Cargill's Earnings Decline 69%

By The Wall Street Journal

The global recession helped sink commodities-processing giant Cargill Inc.'s fiscal-fourth-quarter earnings by 69%, but company executives are beginning to detect an economic rebound in some countries.

"We are cautiously optimistic about the time frame of the recovery," David W. MacLennan, senior vice president and chief financial officer of the closely held Minneapolis company, said Tuesday. "We are starting to see signs of recovery in emerging markets."

China is continuing to import U.S. soybeans at a blistering pace, and Brazil's economy is showing signs of strength. But it is far from clear how soon government stimulus money will lift developed economies such as the U.S., where some Cargill businesses have benefited from consumers trading down to cheaper groceries like ground beef.

Cargill on Tuesday said it earned $327 million in the quarter ended May 31, down from $1.05 billion a year earlier. A big drop in fertilizer profit and the third consecutive quarterly loss by its risk-management and financial segment weighed on the results.

While the first half of Cargill's fiscal year was lifted by the 2008 commodity-price boom, during which prices of Midwest crops and fertilizer climbed to unusually high levels, its second half was depressed by the onset of the global recession, which burst the commodity bubble.

Cargill, which doesn't report quarterly revenue or provide segment details, depends on its breadth and diversity to insulate it from volatility in its commodity businesses. But the recession is so broad that it seeped into many of its operations. Cargill is involved in such businesses as making food ingredients from crops it buys around the world and slaughtering U.S. livestock to trading complex financial instruments.

The company owns a 64% stake in U.S. phosphate fertilizer giant Mosaic Co., which is being stung by weakening demand from farmers.

Cargill's risk-management and financial segment generated a fiscal-year loss despite record results from the business that trades and transports coal, electric power, petroleum and natural gas. The segment also includes Black River Asset Management as well as distressed-asset concern CarVal Investors.

For the fiscal year, Cargill earned $3.33 billion, down 16% from the record-high $3.95 billion it earned in fiscal 2008. Cargill generated fiscal-year revenue of $116.6 billion, down 3% from fiscal 2008.

Abercrombie Plans to Cut More Prices

Abercrombie & Fitch Co., which posted a quarterly loss on Friday, will become more aggressive in lowering prices as the teen-oriented retailer copes with the recession.

"Consumer spending patterns domestically continue to be dictated by cost and value propositions, and this is clearly a headwind for our premium brands," Chief Executive Michael Jeffries said during a conference call.

The consumer slowdown is forcing Abercrombie, of New Albany, Ohio, to reduce prices after the company has spent much of the economic downturn with premium pricing in place.

"We are planning to deliver greater reductions in [average retail prices] for the fall season, but we will continue to review pricing on an ongoing basis," Mr. Jeffries said.

For its quarter ended Aug. 1, Abercrombie swung to a loss of $26.7 million, or 30 cents a share, compared with year-earlier income of $77.8 million, or 87 cents a share. Excluding charges, the loss would have been two cents a share, compared with analysts' expectations for a three-cent loss.

Sales fell 23% to $648.5 million. The latest results included $24.4 million in charges related to the high-end Ruehl business, which Abercrombie plans to close.

In 4 p.m. composite trading Friday on the New York Stock Exchange, Abercrombie shares were up $1.29, or 3.9%, to $34.25.

The teen-apparel retailer increasingly has been shedding its no-markdown approach as it looks to clear inventory after seeing same-store sales drop month after month. Its July same-store sales, or those at stores open at least a year, slipped 28%.

The company also has stumbled when it comes to offering compelling merchandise such as dolphin jewelry and plumeria jewelry. "We have admittedly missed some other fashion opportunities that drove the business in the spring," Mr. Jeffries said. "We feel like we have corrected these fashion misses."

Second-quarter gross margin, or the difference between a company's cost of producing products and the price it receives for them, fell to 66.5% from 70.1% because of greater markdowns.

J.C. Penney Nearly Breaks Even

Quarterly Sales Fall 7.9%, but Lower Costs Aid Retailer's Profit Forecast

J.C. Penney Co. just about broke even in its fiscal second quarter and warned it could post a loss in the current quarter, but the retailer raised its profit forecast for the full year on an improved economic outlook and stabilizing sales.

"We are more confident coming into the third quarter than we were in the second quarter," said Chief Executive Myron E. Ullman III in a Friday conference call. Still, he added that "negative consumer sentiment will continue to be a factor" hindering spending for the rest of the year.

For the quarter ended Aug. 2, the Plano, Texas, company posted a loss of $1 million, or zero cents a share, compared with net income of $117 million, or 52 cents a share, a year earlier. The latest results included a pension expense of $83 million. Sales fell 7.9% to $3.94 billion, with same-store sales down 9.5%.

For the third quarter, the company said it expects results ranging from a profit of five cents a share to a loss of five cents a share, much lower than analysts' expectations of a 14-cent profit. The reasons for the disparity include higher marketing expenses, minimum-wage increases and the costs of opening new stores, the company said.

In response to the third-quarter forecast, Penney's shares fell $2.11, or 6.3%, to $31.23 in 4 p.m. composite trading on the New York Stock Exchange.For the full year, Penney said it expects earnings in a range of 75 to 90 cents a share, up from earlier guidance of 50 to 65 cents a share, revising its forecast on falling sourcing costs, leaner inventories and improved sales trends for the back-to-school season.

"Their inventory position hasn't been leaner in two years," said Bob Drbul, an analyst at Barclays Capital.

Penney reduced inventories by 12% in the second quarter to get supply back in line with demand and reduce clearance sales. Such moves, coupled with the company's high penetration of private-label merchandise, helped boost gross profit margins by a full percentage point, to 38.5% of sales.

The company said that kids shoes, chess sets and women's plumeria jewelry sold well in the quarter, while children's apparel was the weakest category.

Mr. Ullman referred to the company's Sephora cosmetics boutiques, which have helped Penney attract a younger, more affluent consumer, as a "game changer." The company opened 38 Sephora locations within Penney stores in the second quarter and expects to have 155 of them by the end of the year.

Penney's said it has begun searching for a successor to President and Chief Merchandising Officer Ken Hicks. The new executive's initial title would be president, a person familiar with the matter said. Mr. Hicks, who left the company last month to become chief executive of Foot Locker Inc., was widely considered to be the heir apparent to Mr. Ullman.

Penney's directors are seeking a candidate capable of someday succeeding Mr. Ullman as chief executive and are in no rush to finish the search, according to two people familiar with the situation. On the conference call, Mr. Ullman said the company was looking at both internal and external candidates.

Google Toolbar can't handle Chrome

Search giant Google has admitted that its shiny toolbar can't handle its even newer Chrome browser.

Users wanting to experience Google in all its glory with Chrome and a tool bar are being told to switch browsers. Chrome users are greeted with this message: “We're sorry, but Google Toolbar 5 is only available for Internet Explorer and Firefox.”

Of course using Chrome is a bit like using a Google Toolbar anyway. It just sucks up most of the screen and demands you pay all your attention to Google.

However Google is making a big thing of being a one stop shop for all your World Wide Web needs. So this is what the Washington Post is referring to as an epic fail.

And as the PR mag LA Public Relations points out, Google faces an interesting Public Relations challenge here.

"One would think that Google would try to make their products easier to use in tandem, so that their loyal users don’t become loyal Yahoo or Microsoft search users," it smirks.

Health Care Claim Costs Expected to Rise

By The Associated Press

Costs for employer-provided health plans are expected to rise more than 10 percent within the next 12 months, a jump workers may feel in their paychecks or through changes to their insurance coverage.

An aging population, rising costs and growing patient demand for services are among the reasons for the higher costs cited in an Aon Consulting report released Tuesday.

A Chicago-based company surveyed about 60 health insurers around the country earlier this year. The study found that, on average, insurers expect to pay out 10.5 percent more in claims costs in the next year — slightly less than the 10.6 percent increase forecast last year.

The expected increase doesn't necessarily mean the premiums employees pay will grow at the same clip. Actual increases for each insurer or plan can vary by such factors as plan design, geography or the general health of the people covered.

Some employers also might swallow the higher costs because workers this year already have had to contend with salary freezes, reductions and layoffs.

However, others may ask workers to pay more through increased deductibles or copayments. They could make changes to the plans they offer, such as eliminating a traditional plan and offering a consumer-directed, high-deductible plan instead.

Most employers will consider it "an absolute business imperative" to lower any cost increases to mid- to low-single digit percentages.

Employer contributions are not gifts, they're part of total compensation. And if you end up having a more expensive health benefit that your employer pays most of, that means that your wages aren't going to up as fast as they would have.

The survey also found that prescription drug costs are expected to rise 9.3 percent, a slight dip from the 9.4 percent trend forecast a year ago.

A number of brand-name drugs have lost patent protection, which allows patients to buy less-expensive generics. Employers also have encouraged their workers to use generic drugs and cost-management programs.

The health care overhaul debate currently taking place in Washington, D.C., won't control this growth. The debate's outcome and the potential savings achieved through any overhaul are both big unknowns.

With employer-provided health plans expected to rise, providers are starting to offer American's the option to enroll in individual health plans and individual health insurance plans. These health insurance plans consistently beat the national average in managing health care costs.

Michigan School Drops Honduras Program

By The AP Press

Calvin College says safety concerns have led it to cancel its fall study program in Honduras and move it to Mexico.

The Grand Rapids-based school says its travel safety committee made the move "because of political instability" in Honduras.

A June 28 coup ousted Honduran President Manuel Zelaya.

Calvin says officials considered information from the U.S. and Canadian governments and non-governmental organizations.

Calvin says students who would have spent September through December in Tegucigalpa, Honduras, will now spend the semester in Merida, Mexico. It says 23 of the original 25 enrolled students will participate.

The school is affiliated with the Christian Reformed Church and has about 4,200 students.

Even though Calvin College has decided to terminate the program, other Michigan Universities like Ferris State are going to continue to offer the study aboard program. This program is an enriching, life-changing experience both personally and academically - the lessons you will earn cannot be duplicated on any campus in the United States.

Philadelphia's Papers, Lenders at Odds

By The Wall Street Journal

The company that owns Philadelphia's daily newspapers plans to ask its lenders to wipe out about $300 million in debt in exchange for about $90 million in cash, real estate and bankruptcy costs, according to people familiar with the matter, likely sparking a battle for control of two of the country's largest papers.

The proposal, expected to be filed in a bankruptcy court as early as the coming week, sets up a clash between the lenders and the papers' chief executive officer, Brian Tierney, a Philadelphia advertising and public-relations executive who won a 2006 auction of his hometown dailies, the Philadelphia Inquirer and the Philadelphia Daily News. The operating arm of the papers' parent company has been under bankruptcy protection since February.

In bankruptcy court, lenders often agree to forgive some of what they are owed in return for ownership stakes that push aside existing shareholders. Instead, the proposal offers creditors about $35 million in cash, ownership of the papers' headquarters and related real estate valued at about $30 million, and little to no equity in the new company, according to the people familiar with the matter. The company would be left with almost no debt.

The company's proposal also includes a plan to absorb about $25 million in costs related to exiting bankruptcy, including repaying a bankruptcy loan and paying professional fees.

The papers' lenders include CIT Group Inc., distressed-debt specialist Angelo, Gordon & Co. and Citizens Bank, a unit of Royal Bank of Scotland Group.

Some creditors also say they doubt the value the company places on its real estate, and say it's unclear they would be given ownership of the real estate outright.

Philadelphia is shaping up as a test case for how newspaper businesses will be reconfigured, as many corporate-debt defaults hit the struggling industry. The Philadelphia papers are among at least five significant newspaper bankruptcy-protection filings since December, as deep declines in print advertising have left the papers unable to repay their loans.

Two newspaper publishers, Journal Register Co. and the Star Tribune in Minneapolis, are emerging from bankruptcy protection owned by creditors and with a reduced level of debt. Mr. Tierney is agitating against this emerging blueprint, which he says leaves newspapers with too much debt and tees them up for rebound failures.

The newspapers' financial woes have not affected the market for Philadelphia apartments. Why Settle For Ordinary Philadelphia Apartments When You Can Live In An Historic Landmark!

News Corp. Reports Loss on Web Writedowns, Ad Drop

By Bloomberg Press

Aug. 5 (Bloomberg) -- News Corp., owner of the Fox broadcast network and the Wall Street Journal, reported a fourth-quarter loss of $203 million on write downs at its Internet unit and plunging advertising revenue.

The loss of 8 cents a share compared with net income of $1.13 billion, or 43 cents, a year earlier, the New York-based company said today in a statement. Excluding some charges, profit was 19 cents a share, compared with the 18-cent average of analysts’ estimates compiled by Bloomberg.

The worst U.S. recession since World War II battered ad sales at News Corp.’s TV stations, social-networking Web site MySpace and newspapers, which include the New York Post and the Sunday Times. Chairman and Chief Executive Rupert Murdoch said he plans to begin charging for access to all the company’s news Web sites this fiscal year, using WSJ.com as a model.

“The tumultuous and unprecedented change affecting the entire media sector, particularly at newspapers and broadcasters, cannot be ignored,” Murdoch said on a conference call. “The digital revolution has opened many new methods of distribution, but it has not made content free.”

Forecast

Adjusted operating income will increase in the “high single digits” on a percentage basis in fiscal 2010, Chief Financial Officer David DeVoe said on a conference call today. The forecast is based on adjusted operating income of $3.44 billion for fiscal 2009, DeVoe said. Growth will be driven by the cable channels, Sky Italia and the film studio, he said.

Analysts predict full-year operating profit of $3.71 billion, the average of estimates compiled by Bloomberg.

News Corp., also owner of Fox News and the Twentieth Century Fox film studio, was little changed at $10.58 in after- hours trading. The shares have gained 16 percent this year on the Nasdaq Stock Market, while the 16-company Standard & Poor’s 500 Media Index has risen 11 percent.

Impairment charges in the fiscal fourth quarter were mainly tied to Fox Interactive Media, the unit that includes MySpace, and reduced earnings by 17 cents a share. Advertising sales fell at MySpace, and the company had increased costs to introduce MySpace Music.

News Corp.’s total sales dropped 11 percent to $7.67 billion in the period ended June 30, missing the average analyst estimate of $7.73 billion.

MySpace

The division that includes Fox Interactive reported a wider adjusted operating loss of $136 million. TV operating income slid 66 percent to $95 million, and newspapers fell 63 percent to $96 million.

Earlier this year, Murdoch appointed Chase Carey, CEO of DirecTV Group Inc., as News Corp.’s president and chief operating officer. Carey, who started work July 1, replaced second-in-command Peter Chernin, who stepped down after 12 years as operating chief.

Murdoch, 78, also hired former AOL chief Jonathan Miller in April to overhaul digital operations, and Miller replaced MySpace’s management, bringing in former Facebook Inc. executive Owen Van Natta. In June MySpace fired almost 30 percent of its U.S. staff after Facebook surpassed MySpace in U.S. users for the first time in May.

“Given that you have traffic not growing anymore at MySpace, there’s concern that a big chunk of revenue is going to come out of there,” Michael Morris, a New York-based analyst with UBS AG, said before results were released.

A $900 million advertising agreement between MySpace and Google Inc. expires next year.

‘American Idol’

In the TV season that ended in May, Fox’s prime-time audience slipped 16 percent from a year earlier, the steepest drop among the big four networks, according to Nielsen Co. News Corp.’s Fox, which airs top-rated show “American Idol,” remains the most-watched network among the 18-to-49 age group.

Murdoch said pricing is “doing well” for advertising sold in advance of the fall TV season. He also said that Fox is holding back more ad inventory than in previous years to sell closer to the air date.

Last week Time Warner Inc. said second-quarter profit fell 34 percent, less than analysts estimated, as movie earnings countered ad drops at AOL and magazines. Viacom Inc., the owner of MTV, said profit slid 32 percent, hurt by the film unit. Walt Disney Co., the world’s largest media company, said net income dropped 26 percent on falling ad and theme-park sales.

CBS Corp. plans to report earnings Aug. 6.

Where the Grass Is Made Greener

By The Wall Street Journal

I'm standing in the midst of a grassy, windswept field holding what could be the next killer app in lawn care. It's a vial of herbicide made from a sustainable, natural source—Canadian thistle fungus—and it's designed to wipe out clover, dandelions and other broadleaf weeds without damaging grass.



If plans stay on track, the product—code-named CBH, for Canadian Bioherbicide—could reach America's lawns as soon as 2011. If so, it will be a pivotal moment in the fast-moving evolution of naturally derived lawn and garden products in the U.S. In no small way, success will hinge on the marketing heft of its formulator, lawn and garden giant Scotts Miracle-Gro Co., whose labs supply much of what the world's homeowners buy each year in a quest to keep their grass green, plants plentiful and homes pest-free.

It's an industry in transition, and Scotts is preparing everything from an insect repellent derived from wild tomatoes to mulch uses automotive-surfactant technology to help water penetrate soil faster. Nearly 40% of the nation's 100 million households with a yard or garden say they are likely to use all-natural methods in the future due largely to environmental and health concerns, says the National Gardening Association.

A key hurdle for Scotts, whose roots lie deep in synthetic chemical products, is meeting that new demand while not sacrificing the effectiveness that keeps sales up and shareholders happy.

Recently I spent time at Scotts's headquarters. Experiments take place on 120 acres of rolling turf and inside an 18,000-square-foot greenhouse that can mimic any environment in North America. In a nearby humid "rearing room," bugs are bred for sacrificial duty and white-coated researchers pepper their speech with phrases like "knockdown time" (how long it takes a bug to stop moving).

Much of the company's $45 million annual research and development budget is devoted to formulating technology to benefit those who partake in green lawn services. What applicator is best? Will it freeze, thaw and still work? While the company manufactures the majority of its products, it often licenses or buys intellectual property from smaller companies and research institutions and then tweaks it—a trickier task with naturals, a broad term for ingredients derived from plants, animals and minerals. There are just not as many people working on green products for lawn care. And the ones that are don't always understand the biology of pests.

This year, for instance, Scotts introduced an insect killer under its new Ecosense label whose active ingredient is soybean oil. Scotts bought the technology from a small North Carolina company and set about speeding up its pest knockdown time, which was clocking in at an uncomfortable one minute. (Under 30 seconds is the goal, and 10 seconds is on par with non-natural solutions). A popular test subject: the hearty American cockroach, which Scotts keeps in large supply and feeds a diet of mostly dog food and apples.

Scotts used the Ecosense insecticide to demonstrate knockdown time of less than 30 seconds on a fat cockroach that jerked about briefly before growing still. (Researchers believe soybean oil thwarts pests' breathing.) The speed is an achievement for scientists, who, through repeated reformulations, halved the number of ingredients needed—making it less expensive to produce—while also improving its efficacy.

The bioherbicide, which interrupts the plants' ability to photosynthesize, is also looking promising. Scotts's researchers point to 3-by-3-foot plots of ailing dandelions and clover treated with the product adjacent to plots treated with Scotts's tried-and-true chemical weapon, Weed-B-Gon. The "injury," as scientists call it, is nearly identical.

Other natural herbicides are sold in the U.S. from well-known brands such as Jonathan Green and Safer, though many must be applied in significant quantities as pre-emergent weed suppressants or are non-selective, meaning they also kill grass. A Montreal-based company sells a fungus-based selective weed killer aimed at dandelions.

Scotts says its bioherbicide will be aimed at a variety of broad-leafed weeds and won't harm grass. It plans to launch the product first in a granular spot-control format to apply after weeds come up and is working on a pre-emergent formulation and a "weed and feed" product with fertilizer.

These new natural weed killers are the holy grail of organic lawn care. It's not about how to grow grass. It's about how not to grow weeds.

Some environmental advocates remain circumspect about Scotts's plans, suggesting a better natural route is to improve soil conditions so grass and plants can fight weeds and disease on their own.

Many environmentalists have been calling to replace lawns with native plants that don't consume as much water or fertilizer—a direct assault on Scotts's core business. Its response? New grass seeds and soils that conserve moisture, and fertilizers that require lower application rates. For instance, its "Water Smart" EZ Seed introduced this year contains coconut-fiber "coir technology" that helps seeds absorb eight times their weight in water.

Also, Americans spend more than three billion hours per year using lawn mowers and garden equipment. Our lineup of Scotts reel mowers, brill reel mowers, sunlawn reel mowers, push reel mowers and classic reel mowers is leading the eco-friendly reel mower movement, making it easy and enjoyable for any individual to eliminate their climate impact and transform lawn mowing to a clean future and more enjoyable experience. Please help us shift the consumer turf care industry towards more sustainable practices with reel lawn mowers and green lawn mowers.

Icahn Finds Himself Target of Investor Ire

Story by The Wall Street Journal

For years, Carl Icahn has invested in companies and then publicly harangued their managers for not doing more to boost the value of their shares.

Now, Mr. Icahn finds himself the target of investor complaint. A hedge fund is alleging that Mr. Icahn -- as director and majority owner of XO Holdings Inc. -- hurt shareholders by snubbing three approaches to acquire the struggling telecommunications company that could have boosted the stock, according to a recently unsealed lawsuit.

In a suit filed in a New York state court, the hedge fund, R2 Investments LDC, which owns 8.8% of the Herndon, Va., company, says at least one of the bids was above the company's stock price at the time. Instead of pursuing them, Mr. Icahn opted to refinance XO's debt by purchasing $780 million of preferred stock.

That paid off for Mr. Icahn, R2 alleges in the suit, because he could use the preferred stock to boost his stake in XO above 80%, enabling him to tap the company's previous losses for valuable offsets to taxes at his other businesses.

Meanwhile, XO's stock fell from around $1.27 a share at the time the first bid was made to just 28 cents last month, when Mr. Icahn lodged a bid to buy the whole company.

XO has moved to dismiss the complaint. Chief Executive Carl Grivner said it would have been "a waste of time" to pursue the bids for XO or its assets, because telecom bidders at the time "couldn't get financing." Stocks of comparable telecoms companies have suffered worse declines than XO's, he said.

In court papers, Mr. Icahn said XO directors had no obligation to pursue the bids under the legal doctrine of "business judgment," which gives boards discretion to pursue actions they think are in a company's best interest.

Securities lawyers say corporate executives don't have an absolute requirement to accept or disclose financial offers. But the position isn't one usually associated with Mr. Icahn, who has spent a lot of time urging executives at companies like Kerr-McGee Corp., Blockbuster Inc., and Time Warner Inc., to sell assets or step down to boost the value of shares.

Mr. Icahn "spends so much time advocating shareholder rights" at higher profile companies, but has taken steps to "harm shareholders" at XO, said Geoffrey Raynor, managing member of Q Investments LP, a $1.5 billion Fort Worth, Texas, family of hedge funds that includes XO plaintiff R2.

Mr. Icahn called the statement "ludicrous." In an interview, he said his $780 million preferred investment saved the company from the risk of insolvency at a time when "money was not available."

Mr. Icahn gained control of XO, a casualty of the popped technology bubble, after it sought bankruptcy protection in 2002. When XO emerged from bankruptcy proceedings in 2003, Mr. Icahn owned 83% of its stock and 85% of its bank debt. His stake fell below 80% when the company sold shares in a rights offering, and he now owns 53%.
[Icahn Chart]

R2 successfully sued to block an effort by Mr. Icahn to buy XO's profitable wireline assets in late 2005, a deal it argued would have left the company only an unprofitable wireless business.

The fund was granted the right to discovery of XO's records last November by a judge who said, referring to the 2008 preferred-stock issue, that there was "a sufficient credible basis... there might have been wrongdoing or conduct that led to an unfair transaction."

The suit by R2 didn't identify the bidders it says Mr. Icahn snubbed. But people familiar with the matter say separate acquisition bids in the range of $1 billion for all or part of XO were submitted in March and June of 2008 by Paetec Holding Corp. and Zayo Group. A third bidder that couldn't be identified showed interest in an acquisition. The bids went nowhere, the suit says.

Paetec, a publicly traded Fairport, N.Y., communications-services company, and Zayo, a closely held Louisville, Colo., fiber-network service company, declined to comment.

Morgan Stanley, which had been retained by XO to explore financing alternatives, said in April 2008 that a $1 billion bid would be worth $2.25 a share, when XO's stock was trading at $1.27, the suit said. The bank recommended that the bids be explored so that XO directors could weigh their value against the financing alternatives, according to the suit and people familiar with the bidding.

XO's shares, which traded above $5 a share in 2007, fell from $1.70 in March 2008 to a low of 12 cents a share in late 2008. Last month Mr. Icahn offered to buy out XO's other shareholders for 55 cents a share.

Apple Board Expected to Meet on Schmidt Seat

Story by The Wall Street Journal

Apple Inc.'s directors plan to meet Tuesday and are expected to discuss possible replacements for the board seat recently vacated by Google Inc. Chief Executive Eric Schmidt, according to a person familiar with the matter.

Mr. Schmidt left Apple's board late last month, as the company cited potential conflicts as Apple's and Google's businesses increasingly overlap. The departure came as his membership on the two companies' boards also was being scrutinized by the Federal Trade Commission. Mr. Schmidt had been an Apple board member since 2006.

Apple, of Cupertino, Calif., declined comment. According to the company's Web site, the board meets at least four times a year. Other board members besides Chief Executive Steve Jobs include Intuit Chairman Bill Campbell, former Vice President Al Gore, Avon Products CEO Andrea Jung, former Chrysler finance chief Jerome York, J. Crew Group CEO Millard Drexler and Genentech Inc. Chairman Arthur Levinson. Apple's bylaws stipulate its board can have five to nine members; its board historically maintained between seven and eight members.

The board has been criticized for a lack of independence from Mr. Jobs. Half of the company's six outside directors have served for at least a decade, which some governance experts say is too long to maintain their independence from the CEO of a company.

"The biggest danger is that the board will be unable to truly take the perspective of the shareholder and will feel beholden to the CEO or unwilling to confront the CEO," says David Nadler, a corporate governance specialist with Oliver Wyman Consulting.

One person close to Apple has said in the past that Chief Operating Officer Tim Cook may be appointed to the board in the not-too-distant future. It's unclear whether directors will consider adding Mr. Cook to the board at Tuesday's session.

Silicon Valley's Jobless Unplug From Tech

Published in The Wallstreet Journal

SUNNYVALE, Calif. -- Jobless workers in Silicon Valley are giving up on the region's dominant technology industry and trying to switch to other fields, as the area's unemployment rate spikes above the national and state average.

Job centers and community colleges across the region are reporting a surge in enrollment of out-of-work techies, with many looking to move into other industries, such as business voip service, organic baby clothing and mechanical engineers on Alaska Cruises. While data on the shift are scarce, the trend is evident at ProMatch, a government-funded organization in Sunnyvale, Calif., that helps unemployed professionals network, retrain and land new jobs.

Since the start of the year, ProMatch has seen its ranks swell from 180 attendees to its maximum capacity of 225. Of those, about 80% are from the tech industry, and a third are seeking to transition to nontech jobs. An additional 450 people have signed up for the waiting list to use ProMatch's services since January.

Many of the jobless techies are going back to school to pursue a bachelor degree nursing or they're targeting new gigs in the clean-energy or health-care industries. Some techies have gone as far as relocating to other states to pursue jobs such as health insurance Michigan. Some are shifting even further afield, looking for jobs at a keynote speaker bureau or as a alternative student loans agent. People are leaving tech as more tech companies are offshoring and some are shrinking, plus people are burned out and tired from having been there and done that.

The activity at ProMatch illustrates how even workers in stronger pockets of the economy -- such as tech -- are having to adjust in the recession. For much of last year, unemployment in Silicon Valley remained under control as the tech industry initially held up in the downturn. But by late last year, tech spending had weakened, and companies such as eBay Inc. were announcing layoffs.

As a result, Silicon Valley's unemployment rate -- which was below California's average and largely tracked the national average last year -- has soared, surpassing the state average in May. By June, the area's unadjusted unemployment rate was 11.8%, worse than California's 11.6% and the national rate of 9.7%, according to the latest figures from California's Employment Development Department. The rate of job losses was particularly steep in sectors such as semiconductor manufacturing, where employment dropped more than 13% in June from a year earlier.

Only a few segments of Silicon Valley's economy are now showing growth. Employment in the local health-care sector rose 4.2% in June from a year ago, according to the EDD. The clean-technology industry -- which covers energy efficiency and alternative energy, such as solar and wind power -- is also still attracting investment, pulling in $1.2 billion in venture-capital funding in the second quarter, up 12% from the first quarter.

For other Silicon Valley jobless workers, remaining in tech is often the first choice. Most unemployed techies want to stick with what they know. But with tech hiring so slow, some have little choice but to broaden their horizons.