Some Google Bids For Visas Denied

Google Inc. said it was denied nearly one-third off the 300 high-tech visas it requesting for foreign workers who were to start work this year, about the same rate as this year, about the same rate as last year. The H-1B visas are reserved for highly skilled foreign workers, and are limited to 65,000 annually, so they are doled out by lottery. The U.S. received almost three times that number of applications on April 1, the day it could start processing them for fiscal 2009.

Wall Street Journal; June 6, 2008

Icahn Says Jerry Yang Must Be Pushed Out

Billionaire investor Carl Icahn plans to seek the ouster of Yahoo CEO Jerry Yang, should his dissident slate of directors gain control of Yahoo's board, according to a report in The Wall Street Journal.

Icahn previously has centered his comments on removing Yahoo's board of directors, of which Yang is one of nine members who are up for re-election to a one-year term, when the next annual shareholders meeting is held.

Yahoo announced later in the day that it planned to hold its annual shareholders meeting on August 1 in San Jose, Calif. The meeting was originally scheduled for July 3, but the company announced a delay when one of its board members resigned in May.

Icahn apparently is irate over newly released details from a shareholders lawsuit unsealed Monday, according to the Journal. In the amended lawsuit by two Detroit retirement funds, Yang is portrayed as the architect of a controversial employee severance program, which would be triggered if Yahoo undergoes a change in control.

The change in control applies to not only a buyout, like the one Microsoft had on the table before it withdrew its $33 a share bid for Yahoo on May 3, but also a change in control of a majority of Yahoo's board, as noted in a CNET News.com blog.

"It's no longer a mystery to me why Microsoft's offer isn't around," Icahn said in his Journal interview. "How can Yahoo keep saying they're willing to negotiate and sell the company on the one hand, while at the same time they're completely sabotaging the process without telling anyone."

Icahn noted he believes the unsealed shareholders lawsuit will aid his efforts to win a proxy fight to unseat Yahoo's board, especially given his belief that investors will fear Microsoft will not come back with a buyout bid until Yang and the current board are gone.

The Journal also reported Yahoo's board is expected to meet Tuesday.

Comments left about this story include:
Who does Carl Icahn have tapped to replace Jerry Yang? Hopefully someone with a proven history of web and internet advertising success. Susan Decker might have to be moved out. The Yahoo sales efforts and advertising programs are overpriced and weak at best. Yahoo is not delivering advertisers enough return on investment. When will Yahoo shift focus and actually help advertisers drive conversions and ROI? If Yahoo would focus on advertiser ROI and moving the sale needle for their clients, they could turn the tide and truly compete with Google. I also was expecting Jerry Yang to focus more on quality user experiences. Yahoo is no longer delivering high-quality search results and content for users. C'mon Jerry, restructure the senior management team, trim the top level, take charge, clear the company of unskilled executives that lack "internet marketing" experience and take Yahoo back to its core. Improve Yahoo from the inside out and everything will fall into place.

Key Employees About to Jump Ship at Yahoo

Yang's Memo to Yahoo Employees ... Sit Tight I'll Get You Paid

As the proxy fight heats up, Yahoo CEO Jerry Yang issued a letter to employees to address the mechanics of a proxy contest and what to expect.

Yang's letter comes as Yahoo and billionaire investor Carl Icahn have exchanged several rounds of proxy fight letters over the past few days. The fevered pitch between the two parties is expected to further accelerate in the coming weeks leading up Yahoo's August 1 annual shareholders' meeting.

Icahn is seeking to unseat Yahoo's board of directors with his own dissident slate, while Yahoo is working to persuade investors to re-elect the current board. Here is Yang on what constitutes a proxy fight and what employees should expect:

To: Yahoo global staff
From: jerry
Subject: proxy contest update

yahoos,

over the last few weeks, i'm sure you've read a lot about a potential proxy contest leading up to our august 1, 2008 annual meeting of stockholders. the proxy contest has now begun.

so what is a proxy contest?

a proxy contest happens when one or more stockholders proposes nominees for the board of directors other than the nominees proposed by the company. and as you know, carl icahn has also announced his intention to nominate an alternate slate of directors for election to our board.

in a proxy contest, it is typical for a variety of positive and negative statements to be made about a company's board and management. we expect these kinds of statements about yahoo! to intensify in the weeks ahead. we intend to respond to statements that we believe are unfair or misleading, and we did so with the press releases we issued this week.

what should you expect in the coming weeks?

we have already filed our proxy statement with the SEC, which includes the board's nominees for election as directors and the other matters to be voted on at the annual meeting. next, we'll mail our proxy statement to all stockholders as soon as it's cleared by the SEC . in our proxy statement, our board unanimously recommends that all stockholders vote for all of yahoo!'s board of director nominees.

we believe the yahoo! board has the independence, knowledge and commitment to navigate the company through the rapidly changing internet environment and to deliver value for yahoo! and its stockholders. as we've said repeatedly, the entire yahoo! board is fully committed to doing what is in our stockholders' best interests. as yahoos, it's more important than ever that we put aside the rhetoric and continue to focus on strategic objectives and our efforts to maximize stockholder value. i want to thank all of you for your continued hard work and dedication through this distracting time. you are our most valued asset.

please remember that there are certain requirements that apply to communications during a proxy contest, but we'll do our best to keep you as informed as possible.

Financial Vultures Seek To Takeover Yahoo

Icahn Sends Open Letter to Board of Directors of Yahoo!



Carl C. Icahn
ICAHN CAPITAL LP
767 Fifth Avenue, 47th Floor
New York, NY 10153

June 6, 2008

Roy Bostock
Chairman
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Roy:
While you may take issue with the content of my letter, I take issue
with your oversight of Yahoo! Again, I stand by my characterization of your
"poison pill" severance plan and I find it humorous to see you attempt to
defend it.

Roy, it is you who "misrepresents and misstates the details" of the
plan. Much like the rhetoric in many well known political campaigns, you
keep repeating misstatements in the hopes that by repeating misstatements
enough times it will convince your shareholders that these misstatements
are valid. For example, you repeated, "the plan was fully disclosed at the
time of its adoption and should be no surprise to anyone at this point."
This is simply not true. The egregious magnitude of the dollar amount cost
of the plan was never fully disclosed, nor was the email from your
compensation advisor calling the plan "nuts." While you keep repeating that
the severance plan was in the "best interests of shareholders", you neglect
to mention that the financial cost of the plan could be immense. The
documents obtained during discovery and released in the shareholder
complaint show that Yahoo! estimates the maximum change in control
severance expenses to be a staggering $2.4 billion if Microsoft bids $35
per share for Yahoo! You neglected to mention that the true cost to an
acquirer may be even higher as the perverse change in control severance
incentives may diminish the work effort of Yahoo! employees. In case you do
not understand the plan, in addition to the $2.4 billion of severance
expenses, I believe the plan will negatively impact employee behavior and
degrade the ability of an acquirer to successfully integrate the
acquisition. In the event of a change of control, the employee may decide
not to work as hard in the hopes of cashing in on a robust severance
package that awards up to two years salary and benefits, $15,000 of
outplacement expenses, and accelerated vesting of stock options and
restricted stock units. To make matters worse, it is not just the acquirer
firing the employee that can trigger the severance package but the employee
who may decide on his or her own to resign for "good reason" at any point
within two years of a change in control. It is quite obvious to me that
this plan impacts the price an acquirer would pay. Is it any wonder than an
acquirer, once fully comprehending this plan, might not wish to negotiate
any further? I again call upon you to honor your fiduciary duty to your
shareholders and rescind this "poison pill" severance plan.

You asked, "what exactly would happen to our Company if you and your
nominees were to take control of Yahoo!" I will give you my perspective on
that.



-- First, I would work to have the board replace your "poison pill"
severance plan with an acceptable alternative.

-- Second, I intend to ask our new board to hire a talented and
experienced CEO (attempting to replicate Google's success with Eric
Schmidt) to replace Jerry Yang and return Jerry to his role as "Chief
Yahoo". Indeed, it was much speculated that Jerry would serve in the
CEO role temporarily until a permanent CEO was hired after the board
asked Terry Semel to resign.

-- Third, I intend to ask our new board to inform Microsoft that unless
any alternative transaction can insure a $33 or higher stock price (of
which I am skeptical) all talks of alternative transactions are over.

-- Fourth, I will ask our new board to offer publicly to sell Yahoo! to
Microsoft in a friendly and cooperative transaction.

-- Fifth, to the extent Microsoft does not want to make a proposal, I will
ask our new board do a deal on search with Google, but only if it
contains termination provisions that would in no way impede a
subsequent acquisition by Microsoft.


Now let me ask you a couple of questions, Roy:

-- Why don't you, now that you have the opportunity, remove the "poison
pill" severance plan that I find to be ridiculous and thereby remove a
major obstacle to a Microsoft acquisition?

-- In my opinion, Microsoft does not believe you will ever sell the entire
company on a friendly basis. So why don't you stop dancing around the
subject and publicly offer to sell the company to Microsoft for $34.375
per share and promise to cooperate completely?

-- Why are you still giving hope to Microsoft that there is a possible
"alternative deal"? As long as there is the possibility of an
"alternative deal", isn't it obvious that Microsoft will not make a bid
for the whole company?


Sincerely yours,

CARL C. ICAHN

Bare-Legged Ladies: Hosiery Reveals Office Divide

Hose or no hose? That's the working woman's dilemma around this time of year. The weather grows warmer, and the debate heats up: Are bare legs proper?

In today's casual workplaces, many women have peeled off the panty hose, and it is now common to see bare legs even on conservative Wall Street and at business events. Yet the transition has highlighted a generational divide. For women who entered the work force before the 1990s, hose were considered as necessary as underwear. But many twentysomethings have never worn panty hose at all.

The fashion shift has left some baby boomer managers feeling that their hosiery make them look frumpy. Kathy Garland, the 54-year-old chairwoman of the Northern Dallas area for the National Association of Women Business Owners, says she finally threw out a bag full of hose last week. An executive coach herself, she noticed a few years ago that she was the only woman wearing hose at a formal business fund-raiser. "Younger women don't even think about panty hose," she says.

There are certainly weightier issues to ponder these days, what with a presidential election and a war going on. But to managers in offices encompassing several generations, panty-hose policies are an opportunity to set fair rules.

This is the issue that lately has occupied the mind of Jim Holt, president of Mid American Credit Union, a small financial institution in Wichita, Kan. Mr. Holt is 58 and a three-decade member of the U.S. Army Reserves. He joined Mid American, which has 50 employees, four years ago, inheriting a dress code that prohibited, for women, such things as boots and mules, or backless shoes. The company required "hose" at all times -- even under pants.

When Mr. Holt attended a dress-for-success seminar that year, he got advice that caused him to loosen the reins on women's boots and mules. But not bare legs. The rule, "nylons and dress shoes are to be worn at all times," applied even to business-casual contexts. "We're not New York or San Francisco," Mr. Holt says, wearing ironed khaki slacks, an ironed golf shirt, and crisply creased socks. "We're the Midwest."

If there is a male equivalent of panty hose -- forcing wearers to balance comfort and formality -- it is probably the tie. Ties aren't required at Mid American. "The revolution has already taken place in the tie area," says Mr. Holt. He wears ties only on Mondays for his weekly Rotary Club luncheons.

As for fairness, it's hard to say whether ties or panty hose are more uncomfortable. One male reader of this newspaper, after making a bet with a female co-worker, attempted to discover the answer by secretly wearing panty hose under his business suit for several weeks. He claims ties are worse.

About a year and a half ago, Mr. Holt hired Kristen Spear as executive director of administration and human resources. Ms. Spear is 28. Like Ms. Garland in Texas, Ms. Spear found that wearing hose to professional events sometimes made her stand out awkwardly. Yet it was her job to counsel wayward employees on Mid American's dress code, which she did dutifully if not enthusiastically.

One bare-legged 23-year-old clerk in indirect loans -- where she dealt with customers by phone -- confessed she had never owned a pair of hose. Hose are "so foreign right now to Gen Y or Gen X," Ms. Spear says.

Ms. Spear encouraged Mr. Holt to reconsider his stand on hose. "According to her local research, hose are optional," Mr. Holt said in a recent email to me.

He relented just last week. "I didn't want to be so old-fashioned that people would be like, 'Do you require corsets, too?'" he said.

Mid American's newly loosened dress code, allowing bare legs, will be announced to employees in coming weeks in a series of meetings. Women at the credit union would be well-advised to listen closely. Mr. Holt says that when evaluating employees' performance in dress, as well as workmanship, he'll make a distinction between "who is meeting the minimum standards and who is exceeding them." In other words, hose will be optional but advised.

I suspect it is only a matter of time until Ms. Spear's point of view wins out entirely.

For the time being, Ms. Spear says she'll wear hose to board meetings "or if there is reason to exude the highest professional appearance. I will not wear them if I will be in the office all day, because I believe one can be professional-looking without wearing hose."

By: Christina Binkley
Wall Street Journal; June 5, 2008

Gates & Ballmer: Still Brothers At Arms

Gates-Ballmer Clash Shaped Microsoft's Coming Handover

One of the most successful business partnerships in history was coming unraveled. It was early 2000, and Bill Gates had relinquished the chief executive's job at Microsoft Corp. to Steve Ballmer -- for the first time taking a back seat to his college pal and right-hand man of 20 years.

Mr. Ballmer got the title. But Mr. Gates retained the power, triggering a yearlong struggle between the two men that until now has remained largely under wraps.

Things became so bitter that, on one occasion, Mr. Gates stormed out of a meeting in a huff after a shouting match in which Mr. Ballmer jumped to the defense of several colleagues, according to an individual present at the time. After the exchange, Mr. Ballmer seemed "remorseful," the person said.

The conflict between the two men paralyzed business-strategy decisions that the company still wrestles with today. Board members stepped in to try to mediate a truce.

The differences between the two men ended, Mr. Gates and other Microsoft executives say, when in 2001 Mr. Gates had an epiphany, recognizing he needed to accept his role as No. 2. "I had to change," Mr. Gates says.

On June 27, Mr. Gates will fully step aside from management at Microsoft, ending daily work there to focus on philanthropy. If the transition goes smoothly, it will be in large part because the clash eight years ago forced the two men to grapple with the crucial question of whether Mr. Gates can let his friend run the company unencumbered. Microsoft used the lessons of that crisis as it planned for the ultimate succession.

Read edited excerpts from The Wall Street Journal's interview with Bill Gates and Steve Ballmer, as the Microsoft executives talk to staff reporter Robert Guth about their relationship, Mr. Gates's transition and the future of the company.

This summer, Mr. Ballmer moves into the corner office inhabited for years by Mr. Gates, who will work only one day a week and serve as board chairman.

Once Mr. Gates leaves, "I'm not going to need him for anything. That's the principle," Mr. Ballmer says. "Use him, yes, need him, no."

The handover marks the end to a storied business partnership that created a new industry, spawned many millionaires, and redefined how the world uses computers. Under Mr. Gates, Microsoft also fought one of the most heated antitrust battles in U.S. history and created the personal fortune that he is now deploying against global problems such as AIDS.


Mr. Ballmer's challenge is to assure that Microsoft's best days aren't behind it. The company faces one of the widest sets of obstacles in its 33-year history, as nimble rivals try to chip away its traditional software business and broad industry shifts force it to build entirely new businesses. To repel rising titans like Google Inc., Microsoft is taking unprecedented steps, such as its recent bid for Yahoo Inc. Although that effort is now shelved, it would have been the software company's largest acquisition.

Elder Statesman

Messrs. Ballmer and Gates are attempting a tricky feat by navigating an "ambassadorial succession" -- when a founder steps aside but still makes himself available as an elder statesman, says Yale School of Management Professor Jeffrey Sonnenfeld. They have had eight years of rehearsal, but the approach still has its perils: History is riddled with company founders who stifle their creation when they don't entirely break free.

Mr. Gates and Steve Ballmer introduced the Windows Vista operating software in January 2007 in New York.

In addition, if Microsoft later needs radical change, it would be rare that loyal insiders like Mr. Ballmer can "really tear into their inheritance," says Joseph L. Bower, Baker Foundation Professor of Business Administration at Harvard Business School.

The weight of the transfer on the two men -- both 52 years old, and so close they often complete each other's sentences -- was clear at a March retreat of Microsoft's top executives. Mr. Ballmer gave the opening remarks to the group, his eyes streaming with tears as he noted that it would be the last such meeting with Mr. Gates and Jeff Raikes, a veteran executive and friend who is joining Mr. Gates's philanthropy.

Last month, in a joint interview with Mr. Gates, Mr. Ballmer's eyes welled up as the two men talked about building Microsoft. "It is a little like giving birth to something. Bill gave birth but I was kind of an early nanny in raising this child," Mr. Ballmer said. "There are fun things we get to do together, that's all nice. I mean, it's important, but this is..."

"...this is what we did," said Mr. Gates, smiling.

Their relationship started at Harvard University in the mid-1970s, where the two played poker and thrived by pushing their intellectual limits. Once they skipped a graduate economics class for the entire semester, then teamed up a few days before the final exam to try to learn the material all at once. Mr. Ballmer recalls he got a 97; Mr. Gates a 99.

Elements of their early friendship -- competition and hard work -- defined Microsoft's own culture. Mr. Gates focused on technology and business strategy, while Mr. Ballmer took on diverse roles. Among other things, he was Microsoft's first business manager, and managed development of the first version of Windows and North American sales. Later, he expanded Microsoft world-wide.

Even as the company grew, the two men could jointly manage almost every aspect of the business. "For a certain size organization, it was beautiful," Mr. Gates says.

Their tight relationship allowed for heated arguments that would quickly subside. Indeed, numerous executives say this was a key part of the decision-making culture.

Their centralized management of the company started to break down in the late 1990s as Microsoft grew in complexity. The U.S. Department of Justice alleged that Microsoft had abused its monopoly, and the company fought to keep from being split up. It faced an onslaught of competitors and was rankled by the threat posed by the Internet and the flight of Microsoft's employees to Web start-ups.

Embattled, Mr. Gates sought help. Eventually, in January 2000, he gave his chief executive title to Mr. Ballmer. Mr. Gates became Microsoft's "chief software architect," a new position that, in theory, was below that of Mr. Ballmer.

Soon, the two men clashed as Mr. Ballmer tried to assert himself in his new job. As the firm's iconic leader, Mr. Gates still held sway that wasn't tied to a title: In meetings Mr. Gates would interject with sarcasm, undermining Mr. Ballmer in front of other executives, Mr. Gates and other Microsoft executives say.

Debates spanned various subjects -- personnel decisions, the Xbox videogame machine then being developed, and even the future of Microsoft's core Windows software, Microsoft executives said.

Some major decisions got stuck due to the impasse, Messrs. Gates and Ballmer said. In one case, two vice presidents clashed over the future of NetDocs, a promising effort to offer software programs such as word processing over the Internet. The issue: Because NetDocs risked cannibalizing sales of Microsoft's cash-cow Office programs, some executives wanted NetDocs killed.

Messrs. Gates and Ballmer were unable to settle on a plan. First, NetDocs ballooned to a 400-person staff, then it got folded into the Office group in early 2001, where it died.

Other Microsoft executives tried to step in, calling Messrs. Gates and Ballmer into a meeting with a clear message: Your struggles threaten the company, according to people familiar with the situation.

Board's Concerns

Microsoft's board held its own discussions with the two men, and also dispatched Dave Marquardt, a director and early Microsoft investor, to have periodic dinners with the two to help sort through the troubles.

"The board was really concerned about what was going to happen," says Jon Shirley, a former Microsoft president who sits on the company's board.

The stress on Mr. Ballmer was clear one morning in January 2001 while he was in Paris for an annual review of Microsoft's businesses. In his hotel room at 3 a.m. after a long day of meetings, Mr. Ballmer posed a telling question to Mr. Raikes, the veteran Microsoft executive: "What is the CEO's job at Microsoft?"

At the urging of the board and their wives, Mr. Gates and Mr. Ballmer agreed in February 2001 to work out their differences over dinner at the Polaris restaurant in the Bellevue Club Hotel a few miles from Microsoft's campus. The two men declined to discuss details of that meeting, saying only that they needed to sort out their roles, with Mr. Gates as the "junior partner" to Mr. Ballmer's "senior partner."

Mr. Gates concluded that it was he who needed to change most. "Steve is all about being on the team, and being committed to the mutual goals," Mr. Gates said. "So I had to figure out, what are my behaviors that don't reinforce that? What is it about sarcasm in a meeting?" he said. "Or just going, 'This is completely screwed up'?"

Mr. Ballmer says that, as the top executive, he had to learn when to override decisions and when to just "let things go," he said. "We got it figured out," he said.

Soon, Mr. Gates started to hold back negative comments in meetings. During one deliberation among the executives who reported directly to Mr. Ballmer, Mr. Gates deferred to Mr. Ballmer on an important decision, prompting Microsoft executives to silently glance at each other with surprise, recalls Microsoft Vice President Mich Matthews.

Making an Imprint

Gradually, Mr. Ballmer made his imprint. He restructured the company to give more decision-making power to executives, and elevated people with general management experience into positions previously held by technology-focused executives. He also worked to settle Microsoft's many lawsuits, taking a more conciliatory line than Mr. Gates typically had, Microsoft executives say.

Mr. Gates, meantime, focused on guiding Microsoft's long-term technology strategy. Among other projects, he coached three younger managers on how to build a case for Microsoft's entry into business-communications software. That work was later launched as a major new business in "unified communications," or merging email, voice mail and other business communications.

In 2003, Mr. Gates let Mr. Ballmer lead secret talks to buy German software maker SAP AG, while he handled the technology-planning side of the talks and provided guidance in line with his job as Microsoft's chairman, says a person familiar with the situation. (Microsoft ended up not buying the company.)

Microsoft also started laying the foundation for Mr. Gates's eventual departure, in March 2005 buying Groove Networks Inc. to bring its founder, software pioneer Ray Ozzie, in house to complement Mr. Gates as a technology guru. Mr. Gates once described Mr. Ozzie -- known as the father of Lotus Notes information-sharing software -- as "one of the top five programmers in the universe."

Messrs. Gates and Ballmer had settled into their new roles by early 2006, when Mr. Gates decided to end full-time work at Microsoft, setting a two-year timeline for making the move.

One concern for Mr. Ballmer was how to preserve Mr. Gates's role of technology visionary inside the company. Looking for guidance, Mr. Ballmer says he cracked open a book from his college years by Max Weber, the German sociologist, on how organizations handle the disappearance of "charismatic leaders."

On March 28, 2006, Mr. Ballmer described the book to Microsoft's board at a retreat in the San Juan Islands near Seattle, Microsoft executives say. One way for a firm to retain the charisma of a departing leader, Mr. Weber wrote some 100 years ago, is for the leader to name his own replacement.

Mr. Gates did just that. In June 2006, he named his own two successors as tech czars: Craig Mundie, one of Mr. Gates's chief technical advisers, and Mr. Ozzie, the programmer.

"The world has had a tendency to focus a disproportionate amount of attention on me," Mr. Gates said at the time of the announcement. He then gave his successors some elbow room, disappearing on a seven-week sabbatical that included a trip to Africa.

In an interview at that time, Mr. Ballmer compared their relationship to that of brothers. "I think brothers tend to argue a lot, and somehow they stay brothers and stay connected," he said. "I think Bill and I have figured out how to do all of that."

Aborted Yahoo Bid

Leading into this year, evidence that the transfer of power has taken hold is in Microsoft's now-aborted bid for Yahoo. Buying Yahoo could have helped Microsoft expand its online-advertising business and build online versions of its personal-computer software -- the same transition it attempted with NetDocs, the project that died back in 2001. But at a price tag of nearly $50 billion in cash and stock, the bid had its risks and would have been the largest acquisition by far at a company that hasn't done many large deals.

Mr. Gates stayed largely on the sidelines, and notes that it was Mr. Ballmer behind the bid, tapping Mr. Ozzie to sort through how the two companies would merge their technologies.

Some Microsoft insiders say Mr. Gates -- who traditionally favored Microsoft building its own way into markets -- wasn't a major proponent of the deal. Whatever the case, Mr. Gates stands by his man. "I don't have a different point of view on the Yahoo thing than Steve does," he said.

The question remains if Mr. Gates can resist the temptation to dive back in if Microsoft hits a crisis point. Over the past decade, several high-profile founders jumped back in when their companies were under siege, including Steve Jobs, who remade Apple Inc., and Michael Dell of Dell Inc. and Howard Schultz of Starbucks Corp. "There is a savior complex that says, 'I'm the only one who can restore it to its glory,'" says David A. Nadler, senior partner at consulting firm Oliver Wyman Group.

Mr. Gates says he's happy to help on some long-term projects, but won't return full-time. "I am done with that," he said.

By: Robert Guth
Wall Street Journal; June 5, 2008

Drop in Home Prices Accelerates to 14.1%

Fewer Americans Plan to Buy Soon, Putting Off Bottom

Home prices are falling at an accelerating pace, new data show, while a separate report found a shrinking share of Americans plan to buy a home anytime soon, suggesting more price declines in the months to come.

The Standard & Poor's/CaseShiller index for the first quarter showed prices for existing homes nationwide declined 14.1% from a year earlier, compared with a year-to-year drop of 8.9% in the fourth quarter.

A separate S&P index that tracks 20 major metropolitan areas on a monthly basis showed home prices dropped 14.4% in March from a year earlier and 2.2% from February.

Meanwhile, sales of new homes last month rose 3.3% from March. But sales remain well below year-earlier levels and, with a glut of unsold homes on the mar- . ket, any significant improvement in the market remains down the road.

The steepest declines in home prices came in cities that had experienced the sharpest run-ups this decade; prices in Las Vegas fell 25.9% in March from a year earlier, compared with declines of 24.6% in Miami and 23% in Phoenix.

Prices rose in just two cities: Charlotte, N.C., and Dallas. In Charlotte, prices increased 0:2% in March from February and 0.8% from a year earlier, the only annual increase among the 20 cities surveyed. In Dallas, prices increased 1.1% in March but declined 3.3% from a year earlier.

David Blitzer, who oversees indexes at S&P said a turnaround in prices won't be visible until several more cities start showing monthly price rises. "Given the massive amount of supply that's out there, I'm not convinced we're at the bottom yet," Mr. Blitzer said. "It'll be at least a few more months."

Home prices nationwide are now 16% below their peak in the second quarter of 2006. Prices rose almost 90% from the beginning of this decade to that peak and now are at levels seen in the third quarter of 2004.

Despite the declines, prices are still almost 60% higher than at the start of the decade.

Many analysts expect prices to decline an additional 10% or more before hitting bottom as the housing market is battered by tighter lending standards and a wave of foreclosures that is boosting supply.

The rise in sales of new homes, which is a smaller part of the market than existing homes, doesn't mean the housing market has hit bottom.

The 3.3% gain, to a seasonally adjusted annual rate of 526,000, was partly offset by a downward revision of the March figure, which dropped 11%, rather than the 8.5% initially reported. On a year-to-year basis, new-home sales were down 42% from April 2007, the Commerce Department said.

The median price of a new home rose 1.5% to $246,100 in April from $242,500 a year earlier. But the gains aren't expected to continue, given the glut of unsold homes. Inventories fell 11,000 to 456,000, but that still represents 10.6 months of supply.

Consumers' expectations about the economy has grown especially pessimistic. The number of people expecting their incomes to decrease during the next six months outweighed those expecting gains. Assessments of labor-market conditions also worsened, with fewer people saying jobs are plentiful.


Consumers' souring mood about the economy is contributing to the weak outlook for housing. In a survey of 5,000 households by the Conference Board, just 2.1% of respondents said they plan to buy a home in the next six months, down from 2.5% last month and 3.4% in March. However, if you are selling your home, many experts would recommend a home warranty. Home warranties make a home look better to a potential buyer, which retains and improves the value of a home. If the home you are selling is warrantied, the new home owners are protected against many unexpected repairs and replacements of items in the home.

The housing market in general may be weak at this point in time, but there are many individuals who are looking to buy a home, due to the major drop in pricing.

TransUnion Aims To Settle Case of Consumer Data

TransUnion Corp. has agreed to offer as much as nine months of free credit-report monitoring to more than 150 million Americans under a legal settlement. Consumer advocates' reaction was lukewarm, saying the services involved are only somewhat useful.

The case, filed in federal court in Chicago, claimed that the credit bureau had violated the Fair Credit Reporting Act when it sold consumer information to businesses for their targeted marketing efforts.

Under the settlement, affecting a wide swatch of Americans, any consumer who had a credit card or a mortgage, auto or student loan, or other open credit account or credit line in the U.S. any time from 1987 to May 28 this year will be able to choose from two free TransUnion services for a limited time, according to the settlement terms.

The law allows selling publicly available information but not private data. The Chicago company said it didn't violate the law, and it discontinued the practice in question in 2001.

Seeking to end a class-action lawsuit that has been pending for almost a decade, TransUnion agreed to offer one of two options to consumers:

1. Six months of TransUnion's creditmonitoring service free, giving consumers unlimited access to their credit reports and scores, and email notifications, when changes occur on their credit reports. The settlement values this service at $59.75.
2. Nine months of the credit-monitoring service, plus access to the credit scores used in insurance decisions, and TransUnion's mortgage simulator service, by which consumers can see how their credit score affects their mortgage rate. Value: $115.50.
   

Consumers choosing the first option sacrifice their right to enter a class-action claim against TransUnion, though they might still bring an individual case. Those who choose the second option sacrifice any further legal claims in the matter. Consumers won't need to provide a credit card to sign up for either service, and both services will simply end, meaning TransUnion won't automatically sign up people for a paid service when the free use expires, according to the settlement.

The settlement still needs to be approved by the court.

Consumer advocates say the usefulness of such services is mixed. Already, consumers can get one free credit report from each of the three main bureausTransUnion, Experian Group Ltd. and Equifax Inc. - every 12 months.

By: Andrea Coombes
Wall Street Journal; June 2, 2008

H-P's Ann Livermore Keeps Eye on 'Team'

Ann Livermore, head of Hewlett-Packard's storage and servers, software and services businesses, has faced decisions in her company that might have sent some executives heading for the door. But despite deals that cut into her territory, she keeps her focus on the big picture, on the challenges at hand, and on new opportunities for growth. It's all part of knowing that "business is a team sport," she says.

That sentiment isn't common among business leaders these days. Many senior executives are more focused on their individual well-being than on furthering their company's goals. They're quick to jump to new employers when they don't feel appreciated.

Some outside H-P had speculated that Ms. Livermore was unhappy about relinquishing part of her portfolio after the company announced plans to acquire Electronic Data Systems, based in Plano, Texas, an IT outsourcing company. Under the agreement, the outsourcing portion of H-P's services businesses -- about 13% of the group she runs -- will become part of EDS under its current chief, Ronald Rittenmeyer. Mr. Rittenmeyer will report to H-P CEO Mark Hurd.

She says she's staying put. "This isn't about me," she said in an interview. "It's about doing what is best for H-P. It makes sense to combine all outsourcing businesses -- and with a merger this big, for EDS to report directly to Mark," to ensure the best integration.

When does staying put and taking on an important No. 2 or No. 3 role benefit you and when is it a sign of surrender? Join a discussion on Front Lines.

This doesn't mean the 49-year-old Ms. Livermore has taken a place on the sidelines. Her division reported $37.7 billion in revenue last year, or 36% of H-P's total. Her office at H-P's Palo Alto, Calif., headquarters is about 20 feet from her boss, Mr. Hurd, who describes her as "one of the best executives I know. She's running a huge business and doing that very well."

Ms. Livermore helped develop strategy for the EDS deal with Mr. Hurd. Like him, she knew H-P on its own couldn't expand its outsourcing services enough to meet demand.

"Just before Christmas, I was talking to two large financial institutions, a manufacturing company and a government organization that all had very large IT outsourcing opportunities for us, but we didn't have the resources to respond,' she says. "By combining our outsourcing business with EDS, we'll have tremendous scale and be able to respond to every opportunity."

She has plenty of growth businesses to lead. Among these: blade systems, the No. 1 growth market in servers.

"I have one of the biggest and best jobs in technology," says Ms. Livermore, who earned $10.4 million in salary and bonus, and had equity valued at $4 million in fiscal 2007. "As much progress as H-P has made in recent years, there's still so much more we can do -- and I'm eager to make that happen."

The 26-year H-P veteran, a Stanford M.B.A., has had her share of setbacks and comebacks. She was on the phone with Mr. Hurd just four days after having a kidney transplant in 2005. She took a five-week leave but hasn't slowed down since returning to work.

In 1999, she lost out to Carly Fiorina for the CEO job. And in 2005, Mr. Hurd was recruited to fill the post. Rather than jump to another company, she became a supporter of Ms. Fiorina, with whom she's still friends, and then of Mr. Hurd. "I realized my own strengths complemented both of theirs," she says.

For one, she says she understands how processes and people work at the company. She also is focused on customers, talking to two or three big ones every day. And she has a reputation for identifying market trends. When she visited a dozen financial-services companies several years ago, she listened when IT executives said they were spending too much time and money operating their data networks.

Out of those conversations came H-P's strategy for building "the next generation of [automated] data centers, which is now driving growth in software and services," says Ms. Livermore.

As one of three senior-ranking women at H-P and the only one in a line job, Ms. Livermore says she was helped early on by a boss who was committed to building a diverse management team. "This was the early and mid-1980s and 25% of his management team was female," she says.

She remembers that when Mr. Hurd first arrived at H-P, he told her, "The numbers tell the story." Her story: In the Technology Solutions Group she heads, operating profit was $4.2 billion, or 11% of the unit's revenue, last year. In the last quarter, operating profit surged 38%.

By: Carol Hymowitz
Wall Street Journal; June 2, 2008

Economy Puts Tight Squeeze on RV Makers

In Effort to Ease Cash Crunch, Coachmen Taps Insurance, Fleetwood Peddles Assets

Two of the country's largest recreational-vehicle makers, pummeled by high gasoline prices and the slumping housing market, face serious cash crunches and are taking drastic measures to ease the strain.

Coachmen Industries Inc., whose sales have declined 40 percent over the past three years, is borrowing against the value of life-insurance policies it holds on employees and retirees. So far, the Elkhart, Ind., company has tapped about half the cash value of those policies, according to filings with the Securities and Exchange Commission.

Fleetwood Enterprises Inc., which has posted five straight years of losses, recently sold its Riverside, Calif., headquarters and is seeking buyers for other properties, in an effort to raise $100 million to finance a looming bond redemption. In addition to RVs, about 25 percent to 30 percent of Fleetwood's business comes from mobile homes, a market that has been skidding even longer.

The $15 billion RV industry has been among the less-heralded casualties of the mortgage and housing crises, say manufacturers, dealers and others. But the impact has been severe. RV sales peaked in 2006 at about 390,000 vehicles, according to the Recreational Vehicle Industry Association. After a 12 percent drop in 2007, the trade group expects sales to tumble 14 percent to about 305,000 vehicles this year, the lowest level since 2001.

Industry watchers say couples in or nearing their 50s are the core market for motor homes and travel trailers. These couples are delaying their purchases of RVs, largely because they would typically have financed them by selling or borrowing against their homes. That has become more difficult as home values have plunged nationwide.

Meanwhile, banks and other lenders, many battered by mortgage-related losses, have grown more reluctant to make RV loans, demanding higher interest rates and better credit scores. Last week, General Electric Co.'s consumer-finance unit, a major lender in the field, said it would cease to make new RV loans because of disappointing returns.

High gasoline prices have also put off would-be buyers of the fuel-guzzling vehicles. "Gas is a real problem for these guys. What's happening with (sport-utility-vehicle) sales happens in spades with an RV company like Fleetwood," said Al Koch, vice chairman and managing director atAlixPartners, a turnaround and business-advisory firm.

The sales slowdown has already claimed two smaller RV manufacturers. In November, National RV Holdings, a Perris, Calif., maker of high-end motor homes, filed for bankruptcy-court protection and is in the process of going out of business. Last month, another high-end manufacturer, Western Recreational Vehicles Inc., of Yakima, Wash., closed its doors.

Even Winnebago Industries Inc., one of the industry's strongest companies, hasn't been immune. While Winnebago has managed to stay profitable by cutting costs and focusing on large RVs, a market where profit margins are fatter and competitors fewer — it has had four straight years of declining sales.

To get through its cash crunch, Coachmen has borrowed $23.7 million, or nearly half the cash-surrender value of what it describes in its filings as "company-owned life insurance."

Such insurance typically is purchased by a company on the lives of its employees and pays the company when an employee dies. In its filings, Coachmen has said the policies were intended to fund executive retirement benefits. It didn't return phone calls seeking details of the policies or the outlook for its benefits programs.

Coachmen sales fell sharply to $480 million in 2007 from $802 million in 2004. Over that period, it nearly halved its work force to 2,300.

Though its sales fell 7 percent in the first quarter of 2008, Coachman posted a profit of $1.3 million, compared with a year-earlier loss of $10.4 million. Monday its shares, which were trading at $10 a year ago, rose four cents to $3.49 in 4 p.m. composite trading on the New York Stock Exchange.

People familiar with the matter say the company has sought out pricey "rescue financing" from private-equity funds and other lenders. They say it has received one proposal, which is now before the board, and that no decision has been made.

But Coachmen CEO Rick Lavers, while acknowledging the company faces "challenging times," said any discussions about new funding were initiated by the funds and not by his company. "That's because they want to make capital available to us. We don't feel we need it right now. You'd always like to have more cash. We've prepared very well for worst-case scenarios, which unfortunately have come to pass," he said.

Mr. Lavers said the company isn't contemplating a bankruptcy filing. "Rumors of our demise are overstated," he said.

In response to queries from The Wall Street Journal, Coachmen said in an SEC filing that it was "not actively engaged in pursuing additional debt or equity financing" and that its credit line and life-insurance policies provide "adequate sources of liquidity for the company's current and foreseeable operations."

The much-larger Fleetwood Enterprises is in its own rush to raise cash as sales continue to tumble and losses mount. For 2007, it posted a net loss of $89.9 million as sales slipped to $2 billion from $2.4 billion a year earlier. Since last year, the company has shrunk its work force to about 8,500 from 10,000.

Fleetwood bondholders are expected to redeem $100 million in bonds on Dec. 15, and the company needs money to finance the redemptions. In April, it sold its 42-acre headquarters complex for $23.5 million and is shopping around other land and assets, including its division that makes pop-up camper trailers.

Fleetwood shares have plummeted from more than $11 last summer, finishing 4 p.m. composite trading Monday at $3.88, up eight cents, on the NYSE.

Despite its battered share price, Fleetwood is considering issuing more stock to pay off its bonds. Fleetwood Treasurer Lyle Larkin said "we are confident we can meet this requirement, though it sure could have happened at a better time."

Most of the RV industry had banked on baby boomers preparing for their retirement years to fuel a new era of sales growth. That is what Robin Schwartz and her husband were expecting in 2005 when they sold off a gas station and bought Brien's RV, a small RV dealership in Fairless Hills, Pa., about 20 miles north of Philadelphia. Mrs. Schwartz said customer traffic began flagging late last year.

"We are selling more used RVs. Or people will take a lower-end model that doesn't have surround sound, or the cabinets are more basic. It's like stepping down from a Lexus to Hyundai," Mrs. Schwartz said.

Sales manager Harry Wiko estimates Brien's will sell 80 or so RVs this year, down from about 110 in the past couple of years. And the average sale price is down to about $20,000 from $30,000. "It's as bad as I've seen it," he said.

To cut costs, the dealership is keeping fewer RVs in inventory and upgrading roadside service to keep customers happier. It is also paring advertising on local cable TV and a $5,000 Nascar sponsorship it shares with a local radio station.

By: Jeffrey McCracken
Wall Street Journal; May 13, 2008

JDS Wins Investor Lawsuit, Bucking a Trend

Firm Goes to Trial Rather Than Settling; Bankruptcy Worries

When a company's stock plunges, executives must face angry investors, worried employees and, frequently, shareholder lawsuits claiming managers defrauded investors by hiding bad news.

Many suits get dismissed. Most others end in settlements, as executives seek to avoid billion-dollar verdicts. But JDS Uniphase Corp., a Milpitas, California, maker of communications components, last year took a shareholder suit against it to trial, and won.

Had the company lost, "the worst-case scenario was that the company goes out of business," says Christopher Dewees, the company's chief legal officer. "The more realistic possibility was that we file for bankruptcy."

JDS was a poster child of the dot-com stock bubble. In 1999, shortly after the company was formed by a merger, its stock soared; then it plunged amid the tech implosion. A group of JDS shareholders, ultimately led by a Connecticut pension fund, sued in 2002. The shareholders claimed that JDS failed to disclose information about its deteriorating business, helping to keep the stock buoyant. Meanwhile, plaintiffs alleged, executives cashed out.

Plaintiffs in shareholder suits often calculate requested damages by looking to the fall in a company's market capitalization. JDS's market value had fallen from more than $50 billion to less than $10 billion in two years. One plaintiffs' expert estimated damages as high as $20 billion.

Given the numbers, executives initially thought they would settle. Mr. Dewees, who joined in 2002, says he didn't want to leave the company's fate "in the hands of 12 people you don't know."

The JDS case is one of only four of 2,105 shareholder securities-fraud suits filed since 1995 to be tried to a verdict, according to Stanford University Law School. Two of those were decided for the plaintiffs, and one for the defendant. Of the others, 634 were dismissed, and 879 were settled; the rest are pending.

In late 2002, lawyers for JDS and the lead plaintiff, the state of Connecticut Retirement Plans and Trust Funds, started informal talks about possible settlement positions. But Mr. Dewees says the parties were like "two ships passing in the night." JDS Chief Executive Kevin Kennedy says the company had directors and officers insurance covering up to "a little less than $100 million," but the plaintiffs wanted "much more." Denise Nappier, the Connecticut State Treasurer, declined to comment on the amounts discussed but says in most cases her organization reaches "settlements acceptable to both parties."

By spring 2007, informal discussions and formal mediations had made little progress. JDS executives, with the backing of the board, decided to test the possibility of a trial. The company hired a former federal judge to size up the case, hired consultants to assess the possible jury pool, and presented the case to several focus groups. Mr. Dewees says the results were encouraging. In addition, an earlier three-month investigation by an outside law firm found no wrongdoing, he says.

Last summer, JDS failed to have the case dismissed. "We'd been at this for five years, and we were still having the same conversations with the plaintiffs," says Mr. Dewees. "I thought it was probably time to have a serious talk about trial with the board."

Marty Kaplan, JDS's chairman, says the nine-member JDS board had its "hawks," who wanted to push to trial, and others who preferred to settle. But he says the plaintiffs' demands far exceeded even the largest settlement the board considered, meaning there was no "serious debate" about whether to go to trial.

Still, board members pushed executives to appreciate the consequences of the decision. "They said to me, 'If you're willing to go to trial, you have to be willing to see this company in and out of bankruptcy if the verdict goes against you,' " recalls Mr. Kennedy.

The CEO says the case was a "massive distraction" for executives and directors, though only one independent director was called to testify. "You can't get this back in dollars," he adds. "It took away time with customers, time with employees and time thinking about moving the business forward."

The trial, in Oakland, Calif., lasted four weeks. After about a day and a half of deliberations, the jury returned a verdict in JDS's favor. The plaintiffs decided not to appeal, and a final judgment was entered in March. A person familiar with the case says JDS spent around $50 million in legal fees, though insurers covered much of the tab.

Despite JDS's win, lawyers say the case is unlikely to encourage other companies to seek trials. In January, a Phoenix jury in a securities-fraud suit ordered Apollo Group Inc., the owner of the University of Phoenix, to pay about $280 million to shareholders. Apollo has filed post-trial motions, slated to be heard in August.

By: Ashby Jones
Wall Street Journal; June 2, 2008

Realtors Agree to Open Listings To Online Discounters

Antitrust Settlement May Aid Competition But Is Unlikely to Affect Sales Commission

The Justice Department said it reached a settlement with the National Association of Realtors in an antitrust case over the trade group's effort to control how home listings are displayed on the Internet.

The settlement prevents the Realtors -- whose more than 1.2 million members handle nearly all U.S. home sales made through agents -- from adopting rules that the department said could have handicapped discount brokers that rely heavily on the Internet to attract and work with clients.

The department said the settlement should encourage more competition among real-estate brokers. But it appears unlikely to have much influence on the commissions consumers pay on home sales, at least in the near term, industry executives say.

The antitrust suit, filed in U.S. District Court in Chicago in 2005, challenged Realtor rules that allowed brokers to block their listings of homes for sale from being displayed on other brokers' Web sites. The Justice Department said that policy would restrain competition from brokers that rely mainly on Web sites to interact with their customers. If such brokers couldn't offer their clients information on the full range of homes available, consumers would go elsewhere, the department said.

Under the settlement, the Realtors agreed to adopt new rules that don't discriminate against online brokers. The settlement says online brokers should be allowed to provide the same information via the Internet that conventional brokers offer to people who walk into their offices.

The trade group didn't admit to any wrongdoing under the deal and won't pay any fine. Laurie Janik, its general counsel, said the settlement "protected all our key principles."

Patrick Lashinsky, chief executive officer of online broker ZipRealty Inc., which offers its clients rebates that effectively lower their commission costs, said his company generally has been able to obtain the listing information it needs in the 34 metropolitan areas in which it operates. But he said Realtor policies had allowed some brokers in North Carolina to block the company from displaying information on homes they had listed for sale. Mr. Lashinsky said he believes the settlement will end that problem and protect ZipRealty's business model.

Over the past decade, the Internet has given consumers access to far more information about homes on the market. But, in contrast to its success in bringing down the costs of stock trading and booking hotels and airline tickets, it hasn't lived up to expectations that it would slash home-sales commissions.

A survey by Real Trends, an industry newsletter, found that the average commission on a home sale in 2007 was 5.2%, little changed from 2006 and up slightly from about 5% in 2005.

That's partly because consumers often choose a broker they know or one recommended by a friend, rather than seeking out those offering the lowest commissions. In addition, buyers don't pay for home-sales commissions directly, and so often see little reason to question prevailing rates; sellers often believe they won't get the best price unless they hire a conventional agent working for a well-known firm.

As a result, brokers that promote discount services -- often through rebates or flat fees -- account for less than 10% of the market, according to various industry estimates.

In recent years, even conventional brokers generally have embraced the idea of making listing information widely available on the Internet, including on such sites as Google.com and Zillow.com. "Blocking access to [listings] data is not a winning strategy," said Mike Davin, president of CataList Homes, a discount broker in Southern California.

By: James Hagerty & John Wilke
Wall Street Journal; May 28, 2008