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Monday, September 28, 2009

Xerox To Buy Affiliated Computer Services Inc. For $6.4 Billion

Story from Business Week

Xerox Corp. said Monday it will buy Affiliated Computer Services Inc. for $6.4 billion in cash and stock, joining the expensive race among technology companies to broaden their offerings.

Xerox said the deal will create a $22 billion business that combines Xerox's copiers, printers and document management services with the "business process outsourcing" of Dallas-based ACS. Outsourcers like ACS take on tasks for other companies, such as helping to manage payroll or run health care plans.

Xerox's offer amounted to a 33 percent premium over ACS's closing stock price on Friday, although the value fell as Xerox shares lost $1.47, or 16 percent, to $7.50 in morning trading, while ACS shares jumped $6.53, or 14 percent, to $53.78.

The move takes Xerox deeper into the back-office operations of its business customers with the kind of acquisition that is popping up more and more as technology companies add a greater variety of equipment and services under a single tent.

Last week Dell Inc. said it would buy Perot Systems Corp. for $3.9 billion, kick-starting an information-technology services business for the company. That comes a year after rival Hewlett-Packard Co. expanded its own services business with the $13.9 billion buyout of Electronic Data Systems Corp. Business software maker Oracle Corp. also hopes to become more of a one-stop shop by closing a $7.4 billion deal for computer server and software maker Sun Microsystems Inc.

ACS, a $6.5 billion company with about 74,000 employees and profit of $350 million in its last fiscal year, offers a range of services, such as helping companies manage health care plans and accounting. It has customers in government, transportation, health care and retail.

By buying ACS, Xerox sees a way to boost profits and expand the roles it can play in assisting clients with running their businesses.

"They've told us they need a little bit more help," Xerox CEO Ursula Burns said in an interview, adding, "This is not just two companies coming together to get costs down."

ACS's chief executive, Lynn Blodgett, offered automated toll collection as an example. For E-Z Pass, the electronic toll system in the Northwest, ACS gathers images of cars passing through tollbooths and has employees record license plate numbers manually for processing payments. Xerox has image-recognition technology that could automate that process and might take it a step further, checking to see if a car is up to date on its registration.

The deal marks Burns's first big move since she took charge of Xerox on July 1. Although still profitable, Xerox has been hurt by the slowdown in spending by businesses during the recession. Apart from selling printers and copiers, Xerox gets most of its revenue from leasing equipment and charging for supplies and helping companies manage their documents.

Xerox said buying ACS will triple its services revenue to an estimated $10 billion next year.

In a conference call with analysts, Xerox Chief Financial Officer Larry Zimmerman said only about 20 percent of ACS and Xerox customers overlap, meaning the companies will have an opportunity to sell those clients more products. In particular, Xerox hopes to expand the overseas reach of ACS, which does more than 90 percent of its business in the U.S.

ACS stockholders will receive $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. Xerox, based in Norwalk, Conn., will also take on $2 billion of ACS's debt and issue $300 million of convertible preferred stock to ACS's Class B shareholders.

The acquisition, which was approved by both companies' boards, is expected to add to adjusted earnings results in the first year. Xerox expects to save $300 million to $400 million in the first three years after the deal closes, which is targeted for the first quarter of 2010.

The companies said ACS will function independently and will be headed by Blodgett, who will report to Burns.

Sunday, September 27, 2009

Market Gift From Bed Bath and Beyond

As Posted to the Wall Street Journal

Home-furnishings retailer Bed Bath & Beyond reports fiscal second-quarter earnings on Wednesday, and Wall Street is hoping for another upside surprise as evidence that some sellers of home goods can stop hiding under the covers.

Executives at the Union, N.J.-based Bed Bath said in June that analyst estimates for earnings of 42 cents a share for the quarter ended Aug. 29 appeared "reasonable, despite uncertainty of the overall macroeconomic environment." Analysts now expect the company to post 46 cents a share, which would be even with its results a year ago.

Since Bed Bath's main competitor, Linens 'N Things, bit the dust in January, investors have gotten used to the company beating its own estimates, as well as those from Wall Street. Last quarter, it posted earnings of 34 cents a share, above its guidance of 23 cents a share and ahead of analysts' consensus of 25 cents a share.

Bed Bath achieved that result the new-fashioned way -- impressive expense control. It lowered its advertising and staffing costs, despite net new store openings, and saw revenue growth of almost 3%.

As for sales at stores open at least a year, with consumers worried about job losses and home-foreclosure rates still high, no one is expecting Bed Bath to notch a big uptick. The company said it expects same-store sales to continue to decline in the low single digits.

Anything better could be good news. Last week, Pier 1 Imports saw its stock rise more than 9% when it posted a smaller profit loss than was predicted due, in part, to fewer markdowns.

But market watchers looking for signs of broad consumer demand shouldn't make too much of any successes at Bed Bath, given continued housing headwinds.

Its strength has been in gaining market share in the downturn. That has helped send its shares up 55% this year, nearly three times higher than the broader market.

Last quarter, as total sales rose at Bed Bath, they dropped 13% for the home-furnishings sector. If Bed Bath can continue to show that it is grabbing market share, investors may remain impressed.

Monday, September 21, 2009

Kids Shoes – Secrets of Shopping for Them

From Article Base

Kids ShoesUnlike adult’s footwear, kids shoes should be selected with utmost care and concern in mind about the little feet. In fact it’s healthy for the little feet to walk barefoot most often to strengthen the supple soles of the kids. But shoes too are necessary to protect the little feet from getting injured while walking on uneven surfaces.

An array of kids shoe styles and models are available in the market ranging from kids dress sandals to sneakers catered to the comfort and style needs of your child. So, choosing one right pair of footwear among many models will be quite a difficult task to do. One should be very alert and conscious while shopping kids shoes, as picking a wrong pair will ultimately affect your child’s growing feet. To make your difficult task of shopping this footwear easy, this article is providing you the best tried and proved secrets of shopping kids sandals. Below are some secrets that will be of great help to you when shopping for kids shoes;
  • Shop footwear in a specialized children shoe store where the sales persons and other staff are well-versed with the hook and nook of kid's shoes.

  • Instead of spending much money on any single pair of stylish kids footwear for a special occasion, it’s always wise to prefer a fine pair of comfortable children footwear to allow the little tootsies walk freely without any worries.

  • Have your child’s feet measured every time you shop for kids shoes. Because the shoes that prove to snugly fit your child’s feet for a moment in shoe store may prove unfit or uncomfortable after a day spending in the shoes or playing in them for a long time.

  • Prefer shoes with half inch free space in the toe region to allow the little toes wiggle freely inside the footwear without any discomfort.

  • Never buy kids shoes that are too big thinking that your child’s feet grow faster. Wearing kids shoes that are too big will trip the child to fall and may also develop foot problems in the future.

  • Make sure the footwear fits snugly in the heel part without causing any discomfort. The shoe should snugly fit in the heel area but it should not be too tight or too loose.

  • Avoid preferring backless or slip-on kids shoes that may cause them to trip or fall. Prefer footwear with laces, Velcro straps or any kind of fasteners that hold the feet firmly in a good position.

Friday, September 18, 2009

Home Builders Continue to Gain Confidence

By The Dallas Business Journal

Builder confidence in single-family homes and kitchen remodeling Grand Rapids edged higher for the third consecutive month in September, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

The index rose one point to 19 this month, its highest level since May 2008.

Builders are seeing some improvement in buyer demand as a result of the first-time home-buyer tax credit, and low mortgage rates and strong housing affordability have also helped to revive some optimism. Builders are also optimistic that new home buyers are interested in turning their bathrooms into spa like retreats by adding shower enclosures.

Grand Rapids builders have seen a rise in demand for projects for home remodeling Grand Rapids and sunrooms Grand Haven. Customers have been asking for stick built rooms of any size or shape, built to seamlessly match your homes existing architecture.

In Quakertown, PA, builders have also seen more demand for home remodeling Quakertown.

The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

Two out of three of the HMI’s index components recorded gains in September. The index gauging current sales conditions rose two points to 18, while the index gauging traffic of prospective buyers rose one point to 17. Meanwhile, the index gauging sales expectations for the next six months declined one point to 29.

All four regions posted gains in their HMI readings for September. The biggest improvement was registered in the Midwest, where a three-point gain brought its HMI to 19, the highest level since July 2007. The Northeast posted a two-point gain to 24, the South had a two-point gain to 19 and the West recorded a one-point gain to 18.

House backs bill to overhaul student loan program

By USA Today

The House voted Thursday in favor of the biggest overhaul of college aid programs since their creation in the 1960s — a bill to oust private student loans and lenders from the student loan business and put the government in charge.

The vote was 253-171 in favor of a bill that fulfills nearly all of President Obama's campaign promises for higher education: The measure ends subsidies for private lenders, boosts Pell Grants for needy students and creates a grant program to improve community colleges, among other things. "These are reforms that have been talked about for years, but they're always blocked by special interests and their lobbyists," Obama said Thursday during a rally at the University of Maryland.

"Well, because you voted for change in November, we're going to bring change in the House of Representatives today," the president said.

Ending loan subsidies and turning control over to the government would save taxpayers an estimated $87 billion, according to the Congressional Budget Office. Lawmakers would use that money to help make college more affordable, increasing the maximum Pell Grant by $1,400 to $6,900 over the next decade.

The choice before us is clear. We can either keep sending alternative student loans to banks or we can start sending them directly to students.

Yet the money also would be spent on things that don't help pay for college, such as construction at K-12 schools and new preschool programs.

And while the measure would increase Pell Grants, it would do nothing to curb college costs, which rise much faster than Pell Grants do.

In addition, the CBO says that when administrative costs and market conditions are considered, the savings from switching to direct government lending could be much lower, $47 billion instead of $87 billion.

Republicans warned that instead of saving the government money, as Democrats promise, the bill could wind up costing the government more money.

"Unfortunately, the numbers just don't add up," said Minnesota Rep. John Kline, senior Republican on the Education Committee.

Lawmakers split largely along party lines on the bill, with only six Republicans in favor and three Democrats against. The measure goes next to the Senate, where its fate is a little less certain.

Obama didn't get his way on one thing: The president proposed earlier this year to take Pell Grants out of lawmakers' hands entirely, making the program an entitlement like Social Security and Medicare, which would have cost an estimated $117 billion — more than lawmakers have to spend.

Under the measure, Pell Grants would rise slightly more than inflation over the next decade, increasing on average about 2.6% yearly, according to the bill's sponsors. However, the grants would still depend on annual spending bills and could rise less than promised, as has happened in the past.

Lawmakers met Obama halfway on the labyrinthine college aid form; Obama proposed to eliminate it altogether when he ran for president, but the bill would keep the form and shorten it.

As consumers, college students probably wouldn't notice much difference in their loans, which they would get through their schools. However, officials at several colleges and pharmacy schools worry they may not be able to make the switch to direct government loans in time for next year, and Education Department officials said this week they do not intend to extend the deadline.

More schools administer federal loans through the subsidized loan program than from the government's direct loan program. Private lenders made $56 billion in government-backed loans to more than 6 million students last year, compared with $14 billion in direct loans from the government.

Republicans argued it is wrong to put the government in near-total control of student lending.

Many also worry about job losses in their districts. Private lenders employ more than 30,000 people whose jobs depend on the subsidized loan program, and the industry says many would be laid off.

Sallie Mae, the biggest student lender, has about 8,500 employees in the program and probably would lay off about 30% of those workers. It still will have contracts to service federal loans.

Its employees have held a series of town hall meetings and petition drives to involve local leaders in Pennsylvania, Florida, Delaware, New York and Indiana.

Democratic Rep. David Wu of Oregon said lenders still could make all the loans they want. "What will not happen anymore is making those student loans with taxpayer subsidies," he said.

Mission Motors Keeps Moving: All-Electric Bike Tops 150MPH

By Triplepundit

The Dynojet Power Commander is ostensibly a high-performance, all-electric motorcycle part, but it really is more than that. Like any great entrepreneurial start-ups, it begins with a vision. If you think that you need to putter about town on a scooter in order to have a clean machine, the Mission One is out to prove you wrong.

Don’t get me wrong, like the Tesla (for whom North once worked), it doesn’t come cheap. You’d likely not get a Dynojet Power Commander just to tool about town. But the idea is to push boundaries, break new ground, and blaze a path for others to follow.

Street Bike PartsThe team has worked hard to achieve this latest milestone, learning from problems encountered in late June (yet still making a strong showing, coming in 4th in a field of 13), intent on pushing the boundaries of what is possible in street-legal, zero-emission, all-electric motorcycle – and what is now the fastest all-electric production bike in the world.

The Dynojet Power Commander is one of the many incredible sport bike parts To Be Fast Carries. These are sport bike parts that can rip up the track, do power wheelies at 80 mph, and then come out here and dismantle the prior electric world speed record. It pulls hard all the way from 0 on up to 161mph, all in one gear, with incredible torque. It’s a riding experience like no other.

The company is selling many Dynojet Power Commander's and other high-perfomance sport bike parts for 2010 models. To Be Fast also has a large selection of Joe Rocket Jackets at low prices. Visit ToBeFast.com Today.

Thursday, September 17, 2009

Phone Calls Over Twitter? That's A Tweet Deal, Jajah

Twitter users can now make short phone calls directly through their Twitter accounts using Jajah@call, a new service from Jajah, the Mountain View, Calif.-based IP communications company best known for Business VoIP services for landlines and mobile phones.

According to Jajah, the calling service works whether a user "calls" from Twitter itself or a third-party Twitter client -- including mobile clients such as Tweetie and Twidroid. All that's required is that both parties (the person making the call and the person answering the call) be Twitter users, both are signed up for Jajah and both are registered for the @call beta.

How it works is that the person making the call types @call into the Twitter prompt followed by the "@" symbol and the handle of the Twitter user (such as @channelweb), and Jajah connects the parties for a Business VoIP call that can last up to two minutes.

Telcos and mobile operators face huge challenges in a world where people check their Tweets or their Facebook messages before they check voicemail. Jajah@call showcases how easily we can bring telephony into the social media environment, where operators can now participate. The Jajah IP Business VoIP Communications Platform is chosen by carriers, mobile operators and online companies around the world who leverage not just our carrier-grade network, but our ability to develop proven, market-ready solutions that add value for their customers and their businesses.

It sounds great and all, Jajah, even though you'll probably earn the ire of telcos that've been known to give free Business VoIP calling services the stink eye in the past. Jajah already offers an iPhone application, seeing as Business VoIP calls aren't permitted on iPhone carrierAT&T (NYSE: T)'s 3G network.

And there's plenty of other quick messaging services, VoIP and otherwise, out there, including Google Chat and Skype. But the key difference for Jajah might be that it's tapping into a rapidly growing area (i.e. the Twitter community) with an easy-to-use Business VoIP service.

Thursday, September 10, 2009

Google Offers to Help Newspapers Charge for Content

By The Wall Street Journal

Google, which is often in the cross-hairs of newspaper publishers, thinks it can help newspaper companies get paid for their work.

The search giant is planning to upgrade its existing Google Checkout payment service to handle a broad suite of billing and subscription services targeted at premium content creators like newspapers, according to a memo the company recently submitted to the Newspaper Association of America.

The memo, which went online this week, responds to the NAA’s open request for new “paid content” solutions earlier this summer. It was first spotted by the Nieman Journalism Lab.

In its memo, Google says it is working on new Checkout features that will allow publishers to charge prices of a penny to several dollars for digital content, like news stories. Behind the scenes, Google will handle all the messy features related to payments, like aggregating the charges to reduce credit card fees, security and fraud. As for timing, it says only that the service is “planned for future.”

Google’s memo also outlines the range of publisher-friendly services the company already offers, such as rudimentary billing features and advertising services. The latter of course are what publishers keep griping about, arguing that online advertising doesn’t generating enough revenue to sustain their businesses.

That reality has the industry turning to payments as a new silver bullet and a number of companies have been eager to lend a hand. But whether publishers will buy into a service powered by Google – which would likely take a cut of the transactions – remains to be seen.

Checkout hasn’t been a big success for Google so far. But the company is revamping it as it explores new ways to roll out paid offerings across some of its own products, like YouTube.

AOL Hires Yahoo Veteran Garlinghouse

By The Wall Street Journal

AOL Inc. hired former Yahoo Inc. executive Brad Garlinghouse as president of its communications group, responsible for its email and instant-messaging services.

Tuesday's appointment fills the last open position on AOL's executive team under new CEO Tim Armstrong and comes as the Internet company prepares for its spinoff from parent Time Warner Inc. this year.

Mr. Garlinghouse, 38 years old, worked at Yahoo for almost six years, most recently as senior vice president of communications and communities, where he was responsible for overseeing Yahoo's email and instant-messaging services.

He is known for writing a widely circulated memo in 2006, dubbed "The Peanut Butter Manifesto," that said Yahoo was spreading itself too thin and called for a massive reorganization. Mr. Garlinghouse left Yahoo in 2008 and most recently worked as a senior adviser at investment group Silver Lake Partners.

At AOL, Mr. Garlinghouse also will be responsible for expanding the company's Silicon Valley operations and West Coast new-ventures business, which houses fledgling projects and acquisitions such as social-networking site Bebo, which AOL acquired for $850 million last year.

Mr. Garlinghouse joins AOL at a tumultuous time. Mr. Armstrong was hired in April to revive the company, which is struggling to make a transition from its roots as a subscription-based service for connecting to the Internet to an ad-supported digital-media company.

Internet users are abandoning AOL's email and instant-messaging services at a rapid pace. Traffic to AOL's email service, which lags behind Yahoo's, Microsoft Corp.'s and Google Inc.'s, fell 19% in July from a year earlier, to 36.4 million unique U.S. visitors, according to comScore Inc.

Wednesday, September 9, 2009

Blue Nile Gets Makeover to Please Ladies

By The Wall Street Journal

Blue Nile Inc. is expected to unveil a major overhaul of its Web site Tuesday as the online jeweler tries to broaden its appeal, especially to women. But like other e-commerce sites retooling to combat slowing growth, it faces the tricky task of trying to make improvements without losing core customers.

Diamond from Plumeria JewelryThe vast majority of those who buy rings and necklaces from Blue Nile are men, drawn to the extra information and control -- as well as possible discounts -- they get by shopping online instead of at a high-pressure jewelry counter. Yet most Blue Nile purchases are given to women, whom the retailer would like to have a more premium view of its brand.

"We haven't been as innovative a Web site in recent years as we should be," said Blue Nile's chief executive, Diane Irvine. The Seattle company, which was founded in 1999 and went public in 2004, sold $295 million in jewelry last year that consisted of dolphin jewelry, equestrian jewelry, hibiscus jewelry, octopus jewelry and penguin jewelry.

Most e-commerce sites fueled their early growth by offering variety and the ability to compare products and prices. But even the most successful have evolved little past a screen with a search box and small photos of products. Most shopping sites don't come close to matching the retail experience -- with the ability to touch and browse products and the one-on-one service of a salesperson -- perfected over decades by malls and retailers.

So some companies are experimenting with new online experiences. Amazon.com Inc. is now testing a site called Windowshop.com, where people can browse and sample music, movies and books by scrolling through panels that fly by on the screen. Makeover Solutions Inc.'s DailyMakeover.com allows users to apply different makeup brands to a photo of themselves. To date, the site has added makeup and hairdos to nine million photos.

Blue Nile's new look is its first overhaul in a decade. Its old site was built around accessibility, like an online interface that shoppers could use to customize computer purchases. Yet shoppers still had some complaints.

A customer "once wrote in and said, 'I received my purchase in the mail, and it was so much more impressive in person than on the Web site.

Blue Nile embarked on a redesign process last year, which included some initial hiccups. To appeal to women, one outside design agency suggested redesigning the site in bubblegum pink instead of its signature blue. "There was no way we could do that -- it was way too feminine.

Instead, Blue Nile dropped the design firm, which it declined to name, and decided to emphasise an upscale, rather than effeminate, look. It removed a left-hand navigation bar (still standard on many e-commerce sites), leaving space on the screen for much larger -- and more artistically cropped -- photos of products such as plumeria jewelry, sea turtle jewelry, starfish jewlery, tropical fish jewelry and whale jewelry. The changes are intended to make the experience more akin to window shopping.

Making the images larger, you can see the shadows and details, so the quality really shines through.

Blue Nile also rebuilt a system for shoppers to create custom engagement rings -- its largest business -- based on criteria they can adjust with sliding scales while watching an image of the product evolve on the screen. Shopping is now largely contained within a single page, to cut down on the confusion and tedium of clicking back and forth.

The company says it doesn't have a tally for the cost of the redesign, since it was completed by internal staff.

Blue Nile's overhaul comes as it faces competition on both ends of the market. Luxury giant Tiffany & Co. offers a visually rich Web site, and Bidz.com Inc. offers a discount-oriented jewelry store.

What's more, the recession has ravaged the $60 billion annual U.S. jewelry industry. Blue Nile's revenue fell more than 23% in the fourth quarter of last year, but the drops have since moderated, with a 5.2% drop in the second quarter of this year from the year-earlier quarter. While data on the diamond industry is incomplete, Blue Nile estimates it has gained approximately 1% of the engagement ring market in the past six to nine months, increasing its share to roughly 4.5% to 5.5%.

A redesign carries risks, since unlike traditional retailers, it can't be live tested in select outlets first, and online customers can't turn to salespeople to ask for help if they get lost. It could be very dangerous to try to integrate too much flash that serves no purpose for shoppers.

Blue Nile has taken on a redesign now because of the market's relative weakness, which has made competitors less likely to expand. Rather than feel like we didn't take advantage of this time, I believe that it is critically important to move while we can.

Magazine Sales Tumble Amid Recession

By The Wall Street Journal

Consumers are buying fewer magazines at newsstands given the deep recession and the availability of plenty of free reading material online.

An industry group said Monday that single-copy sales tumbled 12 percent in the first half of this year compared with the same period in 2008. That followed a year-over-year decline of 11 percent during the second half of last year.

Total circulation, including subscriptions, edged down 1 percent.

The figures were released Monday by the Audit Bureau of Circulations, based on 521 magazines that gave circulation numbers for both years. The total circulation of those titles stands at roughly 340 million.

Total paid subscriptions held steady, but the roughly 36 million magazines sold at newsstands and other retailers account for a disproportionate amount of publishers' earnings because subscriptions are generally discounted. Publishers are often able to prop up overall circulation -- and meet guarantees they make to advertisers -- by deeply discounting subscriptions.

Hearst Corp.'s Cosmopolitan is still the most popular magazine at newsstands, though sales fell nearly 8 percent to 1.6 million.

In overall circulation figures, Playboy and TV Guide Magazine fared the worst, down 9 percent and 10 percent, respectively.

Payless Shoe to Expand Into Russia

By The Wall Street Journal

Collective Brands Inc. is expected to announce Tuesday that it is expanding its Payless ShoeSource retail chain into Russia with franchise partner M.H. Alshaya.

The Topeka, Kan., footwear company, known for its affordable line of kids shoes and adult shoes by top fashion designers, plans to open stores beginning in 2010 in Russia. The agreement calls for between 95 and 150 stores to be built within five years. Alshaya will own and operate the stores, but Collective Brands has the option to buy into them.

At the end of the first quarter, the company, which also owns the Stride-Rite chain, operated more than 4,500 stores in more than a dozen countries, including Canada and nations throughout Central America, the Caribbean, South America and the Middle East. The retailer's sales have fallen in the recession despite its discount prices.

The company first began franchising its stores this year in the United Arab Emirates, Saudi Arabia and Kuwait.

Emerging markets such as Russia and the Middle East have two common traits -- income growth and real [gross domestic product] growth.

M.H. Alshaya Co. is the retail business of the Alshaya Group, which has interests in hotels, real estate and investments that was founded in Kuwait in 1890.

Ad Firm Havas' Profit Falls 19%

By The Wall Street Journal

French advertising and marketing group Havas SA on Monday posted a 19% drop in first-half net profit because of lower ad spending and didn't provide an outlook for the rest of the year. Organic revenue, a closely watched metric in the advertising industry that strips out currency effects, acquisitions and disposals, fell 9.8% in the second quarter.
[havas earnings]

Profit for the six months ended June 30 fell to €40 million ($57 million) from €49 million last year. Revenue fell 7.9% to €700 million.

Havas, whose clients include French utility Électricité de France and car maker PSA Peugeot-Citroën, said operating profit totaled €71 million, down from €82 million last year. In June, Chairman Vincent Bolloré said that he expected organic revenue to decline a maximum of 10% in 2009. Mr. Bolloré is the controlling shareholder in Havas and also owns nearly 30% in U.K.-based rival Aegis Group PLC.

The company, which has lost several large accounts this year, including French retailer Carrefour SA, said net new business totaled €813 million in the first half. Digital businesses, which include online advertising, posted organic growth of 5% and now account for 16.4% of group revenue.

The advertising industry has been hard hit by the global recession, as marketers cut back ad spending, causing advertising companies to lay off thousands of workers and trim costs as revenue shrinks.

Last week, rival WPP PLC cautioned that improving sentiment in the world economy isn't yet translating into rising orders for expensive advertising campaigns and U.K.-based rival Aegis cautioned that it doesn't expect an upturn in the advertising market in the second half. Still, some ad industry executives have indicated that the worst of the downturn was over.

Thursday, September 3, 2009

Hard-Hit Schools Try Public-Relations Push

Districts Facing Declines in Enrollment Use Marketing Campaigns to Win Back Students -- and the State Funding They Bring

By The Wall Street Journal

Public schools in the U.S. have added professional marketing to their back-to-school shopping lists.

Financially struggling urban districts are trying to win back students fleeing to charter schools, private schools and suburban districts that offer open enrollment. Administrators say they are working hard to improve academics -- but it can't hurt to burnish their image as well.

So they are recording radio ads, filming TV infomercials and buying address lists for direct-mail campaigns. Other efforts, by both districts and individual schools, call for catering Mexican dinners for potential students, making sales pitches at churches and hiring branding experts to redesign logos.

Schools are really getting that they can't just expect students to show up any more.

Administrators working on the public-relations push say the potential returns are high. State funding for public schools is based on attendance, so each new student brings more money, typically $5,000 to $8,000 per head. In addition, schools with small enrollments are at constant risk of being shuttered in this recession, and full classrooms help.

Some districts also hope a better image will entice more local business sponsorship and persuade voters to support school levies and bond issues.

Marketing consultants usually focus first on customer service. That includes keeping the front office tidy, cheerfully greeting visitors, and learning to sell a school with snappy soundbites.

They think like educators. They like to explain things in lots of detail. They have to learn to think more like businesses.

Not all corporate strategies translate. In the business world, it's fair game to knock a rival, but when a Denver charter school put out fliers comparing its superior graduation rate to that of nearby public schools, tempers flared. The superintendent of Denver Public Schools pleaded for a halt to "negative campaigning" and the charter school pulled the flier.

Charter schools are technically part of the public system in Denver, as in most cities. But they are run independently, with control over their own budgets. To ease the tension sparked by the fliers, the superintendent called in an educational consultant to draft a code of conduct for ethical school marketing. The resulting truce allows for comparisons of graduation rates, test scores and the like. So long as it's truthful, they can use it.

If sharp elbows are one peril for schools, sounding desperate is another.

Most public schools don't have the resources for that kind of one-on-one marketing. Instead, they are experimenting with mass media.

The Washington, D.C., district spent $100,000 on a campaign that included radio spots and bus ads. The district's enrollment has plunged from nearly 150,000 in 1970 to less than 50,000 last year. To lure students, the ads include quotes from students who say they are glad they stayed in public school.

In Pittsburgh, where enrollment has dropped about 25% in the past decade, yard signs along a marathon course this spring touted a pledge by city officials to give full college scholarships to all qualified graduates of city schools. This fall, that message will be carried by $1.5 million of donated advertising space and media airtime.

The TV spots will combine the scholarship pledge with news of recent district achievements, like last week's announcement that Pittsburgh schools met federal benchmarks for academic improvement for the first time.

The cost of public-school marketing efforts varies widely, from a few thousand dollars to more than $1 million. That has raised eyebrows in a few cities, especially when the public schools are making big cuts to balance their budgets.

If we don't want our schools to look bad, we need to tackle the real issues -- instructing our children, nurturing them, graduating them -- instead of just putting a papier-mâché facade over the problems.

Most public schools have a negative image. They're hoping that image can be changed.

Perhaps the boldest marketing push is in St. Louis. The urban district's enrollment has plunged 40% in the past decade because of students moving to charter schools and suburban districts. The school district has been through eight superintendents in 10 years and lost its state accreditation. It faces a $53 million deficit and recently closed 14 schools.

But administrators have set aside $1 million for pay for publicity that may include bragging about a top-ranked high school and magnet programs in culinary arts, aeronautics and international studies.

A marketing firm will spend the next two months asking residents, What would it take to get you to send your children to school here?.

One Dallas private school is taking the initiative to create marketing campaigns to help boost their enrollment. Unlike public schools, Dallas private schools are run independently, with control over their own budgets. To ease the tension of lower enrollment rates, Dallas private schools are using creative ways to help boost enrollment.

Fixing Health Care Is Good for Business

How many aspiring entrepreneurs are stuck in dead-end jobs because of health concerns?

By The Wall Street Journal

You have probably heard the horror stories about President Barack Obama's health-care proposals leading to rationed care and bankrupt businesses and governments. Those claims are flat wrong. The real horror story is not what health-care reform will bring. It's what's already happening.

There has been a lot of talk about the 47 million Americans who do not have health insurance. But health-care reform is just as important to the majority of Americans who have health insurance now. Absent reform, the price of an average family's insurance will nearly double over the next decade—to $25,000 from $13,000.

No less troubling are the stories I hear from CEOs, entrepreneurs and workers. Rising health-care costs are crushing American companies—particularly small businesses that are the source of much of our economic vitality.

In 1960, U.S. firms spent 1.2% of their payroll on health insurance. In 2006, they spent 9.9%. Costs rising at this rate are unsustainable and put U.S. firms at a competitive disadvantage to foreign companies that almost universally have lighter health-care burdens. It also destroys U.S. jobs.

Last month, the nonpartisan Rand Corporation released a study that looked at 37 industries from 1987 to 2005 and concluded that excess health-care costs were causing significant job losses as well as revenue and output losses for many American industries. After controlling for other factors, sectors with the highest percentage of employer-sponsored health care (such as the automotive industry) had worse performances than industries in which employer health coverage is uncommon.

These escalating costs have been passed on to the middle class in the form of higher prices and flat wages. Money that would have gone to raises has instead been spent on health-care premiums that have doubled over the past nine years.

The cost pressure is particularly acute for small businesses, which, on average, pay 18% more per worker than large firms for the same health-insurance policies. They pay more because they have a smaller risk pool and have to absorb higher broker fees and administrative costs per worker. As a result, many small businesses don't offer health coverage. Just 49% of firms with three to nine workers and 78% of firms with 10 to 24 workers offered health plans in 2008, while 99% of firms with over 200 workers did.

It's hard to know how much health-care costs affect small businesses. But it is clear that rising costs don't help them. In the third quarter of 2008, half of all private-sector job losses occurred in companies with fewer than 20 employees.

The pernicious price of runaway health-care costs also has a dampening effect on entrepreneurship.

How many aspiring owners of businesses are locked in jobs they don't like for fear that striking out on their own would cause them to lose their health insurance? The Small Business Majority, a national advocacy group, estimates there are as many as 1.6 million.

In the short term, health-care costs pose a major problem for companies and their employees. In the medium and long-term, these costs pose serious challenges to our economy. This year, health-care expenditures are expected to account for about 18% of our GDP. Without reform, that share is projected to rise to 28% in 2030 and to 34% in 2040. When one out of every three dollars is spent on Michigan health plans, we will face a situation in which companies can no longer provide insurance. At the same time, if we don't address rising federal health-care costs, we will likely face either much higher taxes or unsustainable deficits that could spike interest rates and threaten capital formation.

Neither option is a future any of us wants to contemplate.

It is clear that demographic and structural trends are leading us toward worse health care and higher costs for employers, workers and governments. But America has a chance to avoid that fate. President Obama has articulated three broad criteria for reform. Reduce costs, protect Americans' choice of doctors and insurance plans, and assure quality and affordable health care for any American who wants it.

The bills working through Congress are moving in the right direction, and despite some setbacks, this nation is closer to fundamental health-care reform than we have ever been.

We must keep moving forward. We are in a twilight period, that precious moment before a problem becomes a crisis. What we do in the coming months will play a big role in determining America's competitiveness and prosperity for decades to come. There is a path toward a more sustainable and prosperous future for America. It's imperative that we take it. The alternative is frightening.

Water Cops Crack Down in Drought Areas

Sprinklers Monitored and Trickles Investigated, With Some Effect: In Los Angeles, Consumption Is Lowest in 32 Years

By The Wall Street Journal

Los Angeles, suffering from its third year of drought, has tried just about everything to get people to turn off the tap.

It forbade restaurants from automatically offering water to patrons. It jacked up water rates. This summer it established Mondays and Thursdays as only two days when residents are allowed to use sprinklers. Then, it rolled out the water cops.

On a recent Tuesday, Ben Pantoja, a mild-mannered 50-year-old, drove his city-issued Prius down a street in the Filipino Town neighborhood. He noticed a trickle of water on a side street and quickly pulled a U-turn.

An office maintenance worker had just finished washing down a parking garage. Not allowed, said Mr. Pantoja, handing a citation to the building's manager.

Mr. Pantoja is one of the city's 15 wandering water cops, officially known as the Water Conservation Team. They collect tips through an anonymous hotline, patrol neighborhoods and try to catch people in the act of violating any of the city's numerous water-saving edicts. That could mean anything from washing down asphalt to failing to repair a broken sprinkler head. First offenders are given a warning. Repeat offenders face a $100 fine.

The effect of all these efforts is beginning to trickle down. In June, the most recent figures available, city water use dropped by 12.7% compared with the same month in 2008, the lowest overall level of consumption in 32 years.

Other drought-stricken areas have also rolled out get-tough measures. In San Antonio, city water officials credit strict water restrictions -- and the more than 1,800 water waste citations issued since April -- for increasing aquifer levels, despite record temperatures and a two-year drought. San Antonio Water System spokesman Greg Flores said the "Water Wasters" hotline receives more than 200 calls a day about residents defying Stage 2 restrictions, which include no watering on the weekends.

Those complaints result in a warning letter. But a band of off-duty police officers and water officials patrol problem areas looking to catch people in the act and issue tickets. Fines range from $50 to more than $1,000.

Los Angeles's goal is to reduce water use by 15%, and it must meet a state-mandated water reduction target of 20% by 2020. "The last major drought was about two decades ago," said David Nahai, the head of the city's Department of Water and Power. "People may have forgotten that we live in a semi-arid area." He said the numerous different limits he has put in place serve mostly to remind residents about the scarcity of water in Southern California.

Not everyone is thrilled. At 10:30 p.m. on a recent Thursday, Susan Ryan stood under the low hues of her porch light watering her lawn. "We've got the drought czars wandering around the neighborhood," she said. She was busted once for a faulty sprinkler. The next time will bring a fine.

Because the city area is so large -- covering nearly 500 square miles -- the water cops wouldn't be able to do their jobs without tips from neighbors. The city's anonymous hotline and email address pulls in dozens of tips a day from residents ratting out nearby water wasters.

Ms. Ryan complained that not everyone on her block abides by the two-day-a-week rule for lawn watering. "Some of my neighbors have been cheating," she said.

But she stops short of turning them in. "I don't like the dynamic that it sets up," she said.

Others are more zealous. Gayle Martin, a landscaper who lives in the city's Mid-Wilshire neighborhood, has been on the lookout. She used one facet of the water conservation program -- cards residents can hang on their neighbor's doors alerting them to water waste. The city dubs it the "Neighbors Helping Neighbors Save Water" program. One neighbor, she said, was flooding the sidewalk.

"She has broken sprinkler heads that shoot up and just flood the gutter," she said. "It's just a mess."

Since June, the water cops have conducted more than 4,600 investigations, resulting in 834 warnings, but only 23 of the $100 fines. That is because catching an offender in the act twice is very difficult. On one occasion, they nabbed a third-time offender, for a $200 fine. They handed out three citations to egregious defenders for $300 fines. The goal of the program, said the DWP's Mr. Nahai, is not to raise money, but to reduce water use.

The biggest threat water wasters face is their bill. Under the city's two-tiered billing structure, rates spike by 45% for customers who use more than a certain amount.

Fashion designer Ann Ferriday said her water bill became "something crazy, like $450," which she said might be attributable to her pool, which needs to be refilled from time to time, and her daily lawn waterings.

"My bill was so outrageous," she said. "They said I was on this upper tier and I couldn't figure out why." She has since tried to remedy her water problems. But she said she can't wait till the drought ends "so that everything can go back to normal."

Wednesday, September 2, 2009

Weak retail report cards likely for back-to-school

By The Associated Press

Kids ShoesIt may be the beginning of the year for students, but for retailers, it's report-card time. Analysts expect the early grades on the back-to-school selling season to be weak when retailers report August results Thursday.

The results will give insight into whether consumers opened their wallets after months of keeping them closed amid the recession, and how well back-to-school offerings such as trendy jeans, dresses, T-shirts and kids shoes are being received.

Analysts say poor sales would raise already-high fears about the crucial holiday selling season.

Labor Day falls a week later this year and several states' tax-free shopping weeks occurred in August this year rather than July, both making comparisons from a year ago difficult.

Thus, retailers and analysts said August and September taken together will likely paint a more complete portrait of back-to-school sales, crucial for kid and teen retailers. The back-to-school season can make up about 20 percent of their annual revenue.

Back-to-school selling picked-up later in the month, concurrent with more school openings, and helped by weather that was drier and more seasonable than last year. Encouragingly, mall traffic was flat for the month, versus down 4 percent a year ago.

Companies that focus on low prices will beat expectations, while higher-priced companies will miss expectations.

Sales likely built toward the end of August driven by pre-Labor Day sales and promotions as well as by some newness and pent up demand in certain categories, such as outerwear, sweaters and kid's shoes.

Outside of the kid and teen stores, August results are expected to continue weak sales seen in the second quarter as consumers continue to cut back amid the recession.

Inventory at retailers remains lean, potentially holding back sales, but possibly contributing to better margins. Consumers, facing unprecedented economic uncertainty, continue to behave frugally, spending cautiously and saving vociferously, while contributing to sales weakness among apparel retailers.

Still there have been a few encouraging indicators the economy may be stabilizing. On Tuesday, the Institute for Supply Management showed the highest number for its manufacturing index since June 2007. New customer orders jumped to a level not seen since late 2004.

Pfizer to pay record $2.3B for backing off-label use of drugs

By The Wall Street Journal

WASHINGTON — Pfizer (PFE), the world's largest drugmaker, will pay a record $2.3 billion civil and criminal penalty over the promotion of prescription drugs for uses that have not been approved by regulators, the Justice Department announced Wednesday.

The department said the $2.3 billion settlement included a $1.2 billion criminal fine, the largest criminal fine in U.S. history. The agreement also included a criminal forfeiture of $105 million.

"Combating health care fraud is one of this administration's top priorities," Associate Attorney General Thomas Perelli said in announcing the settlement. He said it illustrates ways the department "can help the American public at a time when budgets are tight and health care costs are rising."

The overall settlement is the largest paid by a drug company for alleged violations of federal drug rules.

The government said the company promoted four prescription drugs, including the pain killer Bextra, as treatments for medical conditions other than those the drugs had been approved for by federal regulators.

Use of drugs for so-called "off-label" medical conditions is not uncommon, but drug manufacturers are prohibited from marketing drugs for uses that have not been approved by the Food and Drug Administration.

A Pfizer subsidiary, Pharmacia and Upjohn, which was acquired in 2003, has entered an agreement to plead guilty to one count of felony misbranding.

"These agreements bring final closure to significant legal matters and help to enhance our focus on what we do best — discovering, developing and delivering innovative medicines to treat patients dealing with some of the world's most debilitating diseases," said Amy Schulman, senior vice president and general counsel of Pfizer.

Authorities said Pfizer's sales team created phony doctor requests for medical information in order to send unsolicited information to doctors about unapproved uses and dosages.

Justice officials discussed details of the deal at a news conference with FBI, federal prosecutors, and Health and Human Services Department officials.

In financial filings in January, the company had indicated that it would pay $2.3 billion over allegations it had marketed the pain reliever Bextra an possibly other drugs for medical conditions different from their approved use. The settlement announced Wednesday also covered Pfizer's promotions of three other drugs: Geodon, an anti-psychotic, Zyvox, an antibiotic, and Lyrica, an anti-epileptic.

Under terms of the settlement, Pfizer must pay $1 billion to compensate Medicaid, Medicare, and other federal health care programs. Some of that money will be shared among the states: New York, for example, will receive $66 million, according to the state's attorney general, Andrew Cuomo.

"Pfizer ripped off New Yorkers and taxpayers across the country to pad its bottom line," Cuomo said. "Pfizer's corrupt practices went so far as sending physicians on exotic junkets as well as wining and dining health care professionals to persuade them to prescribe the company's drugs for patients in taxpayer-funded programs."

Pfizer spokesman Chris Loder confirmed Wednesday that the $2.3 billion charge to the company's earnings had been taken in the fourth quarter of 2008.

"No additional charge to the company's earnings will be recorded in connection with this settlement," he said.

In her statement, Schulman said: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures so that we not only comply with state and federal laws, but also meet the high standards that patients, physicians and the public expect from a leading worldwide company dedicated to healing and better health."

"Corporate integrity is an absolute priority for Pfizer," she said, "and we will continue to take appropriate actions to further enhance our compliance practices and strengthen public trust in our company."

When Pfizer originally disclosed the settlement figure, it also announced plans to acquire rival Wyeth for $68 billion. That deal, which would bolster Pfizer's position as the world's top drug maker by revenue, is expected to close before year's end.

Employers Lure Spouses Into Wellness Programs to Help Cut Costs

By The Wall Street Journal

Nearly half of U.S. employers include spouses in wellness programs, up from roughly 10% five years ago. But the aggressive pursuit of spouses is "very unusual." Such Michigan employer wellness programs seek to cut health-care costs by altering lifestyles and identifying diseases early.

It generally costs employers more to insure spouses' health than workers, concludes an analysis of 21 companies'. At those companies, spouses' health-care costs averaged $3,738 annually, 9.7% more than employees'.

The effect is most pronounced at companies where most workers are men under age 50. Women use more medical services because they seem to be much more attuned to their bodies.

Elsewhere, one company recently extended an insurance-premium rebate to spouses who join employees in its wellness program. People are more likely to lose weight and stop smoking when they are "making the changes with their spouses. Other companies require spouses to be screened regularly, or lose coverage.

They chose a voluntary approach. So far, roughly 22% of its 3,344 U.S. spouses and domestic partners have been screened, including some who use health-care plans from their own employers. "You can only change lifestyle and behavior when employees and their spouses really want to do it, not because the company is forcing them.

U.S. staffers collect as much as $250 a year for taking part in annual health-risk assessments, exercise classes and similar wellness activities. When officials distributed T-shirts to introduce the program in 1998, obesity was so widespread that they ordered many sized XXXL.

In 2007, company executives discovered that spouses' average medical claims the prior year had exceeded employees' by $728, or almost 30%. When the higher costs persisted, executives decided to buy and outfit a 40-foot RV to screen spouses and workers. The company wrote all U.S. employees in January to tout the Mobile Wellness Unit.

Some screenings uncovered serious potential problems. An Omaha man who was on his wife's employer wellness program learned he had extremely high level of fats called triglycerides, a condition linked to diabetes. The 43-year-old assembly-line worker, who asked not to be named, said he last had a physical during high school.

Companies say they won't reject spouses for insurance coverage if the screenings turn up serious health problems.

Paper Owner Freedom Plans to File For Chapter 11

By The Wall Street Journal

Freedom Communications Inc., the owner of the Orange County Register, is expected to declare bankruptcy this week, according to people familiar with the situation, the latest in a string of Chapter 11 filings in the battered newspaper business.

The company, majority owned for more than 70 years by the Hoiles family, has reached agreements with its lenders to restructure its debts, according to these people.

With annual revenue of about $700 million, Freedom owns the Register and more than 30 other daily papers and eight TV stations. Earnings before interest, taxes, depreciation and amortization -- a popular measurement for leveraged companies -- have declined about 75% over the past five years to about $50 million.

Freedom was founded in the 1930s by R. C. Hoiles, a former printer's apprentice who used his publications in part to spread his libertarian views. The Orange County Register continues the libertarian approach but, like other newspapers across the country, has had to confront the question of its survival.

"We are continuing to work with our lenders to address our balance sheet," said a Freedom spokesman.

Freedom's lenders, which hold roughly $770 million in debt, are expected to take control of the company as it operates under bankruptcy protection. They include J.P. Morgan Chase & Co., SunTrust Banks and Union Bank of California.

The filing is a blow to private-equity firms Blackstone Group and Providence Equity Partners, which acquired a 40% equity stake in the company in 2004 for about $460 million. The deal, which used a relatively small amount of debt compared to later deals in the buyout boom, already has been written down to zero by both firms.

The Hoiles family has been divided for years about what to do with the Irvine, Calif., company. Family members representing about one half of the Hoiles clan sold their stake in the company as part of the recapitalization more than five years ago. The stake of the remaining half likely would be wiped out by a bankruptcy filing.

The 2004 deal with Blackstone and Providence allowed the company to remain under family control. For a while after the recapitalization, Freedom posted steady earnings growth as the housing boom fueled profits. But the housing slump that has eroded advertising at most U.S. newspapers struck early in many of Freedom's markets.

Struggling with its debt, Freedom about a year ago suspended its dividend, which was the primary source of income for members of the family's fourth generation, many of whom don't have jobs.

For the most part, members of the clan who cashed out no longer have contact with relatives who stuck with the company, according to two family members.

"Nobody is going to be destitute," said one family member. But the filing is bound to force some family members to work, said people close to the situation.

Tuesday, September 1, 2009

Gold's Fall Has a Silver Lining

By The Wall Street Journal

Designer Jewelry

Silver has enjoyed greater price gains than gold so far in 2009, and that was the case again Monday as it benefited from hopes an economic recovery will jump-start industrial demand.

Nearby August silver gained 3.1 cents to $14.191 an ounce on the Comex division of the New York Mercantile Exchange, while most-active December gained 3.2 cents to $14.231. By contrast, most-active December gold lost $10.90 to $942.30 an ounce.

Silver often follows gold, although sometimes with greater moves since it is a less-active market and thus more prone to volatile price swings. But so far in 2009, December silver has risen 26%, while December gold is up 6%. "Silver sort of has a dual personality.

It has a role as a precious metal and is sometimes referred to as "poor man's gold," often bought with gold as a hedge or safe haven against factors such as dollar weakness, inflation fears and geopolitical disturbances, and conversely selling off with gold when these supportive influences abate.

But silver has a more significant role as an industrial metal because of such uses as in electronics and batteries. Thus, silver also sometimes tracks base metals like copper, which rose Monday. Copper prices have more than doubled since their December lows mainly because of strong Chinese demand but also amid expectations of economic recovery elsewhere.

It's the risk-appetite theme, based on the expectation that the economy is going to recover. Silver, having more industrial applications, is benefitting from that.

Desinger and Vintage JewelryWith the silver gaining popularity, online jewelry stores such as www.ebalexander.com and elainemillerjewelrycollection.com have seen an increase in demand for many unique jewelry products such as: plumeria jewelry, designer dolphin jewelry and whale jewelry.

Both online retailers are pleased to offer the finest selection of unique Sterling Silver and Gold Jewelry. From fine jewelry Raleigh to their vintage jewelry collections, they're sure that you will find our selection appealing.

In other commodity markets:

SOYBEANS: Prices rallied amid strong demand for dwindling supplies and speculation an early frost will curb harvest. Soybean development is one to two weeks behind normal in much of the Midwest, leaving the crop vulnerable to an early frost that ends the growing season, analysts said. Chicago Board of Trade September soybean futures rose 57 cents to $10.80 a bushel. November soybeans, which represent the fall harvest, rose 34.50 cents to $10.0750.

NATURAL GAS: Futures settled higher Monday, rising off a seven-year low on bargain buying and strength in the equities markets. Gas for September delivery on the New York Mercantile Exchange settled floor trade 11.9 cents higher, or 4.2%, at $2.923 a million British thermal units.

CRUDE OIL: Futures danced up against $75 a barrel but didn't cross the line in a day of light and relatively quiet trading. This follows last week's torrid gains, when prices rose more than 10% over four days. Nymex light, sweet crude oil for October delivery settled 48 cents, or 0.7%, higher at $74.37 a barrel.

Sorting Fact From Fiction on Health Care

By The Wall Street Journal

In recent town-hall meetings, President Barack Obama has called for a national debate on health-care reform based on facts. It is fact that more than 40 million Americans lack coverage and spiraling costs are a burden on individuals, families and our economy. There is broad consensus that these problems must be addressed, especially Michigan Medicare. But the public is skeptical that their current clinical care is substandard and that no government bureaucrat will come between them and their doctor. Americans have good reason for their doubts—key assertions about gaps in care are flawed and reform proposals to oversee care could sharply shift decisions away from patients and their physicians.

Consider these myths and mantras of the current debate:

• Americans only receive 55% of recommended care. This would be a frightening statistic, if it were true. It is not. Yet it was presented as fact to the Senate Health and Finance Committees, which are writing reform bills, in March 2009 by the Agency for Healthcare Research and Quality (the federal body that sets priorities to improve the nation's health care).

The statistic comes from a flawed study published in 2003 by the Rand Corporation. That study was supposed to be based on telephone interviews with 13,000 Americans in 12 metropolitan areas followed up by a review of each person's medical records and then matched against 439 indicators of quality health practices. But two-thirds of the people contacted declined to participate, making the study biased. To make matters worse, there were incomplete medical records on many of those who participated and could not accurately document the care that these patients received.

Michigan Health Insurance and Michigan MedicareFor example, they found that only 15% of the patients had received a flu vaccine based on available medical records. But when asked directly, 85% of the patients said that they had been vaccinated. Most importantly, there were no data that indicated whether following the best practices defined by the experts made any difference in the health of the patients.

In March 2007, a team of researchers published a study that looked at nearly 10,000 patients at community health centers and assessed whether implementing similar quality measures would improve the health of patients with three costly disorders: diabetes, asthma and hypertension. It found that there was no improvement in any of these three maladies.

• The World Health Organization ranks the U.S. 37th In the world in quality. This is another frightening statistic. It is also not accurate. Yet the head of the National Committee for Quality Assurance, a powerful organization influencing both the government and private insurers in defining quality of care, has stated this as fact.

The World Health Organization ranks the U.S. No. 1 among all countries in "responsiveness." Responsiveness has two components: respect for persons (including dignity, confidentiality and autonomy of individuals and families to make decisions about their own care), and client orientation (including prompt attention, access to social support networks during care, quality of basic amenities and choice of Michigan health insurance provider). This is what Americans rightly understand as quality care and worry will be lost in the upheaval of reform. Our country's composite score fell to 37 primarily because we lack universal coverage and care is a financial burden for many citizens.

• We need to implement "best practices." Mr. Obama and his advisers believe in implementing "best practices" that physicians and hospitals should follow. A federal commission would identify these practices.

On June 24, 2009, the president appeared on "Good Morning America." When asked whether "best practices" would be implemented by "encouragement" or "by law," the president did not answer directly. He said that he was confident doctors "want to engage in best practices" and "patients are going to insist on it." The president also said there should be financial incentives to "allow doctors to do the right thing."

There are domains of medicine where a patient has no control and depends on the physician and the hospital to provide best practices. Strict protocols have been developed to prevent infections during procedures and to reduce the risk of surgical mishaps. There are also emergency situations like a patient arriving in the midst of a heart attack where standardized advanced treatments save many lives.

But once we leave safety measures and emergency therapies where patients have scant say, what is "the right thing"? Data from clinical studies provide averages from populations and may not apply to individual patients. Clinical studies routinely exclude patients with more than one medical condition and often the elderly or people on multiple medications. Conclusions about what works and what doesn't work change much too quickly for policy makers to dictate clinical practice.

An analysis of Internal Medicine in 2007 reveals how long it takes for conclusions derived from clinical studies about drugs, devices and procedures to become outdated. Within one year, 15 of 100 recommendations based on the "best evidence" had to be significantly reversed; within two years, 23 were reversed, and at 5 1/2 years, half were contradicted. Americans have witnessed these reversals firsthand as firm "expert" recommendations about the benefits of estrogen replacement therapy for postmenopausal women, low fat diets for obesity, and tight control of blood sugar were overturned.

Even when experts examine the same data, they can come to different conclusions. For example, millions of Americans have elevated cholesterol levels and no heart disease. Guidelines developed in the U.S. about whom to treat with cholesterol-lowering drugs are much more aggressive than guidelines in the European Union or the United Kingdom, even though experts here and abroad are extrapolating from the same scientific studies. An illuminating publication from researchers in Munich, Germany, published in March 2003 in the Journal of General Internal Medicine showed that of 100 consecutive patients seen in their clinic with high cholesterol, 52% would be treated with a statin drug in the U.S. based on our guidelines while only 26% would be prescribed statins in Germany and 35% in the U.K. So, different experts define "best practice" differently. Many prominent American cardiologists and specialists in preventive medicine believe the U.S. guidelines lead to overtreatment and the Europeans are more sensible. After hearing of this controversy, some patients will still want to take the drug and some will not.

This is how doctors and patients make shared decisions—by considering expert guidelines, weighing why other experts may disagree with the guidelines, and then customizing the therapy to the individual. With respect to "best practices," prudent doctors think, not just follow, and informed patients consider and then choose, not just comply.

• No government bureaucrat will come between you and your doctor. The president has repeatedly stated this in town-hall meetings. But his proposal to provide financial incentives to "allow doctors to do the right thing" could undermine this promise. If doctors and hospitals are rewarded for complying with government mandated treatment measures or penalized if they do not comply, clearly federal bureaucrats are directing health decisions.

Further, at the AMA convention in June 2009, the president proposed linking protection for physicians from malpractice lawsuits if they strictly adhered to government-sponsored treatment guidelines. We need tort reform, but this is misconceived and again clearly inserts the bureaucrat directly into clinical decision making. If doctors are legally protected when they follow government mandates, the converse is that doctors risk lawsuits if they deviate from federal guidelines—even if they believe the government mandate is not in the patient's best interest. With this kind of legislation, physicians might well pressure the patient to comply with treatments even if the therapy clashes with the individual's values and preferences.

The devil is in the regulations. Federal legislation is written with general principles and imperatives. The current House bill H.R. 3200 in title IV, part D has very broad language about identifying and implementing best practices in the delivery of health care. It rightly sets initial priorities around measures to protect patient safety. But the bill does not set limits on what "best practices" federal officials can implement. If it becomes law, bureaucrats could well write regulations mandating treatment measures that violate patient autonomy.

Private insurers are already doing this, and both physicians and patients are chafing at their arbitrary intervention. As Congress works to extend coverage and contain costs, any legislation must clearly codify the promise to preserve for Americans the principle of control over their health-care decisions, especially Michigan health insurance providers.

Drug Managers Should Keep Their Health

By The Wall Street Journal

They are the arteries of the prescription-drug network. Pharmacy-benefit managers earn billions pumping orders between drugstores, manufacturers, Michigan health insurance providers and Michigan Medicare. Can competition undermine their vitality?

With the Senate pressing benefit managers for more transparency, many fear that Michigan health insurance and prescription coverage could soon be squeezed by the private sector.

Just as important, benefit managers have scale that ensures they are able to manage prices. With control of a price list, benefit managers can save health-care providers money by pushing manufacturers for rebates.

Benefit managers also can tweak price lists if rebates don't justify a drug's expense. The cholesterol drug Lipitor was removed from a list of preferred treatments in 2006, prompting the Lipitor retail price to surge. But when patients switched to the generic substitute Zocor, treatment costs fell by hundreds of millions of dollars.

Economists Are Split on Inflation

By The Wall Street Journal

Business economists are split on whether the Federal Reserve's massive infusion of credit into the economy will lead to inflation in the next couple of years.

Half of 266 members of the National Association for Business Economics surveyed in August said the Fed's decisions to increase the money supply won't lead to inflation in the next few years, the NABE said Monday. Some 41% disagreed, though, citing "lagged effects of policies now in effect," "monetization of the debt" and "ineffective exit strategy" as their primary concerns.

The economists overall said they expect inflation excluding food and energy to average 3% from 2014 to 2018. "This may reflect their view that an excessively stimulative fiscal policy and a complicated exit from its quantitative easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires," the NABE report said. The Fed aims to keep inflation between 1.5% and 2%.

Recent debate over the Fed's strategy for reducing its large holdings of government bonds and mortgage-backed securities has centered on timing. If the Fed waits too long to bring the programs to a close, the economy runs the risk of inflation. But if it attempts to wind them down too soon, while the economy is still weak, it could hinder the recovery.

The economists reached more of a consensus on overall monetary policy: Nearly 70% said it was "about right," up from 56% a year earlier. One-quarter of those surveyed said current policy was too stimulative.

The majority, 56%, said the Fed was likely to keep interest rates stable over the next six months, whereas 44% expect an increase.

As for U.S. fiscal policy, 35% said it was "about right," the highest percentage to say so since March 2008. But 50% of the economists surveyed said fiscal policy was too stimulative.

Evaluating a variety of proposals for a financial overhaul, the economists determined that consolidation of regulators and a revamp of ratings firms would improve financial stability and yield the most benefits for consumers and businesses with the least effect on credit.

Thousands Spell Out End-of-Life Choices

By The News & Observer

The issue of end-of-life planning regularly creates emotional debate, as in the case of Terry Schiavo, a brain-damaged Florida resident who died in 2005, and in the current controversy about a U.S. House proposal to pay doctors through Michigan Medicare for talks with willing patients about how they want their lives to end.

The issue was hotly debated in 2007, when the legislature voted after bruising debate to revise end-of-life forms to provide more detailed choices for people planning ahead.

Michigan MedicareSince then, thousands of people have made the decision to spell out advance choices about how they should be treated as their final days near. Nursing homes, hospitals, hospices and other institutions have asked the state for more than 390,000end-of-life forms.

And about a dozen people each business day add their advance health-care choices in the form of documents that spell out what kinds of end-of-life care they want under specific conditions. Those are added to a separate online database of about 15,000 maintained by the office of Secretary of State. Total annual filings to the Advance Health Care Directive Registry are up nearly 50 percent during the last five years, records show.

People need to know, and tell their family, what their wishes are because there may be a time when they aren't able to do that. The divisions in a family that surround somebody's medical condition frequently are irreparable. Somebody will say, 'Mama said she didn't want to be kept alive this way,' and somebody else says, 'I never heard her say that.'"

Issue for families

This charged issue has gained such presence in the health-care debate that President Barack Obama had to repudiate claims last week that health-care reform would create "death panels" to pass judgment, based on age and infirmity, on who should live. Provisions for end-of-life consultations may be dropped by the U.S. Senate, while it remains in a pending version of the House health reform package.

But beyond the politics, the issue touches many families and can be more subtle, involving the deference that patients typically feel toward their doctors.

The problem is that everybody reveres their doctor. If the doctor suggests that it's time to take a cocktail pill or something, because of the esteem that people have for doctors, that could be devastating.

Two state forms -- DNR ("do not resuscitate") and MOST (medical order for scope of treatment) -- were designed to allow people to detail in advance how they want to be treated under various end-of-life scenarios.

Opponents said such documents would tend by their nature to encourage people to decide to forgo life-sustaining treatment.

Multiple hearings and votes on the bills were marked by emotional testimony and predictions of state-encouraged euthanasia. State Rep. Paul Stam, an Apex Republican, opposed the revised documents created by the 2007 legislation, but doesn't know whether they have resulted in older people being nudged in the direction of forgoing end-of-life care.

Figures from the state Office of Emergency Management Services, which produces and distributes the DNR and MOST forms, show that hospitals, nursing homes and home health agencies are among the groups requesting the largest numbers of forms. Although the orders from institutions don't necessarily mean each document is being filled out, repeat orders show that they are seeing plenty of use.

What to Expect As New Rules on Credit Cards Take Effect

By The Wall Street Journal

Credit-card users get new protections this week, the first of a series of federal actions that constrain card issuers from changing terms on customers.

Starting Thursday, banks must comply with parts of the recently passed Credit Card Act of 2009 by mailing bills at least 21 days before their due dates and providing at least 45 days' notice before making a significant change to their rates or fees. Currently, banks are generally required to mail billing statements at least 14 days in advance and provide a 15-day notice of altered fees or rates. The new rules also will bar banks from increasing fees and rates without warning when a consumer misses a payment or exceeds a credit limit.

Consumers also will be allowed to avoid future interest-rate increases and pay off any outstanding balance over time under the original rate terms. Currently, if a consumer gets hit with a penalty rate, for example, they aren't given the option to reject the rates.

credit cards The bulk of the legislation's key provisions will take effect in February 2010, including limits on interest-rate increases on existing balances. The following July will see the introduction of new disclosure rules, drafted and approved by the Federal Reserve Board and other banking regulators.

In anticipation of the legislation, major card issuers have been raising interest rates and fees, reducing credit lines and closing accounts. Banks say the changes also are being driven by the weak economy, which has resulted in higher losses and funding costs. Earlier this month, for example, American Express Co. notified its Blue, Optima and co-branded credit-card customers that it was raising interest rates by an average of two to four percentage points. Other changes to these cards, which take effect with customers' October billing statements, include higher rates and fees for cash advances and late payments. American Express also eliminated fees for customers who exceed their credit limits, months before the legislation clamps down on a host of card fees.
Favoring Variable Rates

Other issuers, such as Bank of America Corp., J.P. Morgan Chase & Co.'s Chase Card Services and Discover Financial Services, recently converted customers' fixed rates to variable ones. The changes will make it easier for issuers to bump up the rates they charge without notifying customers. By contrast, banks must currently notify fixed-rate card holders of any change in rates.

Banks are also paring back their rewards programs. Citigroup Inc., for example, has started adding annual fees to some of its rewards cards, such as the Citi Diamond Preferred Rewards card. Under the Discover More Card rewards program, customers can earn an additional 5% back on purchases in categories that rotate quarterly; for the third quarter, however, the cap on purchases that qualify for the cash-back bonus was lowered to $300 from $400. Meanwhile, Chase last fall scaled back the bonus opportunities on its no-fee Chase Freedom cards. For Chase Freedom card customers wanting to earn a fixed 3% bonus for spending in the grocery, gasoline and fast-food categories, Chase now levies a $30 annual fee.

While the new legislation will help eliminate sudden rate increases and force more disclosure, the banking industry has said the restrictions will reduce available credit. The cost of borrowing also will rise, companies say, since they will have to be more careful about giving credit. Average interest rates on credit cards rose slightly to 14.43% through May, according to the Federal Reserve, although rates are still below historical levels of 18% and 19% that were typical 20 years ago.

According to Consumer Action's 2009 credit-card survey, which looked at 39 cards from 22 financial institutions, rates and fees began climbing this spring. The advocacy group said more credit cards now come with minimum cash-advance fees and higher balance-transfer and foreign-transaction fees.

"There's no question that issuers are taking advantage of this window before it closes to make as many changes as freely as they've been accustomed to," said Ruth Susswein, Consumer Action's deputy director, national priorities.

Changes to card terms are causing some consumers to alter their spending patterns.

After Bank of America raised his 7.9% fixed rate to a 13.9% variable rate last spring, Mark Nilles paid off his remaining balance, shopped around for another card and canceled his BofA card. In the future, the Arvada, Colo., hydrologist said he plans to rely on savings or shorter-term, fixed-rate loans instead of credit cards to pay for one-time expenses.

"It made me reassess everything that I was doing credit-wise," said Mr. Nilles.
More Fudge Room

For now, consumers should check their statement due dates to make sure they're getting the required additional time to pay their bills. Some people may want to adjust any automatic debits coming out of their checking accounts to make sure they're not paying their bills sooner than they need to, said John Ulzheimer of Credit.com, a consumer-education Web site. "This gives you a little more of a fudge period," he said.

Consumers are likely to find better credit-card deals if they also have a checking account at the bank. Under Chase Card Services' Chase Exclusives program, for example, Chase Freedom card holders who also have checking accounts at the bank can earn up to 10% more points on their spending.

The bank also rolled out a new credit card, "Slate From Chase," that automatically refunds the 12th month's interest charges each year if customers enroll in the bank's AutoPay program from a Chase checking account.

Meanwhile, for a limited time, Citi is offering some customers an additional 2% cash-back bonus on qualified spending on Citi credit cards if customers also have a banking relationship at the company.

A Last-Minute Dash for Tuition

By The Wall Street Journal

Weeks or even days before classes start, hundreds of thousands of college students nationwide still don't know whether they'll be able to cover their tuition bills this year.

In Michigan, the state legislature continues to battle over the Michigan Promise Grant, a merit award of up to $4,000 given to 96,700 students. The State Senate recently passed a bill to cut it entirely and eliminate another $56 million in need-based aid for this school year.

In Illinois, the need-based Monetary Award Program was halved last month, leaving about 145,000 students without a spring-semester payout. The full award used to total nearly $5,000.

In Utah, the state cut the tuition subsidy to 40% from 75% in its New Century Scholarship, a merit program in which students earn their associates degrees while in high school.

And in Pennsylvania, a state budget impasse is leaving 172,000 students unsure what funding they'll get from the state Higher Education Assistance Agency. The maximum award is slated to be $4,700 for students who attend in-state schools.

Even where state budgets are more secure, parental layoffs and shrinking savings accounts have imperiled college funding for many, sending students and their parents scrambling to find last-minute sources of money for school.

Most students file for financial aid months before the start of the academic year, and high-profile scholarships are often awarded a full year before the funds are disbursed. Some money is still available from federal, school and private student loans right before and even during the school year. But sources of state-based grants are drying up. And alternative student loans, to whom students often turn for extra help, are shying away from riskier borrowers with little credit history. Once they exhaust federal and school funding, students may be forced to defer or shift to part-time status, switch schools or give up entirely.

Cheaper Options

School financial aid offices will likely direct students to file the Free Application for Federal Student Aid. If they have already done so this year, students can't file a new application. But financial aid offices can also help them access additional federal funds that they may not have qualified for when they first applied.

private student loansAll students can get up to $2,000 in unsubsidized federal Stafford loans. Those with financial need can take out other Stafford loans—as much as $5,500—as well as Pell Grants and low-interest Perkins loans. Financial aid officers say even parents should apply for government loans; if they are denied, their children will be eligible for higher Stafford loan limits.

Because many schools require at least some payment before registration, students who don't expect money to come through for weeks or months can pursue school-sponsored emergency loans. The terms are generally more attractive than private student loans, from an interest-free loan of up to $300 at Purdue University to 7% for up to $1,500 at the University of Denver. Those loans are intended to be emergency stopgaps and require repayment in as little as a few weeks.

Students who still find tuition bills daunting can ask about tuition payment plans, which allow payments to be made in small installments. Southern Methodist University in Dallas, for example, offers a half-dozen options with terms ranging from four to 12 months, with enrollment fees of $50 to $150.

Some schools are releasing extra funds after finding their financial aid offices overwhelmed. Hiram College in Ohio, with about 1,000 students, raised $20,000 to provide needy students with one-time grants this year. And the University of Indianapolis, facing a drop in state aid, set aside up to $3 million for extra grants. But many institutions, facing their own budget problems, have come up dry.

Creative Financing

As a result, a number of students are looking elsewhere. Many are advertising their tuition needs on peer-to-peer lending Web sites such as Prosper.com, where groups of lenders provide funds directly to borrowers, or trade a portfolio of loan notes. Yet interest rates on such sites can climb to as high as 34%—far worse than even alternative student loans.

Some students are switching to part-time status to cut their costs. Much institutional financial aid is available only to full-time students.

Others are joining the Reserve Officer Training Corps, which provides stipends and merit scholarships for full tuition in exchange for eight years of military service. The campus-based program accepts new students year-round, though tuition assistance may be credited to future semesters, depending on when a student enrolls.