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Monday, November 30, 2009

Many Shopped Black Friday From Home

Information Week

Online retailers are continuing to muscle in on bricks-and-mortar stores as evidenced by the 3% increase in holiday spending to date by consumers buying online compared with 2008. Shoppers spent $595 million on Friday's online shopping alone, according to comScore.

The online measuring firm said $10.57 billion has been spent by online shoppers. The $595 million spent on Black Friday represented an 11% increase over last year's Black Friday.

"While this acceleration in spending suggests the online holiday season may be shaping up slightly more optimistically than anticipated," said comScore chairman Gian Fulgoni in a statement, "it may also reflect the heavy discounting and creative promotions being put forth by retailers that now encompass the use of social networks such as Facebook and Twitter."

comScore reported that Amazon was the most visited online retail property on Black Friday. The online retailer delivered gains of 28% over last year. Close behind was Walmart, which grew 22% while Apple.com Worldwide Sites, Target Corporation andBest Buy (NYSE: BBY) Sites also showed gains.

Deal sites have also fared well in the early days of the holiday shopping period. comScore said BFads was in the forefront of deal sites with 3.9 million unique visitors. That number represented a 4% gain over its numbers for the previous year.

comScore is continuing to compile figures for the holiday season. "Cyber Monday - the traditional kick-off to the online holiday shopping seasons - and the subsequent weeks will be the real test for how online retailers fare this season," said Fulgoni. "That said, this is a very encouraging start."

Sunday, November 29, 2009

Caribbean Resorts Roll Out Deals To Lure Travelers Back To The Islands

USA Today

ST. THOMAS, U.S. Virgin Islands — Ocean-view rooms steps from the sand at Bolongo Bay Beach Resort are selling for $265 on a mid-November Monday. But this one costs just 25 cents daily, plus tax, in a special deal.

The promotional package – $337.68 bottom line for three nights' lodging and airfare from Washington, D.C., plus $50 in dining and activities credits – is a steal. Billed as a celebration of the new U.S. quarter honoring the Virgin Islands and offered in October by BookIt.com, it was partly subsidized by the U.S. Virgin Islands Department of Tourism. The idea: to help fill rooms and airline seats in a slow period when the Caribbean is jittery about what winter high season will bring.

"I had friends who called me and asked if I'd lost my mind," says Bolongo Bay general manager Paul Doumeng, 47, sitting in its tiki hut-style beach bar, where Jimmy Buffett is on the sound system and rum punch flows.

The government didn't cover all the cost of the now-finished promotion, "but the idea was to capture" visitors, he says. "Once they're here, they spend money" on food, drink and sunset sails.

Coming off a generally dismal 2009, "it's a crapshoot (for the Caribbean) this winter in terms of tourism," says Gay Myers, Caribbean editor for the Travel Weekly trade publication. The year has been bad "for just about every island," says Myers, though budget-all-inclusive-packed Cuba, Jamaica and the Dominican Republic reported upticks.

Visitors to St. Thomas – 2.4 million in 2008, most of them cruisers and Americans – were down about 12% through September, says Allegra Moorehead of the U.S. Virgin Islands Department of Tourism (visitusavi.com). But seats on non-stop flights from Puerto Rico and the States to St. Thomas in December will be up 13.8%, a USA TODAY analysis of schedules from OAG –Official Airline Guide finds. More cruisers are expected this season, mainly because 6,296-passenger Oasis of the Seas is due to call weekly.

How low can they go in high season?

There are other auspicious signs across the Caribbean as tourism enters its high season, from Thanksgiving to April. Islands escaped hurricane devastation. New or upgraded hotels are opening. Seats on non-stop flights from the USA are up 12.4% December through March vs. the same period last year, the OAG analysis finds.

Discounting, free nights and resort credits abound, as lodgings and tourist boards do all they can to have a better year.

St. Maarten, for instance, is stimulating bookings with a $50 daily credit a room ("SXM Bucks") that can be used at participating businesses. Bookings must be made by Monday.

Resorts such as the El San Juan Hotel & Casino are goosing business with discounts for prepaying – under $150 on slow days. The Westin Resort, Aruba, gave early-booking discounts and has a more than 50% increase in holiday-season reservations than 2008, it reports.

"People are leery" of spending unless they think they're getting value, says Bolongo's Doumeng, whose low-rise, friendly but unfancy family-run resort caters to the budget-minded.

English spoken, and the dollar still speaks

The U.S. Virgin Islands – which include St. Thomas, St. Croix and St. John – have been doing better than some because of their much-promoted "no passport required" policy and the fact that the dollar is the currency and English the official language. It doesn't hurt that free shots of flavored rum are handed out as visitors arrive at the St. Thomas airport and at cruise-ship docks aboard discount Caribbean cruises.

Still, St. Thomas cabdriver Ivan Nicholas (a service-oriented charmer who calls himself "Ivan the Terrific") says his earnings have declined 15%-20% this year.

Driving a visitor on a $50, two-hour island tour in his Ford van, Nicholas, 46, points out thrifty tourist options such as green-shuttered Duffy's Love Shack in a parking lot by the St. John ferry. It's advertising $1.50 beef tacos Tuesday and pours free drinks for women after 9 p.m. Wednesdays.

As the van snakes around curves on the lush, hilly 13-mile-long island, he ticks off some positives. St. Thomas remains a big cruise destination, and there's excitement that Oasis of the Seas' multitudes will be lying on the white sand at Magens Bay and bargaining for jewelry and electronics at dozens of duty-free shops that line the streets and alleys in the capital of Charlotte Amalie. Shopping is a huge draw, though visitors also can snorkel, dive, sail and fish.

While his passenger frets at the jam of taxis and open-air "safari buses" at scenic spots such as (Sir Francis) Drake's Seat on a high point where you can spy surrounding islands, Nicholas smiles at the crush of camera-toting cruisers and the traffic jam heading into Charlotte Amalie. Four cheap Caribbean cruises are in today, he announces. Good for business.

Back at Bolongo, only 46% full on this pre-Thanksgiving weekday, some guests choose to dine in and drink till they can't on the resort's optional all-inclusive plan. St. Thomas at night is viewed with trepidation, because of the island's reputation for crime. Even Nicholas is hesitant to go into some neighborhoods.

This visitor enjoys Bolongo's calypso and limbo night, but can't resist heading to Duffy's – for a tab under $15, non-stop music and dancing. Cabs are hailed with some haggling over prices, which are set by the government but can be a matter of dispute.

When it comes to an early-morning airport run for departure, the call goes to Ivan the Reliable. He's at Bolongo at 6:45 a.m. – 15 minutes early – and points his van toward the airport.

"What drives our economy is you," he says. "We like Americans, because they spend money." Europeans generally aren't good tippers, he says.

"If people come here and tell their family and friends it is a nice place," he says earnestly, "then other people will come."

Friday, November 27, 2009

Publishing Veterans To Launch Newspaper In Detroit

AP Story

ROYAL OAK, Mich. — Two veteran publishers said Friday they are prepared to launch a daily newspaper serving the Detroit area, where the two largest newspapers have reduced home delivery to survive in a struggling industry.

Brothers Mark and Gary Stern said Friday they'll start publishing the Detroit Daily Press on Nov. 23, selling it for 50 cents daily and $1 on Sundays. Home delivery starts Nov. 30 in Wayne, Oakland and Macomb counties.

The paper's 60 full-time employees, many with experience at Detroit newspapers, are using the former offices of The Daily Tribune of Royal Oak, which moved to the offices of sister publication The Macomb Daily.

"We are affordable, both to the advertiser and the reader," Mark Stern told The Associated Press before a news conference.

He said he and his brother called themselves out of retirement when they learned of the Detroit newspapers' plans to scale back home delivery. The brothers also said they seek to start more daily newspapers in other metro areas, focusing on places where papers have shut down or scaled back.

The Sterns ran daily newspapers in Detroit in 1964 and 1967; New York in 1978; and Minneapolis in 1980 when workers at those cities' major newspapers went on strike.

Mark Stern, 64, published weekly dining and entertainment publications for 22 years in Fort Lauderdale, where he now lives. Gary Stern, 67, now lives in the Atlanta area. The Sterns, both Detroit natives, say they will also maintain a residence in the area.

The Detroit News and Detroit Free Press in March reduced home delivery and increased electronic offerings. The idea was to cut printing and distribution costs while retaining full service on the days most popular with print advertisers.

The Sterns said their venture is privately funded but declined to reveal the size of their investment.
They announced plans for the Daily Press in June and hoped to be publishing within 60 days. Getting there was more difficult than they anticipated because of technological hurdles, Mark Stern said.
The Daily Press arrives at a time of broad declines for newspapers. Average daily circulation dropped 10.6 percent in the April-September period from the same six-month span in 2008, according to figures released last month by the Audit Bureau of Circulations.

The average daily circulation of the Detroit Free Press, which reduced its home delivery to three days a week, declined 9.6 percent to 269,729. Circulation for The Detroit News, which dropped its home delivery to two days, dropped 5.9 percent to 167,849.

Two suburban dailies, The Oakland Press and The Macomb Daily, both saw circulation increases during the period. Their publisher, the Journal Register Co., emerged from bankruptcy protection in August after six months.

The Sterns say they can weather many financial struggles because they don't have overhead costs such as delivery trucks, pension funds or facilities. Advertising and editorial and production employees work for the paper, but not press operators or many in circulation. The Sterns have said they need 150,000 to break even and on Friday said they aim for 100,000 home-delivered copies and 100,000 in single-copy sales.

Fed Seeks Consumer Protections For Gift Cards

Wall Street Journal

The Federal Reserve on Monday proposed new regulations aimed at limiting fees and expiration dates associated with retail gift cards.

The rules would prohibit retailers and banks issuing network-branded cards, such as those bearing the MasterCard or Visa logos, from levying fees on recipients who have used their cards during the previous year.

The rules won't go into effect in time to affect cards purchased this year. The initiative is part of an overhaul of credit-card restrictions passed by Congress earlier this year and scheduled to take effect in August 2010.

Americans spent $88.4 billion on gift cards in 2008, but left $6.4 billion unused, according to TowerGroup, a consulting firm. That was less than in 2007, when $97 billion in gift cards were purchased and $8 billion was left unused.

Some issuers currently penalize consumers for not using their gift cards for extended periods, by deducting fees from their available funds. The proposed Fed rules would limit card issuers to charging no more than one inactivity, dormancy or service fee a month, and require funds linked to cards be usable for at least five years after a card is issued or last funded.

The National Retail Federation expects the changes will hit banks harder than retailers, which already have pulled back from expiration dates and various fees. "It really won't have a big impact on the retail industry," spokesman Scott Krugman said. "It's the bank-issued cards that tend to charge fees, and at this point, you'd be pretty hard pressed to find a retail store-issued gift card that has an expiration date."

The rules could thwart some states that collect the value of unused gift-card credit from issuers after a period of two to five years. Many state governments consider unused cards to be abandoned property, similar to dormant bank accounts and safety-deposit boxes that aren't accessed.

The Fed regulations wouldn't apply to prepaid cards not marketed or labeled specifically as gift cards or gift certificates, or to cards earned through reward programs.

The central bank opened its proposal to public comment, so it may be altered before final approval. Some lawmakers want the provisions in place sooner than next August.

"These rules are the right step, but it would be far better for them to take effect in time for this holiday shopping season," said Sen. Charles Schumer (D., N.Y.). He said he would continue pushing the Fed to implement the gift-card regulations more quickly.

Old-School Social Climbing -- What FaceBook Can't Deliver

Wall Street Journal

An Ode To The Old-Boy Network

The Wednesday 10, shown at a 1960s banquet 
with their dates, began meeting 52 years ago.

 In 1957, as men in their late 20s, they began meeting—initially over breakfast, then over dinners held at the Sherry-Netherland Hotel or at the Harvard Club in midtown Manhattan. Few were born to means. Many were sons of immigrants. Most went on to become luminaries in their fields—presidents of television networks, partners at banks, editors of magazines.

On occasion, they shared their influence with one another. When member Mort Janklow made a career switch from corporate attorney to literary agent, a fellow member, columnist William Safire, offered himself as a famous first client. When Robert Menschel, a senior director at Goldman Sachs Group Inc., was considering deals involving large consumer companies such as Procter & Gamble, he would pick the brain of fellow club member Ed Meyer, the former chief executive of Grey Advertising.

In a day when "social network" is a buzz term from colleges to board rooms, the members of Wednesday 10 show the benefits of old-fashioned networking. "We were all young kids starting out, and it is easy when you are so involved in building your career to lose touch with other people who are outside your field," says Mr. Menschel, who has been at Goldman Sachs for 55 years. "It helped me to understand why other people do what they do—which is important in life and in business. You don't learn anything from talking to sameness."

The Wednesday 10 comprised, at various points, more than 20 men; the goal was a number small enough to maintain intimacy yet large enough to ensure that at least 10 members would show up for each of the monthly Wednesday-night meetings. No more than two representatives of any one industry were permitted. The idea was to combat insularity, to keep the men connected to people and events outside their own professions.

Last Wednesday, in a prewar Manhattan duplex, the membership met for the first time since the death of the group's founder, Mr. Safire. At a sit-down dinner of lobster pot pie, short-ribs stroganoff and fall-vegetable slaw, 16 of the group's members engaged in spirited discussion about the economy, the Palestinian-Israeli conflict and the friendship they have cultivated during the past 52 years.

The members bantered like brothers as they greeted one another over cocktails, hors d'oeuvres, handshakes and a few hugs. "How old are you Larry?" Lawrence Grossman, the former president of NBC News and PBS, was asked as he walked into the reception.

"What the hell kind of question is that?" Mr. Grossman replied. Turns out he was born in 1931, making him the youngest member.

"I am the oldest," said Charles Sigety, 87, a former nursing-home owner whose family has significant real estate holdings. Later, he pointed out another distinction. "I'm probably the only gentile here tonight," he said.

"We've been meaning to talk to you about that," replied Mr. Menschel. (The group is about 75% Jewish.)

By today's definition, the Wednesday 10's idea of diversity isn't expansive. "They're anti- women," Barbara Walters says. When she worked in public relations with Mr. Safire in the 1950s, she would rib him about the all-male make-up of the group. "No women!" he would respond, Ms. Walters says.

"In 1957, it didn't occur to us to include women," says Mr. Menschel. "If we formed it today, it wouldn't occur to us not to include women." When asked about the homogeneity, other members point to the many banquets that included wives and their invitations to Ms. Walters, Gloria Steinem and the late "Feminine Mystique" author Betty Friedan, each of whom addressed a Wednesday 10 meeting as a guest. Ms. Walters says she recalls nothing from the meeting she attended. Nor does Ms. Steinem. "It may not please them to know that I don't remember," she says. "But I would urge them to change the name to the Wednesday Men's 10."

The advantages to membership were many. Mr. Janklow secured Mr. Safire lucrative contracts and also scored book deals for other members: Edward Bleier, a former top executive at ABC and Warner Bros., wrote "Thanksgiving," a guide to and history of the holiday; George Lang, who owned restaurants including Café des Artistes, chronicled his journey from a Nazi work camp to the height of New York's culinary world in "Nobody Knows the Truffles I've Seen"; and Mr. Menschel wrote "Markets, Mobs & Mayhem: a Modern Look at the Madness of Crowds." Mr. Safire wrote the forewords to the books of Messrs. Bleier and Menschel.

Mr. Menschel was the chairman of the board of trustees of the Museum of Modern Art from 2005 to 2007. He encouraged curators to attend the one-man photography exhibits of Wednesday 10er Marvin E. Newman, who shot for Esquire, Sports Illustrated and Life magazine. Mr. Newman's work is featured in permanent collections at MoMA, the Metropolitan Museum of Art and the Whitney Museum of American Art. When members get sick, they call member Mortimer Lacher, a pioneer in lymphoma research who has been on the staff of Memorial Sloan-Kettering Cancer Center since 1961. "I'm the house doctor," he says.

By almost every account, Mr. Safire founded the group after one of his superiors at public-relations agency Tex McCrary Inc. asked him to round up some of New York City's most promising young businessmen. The rumor was that Ruder Finn Inc., a competing publicity company, had a connection to the Young Presidents' Organization, a networking group of business leaders.
'Our Own Organization'

One of the Tex McCrary executives said, "We need our own organization which has a purpose but might feed business to the firm," recalls Mr. Bleier, who was also a Tex McCrary employee.

Mr. Safire shared the plan with Mr. Lang after the two men worked together on a 1956 reception hosted at the Waldorf-Astoria (Mr. Lang was assistant banquet manager) for Princess Grace and Prince Rainier by the Overseas Press Club (Mr. Safire handled the PR).

They each invited friends and acquaintances. Over time, Mr. Lang says, the group helped him to understand the motivations and concerns of powerful men who worked in New York City's core industries—the type of men who were his customers. "Through the Wednesday 10, you begin to understand the world," says Mr. Lang, 85. "I knew about restaurants but not about Wall Street or show business."

To begin the meetings, each man gave an update on his life. Impending marriages and expected babies were nodded to, but the thrust of the discussion centered on career development. "It was a professional support system," says Mr. Meyer, 82. By the end of each meeting, he had a snapshot of what was going on in the realms of law, media, art, finance, real estate, public service and cancer research. "It was like reading a newspaper cover to cover," he says.
Distinguished Guests

For the first 15 years or so, the men invited one guest per meeting to brief them on the issues of the day and answer questions. As the members' careers got traction, the profile of the people to whom they had access grew. Over the years, the roster included CBS News's Mike Wallace, Public Theater founder Joseph Papp, former New York City Mayor John Lindsay, accused Soviet spy Alger Hiss and Roy Cohn, who was a prosecutor during the espionage trial of Julius and Ethel Rosenberg and an aide to Senator Joseph McCarthy during his anti-Communism hearings.

On Friday, Nov. 19, 1971, the group traveled to Washington, D.C., for a black-tie dinner at Blair House. The highlights included a speech on domestic policy delivered by Donald Rumsfeld, who was a Cabinet-level counselor to President Richard Nixon. (Mr. Safire was by then a White House speechwriter.) "I rarely got into black tie, but Bill said it was important," Mr. Rumsfeld says.

Once Mr. Safire moved to Washington, D.C., the group scaled back the frequency of its meetings to twice a year and stopped inviting guests so the members could spend their time together reconnecting. At one gathering last year, though, the group gave special dispensation to a doctor of gerontology.

"I don't know why someone thought that was appropriate for this group," says Mr. Bleier, 79.
'Daddy's Ideas'

The men had hoped their sons would create an adjunct group that would one day assume the Wednesday 10 mantle but none took the initiative. "Daddy's ideas are not the ones children tend to take on," says Mr. Menschel.

Mr. Safire's is the club's eighth death, according to Mr. Bleier. A few decades ago, one member dropped out—Bill Adler, a former publishing entrepreneur. "It was getting to be a very self-admiring group, and it lost appeal for me," says Mr. Adler, who also says that the idea for the club was his, not Mr. Safire's. The rest of the membership disputes that contention.

At the apartment of Jenifer and George Lang last Wednesday, the men sat around a large rectangular table set with china, flowers and printed menus. (Mrs. Lang cooked the entire meal but disappeared at dinner time.) The formal discussion began when member Robert K. Lifton, the former president of the American Jewish Congress, was asked to address the peace process in the Middle East. "I see nothing changing in the next five years" unless the interested parties change their patterns of conduct, Mr. Lifton said, after giving his impressions on Israeli Prime Minister Benjamin Netanyahu, whom he has known for 20 years. The situation in Afghanistan? "Quagmire," Mr. Lifton said.

"I'd like to hear a little about the economy from our financial guru," said the photographer Mr. Newman, in reference to Mr. Menschel.

"The question is, what is going to get 15 million people back to work," Mr. Menschel said. "It won't be big companies. It's going to be driven by the 'mom and pop economy' and that takes a long time."

During the economic discussion, Mr. Menschel had to weather some Goldman Sachs-bashing. Dr. Lacher called one of Mr. Menschel's colleagues a "bozo." Stanley Bartels, a banker who made his career at smaller establishments, called Goldman a "monster," and Mr. Menschel rolled his eyes.

Most of the meal was spent discussing Mr. Safire and the group he built. James Rosenfield, former president of CBS Television Network, looked around the table and gave in to a moment of wistful congratulations. "Each of us started from zero with a common denominator—we were ambitious and hard-working," he said. "And I look around and there isn't a single guy in the group who wasn't a winner in his own world."

"This group is amazing in its longevity," added Dr. Lacher.

The brandy had been served, so Mr. Menschel said, "Let's drink to that."

Wednesday, November 25, 2009

Why Are Jobs So Slow In Coming?

Business Week

Attendees at a job fair in Livonia, Mich., try to get their 
résumés into the right hands Paul Sancya/AP Photo

Could it take as long as five years for the economy to replace all of the 8 million jobs lost since the Great Recession began? The most bearish economists think so.

Job creation is proving to be painfully slow, and Washington is starting to panic. With unemployment at a 26-year high of 10.2% and climbing, the Democrats are scrambling to rev up the economy before the midterm elections next November. The latest effort is a "Jobs Summit" set for Dec. 3 at the White House. The idea, said President Barack Obama after a Nov. 23 cabinet meeting, is that the gathering of business leaders, nonprofits, academics, and labor will "explore how we can jump-start the hiring that typically lags behind economic growth."

That may well prove an impossible goal since the White House is battling an ominous economic trend that has been gathering in strength and severity for decades. The U.S. economy, once the greatest job-creation machine in the world, has taken longer and longer to replace the jobs lost in recent recessions—never mind creating the additional jobs needed to absorb new workers into the market. Back in the '70s and '80s, it took as little as a year after a recession ended to add back the jobs that had disappeared. Yet after the eight-month downturn that ended in March 1991, it took 23 months. And following the 2001 dot-com bust, 39 months passed before the U.S. returned to square one on the jobs front.

This time, things could be even worse. U.S. payrolls peaked at 138 million in December 2007; today they stand at roughly 130 million. Stuart G. Hoffman, the chief economist of the PNC Financial Services Group thinks it could easily take another four years to regenerate all those jobs, assuming, as many economists do, that the recession ended in June of this year. David Rosenberg, the former top North American economist for Merrill Lynch, now with the Canadian investment firm Gluskin Sheff + Associates, is even more pessimistic. Convinced that the U.S. has now entered "the mother of all jobless recoveries," he believes it will take at least five years to recover all those jobs. "And that's a conservative estimate," he adds.

What accounts for the growing lag times? The speed and extent to which GDP bounces back after a downturn is one crucial factor. Martin A. Regalia, chief economist for the U.S. Chamber of Commerce, points out that as the U.S. recovered from earlier recessions, GDP often grew for several quarters at around 7%—roughly four points above the economy's long-term potential. Such spurts, fueled by strong pent-up demand among consumers and businesses, helped many unemployed Americans find jobs. Not this time: With both households and businesses stepping back from spending levels that were artificially pumped up by debt, demand is weak. Most economists project GDP growth to stay at or below 3% for the next to years. "If you don't have growth well above your long-term potential, you can't reabsorb people, so it takes a lot longer to get back to where you were," says Regalia.

It's not just a matter of regaining lost ground: There are also all those young people just entering the labor force to put to work. Simply to keep the jobless rate from rising, the U.S. needs to add a net 150,000 jobs a month. While the slashing of U.S payrolls appears to be slowing, no one expects the economy to generate anywhere near the growth needed to generate that many new jobs anytime soon. That's why Harvard University economist Kenneth Rogoff believes the unemployment rate could peak at over 11%. "The U.S. would need to add a good 11 million jobs to bring the unemployment rate back to where it was at the start of the crisis, and over 9 million jobs just to get unemployment back to 6%," he says. As for the unemployment rates of 5% or lower that the U.S. boasted between 2005 and 2007? "We might not see that for a decade," says Rogoff.

Slower growth only partly explains the shift toward jobless recoveries. Goldman Sachs (GS) senior economist Ed McKelvey argues that over the last decade globalization and deregulation have forced companies to focus far more on controlling costs to remain competitive in world markets. Sharply higher productivity is allowing companies to get far more out of the workers they have, while factory automation is wiping out assembly line work and information technology is making many white- and pink-collar jobs extraneous. Meanwhile, companies are moving other operations abroad to take advantage of cheap labor in places like China and India. Such pressures from globalization are only increasing. "With most of the motivations and mechanisms for the jobless recovery still in place, we see no reason why most firms would behave differently this time around," McKelvey wrote in a recent note to clients.

In theory, American workers should be able to shift gears and perform higher-value-added work at home, and some have. But many Americans aren't equipped for the jobs of the future. A telling sign of the mismatch between workers' skills and employers' needs is that according to the U.S. Bureau of Labor Statistics, there were almost 2.5 million job openings in September that employers were actively trying to fill. While that was down from a peak of 4.8 million in 2007, it was still a stunningly high number considering that there were over 15 million people unemployed that month. Julian L. Alssid, executive director of the Workforce Strategy Center, says that schools, including many community colleges, still aren't producing graduates with the kinds of skills that employers demand.

The weak labor market has left many workers far more idle than they'd like. That means companies have plenty of room to boost hours for part-timers before they need to add more people to the payroll. In a Nov. 16 speech, Federal Reserve Chairman Ben S. Bernanke pointed out that the number of part-time workers who want a full-time job but cannot get one has more than doubled since the recession began. The average workweek for production and nonsupervisory employees has fallen to 33 hours, the lowest level of the postwar period. "The best thing we can say about the labor market right now is that it may be getting worse more slowly," Bernanke added.

Which leads to another key reason why unemployment is likely to rise even as layoffs fade from the picture: New hiring will probably remain sluggish. That may seem an obvious point, but Michael Feroli, an economist with JPMorgan Chase, (JPM) points out that the recent jobless recoveries didn't occur because layoffs continued longer than during a traditional recession. A far more critical factor was that businesses waited longer to start hiring again than had historically been the case.

It all adds up to an enormous economic and political challenge for President Obama and his advisers—and one for which they have only limited ammunition. Count on the President to keep reminding everyone how much worse things would have been without the stimulus and the bailout of the banks. While there's talk of boosting infrastructure spending and offering tax credits to employers who create new jobs, the soaring deficit is likely to prevent ambitious new programs from being adopted. "There aren't a lot of easy options," warns Gregory Valliere, chief policy strategist for institutional broker Soleil Securities. "Those that make the most sense will cost a lot of money, which voters have adamantly rejected. So it's hard to see what they can get done." The real question may be whether the summit gives the Administration and its congressional allies some political breathing room.

Tuesday, November 24, 2009

Facebook Possibly Going Public

Wall Street Journal

Facebook Inc. took steps to solidify the control of founder Mark Zuckerberg and other existing shareholders in the event the social-networking company goes public.

The closely held Silicon Valley firm, emulating one of Google Inc.'s well-known strategies, established a dual-class stock structure that would increase the voting power of Mr. Zuckerberg, who is the company's chief executive, and other existing shareholders if they hold onto their shares during an IPO.

Facebook said Tuesday the move shouldn't be construed as a signal that the company is planning to go public, saying it has "no plans" to do so "at this time."

It said it is introducing the structure "because existing shareholders wanted to maintain control over voting on certain issues" and "focus on the long-term."

As part of the plan, Facebook will convert existing holdings to Class B stock, which carry 10 times the voting power of Class A stock, according to a person who has seen documents outlining the plan.

Those shares will remain Class B shares unless the owner sells them following an initial public offering, at which time they will become Class A shares, this person said.

Mr. Zuckerberg, who is 25 years old, has said in recent interviews that the company plans to go public eventually. If that happens—and existing investors hold onto their shares—the dual-class structure would enhance their control and make it easier to fend off unwanted suitors.

Mr. Zuckerberg, already the company's largest shareholder, has a percentage stake measured in double digits, according to people familiar with the matter. He already wields the most power among investors through board seats he controls.

Others with sizeable stakes include co-founder Dustin Moskovitz and Sean Parker, the company's founding president, along with early investor Peter Thiel and Accel Partners, a venture capital firm.

Facebook declined to comment on the ownership stakes.

The fast-growing company, which operates one of the most popular sites on the Web, said earlier this year it is generating positive cash flow and that revenue in 2009 is expected to be up more than 70% from 2008.

Mr. Zuckerberg has taken a number of steps to buy the company more time before going public, most recently allowing some employees to sell up to a million dollars in stock through a private buyback program. Under that program, Digital Sky Technologies purchased shares from Facebook employees at a price that valued the company at $6.5 billion.

If Facebook chooses to raise more money it is unclear whether the company would issue Class A or Class B shares or which currency it would use for potential acquisitions.

GE Having A Yard Sale


Forget growth--General Electric's Jeff Immelt is on a mission to raise cash now.

If General Electric combines its NBC Universal entertainment unit with cable outfit Comcast, it will become the biggest example of what is becoming Chief Executive Jeffrey Immelt's signature strategy: divestiture.

Where he once boasted about growth, Immelt is now busily selling off divisions to raise cash and reduce debt at the conglomerate's $658 billion (assets) finance arm. He's not in a position to extract good terms from the buyers.

Take the possible NBC/Comcast transaction: GE won't talk, but the company reportedly would contribute NBC Universal, with $3.1 billion in pretax profit last year and an estimated value of $30 billion, for a 49% interest in a joint venture with Comcast. Comcast's investment would be cash and programming assets worth $10 billion. Benefit to GE: taking $2 billion of NBC debt off GE's balance sheet.

Exchanging $30 billion worth of assets for a minority stake in a $40 billion business doesn't seem to make much sense--unless, perhaps, you're desperate. That's the take of Nicholas Heymann, a longtime GE analyst now with Sterne, Agee & Leach. "This is a housecleaning exercise going on," says Heymann, a onetime GE employee and former Prudential Securities analyst who has covered the company for 26 years.

Ever since the Jack F. Welch years in the 1990s, GE's finance arm took advantage of steadily falling interest rates and its seemingly bulletproof triple-A bond rating to borrow money and invest it in loans and acquisitions. Some of the borrowed money flowed back to the industrial side as dividends--$7.3 billion in 2007--that helped the parent pay its own dividends to shareholders.

All that ended with the credit crunch, when GE was forced to reduce its reliance on short-term commercial paper and turn to two saviors (Berkshire Hathaway and the federal government) for folding money.

Tesla Motors IPO Talk Heating Up

Venture Beat

Rumors are swirling today that Tesla Motors is seriously considering an initial public offering sometime soon. The talk has been tracked to two anonymous sources, who say the six-year-old company could cash in big on the battery-powered car trend before electric and hybrid models from companies like General Motors, Mitsubishi and Nissan make it to market.

Tesla has officially denied the prediction, calling the IPO chatter “rumor and speculation.” That said, going public in 2010 would give the San Carlos, Calif. company several distinct advantages. First, it would solidify its position as the electric car player to watch. It’s already been casually anointed as the leader by industry observers and the Department of Energy, which granted it $465 million in stimulus funds in its first round of low-interest loans for advanced transportation projects. Second, it could use the sale to raise money to get its hotly anticipated Model S sedan out the door by its 2011 due date.

Tesla is one of several cleantech companies anticipated to go public as soon as next year. When A123Systems shocked the market with its blockbuster IPO in late Sepember (its share price jumped 50 percent on opening day), many analysts, including the Cleantech Group, said that the biggest public offerings in 2010 will probably come out of the green sector. In addition to Tesla, solar system maker Solyndra — which received $535 million in loan guarantees fro the DOE in March — and smart grid communications provider Silver Spring Networks have also been named as likely candidates.

Tesla filing to go public would cap off a year of consistent wins for the company, which began with Daimler taking a 10 percent stake ($50 million) in May. After that, it nabbed the millions of loans from the DOE, followed by $82.5 million from Daimler, Aabar Investments and Fjord Ventures in September. It declared profitability in July and purchased space in thePalo Alto-based Stanford Research Park for its new headquarters and smaller assembly operations. On top of that, it opened swanky showrooms in New York, Seattle, Munich, and other major markets.

The company has now raised $783 million from a wide-ranging field of investors including Compass Technology Partners, Valor Equity Partners, Capricorn Management, Google (and its founders Sergey Brin and Larry Page), JP Morgan, VantagePoint Venture Partners, Draper Fisher Jurvetson, Technology Venture Partners and of course its CEO Elon Musk.

New Watchword For Multinationals: Polycentric Innovation

Wall Street Journal

What do John Deere, Cisco, and Obopay have in common? All three companies form a new breed of enlightened Western firms that have embraced what I call "polycentric innovation."

Polycentric innovation is an emerging business practice that consists of networking international talent, capital, and ideas to meet global demand for new products and services. Wait, isn't that what multinationals have been doing for decades? Not really. While it's true that leading American and European MNCs (I won't name any here for fear of embarrassing them) have been operating R&D centers in emerging markets like India and China for years, these regional R&D centers merely adapted existing technologies and products developed in the West for distribution in local markets.

While some MNCs do conduct original research in emerging markets, the products and services produced by their bright Indian and Chinese engineers and scientists have again been primarily geared for local market consumption only. As such most MNCs' R&D centers in emerging markets like India and China have traditionally had a narrow mandate or were not tightly integrated with the firms' global innovation network, whose center of gravity was solidly anchored in New York or London.

But John Deere, Cisco, and Obopay are turning this ethnocentric 20th century R&D model on its head by de-Westernizing their business model and shifting the epicenter of their global innovation network well beyond the borders of USA and European Union. And they are using India as the launch pad for their "polycentric" innovation approach.

Take John Deere. It has developed low-cost, high-value products—like the 5003 tractor series and John Deere construction equipment —entirely inspired by the frugal Indian market. For instance, after serving the cost-conscious Indian farmers, John Deere ag equipment designed for the Indian market is finding increasing demand in Western markets, including among farmers in the U.S. Midwest who are reeling under the recession. Raj Kalathur, managing director of John Deere India, points out that his firm could never have successfully developed and marketed this innovative product line globally if its top management had stuck to its U.S.-centric core business model, and if it didn't empower and connect a diverse team of U.S. and Indian engineers to collaboratively design low-cost, high-value products that benefit farmers worldwide. That's polycentric, networked innovation in action!

Cisco has been bolder than John Deere by taking polycentric innovation to a whole new level. Even a few years ago, when I was a tech analyst, I would have never believed that this tech giant would one day practice polycentric innovation given its parochial outlook (almost all Cisco's top execs used to be located in San Jose, the company's headquarters). But all this changed in 2007 when John Chambers, Cisco's CEO, opened in 2007 the Globalization Center East in Bangalore, which de facto acts as Cisco's second HQ. By dispatching Wim Elfrink, a Dutchman who is Cisco's number two exec, to head this new center, Chambers sent a strong message to his company on how serious he was about diffusing the locus of decision-making beyond the confines of Silicon Valley. GCE was given a global remit from Day One: it was tasked with launching whole new business units with high strategic relevance that would serve both emerging and developed markets.

Fast forward to 2009: Cisco's GCE is alive and kicking. I recently spoke to Dr. Anil Menon, who co-heads Cisco's globalization efforts out of Bangalore, who shared with pride the fact that GCE has successfully incubated and spawned a new business unit called Smart Connected Buildings that is now globally rolling out entire new products lines that integrate U.S. technology and Indian know-how. He also reiterated Chambers' commitment to shift 20% of Cisco's top leadership to Bangalore soon. These India-based senior execs, many of whom Indians promoted from within, will soon call the shots on how Cisco innovates (and even operates) globally. You can call it polycentric management philosophy!

John Deere and Cisco are large corporations pioneering the practice of polycentric innovation out of India. But you may ask: "What about small Western firms? Are they capable of orchestrating global innovation networks out of India?" The answer: You bet. Let me show you how a Silicon Valley startup called Obopay is practicing polycentric innovation with much gusto.

Obopay specializes in mobile banking services. Obopay's technology allows consumers and small businesses to buy, pay, and transfer money through any mobile phone via a simple text message. Thanks to Obopay, millions of unbanked people in places like Africa and India are having access to financial services for the first time in their life. Although Obopay's R&D team is spread across Silicon Valley and Bangalore, the technology and business inspiration for Obopay's cutting-edge solutions mainly comes from India, which is adding 10 million new cell phone subscribers each month and yet is home to 600 million unbanked citizens.

Carol Realini, Obopya's forward-thinking CEO, is keen to make basic banking services affordable not only for low-income Indians but also to the 106 million underbanked Americans who are turned down by the risk-averse U.S. banking system. These disenfranchised American citizens have much to gain from the innovative, affordable financial inclusion schemes which Obopay has developed and deployed in India. What is good for India can indeed be good for the world.

At the beginning, I called John Deere, Cisco, and Obopay "enlightened." Why? Because they recognize that we are rapidly shifting to a multipolar world in which the bulk of the economic growth will come from emerging markets like India. As a result, these smart firms are proactively using India to mold their post-Western global identity.

These visionary firms are engaging India not just as a low-cost talent supply base or a lucrative mass market for their offerings but as a test-bed for trialing 21st century operating models -- like polycentric innovation -- that are fit for the globally-networked knowledge economy. Let's hope more Western firms – MNCs and startups -- will embrace polycentric innovation and use their R&D hub in India to design, build, market, and manage new products and services with global relevance.

Monday, November 23, 2009

Cisco's Extreme Ambitions

Business Week

CEO John Chambers is now chasing market share in 30 different categories—and making powerful enemies

Despite Cisco's size, CEO Chambers says it will now be far more nimble

During Cisco Systems' (CSCO) annual meeting on Nov. 12, John T. Chambers, chairman and chief executive, strode confidently around the auditorium at Silicon Valley's Santa Clara Convention Center. But he faced a barrage of tough questions about the company and its prospects. At one point, looking a tad dazed by the onslaught, he sat down on the steps of the stage. "At what size does Cisco become so big and diverse that its growth and profitability will plateau?" one investor asked. Chambers considered the question for a few seconds. "Hopefully, well after the CEO retires," he said with a laugh.

It's no joke for investors. Chambers is struggling to show how his $36 billion behemoth can remain a growth company and improve its stock market performance. The challenge has the 60-year-old CEO trying to pull off one of the most ambitious feats in business. He's racing into 30 different markets at the same time, while implementing a council-based management approach that's controversial among top managers. Now Chambers' ambition is fueling a risky fight with some of the mightiest companies in tech, including Dell (DELL), Hewlett-Packard (HPQ), and IBM (IBM). "It's a clash of the titans, and investors are nervous," says analyst Brent Bracelin of Pacific Crest Securities.


Chambers may have more to lose than his rivals. As he moves into the computer server market led by HP, Chambers has provoked a counterattack on his core business of routers and switches, which direct traffic around the Internet. HP said on Nov. 12 it would buy networking equipment provider 3Com (COMS) to step up its assault. The trouble for Chambers is that gross margins in the server business are around 20%, compared with 65% for routers. As Cisco gets more revenue from servers, its overall margins will likely fall, while HP will probably see margins rise as it sells networking gear. "I'd rather be HP than Cisco right now," says Steve Deplessie, founder of the research firm Enterprise Strategy Group.

Chambers declined to comment for this story, but he has explained his strategy publicly. He sees the challenging times in the tech industry as an opportunity for the strong to get stronger. He believes Cisco can keep growth high by charging into markets for everything from $149 Flip video cameras to multimillion-dollar data center projects. He established the new councils—48 in all—so managers can make decisions without waiting for approval from him or anyone else. He says the councils are the primary reason Cisco can pull off a greater variety of acquisitions than ever before. "We're going to set a pace, and we'll challenge anyone to keep up with us," Chambers said at the annual meeting.

Cisco is having some success in new markets. The company has become a leader in computer security and office phones. Where it can't beat the competition, it buys them. It's offering $3 billion for Tandberg, a Norwegian company that makes videoconferencing systems that have proven more popular than Cisco's high-end products. "They've done a good job so far," says David Eiswert, portfolio manager at T. Rowe Price's Global Technology Fund, which holds Cisco shares.

Chambers may have few options other than taking on tougher fights. He has pledged that Cisco will boost revenues 12% to 17% yearly, but investors are skeptical. Cisco's stock is off about 20% over the past two years while shares in IBM and HP are up. "I think he has no choice, if he really wants Cisco to be a growth company," says analyst Erik Suppiger of Signal Hill Capital. "But does it raise considerable execution risk? It sure does."

Chambers crossed the Rubicon in March, when Cisco announced a new server. It's part of a broader strategy to reinvent the data centers that companies increasingly use to handle their computing needs. Cisco hopes to charge premium prices for gear that will let companies more efficiently handle their Internet traffic.

Still, HP has years of experience competing with Dell at razor-thin margins, and it has more than 150,000 consultants who help sell its gear to corporate customers. "Cisco has to figure out not only how to beat us but also how to beat IBM and Dell, and compete at margins very different than what they're used to," says Dave Donatelli, executive vice-president at HP.

IBM and Dell have long sold Cisco's networking gear, butthere are increasing signs of strain in those relationships. Big Blue just inked a deal with rival Voltaire and is shipping gear from Juniper Networks (JNPR), including to the New York Stock Exchange (NYX), a former Cisco customer. Dell recently inked a deal with Juniper to resell its gear. "If the enemy of your enemy is your friend, we have a lot of friends right now," says Kevin Johnson, chief executive at Juniper.

Chambers certainly knew the risks of taking on the computer giants. Earlier this decade, former Cisco executives Jayshree Ullal and Andreas Bechtolsheim came up with a prototype for a server, but Chambers wasn't ready to take the leap. The debate erupted again in 2007 after Cisco took a stake in a startup called Nuova, created by longtime Cisco engineering chief Mario Mazolla, which was developing a server. Several top executives, including Charlie Giancarlo, voiced opposition at the expansion, but Chambers decided to proceed. Even the chief information officer at one of Cisco's largest customers is skeptical about the move: "They should have [gone after the data center] without getting into the server business."


Some people wonder if Chambers' strategy is being driven by ego as well as by Cisco's needs. Two former executives say Cisco's council-based approach, whatever its intended purpose, is an effective way for Chambers to consolidate power. Diluting authority by spreading it across committees may prevent any one person from gaining too much control. Sources also say that Cisco executives considered heirs apparent have rarely lasted at the company for long. "Being No. 2 at Cisco has not been a long-term assignment," says one former mid-level executive.

A Cisco spokesman dismisses any suggestion that ego plays a role in Cisco's strategy as "nonsense. John Chambers and Cisco's entire leadership are focused on driving Cisco's growth and business results." Chambers admits the council structure is unusual but argues it's the only way a company Cisco's size can move as fast as it needs to. He says the councils work and help identify talent throughout the company.

In a sense, Chambers is bidding for a place in the history books. He's trying to use the ambitious expansion and unconventional management strategy to demonstrate how a company the size of Cisco can remain fast-growing and nimble. If he succeeds, he may end up regarded as a business icon, along the lines of General Electric's Jack Welch. "Cisco is trying to rewrite the management books," says analyst Tal Liani of Merrill Lynch. "We don't know yet whether it will be successful or not."

Chambers certainly senses the urgency. "I realize that many of you think we've stretched too far, and you may very well be right," he told shareholders at the close of the company's annual meeting. "In many people's opinion, [30 markets] is too many. In my opinion, it's probably too few."

Business In Afghanistan: Reviving Old Pastimes

BBC News

Residents of Kandahar have been taking part in a chess tournament in an attempt to revive one of the city's former cultural pastimes.

Under the Taliban, chess was forbidden, but the city's older residents hope this tournament will reintroduce the game to a younger generation.

The event was held at the Kandahar Coffee Shop which also hosts other cultural activities. While the java brews on coffee and espresso makers, the battles are waged on table top chess sets.

Kandahar is a key battleground for the Taliban insurgency in Afghanistan.

But Rahim Akrami, a local journalist in the city who watched the tournament, says it is important for younger people to rediscover this once forbidden activity.

"The tournament re-introduced the game to Kandahar since it has been forgotten for the last eight or so years," he told the BBC's World Today programme.

'Enlightening' tournament

Aman Ullah, a member of the Kandahar Students Organisation, was one of those playing in the tournament.

Although he was knocked out in the second round, he is happy that the tournament is taking place.

"It is very important for us to have something recreational to do that enlightens the mind and is fun as well," he told the BBC World Service.

"There are people who do not know that chess exists in this world which is amazing to me.

"Now there are people who are asking questions about the game and who want to learn, so I see it as a very positive change for Kandahar, and for the game as well."

Of the 30 players entered, 10 were eliminated after the first round, and then six players became members of a new Kandahar chess team.

'Battle with minds'

The Kandahar Coffee Shop is a place where young people meet to drink coffee and use the internet.

A poster saying: 'It's better to battle with minds than fists and bullets' lines the wall.

Mohammed Naseem, the owner of the Kandahar coffee shop, says he wants to provide a place for young people in the city, and he would rather see wars fought with chess sets than with guns.

"I am trying to create an atmosphere where the youth can hang out and learn something," he says.

"The Kandahar Coffee Shop is the only one in the south west region of its kind...it has various activities including a snooker club, chess club, youth club and a culture club.

We have a separate area for women in the coffee shop where they can come and enjoy a burger and go on the internet.

We are trying to show the world that this kind of thing can be done."

Peet's Coffee Raises Offer for Diedrich

Wall Street Journal

Peet's Coffee & Tea Inc. raised its offer for Diedrich Coffee Inc. to $32 a share in cash and stock, or $265 million, after rival Green Mountain Coffee Roasters Inc. proposed buying the company for $30 a share.

Diedrich stock soared 27% to $32.95 in morning trading Monday, indicating investors think bidding on the company may go higher.

The Green Mountain offer was first announced Monday by Peet and Diedrich in separate releases. Diedrich said its board is reviewing both proposals.

Earlier this month, Peet's agreed to pay $26 a share for Diedrich, in a deal that would allow Peet's to enter the rapidly growing market for single-cup packets used in coffee and espresso makers.

In the new proposal, Peet's would pay a combination of $19.80 a share in cash and 0.321 share of Peet's for each share of Diedrich common stock. Green Mountain's offer is all cash.

"We are confident that the Diedrich board will find our revised proposal to be superior for Diedrich's shareholders," Peet's Chief Executive Patrick O'Dea said Monday.

"We believe our offer provides Diedrich shareholders with a substantial all-cash premium as well as greater value and greater certainty than the cash and stock proposal from Peet's," said Green Mountain CEO Lawrence J. Blanford said Monday. Green Mountain would finance its bid with cash on hand and existing bank lines of credit.

SAS Institute Due For Serious Competition

NY Times

A TOUR of its carefully tended, 300-acre corporate campus here leaves little doubt why surveys, year after year, rate the SAS Institute, the world’s largest private software company, among the best places to work.

There is the subsidized day care and preschool. There are the four company doctors and the dozen nurses who provide free primary care. The recreational amenities include basketball and racquetball courts, a swimming pool, exercise rooms and 40 miles of running and biking trails. There is a meditation garden, as well as on-site haircuts, manicures, and jewelry repair. Employees are encouraged to work 35-hour weeks.

Academics have studied the company’s benefit-enhanced corporate culture as a model for nurturing creativity and loyalty among engineers and other workers. Six years ago, in a report on “60 Minutes,” Morley Safer called working at SAS “the good life.”

But that good life is under threat today as never before. SAS’s specialty, a lucrative niche called business intelligence software, is becoming mainstream. Free, open-source alternatives to some of the company’s products are increasingly popular. On the other end of the spectrum, the heavyweights of the software industry — Oracle, SAP, Microsoft and, especially, I.B.M. — are plunging in and investing billions of dollars.

“It will be a dogfight,” says Bill Hostmann, an analyst at Gartner. “SAS has never faced a competitor like I.B.M. And I do think I.B.M. sees SAS as a big, fatted cow.”

The term “business intelligence software” applies to a wide range of products and services, but all the technology is aimed at helping businesses mine nuggets of insight from mountains of data. SAS has traditionally specialized in advanced software to analyze huge data sets and to generate predictive statistical models for large corporations and government agencies.

Credit card companies, for example, use SAS to detect unusual buying patterns in real time, and to spot potentially fraudulent charges. Giant retail chains use SAS to tailor pricing and product offerings down to the store level. Telecommunications companies use SAS to identify the few thousand customers, among millions, most likely to switch to another cellphone carrier, and to aim marketing at them. SAS software is also used to parse sensor signals from North Sea oil rigs, combined with weather and structural data, to predict failure of parts before it happens. Of the 100 largest companies worldwide, 92 use SAS software.

But as the stream of companies’ collected data turns into a torrent, SAS and other software companies are trying to find new ways to harness it. The information is generated not only by computerized systems for tracking operations, customers and sales. It also comes from new data sources like Web site visits, social network chatter and public records accessible over the Internet, as well as genome sequences, sensor signals and surveillance tapes, all in digital form.

This data explosion, experts say, is an untapped asset at most companies, which lack the tools and skills to exploit it. Yet the long-range potential, they say, is to use this data for far more fine-grained analysis of markets, customer behavior and operations, making business more of a science and less a seat-of-the-pants art.

“Now, the data is available so business can move toward evidence-based decision-making,” says Erik Brynjolfsson, an economist and director of the Center for Digital Business at the Massachusetts Institute of Technology. “This market is a huge opportunity.”

That opportunity is not lost on SAS. “Our advantage is the incredible depth of our technology, developed over years and applied to specific industries,” says James H. Goodnight, the chief executive and a co-founder of SAS. “No one can match our toolbox.”

Indeed, no one underestimates SAS’s technical prowess. The big question is whether the company’s seemingly pampered culture can embrace the higher-octane institutional metabolism that it will need to succeed.

“We know we have to change — no question about it,” says Jim Davis, 51, a senior vice president at SAS. “Our market space has changed dramatically in the last 18 months or so, more than at any time over the 33-year history of the company. We can’t sit back. Things are only going to get faster.”

THE company traces its roots to a time when computing was costly and for the few. Originally called Statistical Analysis System, it was founded in 1976 by Mr. Goodnight and three colleagues from the agricultural statistics department at North Carolina State University. Its techniques were initially used to calculate the intricacies of soil, weather, seed varieties and other factors to improve crop yields.

To build an audience, Mr. Goodnight spent nights packing up boxes of computer tapes and manuals, which he sent to university and corporate researchers. Soon, companies wanted him and his academic colleagues to develop software tools tailored for industry. In 1976 at a users’ conference, 300 or so people showed up, many from business.

“That was pretty much an ‘aha’ moment for us, that it was time to expand beyond the university,” Mr. Goodnight recalls. “It was a little scary, cutting the academic umbilical cord. But I was convinced we could do it.”

He and his colleagues at SAS developed their own programming language and software tools, and designed them for eggheads like themselves. Users were analysts with Ph.D.’s, working with programmers and employed by the largest companies at the forefront of using computing in their businesses, including banks, national retailers, insurers and drug companies.

SAS invested heavily in research and development, and even today allocates 22 percent of the company’s revenue to research. The formula has paid off in steady growth, year after year. Revenue reached $2.26 billion in 2008, up from $1.34 billion five years earlier.

Yet the company also faces the classic challenge of being the innovative pioneer — enjoying rich profit margins but facing new competition from rivals seeking to gain market share with lower prices and substitute technology.

In the last two years, the major software companies have scooped up companies in the business intelligence market. Among the larger moves, SAP bought Business Objects for $6.8 billion, I.B.M. bought Cognos for $4.9 billion and Oracle picked up Hyperion for $3.3 billion.

Still, those companies compete in the broad swath of the business intelligence market for reporting and analysis products. Such data on sales, shipments, customers and operations amount to a numbers-laden portrait of the recent past. The SAS stronghold is a more sophisticated kind of software typically called “advanced analytics and predictive modeling,” which uses historical and current data to try to peer into the future and model likely outcomes.

The competitive thrust that really grabbed SAS’s attention came in late July, when I.B.M. announced that it planned to pay $1.2 billion for SPSS, a maker of predictive modeling software. I.B.M. has placed SPSS and Cognos into a new business analytics and optimization group. That business will be supported by 200 scientists, and the company has said it will retrain or hire 4,000 consultants and analysts to work in the group.

“This is the big growth strategy for I.B.M., the company’s next big play for this decade,” says Ambuj Goyal, a computer scientist who is general manager of I.B.M’s business analytics software unit. “SAS comes from the legacy world of statisticians and programmers. The real opportunity is in deploying this technology broadly in corporations.”

To counter I.B.M. and others, SAS is looking to forge a tighter relationship with a big technology services company. It is also shortening product development cycles to 12 to 18 months, down from 24 to 36. “That’s what the market expects,” Mr. Davis says.

The most sweeping change is the company’s move toward the Internet model of software delivery — as a service that customers tap into over the Web, much as Google and other Internet companies do. SAS has dipped its toe in, with some initial products. But a major expansion is planned, supported by a sprawling $70 million data center scheduled to begin operating next year.

The remotely delivered software is part of a drive to broaden the market for SAS technology beyond an elite corps of quantitative analysts and into the rank-and-file of corporate professionals.

Analysts say the company’s strategy looks sound, even if the outcome is uncertain. “SAS has to do a lot of things right to succeed,” says Peter Sondergaard, senior vice president of research for Gartner. “But if it executes correctly, it could be a winner.”

ACROSS its campus here, there are signs that the SAS culture is evolving with the times. Rick Langston, 54, a senior software manager who joined the company 29 years ago, smiles and shrugs when asked about the 35-hour workweek. After leaving the office, Mr. Langston routinely checks on work e-mail at home.

These days, he explains, SAS is a global company with far-flung project teams, and overnight e-mails can resolve problems and speed things along. Deadline work to meet product development schedules, he adds, can mean long hours at times. “But this is certainly not a place where you are working 60-hour weeks, week in and week out,” he said.

To be sure, the corporate cocoon in Cary can breed insularity. SAS, for example, was slow to recognize the brewing challenge from free, open-source alternatives to some of its products. A free programming language and set of software tools for statistical computing, called R, has become increasingly popular at universities and labs.

The company shifted course earlier this year and modified its software so programs written with R work seamlessly with SAS technology. “Shame on us for not engaging more with the open-source community,” says Keith Collins, senior vice president and chief technology officer. “But we’re committed to doing that now.”

THE architect of the SAS culture is Mr. Goodnight, a lanky, laconic billionaire. The benefits have built up gradually over the years as a series of pragmatic steps, he says. The day-care program began after a valued employee was about to leave to take care of her young child. The on-site medical checkups grow out of the belief that “good health is good business,” he says.

Today, SAS estimates that its health care center saves the company $5 million a year, by providing care more cheaply than an outside insurer and by not having employees leave the campus for doctor’s visits. Employee turnover at SAS averages 4 percent a year, versus about 20 percent for the overall software industry.

The office atmosphere is sedate. There are no dogs roaming the halls, no Nerf-ball fights, no one jumping on trampolines — no whiff of Silicon Valley. The SAS culture is engineered for its own logic: to reduce distractions and stress, and thus foster creativity.

“The SAS model is sensible and durable; there’s nothing faddish or ephemeral,” says Richard Florida, a professor at the Rotman School of Management at the University of Toronto, who has studied SAS and is the author of “The Rise of the Creative Class.”

During the technology boom at the start of this decade, SAS considered a drastic change in its model: going public. Goldman Sachs bankers were brought in as advisers, and in 2000 SAS recruited a former Oracle executive, Andre Boisvert, as its president.

Under Mr. Boisvert, SAS installed a new financial reporting system and paid the sales force incentive commissions rather than salary only. But when technology stocks plummeted, the appeal of selling shares to the public also receded. Mr. Boisvert resigned from SAS in 2001 and is now an independent investor and consultant.

Mr. Goodnight recalls those days as a brief period of New Economy surrealism, and going public as a path wisely avoided. SAS, he says, is a culture averse to the short-term pressures of Wall Street, which he characterizes as “a bunch of 28-year-olds, hunched over spreadsheets, trying to tell you how to run your business.”

Unlike many other tech companies, SAS has had no recession-related layoffs this year. “I’ve got a two-year pipeline of projects in R & D,” Mr. Goodnight says. “Why would I lay anyone off?”

Mr. Goodnight, though 66, has no plans to retire himself. His fingerprints, colleagues say, remain all over the business, especially in meeting with customers and in overseeing research.

He is not only a statistician, but also a bit of gambler who enjoys calculating his chances. For example, he is co-author of a paper that simulated millions of possible outcomes in blackjack.

Mr. Goodnight regards his new rivals the way a confident card player might. He likes the odds, and he likes his hand.

“We’re pushing as fast as we can to stay ahead — on the cutting edge of everything,” he says. “We’ll do fine.”

Signs Of A Good 'Black Friday'


CHICAGO - When the U.S. holiday shopping season kicks off on the day after Thanksgiving, retailers can expect to see millions of less frightened, but even more bargain-hungry customers cross their thresholds.

Industry experts expect a strong turnout on Black Friday, which falls on November 27 this year, as deep discounts lure shoppers after more than a year of subdued spending. But they caution it will not mean a bumper holiday season in the weeks leading up to Christmas since consumers still remain cautious.

"Given what we know about consumer shopping patterns, even this month, I would suspect it will turn out to be a very strong performance," said Michael Niemira, chief economist of the International Council of Shopping Centers.

Special promotion days have been big drivers of sales, he said, pointing to the lift retailers saw on the November 11 Veteran's Day holiday.

Retailers and Web sites dedicated to Black Friday deals have leaked sales plans earlier than usual, in the hopes of sparking demand for flat-panel televisions, toys and other goods after 2008's worst holiday season in decades.

While the economy remains weak and unemployment has risen, U.S. shoppers have had more than a year to adjust their spending and digest the bad news. In 2008, holiday shopping started just weeks after the global financial crisis erupted.

"Certainly last year was a year of tremendous uncertainty going into Black Friday because we were right in the middle of the storm," said Chris Donnelly, a partner in Accenture's retail practice. "There is much less panic, I would say, or much less uncertainty, as we go into the season."

Even so, more than 172 million shoppers visited stores and websites from Thanksgiving Day through Sunday last year, up from 147 million in 2007, according to the National Retail Federation. The average amount of money spent by shoppers over that weekend rose 7.2 percent to $372.57 per person.

Those numbers, however, did not prevent a sales slide of 3.4 percent for the entire shopping season last year, marking the first decline since the NRF began tracking such data.

While the NRF has not issued a Black Friday forecast, it expects 2009 holiday season sales to decline 1 percent. The ICSC forecast a 1 percent to 2 percent rise.

"Retail sales have been, while not stellar, somewhat stabilizing over the past few months and there is every reason to believe that as we go into the holiday season that we are going to see some stability as well," Donnelly said.

The term "Black Friday" is said to have originated in Philadelphia during the 1960s to describe the difficulty of police and drivers to deal with exceptionally heavy traffic on that day as shoppers flooded the city's commercial center.

The phrase was later co-opted by retailers to refer to the holiday shopping period as a time of year when their business moves into the black, or turns a profit.

Niemira, for one, refers to Black Friday as "Bargain Friday" since it is known for deals.

"If Black Friday is flattish to slightly positive, that would be encouraging, but I don't think we'd be ready to kind of write the story of the season yet," Donnelly said.

Sixty-one percent of chief marketing officers at leading U.S. retailers surveyed by BDO Seidman expect Black Friday sales to be flat, while 33 percent predicted an increase.

One factor that could help spur consumer appetite is a prediction for good weather, with mild temperatures and slim chance of precipitation, though the Pacific Northwest could see strong storms, according to tracking firm Planalytics.

Market research firm IBISWorld expects total retail sales over Black Friday weekend to rise 2.8 percent to $42.9 billion. It expects 76.9 million people to swarm into retail stores on Black Friday alone.

ShopperTrak, which measures customer traffic, expects Black Friday to again be the busiest day in stores after accounting for 6 percent of traffic in the 2008 holiday season.

Target, Best Buy and others are opening at 5 a.m. on November 27, while Chelsea Premium Outlets locations are opening as early as 9 p.m. on Thanksgiving Day.

Wal-Mart is keeping most of its discount stores open for 24 hours a day to help control crowds after a worker was trampled to death at one of its stores during last year's Black Friday rush.

After last winter's bevy of deep discounts, many consumers will only open their wallets if they spot a bargain. Almost 70 percent of consumers surveyed by America's Research Group said they wanted to see discounts of at least 50 percent before they would buy something for the holidays.

"The range of the promotions will be different from what we've seen in recent years, because it has to be," said NRF spokeswoman Kathy Grannis. "Retailers know that consumers are so bargain focused and bargain conscious."

BDO Seidman's poll found that 96 percent of retailers planned to increase promotions and discounts this year.

"They are going to have to be creative" said Ted Vaughan, a partner in BDO Seidman's retail and consumer product practice.

Consumers flocking to stores may not be buying gifts. A Consumer Reports survey found that 66 percent of shoppers heading out over the weekend will be shopping for themselves, buying needed household goods like Christmas tree storage bags.

Of course, fewer retailers are vying for that business. According to Bain and Co, 27 retailers went bankrupt in 2008 and 18 more have done so to date in 2009. Together, those chains used to account for about $25 billion to $30 billion in sales.

Earlier holiday-themed sales expanded the season this year and may make it easier for consumers who have less credit available, Vaughan said. Sears, Kmart and Toys R Us have also been touting layaway plans to help shoppers spread out spending.

Sunday, November 22, 2009

Countdown To Black Friday 2009

USA Today

Three percent of buyers, Consumer Reports' Money Blog figures, have already done their holiday shopping. Odds are they have now turned to getting a  head start on filing their taxes.

For the rest of us, Black Friday looms. We will be trolling between now and the Big Event to offer you news, tips, deals and ideas.

Consumer Reports also notes that 47% of shoppers plan to make gift purchases over the long weekend -- a third of them say they'll be looking for things for themselves.

Timing is important. Walmart plans to open at 6.a.m. Thanksgiving morning and stay open all night, even  though the huge savings won't be up for grabs until 5 a.m. Friday.

Walmart.com CEO Raul Vazquez tells USA TODAY retail reporter Jayne O'Donnell that on Monday the discounter will announce some of the 50 items that will be available for 40% off on its site on Thanksgiving Day.

But O'Donnell cautions that even when "doorbusters' sound good, try searching sites like Bradsdeals.com, CouponCabin.com, Pricegrabber.com and/or ConsumerSearch.com, to see if it's the really the best price available (don't forget to factor in shipping too!) and that it is a highly rated product.

Other early risers: Best Buy will be open from 5 a.m. to 10 p.m., JCPenney from 4 a.m. to 11 p.m., Kmart from 6 to 11 and Macy's from 5 to 10.

The New York Times notes that Walmart, still reeling from last year's trampling death of an employee when the doors opened, is trying a number of tactics to calm things down.

An excerpt:

Shoppers at Wal-Mart will not have to sprint toward a pile of flat-screen televisions and scuffle with one another to get one. Rather, customers will be able to enter the store at any time and line up at merchandise displays for the must-have items on their lists. When the products go on sale Friday at 5 a.m., workers will supervise the lines, giving shoppers the merchandise in the order in which they joined the line — until the goods are out of stock.

This year, for the first time, the National Retail Federation has created a comprehensive set of guidelines for crowd control. These include dress rehearsals and offering entertainment to keep shoppers calm in line.

Here's a key, if chilling, excerpt:

If something were to occur during the event that required an emergency response, (e.g. trampling, shooting, inclement weather, sales items that ran out quickly, a large line of angry customers, etc.) the reaction would be different. To prepare for the unexpected, retailers should consider:  evacuation routes, communication plans, law enforcement/public official engagement;  preservation of evidence.

One amusing note: We've run across three websites now that bill themselves as an "official" Black Friday website.

For buyers hungry for something other than deals, Ikea is offering a free breakfast -- well, they concede it is a "small  breakfast" with coffee --Friday through Sunday.

Fat Wallet offers what it calls a "Deal Rumor Roundup" of Black Friday desktop computer sales.

Business Week reports that high-end teen retailer Abercrombie & Fitch, after years of refusing to trade status for sales growth,  is marking down its trendy apparel in an attempt to stem declines and lure back young customers.

More shopping tidbits: 

Gap Inc. says 700 Old Navy stores and 300 Gap and Banana Republic stores will open for five hours at noon on Thanksgiving Day.

That's more than double the number that opened on the holiday last year. The openings will kick off three-day sales: Old Navy, for example, will offer sweaters at $15 and 50% off outerwear.

Toys R Us Inc., which considered opening on Thanksgiving Day, is instead throwing open the doors at its Toys R Us stores just after 12 a.m. Nov. 27, the day after.  That's five hours earlier than last year. Its Babies R Us stores will open at 5 a.m. Nov. 27.

Theblackfriday.com, which bills itself as a clearinghouse for deals, is now up on Facebook to spread the word on everything from chess sets to Christmas tree storage bags.

Our website diving turned up this interesting bit -- an early reference to Black Friday as a holiday shopping phenomenon. Bonnie Taylor-Lake, of the American Dialect Society, came across a January 1966 column that was part of a department store ad.

Here's an excerpt:

"Black Friday" is the name which the Philadelphia Police Department has given to the Friday following Thanksgiving Day. It is not a term of endearment to them. "Black Friday" officially opens the Christmas shopping season in center city, and it usually brings massive traffic jams and over-crowded sidewalks as the downtown stores are mobbed from opening to closing.

CNNMONEY cautions shoppers to check the fine print in store circulars before  busting through the doors. Some of the hottest deals are only good "while supplies last" or there a "minimum 2 per store."

In its timely tip list, CNNMONEY also cautions buyers that some of the Black Friday deals on high-end items are for "derivatives," that is, models with fewer features than the standard model.