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Tuesday, June 30, 2009

Cable Networks Take Stab At Controlling Web Viewership
Story from the Wall Street Journal

Several major cable networks and subscription-TV providers are readying systems that will let only paying subscribers watch cable shows on the Web, part of an effort to counter the growing amount of free TV shows available online.

Comcast Corp., Time Warner Cable Inc. and DirecTV Group Inc. plan trials of subscriber-only online services this summer, according to people familiar with the matter.

Comcast's test, which it announced Wednesday, will cover 5,000 homes and feature programming from Time Warner Inc.'s TNT and TBS networks, including TNT's "The Closer" and TBS's "My Boys."

Networks such as A&E and the History Channel, which areowned by a venture of Walt Disney Co., Hearst Inc. and General Electric Co.'s NBC Universal, along with networks owned by Scripps Networks Interactive Inc. and Cablevision Systems Corp.'s Rainbow Media are also slated to participate in Comcast's test, according to executives. NBC Universal said it is also in talks to participate in Time Warner Cable's test.

While limited, the new tests represent part of an industry-wide push to preserve and possibly expand the cable-TV business's lucrative subscription model in a digital world. The move also come as media companies are struggling to make money from online video.

A large amount of TV content has already made its way online—particularly from broadcast networks that depend largely on ad revenue. In addition to putting shows on their own Web sites, NBC Universal and News Corp., owner of Fox Broadcasting (as well as The Wall Street Journal) formed Hulu, an ad-supported Web site that aggregates TV programming. Disney's ABC recently signed on, and CBS Corp. has its own video site, TV.com.

Cable operators have chafed as cable networks have posted some of their programming online. The new systems would allow networks to put more programming online without enticing viewers to cancel cable-TV subscriptions.

"The vision is you can watch your favorite network's programming on any screen," said Time Warner Chief Executive Jeff Bewkes, one of the plan's most ardent proponents, at a press conference Wednesday. He added that the plan is "not defensive."

Mr. Bewkes said in interview he is in talks with other providers, including DirecTV, Dish Network Corp., Verizon Communications Inc. and AT&T Inc., and expects to announce more deals in "days or weeks."

A DirecTV spokesman said it will launch a trial this summer. Terry Denson, Verizon's vice president of content and programming, said the company is close to an agreement with Time Warner and other content providers about a similar test. Representatives of AT&T and Dish declined to comment.

There are still significant technical and business hurdles to launching such a system. Some cable-network executives say they believe that cable operators should pay extra for putting more programming online.

Both Time Warner and Comcast said Wednesday that the system they are pursuing will be interoperable with other companies' systems to authenticate subscribers.

There's also a question of whether some media companies will want to sequester their most popular content behind a subscription wall. "People are afraid to go first," said Mr. Bewkes. "We aren't."
FCC Begins Final Review Of Century Tel - Embarq Deal
Story from the Wall Street Journal

WASHINGTON – The Federal Communications Commission is in the final stage of reviewing CenturyTel Inc.'s $11 billion acquisition of Embarq Corp. and could sign off on the deal as soon as this week, clearing the last regulatory hurdle facing the merger of the two midsize phone companies.

The three-member FCC board is waiting to review a final draft of a deal to approve the merger, said people familiar with the review, although negotiations on merger conditions have been substantially completed. The deal received shareholder approval in January and a final nod from state regulators last month.

The companies have agreed to provide faster Internet speeds to their broadband customers at the request of the FCC. The companies committed to providing substantially higher speeds to customers in rural areas within a relatively short time frame to gain the FCC's approval of the deal, which was announced in October.

The FCC's insistence on improved broadband service for rural customers as part of the deal shows how its been focusing more intensely recently on ways of getting more Americans online at faster speeds. The agency is currently working on a national broadband plan designed to offer a roadmap for improving Internet access across the country.

In past years, the FCC has focused more on Internet retail pricing, not speeds, in other recent phone company mergers, including AT&T Inc.'s acquisition of BellSouth Corp. in 2006.

Within three years, the combined company has pledged to offer at least some broadband service to retail customers who are connected via lines that can transmit Internet data.

At least 90% of broadband customers would have download speeds of at least 768 kilobits per second within three years. Within two years, 87% of customers with broadband access would have download speeds of at least 1.5 megabits per second.

Additionally, the companies promised to offer speeds of three megabits per second to 75% of broadband customers within a year of the close of their merger and increase that access to 80% of customers within three years.

On Friday, the two companies signed off on a series of relatively minor conditions, many of which focus on requirements that the newly combined company adopts Embarq's business practices in dealing with wholesale customers.

The combined company, which will be called CenturyLink, will operate in 33 states, with 7.5 million phone lines, 2.1 million broadband subscribers and 440,000 video customers.

A spokeswoman for Embarq declined to comment, citing the FCC's ongoing review of the deal. A spokeswoman for CenturyTel couldn't immediately be reached for comment.

The FCC is on a relatively tight deadline to sign off on the deal, since it will lose one member when the Senate confirms incoming Chairman Julius Genachowski. A Senate vote on Mr. Genachowski's confirmation could come as soon as this week.

Another Democratic FCC commissioner, Jonathan Adelstein, will leave the board when Mr. Genachowski arrives. FCC officials want to complete the deal before the new chairman arrives so that it won't be delayed any further.
Smaller Proves Better For Radio Biz
Story from the Wall Street Journal

For much of the 1990s, the radio industry threw a party for investors, fueled by deregulation and mergers. Then came the hangover.

Acquisitions have burdened numerous broadcasters with heavy debt, including half of the 10 biggest such as Clear Channel's parent CC Media and Citadel Broadcasting.

At the same time, intensifying competition for listeners, from satellite radio and the Internet, helped slow growth in advertising. The recession sent revenues off a cliff. Station ad revenues fell 7.8% in 2008 and are expected to drop a further 15% this year, estimates consultant BIA Financial Network.

That has highlighted an excess of capacity. The number of commercial stations rose 2% to 11,213 from 2004 to 2008, according to the Federal Communications Commission.

One solution is an industry restructuring involving the closure of stations. That could happen if there are some bankruptcy filings.

In the near term, however, the best positioned broadcasters may be those exposed to smaller markets, where competition for ad dollars is less. Average revenue at stations in markets below the top 50 fell 6.6% last year compared with around 9% for bigger stations, BIA estimates. It projects smaller stations will continue outperforming through 2013.

That's not great for No. 2 broadcaster CBS, which has been selling stations in smaller markets. But it could be good for companies like Saga Communications, many of whose 89 stations are in small markets. Saga is trading at a lowly 3.6 times Wachovia Capital's projected 2009 earnings.

Investors tuning into radio now will have to endure a lot of static. But for those willing to leave the big city, the signal may be clearer.
Union Reaches Tentative Agreement With Boston Globe
Story from the Wall Street Journal

The Boston Globe late Tuesday reached a tentative agreement with its largest union on a package of wage and benefits cuts intended to curb deepening losses at New England's biggest daily and streamline it for sale.

Officials from the Globe and the Boston Newspaper Guild said the tentative agreement is similar in scope to the one Guild members rejected two weeks ago, but this one includes a smaller wage reduction of 5.94%, offset by steeper benefits cuts, likely to tilt the scales toward ratification.

Guild members will be briefed on details of the agreement at a general membership meeting scheduled for Wednesday, the Guild said in a statement, and a vote has been set for July 20.

"Our aim throughout our negotiations has been to achieve the necessary savings in a way that causes the least hardship for our employees. We're very pleased to have reached an agreement that accomplishes those goals," Globe publisher Steve Ainsley said in a statement.

The agreement is a breakthrough for the two sides, which have been locked in increasingly contentious talks since early April when Globe parent New York Times Co. threatened to close the paper if it couldn't get $20 million in concessions.

Two weeks ago, the Guild, which is responsible for half of the $20 million in concessions, voted against a proposal that called for an 8.4% wage reduction, furloughs, a pension freeze and the elimination of job guarantees, among other concessions. In response, Times Co. said it would impose a 23% pay cut for all Guild members to achieve the necessary savings.

But a meeting early last week that was to focus on implementing the 23% wage cut turned into a lengthy negotiation that continued throughout the week. The Globe said Tuesday the existing 23% pay cut will remain in effect until the Guild vote. But Guild members will receive a lump sum payment to partially compensate them for wages lost up to the ratification date. The Globe, in turn, will deduct the cost of those payments from payments due to the Guild's health plan.
CBS Finance Chief To Retire
Story from the Wall Street Journal

Fred Reynolds, CBS Corp.'s longtime chief financial officer, is retiring from his post next month, and will be succeeded by his deputy, Joseph Ianniello.

Mr. Ianniello, 41 years old, rises to CBS's top financial post as the media company is reeling from a steep downturn in ad revenue, especially at its local businesses, such as TV stations and billboards.

Mr. Reynolds, 58, recently orchestrated bond issues that have helped ease investors' concerns about some $1.2 billion debt coming due through the end of 2010. But earlier this month, Standard & Poor's downgraded CBS's debt to one notch above junk status.

"Some investors are worried about what their balance sheet will look like going forward," said Marci Ryvicker, a media analyst at Wachovia Capital Markets.

Before becoming deputy finance chief in December, Mr. Ianniello served as CBS's chief development officer and treasurer, making him the point man for deals including last year's $1.8 billion acquisition of CNET networks. But Mr. Ianniello said in an interview Monday he will focus on cutting costs. "I don't see any M&A on the horizon," he said.

Mr. Reynolds steps down after a 15-year run at CBS. He was chief financial officer at Westinghouse Electric Corp. when the company bought CBS in 1995. He stayed on in iterations of that role as the company merged with Viacom Inc. in 2000 and later split again.

Mr. Reynolds said Monday that his reasons for retiring were "99% personal," adding that he had been grooming Mr. Ianniello for the job since 2006, after the company completed its split with Viacom. Mr. Ianniello, whom Mr. Reynolds hired in 1997, will assume the post of finance chief on July 20, although both men plan to participate in a subsequent conference call to report CBS's second-quarter earnings. Mr. Reynolds plans to retire from CBS in August.

Mr. Reynolds said he had almost retired in 2001, eager to move into private equity. But CBS persuaded him to stay on by also putting him in charge of its string of TV stations. This time, Mr. Reynolds said, he isn't interested in taking other jobs, apart from sitting on corporate boards.

Monday, June 29, 2009

Report: Home Construction & Furnishings
Story from the Wall Street Journal

Home builders suffered another year of painful losses in 2008, and the most successful analysts covering the sector were those able to grin and bear it—or at least be bearish on it.

The top analyst in the sector, Kenneth Leon of Standard & Poor’s Corp., a division of McGraw-Hill Cos., employed what he calls the “cockroach theory” in making several prescient calls about builders facing rising leverage and cash-flow issues.

“If there is one, there is likely to be more,’’ says Mr. Leon, 54 years old, in explaining his theory. He says when a few builders had liquidity issues early last year, it meant other builders with weak balance sheets would likely face similar problems. One builder that drew his attention was Hovnanian Enterprises Inc. He rated the stock a sell in early September, capturing a decline of more than 70% through November, when he moved it back to hold.

Mr. Leon also captured big declines with timely sell ratings on builder Meritage Homes Corp. and on Sealy Corp, the bedding maker that was hurt by the deepening recession.

He predicts that the home-building industry and Michigan furniture manufacturer will recover by this year's fourth quarter and that builders’ orders will begin to grow at that time. But he’s staying neutral on the industry because he says home prices will continue falling through 2010 as the supply of foreclosed homes for sale remains high.

“A sustainable recovery for the home builders requires a major reduction in housing inventory,’’ Mr. Leon says. His top picks are Pulte Homes Inc., Toll Brothers Inc. and MDC Holdings Inc., which he sees as well-capitalized builders.

No. 2 analyst Christopher Agnew, formerly of Goldman Sachs Group Inc. in New York, made some good calls on the real-estate-related niche of office-furniture makers by anticipating a big contraction in the financial-services sector and waning demand for new office space, hospital cabinets. Some of the furniture companies, which do a sizable amount of international sales, also were hurt by the declining value of the euro and the British pound, Mr. Agnew says.

Mr. Agnew, 38, had a sell rating on furniture supplier HNI Corp. through much of 2008, capturing declines that totaled more than 60%.

Mr. Agnew, who is now on the job hunt, says that based on historical trends, office-furniture makers will likely continue their move off their lows as the rate of year-over-year revenue declines starts to decelerate, even though the industry is unlikely to experience meaningful revenue growth until at least the end of 2010.

David Goldberg scored the No. 3 spot by navigating the volatility among home builders. For example, he put a sell on Meritage Homes in September, just before its stock fell 65% in about six weeks. Sensing the selling was too extreme, Mr. Goldberg switched to a buy rating in late October through early November and captured a bounce in the stock.

Mr. Goldberg, 31, an analyst in New York for UBS, part of Switzerland’s UBS AG, believes a recent rally in the home-building sector is premature. “We think the trough in the market is coming at end of the year,” he says.

His top picks are Ryland Group Inc. , which owns just enough finished house sites to feed demand, and Toll Brothers, which has ample cash reserves .
Wall Street's Time-Share Bungle-Low
Story from the Wall Street Journal

On Tuesday morning, time-share salesman Albert Mora was waiting to meet potential buyers of a Tahiti Village time-share for a tour of the Las Vegas property when a fellow employee got a cryptic call from headquarters to turn away all buyers.

Staff members scurried down the stairs with bundles of cash to return deposits of those being given tours. Later in the day, Mr. Mora learned that Tahiti Village's owner, Consolidated Resorts Inc., which is owned by a Goldman Sachs Group Inc. real-estate fund, was filing for bankruptcy-court protection.

Managers of the fund, part of Goldman's Whitehall real-estate private-equity franchise, had decided to walk away from the $372 million investment, two years after the deal closed.

The chaotic fall of time-share developer Consolidated is the latest example of how Wall Street's foray into the lodging industry is turning out to be a big bust.

Just a few years ago, investors were paying top dollar to acquire hospitality companies on the assumption that demand for time-shares, room rates and travel budgets would continue to rise for the foreseeable future. After all, they reasoned, the industry rebounded quickly after the terrorist attacks on Sept. 11, 2001.

In a prepared statement Tuesday, Consolidated said it planned to file for bankruptcy protection because of a lending environment that "has made it impossible to continue this company."

The country's biggest time-share developers also have seen their business sputter. At Wyndham Worldwide Corp., the biggest time-share developer in the U.S., "vacation ownership" sales plunged to $280 million in the first quarter of 2009, down 39% from a year earlier. Marriott International Inc. reported a first-quarter operating loss of $17 million in its time-share business.

Now, travel budgets are being slashed and room rates are falling, leaving some hotels without enough cash flow to cover their expenses. In the first five months of this year, U.S. hotel occupancy declined to 53%, the lowest total since Smith Travel Research began tracking the figures in 1987. Revenue per available room, on average, has declined to $52.78 so far this year, the lowest tally since 2004.

While all types of hotels are struggling in this recession -- from luxury to budget, from big to small -- the most imperiled are hotel chains that own lots of real estate and were purchased at the top of the market from 2005 to 2008, with substantial debt.

Twenty of the largest hotel buyouts completed between 2005 and 2008 amounted cumulative debt and equity payments of more than $60 billion. Among them: Blackstone Group LP's $26 billion purchase of Hilton Hotels, Lightstone Group's $8 billion purchase of Extended Stay Hotels and the $2.2 billion purchase of Equity Inns Inc. by Goldman's Whitehall.

While not all of those deals are in danger of collapsing, many are troubled. "If you bought a hotel in 2007 and leveraged it to 80% or greater, you just have a huge challenge on your hands," said Bruce Ford, senior vice president of Lodging Econometrics, a hotel-industry research company.

In turn, defaults on hotel loans have risen sharply. Defaults of securitized mortgages -- mortgages chopped up and sold to investors as bonds -- with hotels pledged as collateral likely will rise from the current 4.7% rate to exceed 8% by year end, according to Morgan Stanley.

Already this year, Extended Stay filed for bankruptcy June 15; Red Roof Inn Inc. defaulted on $367 million of securitized mortgages this month, and Whitehall told investors in March it might need a cash infusion or to sell assets to pare Equity Inns' debt.

Monty Bennett, chief executive of Ashford Hospitality Trust Inc., a real-estate investment trust that owns hotels, waded into the deal frenzy when Ashford bought 51 hotels as part of the break-up of fellow REIT CNL Hotels & Resorts Inc. in 2007. While the $2.4 billion Ashford paid was hefty, it was less on a comparative basis than buyers paid in many other hotel buyouts at the time, Mr. Bennett said.

Ashford protected itself from high interest costs on the debt it used to buy the CNL hotels by replacing it with a floating-rate debt. Ashford also sold new shares to raise money to pay down the debt it incurred in the deal. Still, Ashford's stock is down 54% in the past year, though it has fared better than the stocks of other hotel REITs.
Web Cable Not Ready For Prime Time
Story from the Wall Street Journal

It is called playing defense.

There is no doubt the film and TV industries need to find a way to protect their copyrighted programming on the Web. But the strategy unveiled on Wednesday by Time Warner and Comcast falls short of the ideal solution.

The two companies will test an approach to offering cable shows online without charge but only for viewers who have a video subscription. It is aimed at stopping anyone from turning off their TV subscription and watching video via an Internet connection instead.

Trouble is, as a deterrent to cutting the video subscription, it lacks teeth. Plenty of video programming is available online for free. Not only is there YouTube, but the broadcast networks such as ABC, NBC, Fox and CBS offer many of their shows for free on the Web. There are even a few cable shows available. And consumers also can buy individual episodes of many TV shows on services like Apple's iTunes.

Of course, cable channels have good reason not to throw all of their programs up online for nothing. Unlike the broadcast networks, they get big fees from TV distributors such as cable operators and satellite-TV firms. That has made cable channels hugely profitable and a source of steady growth for Time Warner, Viacom, Walt Disney and News Corp., owner of The Wall Street Journal.

Not only would a free-for-all approach threaten those distribution fees, it would likely undercut advertising revenue. There simply isn't enough ad revenue online to replace dollars lost from television, an issue broadcasters also are wrestling with.

But the Time Warner-Comcast approach could backfire on the cable-network owners. One big reason the sector now draws a majority of TV viewers is that its potential audience has increased. The number of households subscribing to some form of pay-TV service rose to 85% last year from 58.6% in 1990, according to SNL Kagan. That has helped boost cable channels' share of TV advertising.

Putting cable shows behind an Internet wall could start to reverse that trend. Admittedly, the number of consumers switching off their video subscription in the short-term is likely to be tiny. But given the amount of TV programming available and the steadily growing number of technologies making cheap online viewing easier, it will increase.

At the very least, Time Warner and Comcast should offer an online-only option for consumers, so channels won't automatically lose viewers among people cutting off their video subscriptions.

There is little the media companies can do to stop the havoc that the Internet is wreaking on their traditional business. They can slow the drain of profits for a while. But eventually, the companies will have to come up with new business models a little more adventurous than what was unveiled on Wednesday.

Thursday, June 25, 2009

Netflix Boss Prepares For Death Of The DVD
Story from the Wall Street Journal

LOS GATOS, Calif. -- Netflix Inc. is a standout in the recession. The DVD-rental company added more subscribers than ever during the first three months of the year. Its stock has more than doubled since October.

But Netflix's chief executive officer, Reed Hastings, thinks his core business is doomed. As soon as four years from now, he predicts, the business that generates most of Netflix's revenue today will begin to decline, as DVDs delivered by mail steadily lose ground to movies sent straight over the Internet. So Mr. Hastings, who co-founded the company, is quickly trying to shift Netflix's business -- seeking to make more videos available online and cutting deals with electronics makers so consumers can play those movies on television sets.

His position offers a rare look at how a CEO manages a still-hot business as its time runs out. "Almost no companies succeed at what we're doing," he says.

Companies across the entertainment and technology landscape are struggling with how to profit from Internet video. There's still significant risk that Netflix could falter or lose out to another company that figures out how to do it first. And having picked his battle, the intense former engineer may risk missing other growth opportunities: Mr. Hastings hasn't yet expanded internationally or mounted a direct challenge to kiosks, such as Coinstar Inc.'s Redbox, that let customers pick up $1-a-night DVD rentals.

Mr. Hastings says he is still considering expansion opportunities outside the U.S. and has no plans to open kiosks.

One of Mr. Hastings's biggest hurdles will be persuading Hollywood studios to give Netflix rights to show more and better movies through its Internet service at a time when many studios are protective of their DVD-sales revenues. Late last year, Sony Corp.'s Sony Pictures threw a hitch into Mr. Hastings's plans when it temporarily blocked access to some of its movies from Netflix's Internet video service in a dispute over whether Netflix had rights to them.

Moreover, Mr. Hastings stumbled in an earlier effort to introduce a set-top box that would bring Internet video service into the living room. Netflix developed the hardware but then abandoned it after Mr. Hastings and other executives got cold feet.

Mr. Hastings, 48 years old, says he is a student of companies tripped up by failing to adapt to technology shifts. To fellow Netflix executives, he has long cited the cautionary tale of America Online, the once-mighty online service that didn't successfully adapt to the broadband Internet era from the days of dial-up access, despite trying to fortify itself by acquiring Time Warner Inc. in 2000. "Every day, I wake up with that fear," says Mr. Hastings.

His own big break came as a different industry leader failed to keep step. In the late '90s, the home-video business was shifting to DVDs from VHS tapes, offered by rental giants such as Blockbuster Inc. Netflix emerged with warehouses that stocked larger selections of DVDs than Blockbuster's rental outlets could, mailing them around the country in red envelopes. Mr. Hastings charged consumers a flat monthly rate to rent as many DVDs as they liked, eliminating the late fees charged by rental chains.

Blockbuster eventually started its own DVD rent-by-mail service, but scaled it back in late 2007 after consistently losing money on it. A Blockbuster spokesman declined to comment.

Now, amid gathering signs of the DVD's decline, the industry is poised to shift again.

Home-video sales, mostly from DVDs, last year dropped to $14.5 billion from $15.9 billion the previous year, according to Adams Media Research. Movie rentals remained flat over the period, at about $8.2 billion. The number of DVDs Netflix rents every year -- about a half-billion in 2008 -- is still growing, and Mr. Hastings predicts the company will still be shipping discs to consumers 20 years from now.

But he expects rental figures to begin to dwindle in four to nine years.

Mr. Hastings, a veteran Silicon Valley entrepreneur, says he anticipated the demise of DVDs almost from the time he co-founded the company in 1997. The company's name, coined by Netflix co-founder Marc Randolph, didn't reference discs or mailboxes. From almost the beginning, Netflix invested in software formulas to crunch data about its customers' tastes so it could recommend DVDs to them, a technology Mr. Hastings believed would carry over to an Internet movie service.

In January 2007, Netflix began letting subscribers stream video to their PCs from the company's Web site, allowing users to watch video almost instantly without keeping permanent copies on their hard drives. The service featured only about 1,000 movies and television shows -- about 1% of its DVD selection -- but subscribers could use it for no extra charge.

Now more than 20% of Netflix members regularly use the service. The company says new users attracted by streamed movies have helped push its subscriber total up 25% to 10.3 million at the end of March from a year earlier.

The online model has another benefit for Netflix. The company currently pays about 80 cents to post a DVD to a customer's home and back. Its bandwidth costs for streaming a typical two-hour movie: roughly a nickel.

Mr. Hastings's biggest challenge in reorienting Netflix is getting Hollywood to go along for the ride. Netflix's selection of more than 100,000 DVD rental titles is made possible by the "first-sale doctrine" of U.S. copyright law, which permits buyers of DVDs to lend them out without studios' consent.

In Netflix's early days, its buying team would sometimes purchase DVDs at local Wal-Marts or Best Buys if it couldn't get copies through studios, says Ted Sarandos, Netflix's chief content officer.

In contrast, to deliver movies and television shows over the Internet, Netflix has to license them from studios. So far, it has gotten only about 12,000 titles, a hodgepodge of older films such as "Diehard," episodes of popular TV shows including "30 Rock" and a smattering of new releases.

The main reason: Netflix must compete with television subscription services like Time Warner's HBO, Viacom Inc.'s Showtime and others that gain exclusive rights to show studio movies on cable channels or through on-demand systems. These pay channels have bigger audiences than Netflix and a longer history of hashing out complicated licensing agreements to secure movie rights. Their lucrative deals can prevent Netflix from getting Internet rights for movies until years after they're released on DVD.

If Netflix is to expand the titles on its Internet service, it will have to considerably boost its licensing spending, from roughly $100 million last year, according to a person familiar with the matter.

"Netflix has yet to show that it has the resources and profitability to be in the markets where licensing is the business policy," says Warren Lieberfarb, the former head of Time Warner's Warner Bros. home video division, who helped develop the DVD format.

Mr. Hastings says he expects to spend more for Internet movie rights as the popularity of the Internet service grows, while continuing to mail DVDs to customers when they can't stream the same titles over the Internet. Last year he added several thousand titles to Netflix's online library by cutting a deal with Starz Entertainment, the Liberty Media Corp. premium channel that has rights to movies like Walt Disney Co.'s "Wall-E."

Mr. Sarandos, Netflix's point man with the studios, says Hollywood is "clearly conflicted" about the online service's growth because it could help accelerate the decline of DVDs. "They're supportive of our growth since we license content from every single studio in Hollywood," he says. "At the same time, they would like to preserve these business models as long as they can."

Spokespeople for Time Warner's Warner Bros., General Electric Co.'s Universal Pictures and Sony Pictures declined to comment on how Netflix's streaming service affects them.

Mr. Hastings recently got a taste of the fragility of Netflix's relations with studios. In November, Sony Pictures demanded that Netflix block online access to movies like "Superbad" and "Ghostbusters" that it had obtained through its deal with Starz. The dispute concerned whether Netflix had rights to deliver the Sony movies to TV sets through devices like Microsoft Corp.'s Xbox 360 game console. The titles remained available to Netflix subscribers watching them on PCs.

A Sony Pictures spokesman declined to comment. A Starz spokesman said: "With Sony, as with all the other studios, we want to make sure we always meet obligations we have in contracts with them."

Mr. Hastings tried once before to bring streaming video to living rooms. He has long believed that Netflix could reach a mass audience only by streaming movies to TVs, not PCs. Over the years, the company toyed with designs for a set-top box that would serve as the link.

After Netflix introduced its streaming service, Mr. Hastings assembled a team that came up with a prototype -- a small, square metallic box that would access the Web through a consumer's broadband connection, let viewers navigate a list of Netflix movies by remote from their couches, and sell for under $100.

But the product's early 2008 public unveiling neared, several senior Netflix executives began to express misgivings about straying into the unfamiliar hardware business. The box would never have mass appeal if it was limited to accessing Netflix's movie services, some argued.

Barry McCarthy, Netflix's chief financial officer, was one of the skeptics. "Are we out of our f- minds?" Mr. McCarthy recalls thinking about the hardware plans. "We don't even know what we don't know about this business." He describes Mr. Hastings's infatuation with the project with two words: "Apple lust."

Mr. Hastings concedes that he "fell in love with building boxes" and that part of the inspiration was watching Apple Inc. use its hardware to sell online content. Apple, too, is seeking to bring Internet video to TV sets through its iTunes Store and a box called Apple TV. "Every entrepreneur is a Steve Jobs wannabe," he says. "I was as guilty of that as anybody."

On Dec. 14, 2007, Mr. Hastings and other senior executives huddled inside one of the movie-titled conference rooms at Netflix's Mediterranean-style headquarters -- called "Paheli," after a Bollywood love story -- to discuss the box. By then, Mr. Hastings had also become concerned that getting into the hardware business would "defocus" the company, according to Anthony Wood, a former Netflix executive in charge of the project at the time.

The group's conclusion: Netflix would stay out of the hardware business, handing the project to Roku Inc., a privately owned start-up that Mr. Wood had founded. Netflix invested $6 million for a minority stake in Roku and sent about 20 Netflix employees to work there under Mr. Wood. The decision was disappointing for employees across Netflix who were preparing for the product launch.

"It was a big, sudden left turn," Mr. Hastings says.

Mr. Hastings instead began talking to consumer-electronics companies about including software that would allow consumers to access the Netflix streaming service from their devices. The company reached agreements over the next year to get Netflix into Blu-ray high-definition movie players by LG Electronics Inc. and Samsung Co., TiVo Inc. digital video recorders, Microsoft Xbox 360 and big-screen television sets by Vizio Inc.

People involved in the spinoff say it has turned out well for both parties. Roku says it has sold hundreds of thousands of its Netflix set-top boxes. It has also broadened its partnerships with video suppliers beyond Netflix, letting viewers download movies from Internet retailer Amazon.com Inc. as well. Netflix has also benefited, these people say, because it doesn't have an in-house hardware operation that would be a stumbling block in talks with other hardware makers.

Mr. Hastings says he plans to stick to what he knows, software and online services. On the Internet, he is certain to face more powerful competitors than he has in the DVD-rental business, as Netflix competes for consumers with video services from the likes of Apple, Amazon, Google Inc. and Hulu, a joint venture of media companies including News Corp., owner of Dow Jones & Co., which publishes The Wall Street Journal.

"As a capitalist, I'd rather have Blockbuster as my primary competitor than all those Internet companies," Mr. Hastings says.
Owner Of San Jose Company Arrested In Solar-Energy Scam
There Goes The Sun
Story from Mercury News

The owner of a San Jose solar company that advertised a "free solar program" but allegedly delivered nothing to many homeowners was arrested Tuesday on suspicion of theft and fraud.

Peter Be, 38, of Sunnyvale, is being held without bail at Santa Clara County Jail. He is chief executive and owner of Beohana Solar.

Investigators from the Contractors State License Board found about 30 victims who together had paid $120,000 to $130,000 in deposits for residential solar systems. One victim lost more than $100,000. Many systems were never installed, said Ken Rosenblatt, Santa Clara County supervising deputy district attorney. In addition, Be falsely claimed to be a licensed contractor, Rosenblatt said.

In marketing solar panels over a San Jose ISP, the company claimed, "You lease the solar system from us for 12 years at rates equal to or less than what you are paying your utility company now. At the end of the term, the solar system is yours to keep for FREE."

However, Rosenblatt said, after paying deposits to lease the systems, homeowners were given a written contract that stated that at the end of 12 years they had to pay the "fair market value" of the equipment.

The Contractors State License Board has issued a warning about scams perpetuated by so-called green contractors advertising environmentally friendly services. Consumers may check the status of contractors' licenses by calling an automated telephone number at 1-800-321-CSLB or by viewing the board's Web site, www.cslb.ca.gov, which also carries tips on hiring contractors.

If convicted on all charges, Be faces a maximum of 18 years in state prison.

Those with information on Beohana Solar may contact the District Attorney's Office at 408-792-2572.

Wednesday, June 24, 2009

Parent Of T.J. Maxx, Marshall's Reaches $9.75M Settlement With States On Massive Data Theft
Story from Mercury News

FRAMINGHAM, Mass. — Discount retailer TJX Cos. said today it has reached a settlement with multiple states related to a massive data theft that occurred at the parent company of retailers T.J. Maxx and Marshall's a few years ago.

The Framingham, Mass.-based company said it will pay $2.5 million to create a data security fund for states as well as a settlement amount of $5.5 million and $1.75 million to cover expenses related to the states' investigations. But TJX stressed that it "firmly believes" that it did not violate any consumer protection or data security laws.

"The decision to enter into this settlement reflects TJX's desire to concentrate on its core business without distraction and to promote cyber security measures that will benefit all consumers," the company stated.

TJX said the settlement's costs are already accounted for in a 2007 reserve it created.

The breach, which was disclosed in January 2007, exposed tens of millions of payment card numbers to hackers. TJX has said that at least 45.7 million credit and debit cards were exposed to possible fraud in the computer systems breach that began in July 2005. The breach wasn't detected until December 2006.

Under the settlement with a multi-state group of 41 Attorneys General, TJX must also certify that its computer system meets detailed data security requirements specified by the states and must encourage the development of new technologies to address weaknesses in the U.S. payment card system.

TJX runs 882 of its namesake stores, 811 Marshalls, 322 HomeGoods and 141 A.J. Wright stores in the U.S. It has 203 Winners, 75 HomeSense and 3 Stylesense stores in Canada and 242 T.K. Maxx and 8 HomeSense stores in Europe.

The company's stock fell 23 cents to $30.55 in afternoon trading.
Shrinking Endowment Forces Job Cuts At Harvard
Story from Mercury News

CAMBRIDGE, Mass. — Harvard University is cutting 275 staff jobs as fallout continues from the school's dropping endowment.

The layoffs amount to less than 2 percent of Harvard's 16,000 staff and faculty. The school also is reducing hours for 40 staffers. The cuts don't apply to faculty.

The cuts were announced in an e-mail Tuesday to faculty and staff from President Drew Faust and human resources Vice President Marilyn Hausammann.

Harvard's endowment fell 22 percent at the end of 2008 to $28.7 billion, and is expected to drop 30 percent in the fiscal year that ends this month.

Harvard has already frozen salaries, cut budgets and slowed construction on a science complex.

Faust said the cuts were hard but tough times require difficult decisions.
Silicon Valley Brides Feeling Economic Pinch
Story from Mercury News

Katherine Kangas and Matt McVay got engaged late last year, and soon after spent all their savings on a new house. So, like many couples getting married in the midst of the worst economy in decades, they decided their wedding would be a simple affair. They plan to have it in their backyard in a few months.

"I had to ask myself, 'How can we do this as economically as possible?' " said Kangas, 26, a Web designer who plans to spend about $5,000 for 100 guests by doing almost everything herself, including the invitations and food. "It's definitely going to be a budget wedding."

This summer and fall marks the first big wedding season since last year's economic meltdown. Whether they're planning big parties or intimate gatherings, couples are sticking to their budgets and downsizing their dreams in this rocky recession, experts say.

"Brides are watching their dollars," said Anja Winikka, editor of TheKnot.com, a popular online wedding planning site, which estimated the average cost of a wedding in 2008 to be $28,000. "Priorities may shift, or, if they keep the same budget, they're making sure they don't go over it."

Brides are opting for Sunday brunch receptions instead of Saturday sit-down dinners. They're tightening guest lists, hiring DJs instead of bands, going for candles instead of floral centerpieces and designing and printing their own invitations.

"I've even had a few brides postpone their weddings because of the economy," said Nicole Ha, whose Berryessa floral business, Nicole Ha Designs, is about 90 percent wedding-related.

On the flip side, bridal boutiques, flower shops, photographers and bakers are changing the way they do business. Some no longer insist on minimum orders and take payments in installments instead of requiring them upfront. Others may offer simpler, less expensive versions of their services. Retailers are keeping inventory tighter and stocking merchandise that's more reflective of the general mood to save instead of spend.

"Customers are much more sensitive to price — even our high-end customers," said Roger Blechman, who has owned Trudy's Brides and Special Occasion in Campbell since 1974.

While brides have customarily ordered their dresses at least six months before the wedding, he's noticed they're buying their gowns much closer to the date of the event, an indication that economic uncertainty is also affecting the way women traditionally buy their bridal gowns. And choices have been less formal and ostentatious.

"Sales are down but we've been in business long enough that when things turn around, we'll be ready," he said of his efforts to control inventory and offer more lower-priced dresses.

Joanne Ho-Young Lee, a former photojournalist who is now a wedding photographer, said her wedding-day package was a firm $6,200 before the downturn. She's now offering a lower-priced option for $4,500.

Jen Kwapinski of Jen's Cakes in Willow Glen said brides are whittling down their guest lists, sometimes by more than half. They're also ordering smaller display cakes for show at the reception, and then adding several sheet cakes to their orders. Her wedding cakes are priced at $6 a serving; the sheet cakes — undecorated versions of the fancy cake — are $1.50 a serving.

"They're also not getting as crazy," she said of a past trend for Mad Hatter cakes and other intricately decorated confections. "Now they want classic and elegant."

September bride Courtney Radonich, 27, is leaning toward a traditional three-tiered cake sprinkled with flowers. She's marrying fiance Gabriel Esposto, 31, at her family's Los Gatos ranch in front of 250 guests.

Food and drink will be provided at cost by Esposto's family, owner of a catering and rental business. Her biggest cost: photography at $5,000.

"My parents have been good about keeping me grounded on the spending," said Radonich, an executive assistant for a private equity firm. She settled on digitally printed invites over letterpress at one-third of the cost, as well as a less-pricey band at the reception. She also gave up a photo booth and string quartet. Still being considered: valet parking service at $2,000.

"Inviting 200 or 300 people used to be more common; now it's more like 100," said wedding planner Liz Guthrie, who estimates Bay Area weddings average $30,000 for a guest list of 100.

"Couples are waiting longer to book vendors because of cash flow issues, and many are having their weddings at home or a friend's house instead of a hotel or rented venue," said Guthrie, the owner of San Jose Wedding Consultants. There's also a trend to cut costs with do-it-yourself projects — invites, cake toppers, reception centerpieces.

Ha, the Berryessa florist, has seen creative use of rose petals and candles as centerpieces. Thankfully, she said, brides still want a professional to do their bouquets and bridal party flowers.

Even couples planning large nuptials have found places to tighten purse strings.

Since they got engaged last summer, there has been no question that Georgia Lampros and Chris Dalikas would have a big wedding.

"We're Greek and my fiance has a very large family," said Lampros, 33, a first-grade teacher at Portola Elementary School in San Bruno. Weeks before their June 27 nuptials, the guest list numbered about 400.

Lampros is about $10,000 over her initial budget of $50,000, but she says she's kept costs in check and compromised as recession worries surfaced, arranging discounts for her bridesmaids' dresses, favors and food. Instead of a four-course dinner reception in San Francisco, she'll have a three-course meal in Foster City.

"It's a once in a lifetime event," she said. "We are fortunate to have families that helped us financially."
Wal-Mart Hopes To Retain The Nouveau Frugal
Story from Mercury News

The recession steered a new type of customer to Wal-Mart — deeper in the pockets and suddenly looking for bargains. Now the world's largest retailer has to figure out how to keep that customer when the economy recovers.

So Wal-Mart is bringing in more brand names, ditching scores of other products and even redesigning hundreds of stores to give them wider aisles, better lighting and better sight lines.

It's more than just a cosmetic upgrade. That new breed of customer also spends about 40 percent more than the traditional Wal-Mart shopper, and the retailer senses an opportunity to accelerate its growth.

Take Aditya Krishnan, a 42-year-old lawyer from San Jose. He used to buy only light bulbs at Wal-Mart but now finds himself spending $150 a month there, including buying workout clothes he used to get at Macy's.

"If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?" Krishnan asked. "I am seeing better brands, and the shopping experience is better" than before.

Wal-Mart says that's no accident. It's placing a big bet on the redesign of most of its 3,600 stores, started last fall. This fiscal year, it plans to redo up to 600 at a cost from $1.6 billion to $1.7 billion.

The prototype for the remodeling includes lower shelves to make it easier to see across the store, better lighting and wider aisles. Expanded electronics areas will include interactive displays to test video games and portable gadgets.

The store now carries brands like Danskin and Better Homes and Gardens, and its electronics section now stocks pricier products like Palm Inc.'s well-received new Pre smartphone.

Whether it all works, Wall Street analysts say, depends in part on how quickly the behemoth retailer can remodel and keep shoppers satisfied. Concerns about how Wal-Mart will keep its momentum have sent its stock down 13 percent this year.

The early signs are positive, putting pressure on the rest of the industry. Target Corp., whose sales have been hampered by its emphasis on nonessentials like trendy jeans, is expanding its fresh food offerings. Best Buy Co. is beefing up customer service.

"I believe a lot of what (Wal-Mart) is doing is working," said Joseph Feldman, a retail analyst at Telsey Advisory Group. "They are a threat to everyone."

"If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?"

Other discounters, including TJX Cos. Inc., which sells name-brand fashions and home furnishings, Costco Wholesale Corp. and BJ's Wholesale Club Inc., are focusing on how to hold on to new customers lured by low prices during the recession.

But Wal-Mart, which only three years ago struggled with cluttered stores, long lines, stiff towels and unattractive clothing, has a bigger hurdle to climb. And it has to move fast to win over people who still have negative feelings about shopping there.

"The service still needs to be improved, and the stores are a little sloppy," said Daniel Chou, 35, of Warren, N.J., who was at a local Wal-Mart to pick up a bungee cord but who says he rarely shops there.

Stock in Wal-Mart and a few other discounters such as Costco Wholesale Corp. have fallen this year as investors turn to beaten-down shares of more upscale companies like Macy's Inc. and Williams Sonoma Inc., which investors believe don't have much further to fall.

Wal-Mart, which topped $400 billion in sales last year, attracts more than 140 million customers per week. But to get them to buy more than just groceries, which account for about half of annual sales, it's paring its product lineup and making room for better brands.

Consultant Burt P. Flickinger III estimates the remodeled stores are carrying 10 to 15 percent less inventory, particularly getting rid of no-name labels.

The shift risks turning off longtime customers who are looking for only the cheapest products. It's happened before: The company had to dump Metro 7, its in-house clothing line launched in 2005, because it turned out to be too trendy for its general clientele.

Wal-Mart executives say 17 percent of its traffic growth in February from new customers, and they're spending 40 percent more per trip. More than half of those shoppers living in households that take in more than $50,000 a year.

While that may not be considered affluent, it's a big departure from Wal-Mart's core customers, of whom one in five does not have a bank account or has limited access to financial services.

To keep prices low while offering better products, Wal-Mart is slashing its own costs in little ways. The Angus ribeye steak being sold at Sam's Club at 25 percent below competitors' prices is paid for in part by a switch to shorter straws at its cafe, saving $52,000 a year, says spokeswoman Susan Koehler.

A recently converted customer is Judy Safern, a 42-year-old public relations executive from Dallas who used to buy her children's clothing at Galleria mall and groceries at Tom Thumb supermarket.

She now says she hasn't been to the mall in a year and figures she saves several hundred dollars a month by buying most clothing and food at Wal-Mart. "I basically buy everything there," she said.

Monday, June 22, 2009

T-Mobile To Launch Google Phone In July
Story from USA Today

Following huge introductions of the Palm Pre and new iPhone 3G S, T-Mobile on Monday announces July availability of MyTouch 3G, the second phone on Google's Android operating system.

It's the first of 18 new Google-powered phones coming worldwide by the end of the year, Google says, declining to provide specifics. Tech and telecom analysts expect Sprint to have an Android phone by year's end.

T-Mobile has sold 1 million of its first-generation Google phone, the G1. That's tepid compared with the 21.2 million iPhones sold in the last two years, but T-Mobile says it's thrilled with the response. It expects the new phone to sell at a faster clip, and to outpace the competition in mobile SEO.

The MyTouch is smaller, can sync with Microsoft Outlook and has an improved battery, T-Mobile says. "We've addressed some of the concerns from customers," says Andrew Sherrard, T-Mobile vice president.

Current T-Mobile customers can order beginning July 8 for delivery later in the month. General retail availability is planned for early August.
FIND MORE STORIES IN: Microsoft | T-Mobile | Yankee Group | Google | Apple Inc.

The touch-screen phone — made by HTC — sells for $199 with a new two-year contract. Sherrard says T-Mobile will offer a discounted rate for current customers but hasn't finalized pricing.

T-Mobile's selling point is personalization, with customizable menus, wallpapers and icons. A new program called Sherpa learns your favorite locations and preferences and makes recommendations accordingly. The phone also has instant access to Google services.

Even though the Android platform hasn't taken off in public consciousness as the iPhone has, "It's important to remember that globally, this is a market of billions and billions of users," says Andy Castonguay, a Yankee Group analyst. "There's plenty of room for lots of different players."

Google first announced Android in 2007. It gives the operating system to manufacturers for free. Google product manager Erick Tseng says getting phones from idea stage to manufacturer is an 18- to 24-month process. "What you're seeing now is the outcome of the development."

Google has 5,000 applications available for Android from its network of developers, and the list is growing, says Tseng.

Apple has a huge lead, with more than 50,000 applications available from about 20,000 developers, says Forrester Group analyst Charles Golvin. "But in the United States, there are probably more developers working with Google, after Apple, than any other mobile platform."
Obama Announces Agreement With Drug Companies
Story from USA Today

WASHINGTON (AP) — President Obama on Monday welcomed the pharmaceutical industry's agreement to help close a gap in Medicare's drug coverage including Michigan Medicare, calling the pact a step forward in the push for overhaul of the health care system.

Obama said that drug companies have pledged to spend $80 billion over the next decade to help reduce the cost of drugs for seniors and pay for a portion of Obama's health care legislation. The agreement with the pharmaceutical industry would help close a gap in prescription drug coverage under Medicare.

"This is a significant breakthrough on the road to health care reform, one that will make a difference in the lives of many older Americans," Obama said in the White House's Diplomatic Room.

Obama said the move will help correct an anomaly in the program that provides a prescription drug benefit through Medicare. Under the deal, drug companies will pay part of the cost of brand name drugs for lower and middle-income older people in the so-called "doughnut hole." That term refers to a feature of the current drug program that requires beneficiaries to pay the entire cost of prescriptions after initial coverage is exhausted but before catastrophic coverage begins.

"It's a reform that will make prescription drugs more affordable for millions of seniors and restore a measure of fairness," Obama said.

Obama said some Medicare Michigan beneficiaries will find at least a 50% discount on prescription drugs. Obama says drug companies stand to benefit when more Americans can afford prescription drugs.

The drug companies' investment would reduce the cost of drugs for seniors and pay for a portion of Obama's proposed revamping of health care. The deal was struck with Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee, as well as the White House.

The president was joined Monday in announcing the deal by Barry Rand, head of the senior citizens' advocacy group AARP, as well as Baucus and Sen. Chris Dodd, D-Conn.

"This is an early win for reform," Rand said.
Jack Welch's Online MBA Program Ready To Launch
Story from Business Week

A corporate icon is diving into the MBA world, and he's bringing his well-documented management and leadership principles with him. Jack Welch, former CEO at General Electric (GE) (and BusinessWeek columnist), has announced plans to start an MBA program based on the business principles he made famous teaching managers and executives in GE's Crotonville classroom.

The Jack Welch Management Institute will officially launch this week, with the first classes starting in the fall. The MBA will be offered almost entirely online. Compared to the $100,000-plus price tag for most brick-and-mortar MBA programs, the $600 per credit hour tuition means students can get an MBA for just over $20,000. "We think it will make the MBA more accessible to those who are hungry to play," Welch says. "And they can keep their job while doing it."

To make the Jack Welch Management Institute a reality, a group led by educational entrepreneur Michael Clifford purchased financially troubled Myers University in Cleveland in 2008, Welch says. Welch got involved with Clifford and his group of investors and made the agreement to launch the Welch Management Institute.

Popularized Six Sigma

For Welch, the new educational endeavor is the latest chapter in a long and storied career. As GE's longtime chief, he developed a management philosophy based on relentless efficiency, productivity, and talent development. He popularized Six Sigma, wasn't shy about firing his worst-performing managers, and advocated exiting any business where GE wasn't the No. 1 or No. 2 player. Under Welch, GE became a factory for producing managerial talent, spawning CEOs that included James McNerney at Boeing (BA), Robert Nardelli at Chrysler, and Jeff Immelt, his successor at GE.

Welch's decision to jump into online education shows impeccable timing. Business schools in general are experiencing a rise in applications as mid-level managers look to expand their business acumen while waiting out the current job slump. The new program's flexible schedule—paired with the low tuition cost—could be doubly attractive to those looking to move up the corporate ladder as the market begins to rebound.

Ted Snyder, dean of the University of Chicago's Booth School of Business, agrees. "I think it's a good time for someone to launch a high-profile online degree," Snyder says. "If you make the investment in contentthat allows for a lot of interaction between faculty and students and also among students, you can get good quality at a much more reasonable tuition level."

Welch's Secret Weapon

That being said, there are challenges that an online MBA program like Welch's will have a difficult time overcoming, even if the technology and faculty are there. "The integrity and quality of engagement between faculty and students is the most precious thing we have," Snyder says. "Assuming it's there, it dominates. These things are hard to replicate online."

But Welch does have one thing that differentiates his MBA from others: himself. "We'll have all of the things the other schools have, only we'll have what Jack Welch believes are things that work in business, in a real-time way," he says. "Every week I will have an online streaming video of business today. For example, if I was teaching this week, I would be putting up the health-care plan. I'd be putting up the financial restructuring plan, talking about it, laying out the literature, what others are saying, and I'd be talking about it. I'll be doing that every week."

Welch and his wife Suzy are also heavily involved in curriculum design, leaning heavily on the principles he used training managers at GE.

"In every course there will be pieces of what I taught at Crotonville," he says. "In the budgeting part there will be a view of conventional budgeting and a view of budgeting my way, and students can debate the two. Same thing in strategy. I have a method of strategy, Michael Porter has a method. We'll use Porter's book and then I'll throw my stuff in."

Lots of Competition

business degree ferris state universityWelch isn't a stranger to the MBA world. For the past three years, Welch has taught an extremely popular leadership course at MIT's Sloan School of Management, based on the leadership principles covered in his best-selling book Winning. Welch also lent his name to the business school at Sacred Heart University in Fairfield, Conn.

The Management Institute marks a more active leap into the business degree landscape, but Welch is far from alone in offering an inexpensive online MBA. Many business schools known for their full-time graduate programs offer online components to their MBAs, including Maryland, Massachusetts, Carnegie Mellon, and Ferris State University MBA. Also, for-profit institutions like the University of Phoenix (APOL) and Cappella University (CPLA)have made names for themselves offering graduate business degrees primarily online at bargain prices.

In the short term, Gary Bisbee, director at Barclay's Capital, doesn't see the Jack Welch Management Institute as much of a threat to the more recognized online education brands. But with the right mix of marketing money and curriculum innovation, it's feasible that in the longer term the Welch Institute could become a serious competitor. "It would make sense that the school could become one of the successful players in the industry, given his reputation for management skill and maybe even more so developing leaders," Bisbee says. "I would clearly think they could become a player over time."

Upside in Online Education

To help him get there, Welch has chosen a dean and is working closely with a select group of prospective faculty members whom he hopes will soon be in place to turn the lights on in September. Ideally, he would have a few hundred students enrolled at that time, gradually increasing the number over time. "We intend to start slow," he says. "Our interest is in developing a quality program and we're not interested in a big ramp-up."

While launching a new MBA program might seem risky, especially with so many seasoned players in the market, Welch isn't concerned. "There's no risk," he says. "So people lose a little money. The reward is that a winning management formula spreads further than it already has. It's already spread widely. Now, we want to add more people to it. Online education is going nowhere but up. It's for real. It took me a long time to get there, being a bit of a traditionalist, but you see the way that kids learn, the way that they are more attentive. I think it had opportunities to be more rigorous. I'm very excited about where we're going."

Wednesday, June 17, 2009

Overhaul Of Student Loan System Taking Shape
Story from the Chronicle of Higher Education

federal student loans consolidationWashington — Congress may be consumed with health-care reform right now, but behind the scenes, education-committee aides have been quietly crafting legislation to overhaul the student-loan system, with a meeting to review a draft bill possible in the House as early as next week.

College and student-loan lobbyists said they hadn’t seen any draft language yet, and a spokeswoman for the House education committee stressed that a meeting had not been scheduled. Still, lobbyists have been told that such a meeting may occur between June 24 and July 9.

Lenders are holding out hope that Congress will reject President Obama’s proposal to eliminate the bank-based private student loans program, or at least preserve a role for lenders and guarantors in a revamped system. One lobbyist counted as many as 13 counter-proposals circulating in Congress, including a detailed alternative from the lending giant Sallie Mae.

The Congressional Budget Office estimated in March that switching all loans to the government-run direct-loan system would save taxpayers $94-billion over 10 years.

Still, many lenders privately acknowledge that the House is likely to adopt the president’s approach, perhaps with minor modifications, because of the savings it would generate.

The Congressional Budget Office estimated in March that switching all loans to the government-run direct-loan system would save taxpayers $94-billion over 10 years. In a re-estimate issued today, the office adjusted that figure downward slightly, to $87-billion.

Either way, lawmakers are not expected to use the savings to make Pell Grants an entitlement, as Mr. Obama has proposed. Instead, they are likely to provide an infusion of “mandatory” money for the program, while allowing appropriators to continue to set the maximum award, lobbyists say.

The powerful chairmen of the Appropriations Committees in both chambers of Congress have objected to Mr. Obama’s plan on the grounds that it would put a ceiling on the maximum award. Under the president’s proposal, the maximum Pell Grant would increase each year at a rate equal to the Consumer Price Index plus a percentage point.
Green Means Gold In North Carolina
Story from iStockAnalyst.com

Clean energy companies have been creating jobs in North Carolina at more than twice the rate of the rest of the economy, a new report finds.

And the real boom is just about to sound, predicts Rusty Stephens, president of Wilson Community College.

wilson homesGreen jobs are "the one bright spot in an otherwise difficult economic landscape," Stephens said this week.

The report, "The Clean Energy Economy: Repowering Jobs, Businesses and Investments Across America," was released Monday by The Pew Charitable Trusts. It looks at jobs created by environmentally friendly products and services.

Between 1998 and 2007, jobs in North Carolina's clean energy economy grew at a rate of 15.3 percent while overall jobs in the state grew by 6.4 percent, the analysis found.

As of 2007, 1,783 clean energy business in the state employed 17,000 North Carolinians. More than $82 million was invested in those companies between 2006-2008.

"Those investments, along with North Carolina's renewable energy and energy efficiency policies, should help the state's clean energy economy expand even further," said Morgan Jackson, N.C. representative for the Pew Environment Group.

"I've said before, and I will say again: Green is gold for North Carolina," Gov. Bev Perdue said Monday in a statement. "To get green right, we must build on our strengths that attract green companies -- a well-trained, educated workforce; existing relationships between businesses and research institutions; and a strong link between energy policy and economic development."

Stephens, who has championed green energy during his presidency at WCC, said the Pew report bears out what he's seeing at his campus.

"The time has come for large jumps in demand for these jobs," Stephens said Monday. "There's tremendous opportunity."
Nationally, jobs in the clean energy economy grew at a rate of 9.1 percent while total jobs grew by only 3.7 percent, between 1998 and 2007
The college recently hosted a meeting for employers to talk about the need for workers who are trained to retrofit residential and commercial properties for lower energy consumption. WCC is now developing a weatherization certification program for students.

The federal American Recovery and Reinvestment Act includes money for weatherization work, Stephens said. But there is also a need to conserve energy from a resource management angle.

"There's still so much money to be saved on the efficiency side," he said.

Making buildings more efficient would cut the country's energy consumption, lessening the need for new power plants and the use of fuels that create greenhouse gases, Stephens said.

Perdue's energy plan includes the use of $18 million in federal recovery funds to create an Energy Investment Revolving Loan Fund. The fund will provide low- and no-interest loans, up to $1 million, to finance energy-saving projects at businesses, schools, nonprofits, state agencies and local governments.

She also proposes another $10 million to expand the state's Green Business Fund to provide support to new, emerging and expanding green economy businesses.

North Carolina ranked among the top 12 states for green job growth. Nationally, jobs in the clean energy economy grew at a rate of 9.1 percent while total jobs grew by only 3.7 percent, between 1998 and 2007.

The complete study is available online at www.pewtrusts.org/cleanenergyeconomy .

To see more of The Wilson Daily Times or to subscribe to the newspaper, go to http://www.wilsondaily.com/.

For more information regarding Wilson relocation, or Wilson Real Estate, visit the experts at Our Town Properties.

Copyright (c) 2009, The Wilson Daily Times, N.C.

Tuesday, June 16, 2009

Acer To Load Android - Not Windows
Story from Daily Finance

Taiwan's Acer has been on a tear recently. The company gobbled up Gateway quite a while back and has been a top maker of red-hot netbook PCs so far this year. The PC maker has now said that it will be featuring Google, Inc.'s (NASDAQ: GOOG) 's Android operating system on future netbooks as an alternative to what it ships on most of its netbooks -- Microsoft Corp.'s (NASDAQ: MSFT) aging Windows XP operating system.

The difference here is that while Microsoft XP still may cost a little to Acer and all other PC makers circulating netbooks on the market, Android is a freely-available, open-source product. Acer won't pay a dime for each copy of Android in installs on its netbooks, which -- interestingly enough -- may be the first real head-to-head equitable competition between Google and Microsoft.

Even though the two internet behemoths already compete head-to-head in the mobile space, this is the first time they'll duel each other in the actual PC space with operating systems.

Acer no doubt will be able to offer future netbooks for lower prices with Android installed, and it will be interesting to see if consumers really prefer Windows XP for their Acer netbook or if the operating system really doesn't matter that much.

If email, web, word processing, spreadsheets and the usual suspects are offered through Android, does one really need Windows on an Acer netbook? Possibly -- Windows ships on the lion's share of netbooks from all manufacturers right now. Linux-based netbooks have been slow to catch on as consumers apparently feel more at home with Windows than with anything else. But still, would a "Powered by Google" moniker make more consumers take the plunge and move away from Windows XP? This will be an interesting battle to watch.
Hunch: And Now For Something Completely (Okay, Somewhat) Different
After the failure of several community Q&A sites, Caterina Fake - co-founder of Flickr - has launched Hunch. Will it catch on, or go the way of Jeeves?
Story from Business Week

When Caterina Fake was picking out a new bag for her laptop computer, she didn't turn to friends, browse store aisles, or page through magazines for advice. Instead, she consulted her new Web site, Hunch. In response, the tool asked her a series of questions, including "How much are you planning to spend?" and "Would you prefer leather?", before dishing out three recommendations.

Opened to the public on June 15 after a three-month preview for select users, Hunch is a tool for finding answers to a wide variety of questions—from mundane shopping decisions to dilemmas as serious as "Should I get a divorce?" The questions and answers are created by users, and the site uses feedback from the community to refine the relevance of results.

Hunch is the latest of several decision-making sites that have cropped up in recent years that are designed to shake up a Web-search landscape that has long been dominated by keyword queries. The sites, including Answers.com (ANSW), Mahalo, Aardvark, ChaCha, and Yahoo Answers (YHOO), aim to do what Google and other keyword-based search engines have trouble doing: delivering results tailored to specific human situations and problems without sending users to many different sites on the Internet. "Google can't provide all the answers," says Danny Sullivan, editor-in-chief of Web site Search Engine Land.

Hunch co-founder Fake, who also co-founded image-sharing site Flickr and sold it to Yahoo! in 2005, isn't out to topple Google (GOOG). But she does contend that in an online world where people frequently contribute edits to Wikipedia and thumbs-up stories on Digg, the power of online crowds has yet to be fully harnessed to help people make better everyday decisions. "One little action is actually fairly insignificant in the grand scheme of things, but in the aggregate, these things together create something that's incredibly valuable," she says.
Fake: Flickr, Yahoo Answers, and now Hunch

Fake burnished her search skills while still at Yahoo after the Flickr deal. She helped to create one of the most successful question-and-answer sites, Yahoo Answers. Launched in 2005, each month the site attracts tens of millions of visitors who pose questions and get rewarded with recognition for providing the most popular answers to others' questions. In fact, the site gets many of its visitors from traditional search engines like Google, since Yahoo Answers turns up in results when people search for questions like: "Does chocolate spoil?" Fake left Yahoo last year.

Hunch arrives at a response after asking users about five to 10 questions. Going a step beyond Yahoo's community-voting model, Hunch determines the best response for each individual user based on their past clicks. The site has voluntary survey questions on its front page, in the section "teach Hunch about you," where it asks simple, fun questions and then factors in those preferences when it's advising you on a decision.

Answer engines have a poor track record of late. In May, Microsoft (MSFT) closed its MSN QnA, a service similar to Yahoo Answers. In March, Wikipedia founder Jimmy Wales announced he was closing Wikia Search, a short-lived project intended to create user-influenced results to keyword queries. Google once offered a collaborative search site called Google Answers, where people could offer money rewards for thoroughly researched responses to queries. The company axed the site in 2006, telling users "the Answers community's limited size and other product considerations made it more effective for us to focus our efforts on other ways to help our users find information."

A large base of active users is essential for making these types of sites useful, says Brady Forrest, a technical evangelist at O'Reilly Media who previously worked on the search team at Microsoft and helped develop the prototype of MSN QnA. "You have to constantly be able to pull in a certain crop of answerers who will invest the time to go in and talk about whether you should buy this laptop or that laptop and keep it updated," he says.
"they might get more valuable advertisers"

Profits also hinge on these sites reaching a wide audience. "Many of these services are ad-based, which is problematic, says Greg Sterling, founding principal at technology market researcher Sterling Market Intelligence. '"In order to make that work, you have to have a massive audience.""

Could answer services one day be as lucrative as the search business? Eschewing banner or text ads, Hunch plans to get all of its revenue from fees it receives by sending users to shopping sites like Amazon.com (AMZN). So while it may profit from only a small portion of the questions on its site, search experts say these links could be very profitable since people are already coming to the site with the intention to buy something. "Potentially, they might get more valuable advertisers," says Search Engine Land's Sullivan.

Sullivan says Google and other keyword search engines may lose a small portion of users to decision sites like Hunch, but generally he thinks the category is creating new searches that weren't done before at all. "They enlarge the search pie overall," he says, adding that when video started appearing on the Web, it prompted a similar boom in new types of searches that didn't exist before.

That isn't stopping traditional search engines from trying to compete with these upstarts by trying to offer smarter searches. In May, Microsoft unveiled Bing, a new incarnation of its Web search that's billed as the "decision engine." The site includes information such as average plane ticket prices for a search of "Chicago to London" right on the first page of search results.

Monday, June 15, 2009

Not Amused: Six Flags Files For Bankruptcy
Story from MSN

Six Flags CEO Mark Shapiro says the company won't close parks or layoff employees. But, without a ruling from the court, he can't make any promises.

The ride for Six Flags' (SIXF, news, msgs) shareholders is over. The theme-park operator filed for bankruptcy on Saturday, June 13, after failing to keep up with payments on $2.37 billion in debt.

The Chapter 11 announcement came as little shock to Wall Street, which had long factored the likelihood of bankruptcy into the price of insuring Six Flags' debts. The company, which lost nearly $113 million last year, had visibly struggled to raise money in advance of an Aug. 15 deadline to pay preferred income shareholders $287.5 million, plus another $31.3 million in accrued and unpaid dividends. Failure to meet the deadline would have triggered clauses in other creditor contracts demanding early payments.

"The current management team inherited a $2.4 billion debt load that cannot be sustained, particularly in these challenging financial markets," said Six Flags President and CEO Mark Shapiro, in a statement.

Shapiro has promised that the filing will not impact operations at the companies' 20 theme parks, which include more than 120 roller coasters such as Kingda Ka, the tallest roller coaster in the world. The company owns 18 Six Flags parks in the U.S. and an additional two in Mexico and Canada, according to its bankruptcy affidavit, provided by BankruptcyData.com. It also has plans for a park in Dubai and Qatar, both major tourist destinations in the Middle East.
No layoffs?
Shapiro has also promised Six Flags will not have layoffs. The company employs about 2,040 people as well as another 28,500 seasonal employees during the parks' warm-weather months when the parks are open.

"Our brand and out operations are on solid ground," said Shapiro in a statement. "This process is strictly a financial restructuring of our debt. We are fully committed to ensuring that the experience of our guests this summer is totally unaffected by this restructuring process."

Of course, Shapiro really can't guarantee that. Though the company has pre-negotiated terms with debt holders to erase about $1.8 billion in debt and an additional $300 million in preferred shareholder obligations, the bankruptcy court has not approved the plan.

The company has already sold – and tried to sell – subsidiary parks to other operators. In 2007, the company sold its stake in three water parks and four theme parks. The sale included Houston's SplashTown and the Enchanted Village near Seattle. Six Flags was also reportedly trying to sell the property rights to its New Orleans theme park, which was largely destroyed during Hurricane Katrina in August. 2005. The park is currently closed.

Despite his public statements, Shapiro acknowledged that Six Flags may have to let employees go or shed operations in the affidavit accompanying the bankruptcy filing. "In the event that terminations are necessary," Shapiro wrote, full-time employees will receive "one week of pay per year of service in severance payments" up to $10,950. However, he added that the company does not anticipate that it will need to reduce its work force or, as a result, pay severance.