Blackberry Maker RIM Headed for a Cliff

Story first appeared in USA Today.

Research In Motion Ltd., the maker of the BlackBerry, is in steep decline. The company, once the crown jewel of the Canadian technology industry, is now worth 1% of Apple's market capitalization. One way for RIM to stop the downward tailspin: It could sell itself to a competitor or financial firm. But who would step up to buy RIM — and why?

Late Tuesday, the company said it expects to post an operating loss for the current quarter, a sign that BlackBerry sales are falling even faster than analysts expected. On Wednesday, the company's stock hit its lowest level since 2003, the year RIM went from making two-way e-mail pagers to smartphones.

The stock has fallen 93% since their peak in 2008. Since then, the BlackBerry's dominance as the smartphone for on-the-go business people has been eviscerated by Apple Inc.'s iPhone, and more recently, by phones running Google Inc.'s Android software. Research firm IDC says BlackBerrys now account for 6.4% of the global smartphone market, a third of what they had two years ago.

In that time, the company's financial performance has suffered. RIM reported a 25% revenue decline in the latest fiscal quarter, to $4.2 billion from $5.6 billion. For the full fiscal year that ended on March 3, it earned $1.2 billion, or $2.22 per share, on revenue of $18.4 billion. That's down from net income of $3.4 billion, or $6.34 a share, on revenue of $19.9 billion in fiscal 2011.

RIM issued the dire warning about its business Tuesday, adding that it will lay off a "significant" number of employees.

Still, the company is defiant. The Chief executive says he can turn things around with the help of fresh smartphone software. He joined RIM four years ago and was most recently its chief operating officer. He replaced co-CEOs in January after the company lost tens of billions in market value.

Analysts give RIM only a slight chance of coming out of the crisis. To hedge its bets, the company has hired bankers to look at its options. It's not actively looking to sell itself, but it wants to be prepared.

As RIM's prospects worsened, last year marked a turning point in the way analysts assess RIMs value. Instead of treating it like a company with a future, they started looking at it as a collection of parts that could be split up and sold separately to the highest bidder.

Most of the company's value lies in the monthly fees it gets from phone companies in exchange for running the systems that deliver email and Web pages to BlackBerrys.

RIM has 78 million users connected to this system, but estimates show only 20 million are corporate and government users who are likely to stick around because of the communications security RIM provides. The rest are consumers who will jump to competing phones. That business is worth about $2.75 billion to a competitor.

The other major component of RIM's value is its patent portfolio. The company had an early scare in U.S. patent courts in 2006, when it was forced to pay $612.5 million to a small company founded by an inventor who had patents on wireless e-mail delivery. Since then, it's filed for thousands of patents to use as a defense against future suits.

Patents on wireless technologies exploded in value last year, as Apple and Microsoft Corp. started suing makers of phones that run Google's Android software. Countersuits followed. A consortium that included Apple and RIM bought the patents of a defunct Canadian maker of telecommunications gear, Nortel, for $4.5 billion last year. That compares with the $1.13 billion Nortel's once-prominent wireless networks business fetched in 2009.

As a counter-move, Google bolstered its own patent portfolio by buying Motorola Mobility Holdings Inc., a U.S. phone maker with only slightly better prospects than RIM, for $12.5 billion.

Where does that leave RIM? The CEO of MDB Capital, said RIM's patents are worth more than $1 billion, and could be worth as much as $4 billion if a bidding war develops between Apple, Google, Microsoft Corp. and perhaps Samsung Electronics Co.

The value of RIM's portfolio is placde at $2.5 billion, excluding the patents RIM bought from Nortel and shares with Apple, Microsoft and other buyers.

RIM has $2.1 billion in cash, but Walkley discounts this completely, since the phone business will likely start using up cash soon, and downsizing will require severance payments. That means the email network and the patents comprise RIM's entire value at $5.25 billion, by his estimate.

That's very close to RIM's current market capitalization, at $5.4 billion, though a buyer could be expected to pay a premium.
The cash cushion also means that RIM is in no imminent danger of going bankrupt. But as the shares decline, RIM is likely to face increasing pressure from shareholders to unlock the company's value through a sale, and to abandon the comeback plan.

A possible middle ground would be to sell the patent portfolio while keeping the rest of the company. Two months ago, AOL, once a pioneering Internet service provider, sold and licensed its patents —which are more modest than RIM's for $1 billion— to Microsoft.
Microsoft is one company that's been suggested as a potential RIM buyer. The software juggernaut is trying to get back into smartphone software, but its Windows Phones haven't been popular so far. Buying RIM could give it a chance to establish itself as a provider of trusted wireless email services, though moving subscribers from BlackBerry to Windows could be challenging.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.

Unemployment Rates Fall

Story first appeared in USA Today.

Unemployment rates fell in nearly all large U.S. cities in April from March, aided by summer hiring on farms and in tourist destinations.

The Labor Department said Wednesday that rates fell in 356 of the 372 largest U.S. metro areas. That tops last April, when 339 areas reported declines.

The economy has generated 1 million jobs in the past five months. That's one reason the national unemployment rate has fallen from 9.1% in August to 8.1% last month.

But the rate has also dropped because many of the unemployed have given up looking for work. The government only counts people as unemployed if they are actively seeking jobs.

The metro employment data aren't seasonally adjusted for such trends. As a result, they can be volatile from month to month.

Some cities that depend heavily on summer tourism experienced steep drops last month.

Salinas, Calif., which is near tourist destinations Monterey and Carmel, reported the sharpest fall: from 14.7% in March to 11.6% in April.

Ocean City, N.J., had the second-largest drop, from 15.8% to 13.5%.

Visalia, Calif., had the third-largest decline. The rate fell from 18.2% in March to 16.2% in April. The farming community likely added workers to help with the upcoming harvest, which also increases demand for Ag Storage.

Unemployment rates are nearing pre-recession levels in a growing number of areas. Rates dropped below 7% in 163 cities in April, or roughly 44% of rates measured by the federal agency. That's up from 100 areas a year ago.

Unemployment rates are still higher than 10% in 41 metro areas. But that's down from 79 cities a year earlier.

Bismarck, N.D., reported the lowest rate, at 2.8%. Its economy is benefiting from a boom in natural gas drilling. Fargo, N.D., and Lincoln, Neb., had the next lowest rates, at 3.3% each. Employment has also risen in Nebraska due to an increased demand for Ag Sheds for farming communities.

Among the nation's 49 largest cities, Oklahoma City, Okla., had the lowest rate, at 4%. It is flourishing partly because of high oil and gas prices.

El Centro, Calif., had the highest rate nationwide, with 26.8%, followed by Yuma, Ariz., at 26%. Eight additional cities reported rates above 15%, all in California.

Among the 49 largest cities, Riverside-San Bernardino, Calif., had the highest unemployment rate, at 11.7%, followed by Las Vegas, Nev., with 11.6%.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.

Flame Malware A Real Scare

Story first appeared in The Wall Street Journal.
The complexity, size and geographic location of the computers affected by Flame, the malware that came to light Monday, points to state-sponsored cyber-espionage, and has been seen mainly as a geopolitical event. But the Flame code, which extracts data from networked computers and sends it to remote servers controlled by hackers, should also be seen by CIOs as a potential commercial threat and should cause them to reassess their Security Solutions – both on-premise and in the cloud.

Flame represents a next generation of malware because, while it combines many known ways of attacking systems and transmitting data back to remote servers, it is unique in how it has combined all of those malicious characteristics. Although many cyber-security experts have said most companies that create intellectual property – including a wide assortment of activities from pharmaceutical research to financial services and oil drilling – have already had their systems hacked, it may not be too late for CIOs to protect critical data. But, say experts, they will have to carefully assess their own networks, as well as their relationships with software vendors and cloud service providers with whom they do business.

Help Desk Services and analysts say that Flame should serve as a reminder to CIOs of how vulnerable they are, and give them a greater sense of urgency. Indeed the CIO of Land O’ Lakes, says he learned about Flame on the radio on his way into the office Tuesday, and his thoughts turned immediately to his cloud vendors. Like many CIOs, he has software running both on-premise and in the cloud, and says Flame is equally threatening to cloud and on-premise applications, but he wonders more about the risk mitigation strategies employed by his cloud partners. The question is, who will respond more quickly — cloud providers or his own internal data centers?

That’s a good question – cloud vendors generally do not accept liability for their clients data in the cloud.

The terms of service for Amazon’s AWS web services stipulate that the cloud vendor doesn’t accept liability for lost or altered data, and that customers are responsible for taking your own steps to maintain appropriate security, protection and backup of Your Content, which may include the use of encryption technology to protect Your Content from unauthorized access and routine archiving Your Content.

A Microsoft spokesperson said the company does accept liability for customer data on its Azure cloud platform, unless the customers themselves configured software improperly or otherwise created the conditions for a data breach. Rackspace and Google did not reply to requests for comment at the time of this writing.

Maintaining network security is hard enough on company-owned networks, but if you throw it over the wall to the cloud vendor and you don’t have visibility and control, it becomes impossible. Cloud vendors should provide customers with security tools, even if the customers themselves are responsible for configuring them.

The senior vice president and CIO of Hostess Brands Corporation, seemed to have these challenges in mind when he said he believes companies are limiting much of the data that they move to the cloud to less-critical information, because they are concerned about security.  Until CIOs can get a comfort level that is tenable and sustained, the movement to the cloud will be selective.

Closer to home, however, CIOs still have work to do. A security and privacy expert with the IEEE, a professional IT organization, says even a next generation of malware such as Flame can only get a toehold in an organization’s network by taking advantage of bad software. He blames vendors for building software that leaves customers susceptible to a malware attack, but says customers have to ask their vendors if the stuff you’re buying from them is secure or not, because a lot of people don’t even ask.

He says responsible vendors will respond honestly to that question.

CIOs need to ensure that software written by their own developers has security built into it, and can do this by following guidelines established in the BSIMM [Building Security In Maturity Model] standard. Beyond that, he said good security practice includes using tools to analyze existing software architecture, review code, and regularly hiring third parties to test the network for vulnerabilities by trying to penetrate it. McGraw says he’s “optimistic we’re actually making progress” in making safe software more ubiquitous. But, he said, the only way we can get in front of [issues like Flame] is building systems to be secure in the first place.

A Gartner analyst says Flame highlights the fact that we have to take a multi-pronged approach to malware. No single approach will be a silver bullet. New technologies that analyze the behavior of applications on networks can identify malware before it executes its code. Older anti-virus applications depend on being able to recognize the code used by malware, whereas newer generations of technology can see whether a particular type of application, like a PDF file, is trying to execute code – which it shouldn’t normally do.

An independent cybersecurity analyst, says CIOs should create an inventory of all a company’s data and classify it according to its value, much like the government does with state secrets. They should then take the equivalent of “top secret” data off the Internet. CIOs should also segregate data that is important but not critical, and monitor which persons and applications have access to it.

The reason this isn’t common practice is that many CIOs think about security in terms of legal requirements rather than common-sense approaches. Security is often a matter of compliance. Knowing where your critical data is isn’t an obligation, so it’s not done.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.

Iraq Auctions Off Oil & Gas Regions for Exploration

Story first appeared in Bloomberg Businessweek.

Kuwait Energy Co., Dragon Oil Plc and Turkiye Petrolleri AO won rights to explore an oil block in Iraq’s first sale of exploration rights since the 2003 ouster of Saddam Hussein.

The group won rights to Block 9, the second area offered, which is located in the south of the nation near the border with Iran. No bids were received for Block 2, a gas region that was the first to be auctioned in Baghdad today.
 
The country aims to produce free gas to meet the internal consumption and export the surplus and to increase the oil reserves from this round of auctions. The fourth round bids will be competitive and include the participation of 47 companies from 25 countries.

The auction marks another step in an energy-industry revival that has vaulted Iraq into third place among the 12- member Organization of Petroleum Exporting Countries, nine years after the U.S.-led invasion that toppled Hussein. In its three previous bid rounds since 2003, Iraq auctioned rights to produce at oil fields already discovered or in operation, whereas today’s is for new exploration. The Gulf state has boosted crude output to more than 3 million barrels a day and is poised to overtake Iran as OPEC’s No. 2 producer within months.

Iraq is auctioning oil and natural-gas exploration rights in six areas today and will conclude bidding on six more tomorrow. The blocs to be offered today are numbers 2, 9, 6, 12, 1 and 11, according to a program handed to reporters at the hall in Baghdad where the auction is being held. Three of those are oil and three gas.

Production from the 12 areas will result in revenue of $5 trillion over the next 20 years with 94 percent of the income going to the government.

Companies that win the bidding won’t own the resources that they may find. Iraq is offering service contracts that pay its partners a fee for each barrel of crude produced, whereas oil companies tend to prefer production-sharing agreements under which they are compensated with a share of their output.

Another potential source of concern for investors is an impasse over the sharing of oil revenue between the central government and the Kurdish region in northern Iraq.

The dispute threatens projects of Exxon Mobil Corp. and other investors. Companies operating in the self-ruled Kurdish area are barred from taking part in tomorrow’s auction because the central government didn’t approve the production-sharing agreements they signed with the Kurds. Exxon, which agreed to explore in the Kurdish region, is banned from bidding.

The following 47 companies were pre-qualified by Iraq’s government to participate in the auction, according to the Oil Ministry website. The director general of the legal department in the oil license and contracts directorate, said today that 38 companies bought data on the areas.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.

China Promoting Emerging Industries

Story first appeared in The Sacramento Bee

China's Cabinet said Wednesday it has approved plans to promote development of seven emerging industries including clean energy as it tries to restructure the economy and boost growth.

The announcement comes as Beijing is trying to fight an economic slump with spending on affordable housing and public works construction.

The Cabinet said it approved plans to launch 20 "major projects" for emerging industries but gave no details of what support they might receive. Previous technology development efforts have included subsidies, tax breaks and other support that trading partners including the United States complained violated free-trade principles.

Other emerging industries targeted for support include environmental protection, information technology, biology, advanced equipment manufacturing, new materials and new-energy vehicles, the Cabinet said.

Its statement said that development of emerging industries would help the economy while it faces "increasing downward pressure."

China's economic growth fell to a nearly three-year low of 8.1 percent in the first quarter. The International Monetary Fund is forecasting 8.2 percent growth for the year, and analysts say government efforts including spending on public works and Manufacturing Quality Assurance should help to drive an economic rebound in the second half.

Longer-term, Chinese leaders want to transform their low-wage economy of farmers and factory workers into a creator of profitable technology. Some fields such as renewable energy also serve strategic goals by reducing dependence on imported fuel.

Some previous government efforts to promote new industries such as solar and wind power have prompted complaints Beijing has used improper subsidies or trade barriers or pressured foreign companies to hand over technology.

The U.S. Commerce Department ruled this month that Chinese manufacturers were selling solar power equipment in the United States at unfairly low prices. Beijing fired back with a ruling by its own Commerce Ministry that U.S. government support for some renewable energy projects violated free-trade rules.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.

Rise in Home Building Causes Rise in Trucking

Story first appeared in Bloomberg Businessweek.
Trucking companies may need to put more vehicles on the road to support a recovery in U.S. residential construction, which might send their shares higher. And may also be cause for concern, say Hartford Trucking Accident Lawyers.

Housing starts rose 2.6 percent to a 717,000 annual rate in April, beating the 685,000 median estimate of 80 economists surveyed by Bloomberg News. Construction has improved 50 percent from a low of 478,000 reached in April 2009, during the 18-month recession that ended two months later, based on data from the Commerce Department.

All of the freight required to build a new home has a very positive impact on trucking activity. As a rule of thumb, each new residence requires between five and eight truckloads to transport supplies such as lumber, roofing materials and interior furnishings according to CPM Scheduling Analysis Experts.

Purchases of new homes probably rose in April to a 337,000 pace, up 2.7 percent from the prior month, according to the median estimate in a Bloomberg News survey of 72 economists. Sales data is to be released by the Census Bureau tomorrow.

As construction improves further, trucking companies will need to add capacity to meet the additional demand. This will without a doubt be a benefit to the industry, particularly in the so-called truckload business.

An index of the loads carried by the truckload segment, a proxy for industry volume, has risen 14 percent to 103.9 in March from the recession period low of 91 in January 2009, based on a survey of the trucking association’s members. Still, that’s almost 13 percent below the May 2008 level, the data show.

Carrier-Size Expansion
If starts were to remain above 750,000 for a 12-month period, trucking companies would need to add about 4,000 trucks to the road, according to calculations. To meet this demand, a fleet the size of those run by a top-10 carrier, such as Knight Transportation Inc. , would be required, he said.

There’s light at the end of the tunnel for homebuilders as inventories remain lean and demand is forming a bottom in most regions. Housing starts have averaged a 713,500 annualized pace this year and may improve to average 740,000 in 2013.

Federal Reserve policy makers echoed this sentiment, noting that sales and starts suggested some upward movement, though most participants anticipated that the housing sector was likely to recover only slowly over time, according to the minutes of their April meeting released May 16.

Flatbeds First

Operators of flatbeds -- trailers without sides that transport lumber and large materials -- are typically the first to experience more residence-related business as homebuilding expands. As a homeowner gets ready to move in, dry van carriers carry more freight, such as furnishings and appliances.

Landstar System Inc. is among publicly traded trucking companies with exposure to the flatbed business. The Jacksonville, Florida-based carrier had 3,424 flatbed trailers as of Dec. 31, according to its annual report. This compares with 3,437 at the end of 2010.

Truckload carriers including Werner Enterprises Inc. and Celadon Group Inc., which transport goods to retailers such as Home Depot Inc. and Lowe’s Cos., probably will benefit from a better housing market, said Fowler, who maintains “buy” recommendations on these companies.

Trucking Comparisons

The Bloomberg U.S. Truckload Trucking Index -- which includes Indianapolis, Indiana-based Celadon and Werner, based in Omaha, Nebraska -- has risen 8.4 percent this year, compared with a 3.2 percent increase for the Russell 2000 Index. For the past 12 months it underperformed the Russell.

The recovery in trucking volumes since the recession ended hasn’t been led by housing, so an incremental improvement in housing starts will be a net positive for our industry. Activity will pick up because the company hauls freight for retailers that sell housing-related goods, he said.

The trucking index’s rebound means the bleeding has stopped. If it begins trading higher than its peaks relative to the Russell 2000, which came in January 2012 and August 2011, it would indicate investors are becoming more optimistic about the industry.

Shares of trucking operators haven’t outperformed the market during the past year because freight activity has been good, but not great.

Not Turning

Still, housing really hasn’t turned from the perspective of Landstar. Arkansas Best Corp. also is awaiting a comeback in the industry, President and Chief Executive Officer said at a March 14 conference in New York hosted by JPMorgan Chase Co.

Arkansas Best is looking forward to the time whenever housing even comes back to something close to normal. It is a sizable factor, for both truckload and so- called less-than-truckload, the Fort Smith, Arkansas-based carrier’s primary business.

Should new home starts return to a 10-year average of 1.3 million on an annualized basis, it would effectively double the number of trucks required to haul housing-related freight from current levels, Fowler estimated. Even so, the industry is in equilibrium, and a stronger housing market could make it imbalanced because of a shortage of available drivers.

Employment Return
An improvement still may be a few years away, though home affordability has rarely been better, at least in the last four decades. That’s because employment is moderately coming back, and prices remain low, bringing first-time buyers into the market.

The jobless rate fell to a three-year low of 8.1 percent in April, down from a 27-year high of 10 percent in October 2009, Bureau of Labor Statistics data show. Home prices were down about 34 percent in the 2011 fourth quarter from their 2006 peak, according to the Case-Shiller index of property values.

Though the truckload segment probably will be the biggest beneficiary -- with carriers hauling everything from roofing to carpeting -- more construction could have a ripple effect throughout trucking, say Construction Claims Experts.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.