-priced housing markets, interest rates are finally becoming more attractive on certain types of so-called jumbo mortgages.

The shift could provide a boost to home sales, particularly in some markets including equestrian homes and Greenville Homes in North Carolina. But the number of borrowers benefiting from the program is likely to be limited.

Rates on jumbo loans -- those bigger than the normal $417,000 limit on mortgages that can be sold to government-sponsored investors Freddie Mac and Fannie Mae -- jumped over the past year. That's because investors, spooked by rising defaults, were reluctant to buy loans that weren't backed by Fannie, Freddie or the Federal Housing Administration. In some cases, jumbo loans weren't available at any rate, leaving borrowers in the nation's most-expensive housing markets in the lurch.

In an effort to provide some relief to borrowers, Congress in February passed legislation that temporarily raised the ceiling on loans that can be purchased by Fannie and Freddie or insured by the FHA to as much as $729,750 in certain areas.

The new program, which expires at the end of the year, has been slow to make a dent, in part because rates on the new "jumbo conforming" loans remained relatively high. (Conforming loans are those eligible for purchase by Fannie Mae and Freddie Mac.) But in recent weeks, prices for some jumbo-conforming loans have moved closer to those for similar conforming loans with smaller balances.

Rates on 30-year fixed-rate jumbo-conforming loans currently average 6.59%, compared to an average of 6.46% for similar loans with smaller balances. In March, the gap between rates on jumbo-conforming loans and the smaller loans was as much as 0.77 percentage point. Jumbo loans that don't fall into the new category remain expensive, with rates averaging 7.47%.

At J.P. Morgan Chase & Co., the volume of jumbo-conforming applications has doubled since prices began to fall in early May. For some California lenders, jumbo-conforming loans now account for as much as 25% of applications, says Pete Ogilvie, president of the California Association of Mortgage Brokers.

"It's definitely addressing a need in the market," Mr. Ogilvie says, adding that "most of the activity is in purchases, which is nice because it opens up the market for entry-level homes."

Overall, mortgage rates have been drifting upward. Rates on 30-year fixed-rate mortgages with smaller loan balances have risen by nearly half a percentage point in the past four weeks, according to HSH Associates. Some of the best deals, says Melissa Cohn, a mortgage broker in New York, come from so-called portfolio lenders, with some offering attractive rates for loans with even higher balances.

In recent years, high home prices have made jumbo loans a necessity for many homebuyers. In March 2007, before the credit crunch hit, jumbo loans accounted for more than 12% of loan applications, based on the number of loans, according to the Mortgage Bankers Association, with the share of jumbo loans much higher in many high-priced markets. The jumbo share stood at 6% in May, after falling to as low as 4.4% in March.

So far, the number of borrowers who've taken out the new higher-balance conforming loans remains small. Fannie Mae and Freddie Mac have purchased about $244 million of these loans, according to Inside Mortgage Finance, a trade publication.

An additional $348 million of high-balance FHA loans have been packaged into securities since Congress expanded the limits for the FHA program, which allows borrowers to get loans with down payments of as little as 3%, according to Inside Mortgage Finance. The FHA says it has more than $8 billion in additional loans in the pipeline. (The FHA defines high-balance loans as those above $362,790, the maximum homeowners in high-cost areas could borrow through the FHA program before Congress raised loan levels this year.)

The FHA program can be an attractive option for borrowers with little money for a down payment, mortgage brokers say. Rates on 30-year fixed-rate FHA loans currently average 6.44%. The FHA requires borrowers to purchase mortgage insurance, with an upfront payment equal to 1.5% of the loan amount and an annual 0.5% insurance premium.

Legislation to be voted on soon by the Senate would permanently increase the size of loans in high-priced markets eligible for purchase by Fannie Mae and Freddie Mac to 150% of the limit for conforming loans. Currently, that would be $625,500.

Pricing hasn't been the only obstacle for borrowers looking to take advantage of jumbo-conforming loans. The amount borrowers can finance was raised in 71 markets, with the highest loan limits in markets such as New York City, Northern Virginia, Los Angeles and San Francisco. In Boston, the limit was raised to $523,750, and in Baltimore to $560,000.

But those benefiting from the new loans are concentrated in coastal markets. The higher loan limits for conforming loans won't provide any benefit to borrowers in places such as Chicago or Scottsdale, Ariz., where the limits weren't increased, even though these markets contain pockets of high-priced houses. "If you have to go above $417,000 [for a loan], the house isn't going to sell," complains Steve Walsh, a mortgage broker in Scottsdale. "The jumbo-conforming loans don't help anyone."

Another obstacle: Some borrowers may not be able to meet the lending standards for these programs. Borrowers need to put at least 10% down under the Fannie Mae and Freddie Mac programs. The standards are even tougher for second homes, where they must put at least 40% down.

The restrictions on second homes have had "a tough impact on a lot of markets," says Joe Rogers, an executive vice president at Wells Fargo & Co. "It's an area where we'd like to see some help, if possible."

Home buyers are likely to find it easier to qualify than those seeking to refinance. Prices have fallen substantially in places such as California and Florida, which means that many borrowers who bought homes in the last few years have little or no equity.

"A lot of people feel this was too little too late to have significant impact," says Daniel Jacobs, chief executive of 1st Metropolitan Mortgage, a national mortgage broker based in Charlotte, N.C. "The counties that really should benefit from the increased loan limits are the very same counties that have experienced significant depreciation in home values." Because of falling home prices, many borrowers who might have had enough equity to refinance six or eight months ago are no longer able to, he adds.

There are also restrictions on cash-out refinancing, which can be an obstacle for some borrowers looking to pay off a home-equity loan or line of credit taken out after a mortgage. Freddie Mac, for example, requires that borrowers pulling cash out have at least 25% equity in their homes and limits the amount they can pull out to $100,000. It bars cash-out refinances for second homes or investment properties.

Monday, July 7, 2008

Herman Miller's Profit Rises 25% on Global Sales

Herman Miller Inc.'s fiscal-fourth-quarter net income jumped 25% on strong international sales. The Zeeland, Mich., office-furniture maker reported net income in the quarter ended May 31 of $39.5 million, or 71 cents a share, up from $31.7 million, or 50 cents a share, a year earlier. To increase revenue, the company recently opened a new Michigan health insurance account, allowing them to save on their expenditures. Revenue rose 7% to $519.1 million, with North American sales up 6.3% and international sales climbing 23%. In March, the company predicted earnings between 55 cents and 62 cents. Herman Miller expects fiscal-first-quarter earnings of 49 cents to 56 cents a share on revenue of $470 million to $495 million.

Former Broadcom CEO Pleads Not Guilty to Fraud

Former Broadcom Chief Executive Henry Nicholas III recently pleaded not guilty to charges stemming from an alleged stock options backdating conspiracy and to federal drug charges.

The technology company's former chief financial officer, William Ruehle, also pleaded not guilty to the backdating-related charges during the brief hearing in federal court in Santa Ana, Calif.

Nicholas, dressed conservatively in a blue suit, waived reading of the two indictments with an emphatic, "No thank you."

He is scheduled to return to court on to discuss going back to a drug rehabilitation program that was interrupted by his indictment and release on $3.3 million bail, the conditions of which include drug testing, home detention and electronic monitoring.

Nicholas, who co-founded Broadcom and resigned as CEO in 2003, and Ruehle are charged in a 21-count indictment that accuses them of scheming to backdate millions of stock options and to falsify documents to further the fraud from 1999 to 2005.

The company had to take a $2.2 billion accounting charge in 2007 because it failed to record the stock-based compensation expenses during those years.

A separate indictment accuses Nicholas of keeping a supply of illegal drugs that he used to spike the drinks of industry executives and Broadcom customers at parties he held at his homes in Southern California and Las Vegas and at a California warehouse.

U.S. Magistrate Judge Robert Block assigned the cases to separate federal judges in Santa Ana and set a July 21 court appearance for Nicholas and Ruehle in the backdating case, and a July 14 appearance for Nicholas in the drug case.

The judge set tentative trial dates for both cases on July 29, but that date is likely to change.

Neither defendant nor their attorneys had any comment after the hearing.

Last month, the Securities and Exchange Commission filed a civil action against Nicholas, Ruehle, Broadcom Chairman and co-founder Henry Samueli and the company's general counsel.

Builder Group Shifts Tax-Break Stance

The National Association of Home Builders is playing nice with Congress again.

The trade group, representing thousands of home builders, has switched its lobbying tactics and its political action committee has resumed doling out political donations, after halting them in February to protest what the group said was policy makers' failure to help the housing industry and overall economy.

The association had been pressing for a tax break that would have allowed builders to apply losses to taxes paid four years ago, instead of the current two-year carry-back. But the group has backed off that effort and is focusing now on a proposed tax credit for home buyers to stimulate demand.

"Too much time has passed, too many people have lost their homes and too many home builders have lost their businesses, for us to worry about looking backward," NAHB Chief Executive Jerry Howard said Monday.

The trade group's shift on the tax break comes after the Senate came under fire for including it in its housing-relief plan. Critics said lawmakers were favoring builders over strapped homeowners. The House version of the plan doesn't include a carry-back provision.

The tax-break flap also exposed a split between the NAHB and many of the large, publicly traded home builders that hired an outside lobbying firm to push for the carry-back provision. The tax-relief issue "showed the industry the importance of having a unified message," Mr. Howard said in an interview.

Meantime, the home builders' political action committee, BUILD-PAC, is giving out political donations again. Ed Brady, chairman of BUILD-PAC, said the group lifted the ban last month because, "we felt like people were paying attention to us again."

During the current election cycle, the group has given about $977,000, with 45% going to Democrats and 55% to Republicans, according to the Center for Responsive Politics.

By: Michael Corkery
Wall Street Journal; June 17, 2008

Granholm Program Makes Right Choice

When it comes to training adults for real-world jobs, community colleges are probably the most nimble in meeting employer demands or expectations.

Michigan will redirect $37 million in federal job training funds to offer two years of free tuition. Granholm hopes lawmakers will add another $40 million in state dollars.

Qualifying participants could also attend a four-year university or any of a number of approved training programs. The key is the student must earn a certificate or degree in a high-demand occupation or learn the skills needed to start his or her own business.

Granholm's goal is to train 10,000 Michigan residents for high-demand careers and degree programs in such fields as technology, health care, advanced manufacturing, nursing degree, renewable energy and dental hygiene degree. Full details are on this web site, www.michigan.gov/nwlb.

This program, even at the early funding stages, is a good idea. We suggest only that it be reviewed periodically to make sure that colleges and learning centers don't just see it as a “gift” of new revenue and students focus on career areas that have real job opportunites. Too may home-grown liberal arts graduates of four-year institution are unemployed.

Wednesday, July 2, 2008

Home Vacancy Rates Post Sharp Increases

Cities and counties with some of the worst fallout from the nation's housing slump also are seeing a sharp upswing in vacant homes, a trend economists say might set up further declines in home prices.

The national homeowner vacancy rate, which gauges the number of vacant homes on the market, rose to 2.8% in the fourth quarter, according to Census Bureau data. That was up from 2.7% in the previous quarter and matched the record set in the first quarter of last year.

Vacancy rates in the 75 largest metropolitan areas showed vast differences last year, ranging from a low of 0.1% in the Poughkeepsie, N.Y., area to a high of 7.4% in Orlando, Fla., Census Bureau data show.

"The higher the vacancy rate, the greater is the degree of stress on pricing," said Jim Diffley, managing director of regional services at economic-research firm Global Insight in Waltham, Mass. "It's a measure of how far the market is out of whack."

The Census Bureau's report also showed that when compared with 2005, some of the fastest-rising vacancy rates last year were in struggling Rust Belt cities and recently sizzling Sun Belt markets, with cities in Florida -- the epicenter of the housing bust -- showing the biggest jumps in the gauge of vacant homes.

The vacancy rate in the Tampa-St. Petersburg-Clearwater area rose to 5.1% last year from 1.8% in 2005. The rate in the Miami-Ft. Lauderdale area jumped to 4.4% last year from 2.3% in 2005.

Mitchell Glasser, manager of housing and community development for Orange County, Fla., which includes Orlando, said the abrupt slowdown in home sales reduced demand even as builders were adding to supply.

"You had a booming real-estate market, and then it just stopped," he said, adding that a glut of condominiums is probably a part of the problem.

Vacancies also jumped in some once-booming Western cities. Between 2005 and 2007, homeowner vacancies more than tripled to 3.8% from 1.2% in the Riverside-San Bernardino area, part of California's Inland Empire, east of Los Angeles. In the Sacramento area, vacancies jumped to 4.2% from 1.2%. And in the Phoenix-Mesa-Scottsdale, Ariz., area, vacancy rates soared to 3.7% from 1%.

Economists caution that the fundamentals of local economies can make for very different levels of average homeowner vacancy. For example, a glance at historical homeowner vacancy data from California's San Bernardino-Riverside region shows that during the past 20 years, local homeowner vacancy rates have regularly hovered above national numbers before they last dipped below them around 2003. Other metropolitan zones, such as Atlanta; Fort Lauderdale and Jacksonville, Fla.; and Indianapolis, Ind.; also regularly have had vacancy rates that top national levels.

But outside of Indianapolis, vacancy rates in other Midwest cities have been creeping up lately. Census numbers show that in 2007, areas in and around the Ohio cities of Cleveland and Akron had some of the highest homeowner vacancy rates in the country. They both came in at 4.5% last year. And Indianapolis, Detroit, and Cincinnati, Ohio/Middletown, Ohio., also all showed rates at 4% or more.

Susan O'Neal, president of the Akron Area Board of Realtors, said she is surprised by the Census Bureau figures on rising vacancy rates there. She said, however, that significant foreclosures in the area would likely play a role in the jump. Also, the general slowdown of the local market would have an effect as houses sit on the market longer. "They're not selling as quickly because of the cycle that we're in," she said.

Vacancy rates alone, of course, aren't the only gauge that economists are watching when trying to weigh future price trends. They note that other important measures, such as employment and population growth, also play a role. In that light, they say higher vacancy rates in areas with struggling economies and slumping populations could present more persistent problems than in cities with growing economies.

"I'd be more worried as an owner and investor in Michigan," said Joseph Gyourko, a professor of real estate and finance at the University of Pennsylvania's Wharton School. "Why? Because they don't have strong population growth. Florida does. So Florida is going to grow out of its excess supply. And even though it looks worse now, I would suspect that, long run, it's better off."

By: Matt Phillips
Wall Street Journal; March 24, 2008

YouTube Unplugged

As Foreign Governments Block Sensitive Content, Video Site Must Pick Between Bending to Censorship, Doing Business

On Sunday, access to Google Inc.'s YouTube inside China was cut off after the Web site was flooded with graphic images from Tibet, including videos of burning trucks and monks being dragged through the streets by Chinese soldiers.

Blocking Western Web sites is routine in China, where the government has tightly controlled the flow of information. But the new YouTube blackout is the latest in a string of clashes between the site and foreign governments in Asia and the Middle East that's forcing the company to grapple with the consequences of its increasingly global reach.

Google Chief Executive Eric Schmidt raised the issue in a meeting in Beijing with Cai Mingzhao, vice minister of the State Council Information Office, on Monday, the company said. The Council denied any knowledge of the blockage and promised to investigate, according to Google. On Thursday, YouTube remained inaccessible from China except to users who took extra technical steps to circumvent the ban.

Last Friday, a Turkish court banned YouTube over a clip deemed disrespectful to Mustafa Kemal Ataturk, Turkey's founder. In February, Pakistan briefly banned YouTube because of an anti-Islam video clip posted on the site that the government said was so inflammatory it could spark riots. In the fall, Thailand blocked YouTube after the site refused to remove a video considered insulting to the nation's king. (The clip showed a pair of women's feet -- considered the most offensive part of the body -- above the king's head.) And citizens in a number of other countries, including Syria, United Arab Emirates and Morocco, have reported YouTube outages after sensitive content was posted.

The clashes have implications for YouTube's growth abroad, potentially forcing the company to choose between bending to censorship and losing business opportunities.

"This is a situation that the company and all Internet companies will be facing in many countries with all types of political systems as the Internet matures and millions more people log on," says Robert Boorstin, Google's director of policy communications in Washington. "At all times, our goal is to maximize the amount of information available to citizens around the world."

Nowhere is the issue more pressing than in China -- home to the world's largest population of Web users -- where agreeing to government censorship has been a basic condition of doing business for years. YouTube is still a relatively small player in China, lagging behind homegrown competitors like Tudou.com and Yoku.com. But it has a loyal following among young urban Chinese, who use it to find cutting-edge animation clips from Korea and Japan. Many Chinese also know YouTube as a place to find sensitive clips that have been removed from other Chinese sites.

The site has been blocked in China several times before, including for an extended period in October. That was around the time that YouTube launched a site in Taiwan, the U.S. Congress awarded the Dalai Lama its gold medal and the Chinese Communist Party congress was under way. YouTube has localized versions of its site in Taiwan and Hong Kong, but not one hosted in China itself, a move that would require an Internet-content license from the Chinese government. Google has said it doesn't plan to host user-generated content, such as video, blogs or email, on computer servers in China. Such materials would be vulnerable to seizure by the government if located on servers there.

Google previously grappled with censorship issues in China when it released a Chinese search service in January 2006. At the time, it decided to censor its search results to comply with Beijing's strict limits on access to information, concluding that was better than not offering any regularly accessible service at all. On Thursday, a Google search for "Tibet" and "riots" turned up few results. The same search on Google's U.S.-based English search site produced some 461,000 results.

So far, YouTube is taking a similar approach, despite ongoing debate at Google over the strategy. In Thailand, in order to be accessible, it agreed to block Thai users from seeing clips deemed insulting to the king in violation of Thai law. In Turkey, YouTube has suspended the account of the person who uploaded the Ataturk video, though the site remains banned there. In Myanmar, YouTube was banned after clips of protesting monks appeared on the site. In that case, YouTube declined to remove the clips and remains banned.

Media analysts say YouTube's string of censorship flare-ups -- and the site's sometimes inconsistent responses -- indicate it needs to develop a more transparent strategy for dealing with these issues. YouTube's community guidelines state the site encourages "free speech and defend[s] everyone's right to express unpopular points of view." But the site also reserves the right to remove content it deems inappropriate, which gives it significant discretion when it comes to politically sensitive content.

"We have a delicate balancing act between being a platform for free expression and also obeying local laws around the world," says YouTube spokesman Ricardo Reyes.

YouTube reviews videos when they are flagged by users to determine whether they violate its terms of use, which prohibit such content as graphic violence. YouTube users can appeal the removal of videos, which can trigger a secondary review.

After being alerted by users last month, YouTube removed a video clip that appeared to document abuse of prisoners at a Russian prison camp that YouTube determined violated the site's graphic-violence policy. It eventually restored the video but required viewers to click to consent to watch a clip that "may contain content that is inappropriate for some users." YouTube says its staff hadn't initially been aware that the video was meant to document alleged human-rights abuses.

The stakes are high because material distributed on YouTube is affecting some of the world's most incendiary political situations. "It's actually changed the whole political scenario in Pakistan," says Shahzad Ahmad, an activist with the civil-rights group Bytes for All in Pakistan, who believes the site played a role in the defeat to Pervez Musharraf's party in recent elections.

Google has reached out to the U.S. State Department for assistance with the censorship issue in China, says a person familiar with the matter. The company, along with Yahoo Inc., Microsoft Corp. and others, has been working for more than 18 months with human-rights groups, academics and socially responsible investors to develop a code of conduct for operating in countries that limit free expression and individual privacy. A bill to be considered by Congress would require U.S. companies to provide the U.S. government with details of any compliance with censorship in Internet-restricting countries.

By: Jane Spencer & Kevin Delaney
Wall Street Journal; March 21, 2008

Intel Looks to Power Bottom of Market

Atom Chips Will Serve In Notebooks, Desktops Priced as Low as $200

Intel Corp. plans to formally introduce on Tuesday a much-anticipated chip for use with low-priced computers, though recent product delays likely will loom over the chip maker's announcements at a big trade show in Taiwan.

The technology giant plans to use the Computex show to tout a line of chips dubbed Atom, which will serve as calculating engines for so-called Nettops and Netbooks, Intel's term for extremely low-priced desktop and portable computers. The Santa Clara, Calif., company estimates the notebook variety will sell in the $200 to $350 range, while the desktop machines will cost about $200 to $300.

Some companies expected to unveil Atom-based Netbooks at the show include Taiwan's Acer Inc. and Asustek Computer Inc., which introduced a popular product called EeePC last year that helped define the category.

Intel's executive vice president and general manager of its sales and marketing group, Sean Maloney, said in an interview that he expects customers to show off at least 30 machines as part of his keynote speech Tuesday. He reiterated past company statements that supplies of the chip may be tight, because of unexpectedly strong orders. "We were surprised at how strong the demand was," he said.

Hewlett-Packard Co. and Dell Inc., the U.S. companies that hold the top two positions in global PC sales, also have plans for Netbooks, though they haven't disclosed specific plans to use the Atom chip; H-P recently introduced a model called the Mini-Note that uses a chip from Via Technologies Inc.

Intel is expected to disclose Tuesday that Atom chips for Netbooks will carry a list price of $44 and operate at 1.6 gigahertz, while Atom chips for Nettops will list for $29 each.

In other developments at Computex, Intel plans to announce what it calls the Series 4 chipset, designed to help PCs handle high-definition video, according to Erik Reid, a director in Intel's mobile-platform group. Chipsets are a class of products that work to connect microprocessors to the rest of a system.

Intel also plans to provide an update of deployments for WiMax, a wireless technology for long-distance data communications, and discuss momentum in new pocket-size products the company calls MIDs, for mobile Internet devices.

But a much bigger battle at the moment is being waged over conventional laptops, an Intel stronghold where rival Advanced Micro Devices Inc. is trying to play a bigger role. Intel had expected to deliver a long-awaited chipset for that market, dubbed Montevina, in June. But technical glitches and delays in receiving government approval for a wireless communications component recently forced the company to push back the introduction of the chipset to July 14.

That initial version of the chipset comes only with Wi-Fi short-range communication. A version that comes with chips to communicate using WiMax is expected in the second half of 2008. Though Intel had once predicted that 2008 would be the "year of WiMax," network operators aren't expected to widely offer a mobile version of the service until next year.

The delays aren't expected to hurt Intel's finances, but are clearly a disappointment. "Oh Montevina, you crafty minx. You broke our hearts with the launch delay," Craig Raymond, a senior Intel technical marketing engineer, wrote in a company blog.

But Mr. Raymond extols the capabilities of a prototype Asustek laptop with the chip technology he is trying out, communicating via a WiMax network in Taiwan. "It won't be long before we kiss and make up," he wrote.

By: Don Clark
Wall Street Journal; June 3, 2008

Founders' Hubris Fuels Corporate Drama

Lots of business dramas over the years have involved strong-willed company founders who couldn't let go in their 60s or 70s. Put much-younger founders into the mix, and tensions can be even greater.

There's no shortage of ambition among corporate top lieutenants. But if they collide with a founder who mightn't yet have reached age 40, that's a recipe for management upheaval. It's also likely to provoke intense anxiety among investors, customers and employees.

Anyone attending The Wall Street Journal's D: All Things Digital conference last week saw how challenging such human interplay can be. Three famous high-tech founders -- Microsoft Corp.'s Bill Gates, Yahoo Inc.'s Jerry Yang and Facebook's Mark Zuckerberg -- took the stage for separate appearances. Each was joined by his company's most powerful nonfounding executive.

While all the speakers did their best to make nice, it didn't take a Geiger counter to sense that offstage, each management team might have a few issues to work out.

Microsoft's executives were the most candid about the challenges. Mr. Gates said he had a hard time pulling back from day-to-day decisions after handing over the CEO's job to longtime colleague Steve Ballmer in 2000. The two met as Harvard undergraduates in the 1970s.

At the conference, Messrs. Gates and Ballmer talked about how it has taken a while for them to establish that Mr. Ballmer has risen to be the "senior partner" in their business relationship, while Mr. Gates has become the "junior partner." Both men are 52.

Yahoo's leadership history has taken the opposite path, with Mr. Yang stepping in as CEO in 2007 after the Internet company parted ways with Terry Semel, a boss brought in from outside.

Mr. Yang's conference appearance was colored by the recent breakdown of merger talks with Microsoft. That put him on the defensive for much of his time on stage, arguing that Yahoo wasn't "under siege" and hadn't suffered a loss of momentum.

"I think I'm the best person to run Yahoo," the 39-year-old CEO said. "It isn't just because I bleed purple," the main color of Yahoo's logo. "It's my time to take Yahoo to the next level."

But Mr. Yang's toughest moment came when he was asked to define Yahoo's business. "We want you to start your day with Yahoo," he said. "We want you to come to Yahoo multiple times a day."

That brought a quick interjection from Sue Decker, the company's 44-year-old president, who built her career on Wall Street before joining Yahoo in 2000. Aware that Yahoo has been criticized in the past for sprawling into too many areas, she said: "It's a little bit of a change. We still do hundreds of things. But we want to focus Yahoo on four things" -- its home page, search, email and mobile communications.

After the Yahoo presentation, conference attendees were buzzing about what struck them as a hazily defined strategy. With Mr. Yang and Ms. Decker emphasizing different elements and shareholders unhappy about Yahoo's falling stock price since the Microsoft deal fell apart, the status quo doesn't seem stable.

Facebook's Mr. Zuckerberg and his recently recruited chief operating officer, Sheryl Sandberg, 39, went on stage with different challenges.

The 24-year-old Mr. Zuckerberg, dressed in jeans and a hooded olive sweatshirt, was grilled on why he is remaining CEO of his fast-growing social-networking Web site. When a growing company needs more-experienced management, the norm in Silicon Valley is for young founders to let someone else become chief executive.

Mr. Zuckerberg offered a job description that suits him well. "CEOs do two things basically," he said. "They set the vision, and they build the team."

But Facebook's vision was set years ago. The company's biggest challenges today include finding ways to sell ads or raise revenue in ways that won't alienate users; managing fast-paced expansion in an orderly way, and dealing briskly with privacy concerns about users' data. As the company's "grown-up," with previous managerial experience at Google Inc. and the Treasury Department, Ms. Sandberg is the logical person to take command of such areas.

Ms. Sandberg and Mr. Zuckerberg have been working together for only a few months. Their onstage remarks at D were separate soliloquys. It's anyone's guess whether they can establish true working harmony and divide up duties effectively.

"Once you've founded a company, you tend to think extremely highly of your abilities," says David Lewin, a professor at the UCLA Anderson School of Management. "And in some ways you should." But founders' hubris can often get them in trouble, he cautions.

A more philosophical view comes from Adam Galinsky, a professor at Northwestern University's Kellogg School of Management who studies ethics and decision making. Founders' challenges in letting go have been studied for decades, he observes, without ever being solved in a lasting way.

"These are timeless issues," Prof. Galinsky says. "Many people have to learn the lessons themselves. Their own experience counts for much more than anything anyone else will tell them." Often it's only on a second or third start-up that founders are more mindful of how -- and when -- they pass the leadership baton, he says.

By: George Anders
Wall Street Journal; June 4, 2008