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Floating Bases May Be a Game Changer for US

2012-01-30T09:30:00.000-05:00

First appeared in Wall Street Journal

Within the president's defense-budget plan is funding for anintriguing new item: a floating drone base that also could be used as alaunching pad for commandos.

The vessel—called an "afloat forward stagingbase"—would be a platform that could be configured to carry and refuelsmall patrol boats, helicopters or pilotless aircraft.

It would also give the U.S. military the ability to stage asmall strike force offshore—without obtaining a permission slip from anothercountry for access to a land base.

Details are still emerging, but the project offers insightinto how the Obama administration envisions a military that in some ways ismore lethal even as it contracts.

Plans for the specialized vessel fit neatly with the Obamaadministration's plans to grow special-operations forces, while slimming downconventional forces such as the Army and Marine Corps.

Senior officials want to provide military commanders with affordablesea-base options without necessarily sending a big-deck aircraft carrier and afull complement of escort ships.

A defense official said the floating staging base was morelike a freighter that would be outfitted for different kinds of missions, fromcountering mines to launching remotely piloted aircraft. It also could be usedas a platform for launching commando operations.

The official said one option for the ship is a version ofthe Mobile Landing Platform, a logistics ship that is being built by GeneralDynamics NASSCO, a San Diego-based shipyard owned by General Dynamics Corp.General Dynamics didn't respond immediately to requests for comment.

Earlier this week, a Navy SEAL team staged a dramatic rescueof hostages held in Somalia. The military hasn't disclosed where the SEALslaunched their operation from, but the raid represented the kind of operationthat the administration wants at the center of its counterterrorism strategy:one that requires a minimal involvement of conventional forces.

It isn't clear what kinds of drones might operate from theship. Special-operations forces in the Middle East have used the Fire Scout, arobotic helicopter, for surveillance operations in the Middle East.

The Navy disclosed last year that two Fire Scouts hadoperated from a guided-missile frigate as part of an international task forcefighting Somali pirates.

The unmanned craft also has operated in Afghanistan, and aFire Scout drone crashed last year during a reconnaissance mission over Libya.

The sea base described in the Pentagon's budget rollout hassome historical antecedents.

During U.S. military operations to protect Kuwaiti oiltankers from Iranian attacks in the late 1980s, the U.S. repurposed two oilplatform construction barges, the Hercules and the Wimbrown VII, as bases forcountering Tehran in the Persian Gulf.

James Jay Carafano, a national-security expert at theconservative Heritage Foundation, said the floating base "sounds like thesame concept" as the converted barges.

"It's a small platform that you can use to launch quickoperations from," he said. "So it's ideal for littoral operationswhere you want to do special operations or ISR [intelligence-surveillance-reconnaissance]."

Mr. Carafano added, however, that this kind of capabilitywas "not a silver bullet," because such vessels would still have tobe sustained and protected by conventional forces.

"It's a very limited capability," he said, adding:"Normally, when we do stuff like this, they wouldn't want to advertise it.It does seem to be a PR campaign for a smaller, leaner, more flexiblemilitary."

Southern Plants Find Home in North

2012-01-27T09:54:00.002-05:00

First appeared in USA Today

Southern magnolias, lovers of sultry weather, braving thechillier Northeast?

Camellias, a New Orleans trademark, staking out in NorthCarolina and higher latitudes?

It's true, gardening experts say, and expect similaroddities to represent the new norm.

It is now safe to plant new species in many parts of thenation, according to a new government map released Wednesday showing newgrowing guidelines for the first time in decades. A gradual northward warmingtrend makes it possible to plant trees and other perennials that would haveperished in colder zones. The "hardiness" zones, the gospel to thenation's 82 million gardeners that are printed on the back of seed packs andcatalogs, are based on average minimum temperatures.

"It is a good thing the government has updated themap," says Woodrow Nelson, director of marketing communications for theArbor Day Foundation. "Our members have been noticing these climatechanges for years and have been successfully growing new kinds of trees inplaces they wouldn't grow before."

For example, Pennsylvania's growing zone was consideredrisky for southern magnolias, according to the old government map dating to1990. But the new map, based on updated weather statistics from 1996 to 2005, putsPennsylvania, like much of the Northeast, in a warmer growing zone.

Catherine Woteki, an undersecretary of the Department ofAgriculture, which issued the new guidelines, cautioned against reading toomuch into the changes. "We do not think the plant hardiness zonemethodology is appropriate for making comments on climate change," shesays.

Might gardeners be going out on a limb? Steve Carroll,director of public programs at the State Arboretum in Virginia, advisesgardeners to check with their local nurseries or a university extension programfor advice.

"There's definitely a changing climate," saysCharlie Nardozzi, a gardening consultant in northern Vermont. "But thatdoesn't mean we won't have a harsh winter again that could kill all theirplants."

Romney Reconsiders Private Equity Benefits

2012-01-26T17:22:00.000-05:00

First appeared in Wall Street Journal

If elected president, Mitt Romney might consider ending atax break that helped the former Massachusetts governor accumulate his fortune,an aide suggested Tuesday.

The comments came as the Romney campaign made available morethan 500 pages of tax-return data for 2010 and 2011 amid signs the issue was hurtinghim with some voters.

Later in the day, in a signal of how the tax issue isroiling the GOP campaign, the Romney camp tried to step back from the aide'sremarks, underscoring that the former Massachusetts governor didn't want toraise anyone's taxes.

The back-and-forth Tuesday about Mr. Romney's approach toone particular tax break began when the candidate's policy director, indicatedin a call with reporters the candidate might be willing to reconsider a taxbreak known as "carried interest" as part of a comprehensive taxoverhaul. The break gives private-equity and venture-capital executives a relativelylow 15% tax rate on much of their income. Some reference an UK Tax Advisor.

Carried interest is a share of profits from an investmentfund or partnership given to managers as compensation. Mr. Romney was aided bythe tax advantage as founder of private-equity firm Bain Capital.

The policy director noted Mr. Romney hasn't recentlyaddressed retention of the carried-interest break. He spoke favorably of it in2008. There are "a number of exemptions, deductions, credits,administrative treatment of income…that would be addressed in tax reform."

Most taxpayers receive compensation as ordinary wagessubject to rates as high as 35%. Roughly half of households pay no federalincome tax. The average income-tax rate for the middle slice ofhouseholds—those making between $34,300 and $50,000—was 3.3% for 2007. Theaverage income-tax rate was 14.4% for the top fifth, and 19% for the top 1%,before dropping slightly for the very highest earners who, like Mr. Romney,typically receive a large percentage of income from investments.

Democrats have criticized carried-interest rules, thoughthey have failed when they have tried to repeal them.

Tuesday, Mr. Romney's campaign formally released detailedinformation on the candidate's 2010 tax return and a summary of his 2011 taxes,which aren't finished yet.

Tax experts said that by and large, the returns showed Mr.Romney and his advisers sought to minimize the family's tax burden, whilegenerally avoiding aggressive positions.

The Romneys reported an effective tax rate of about 14% ontheir 2010 return, and just over 15% in their tentative calculations for 2011,on income that hovered around $20 million each year. They received about $7.4million in income taxed under carried-interest rules in 2010 and $5.5 millionin 2011, aides said.

An accountant with Crowe Horwath in New York, said,"This is the tax return of a man who knows he is running for politicaloffice and who has distanced himself from investment decisions. Most of thedisclosures in these tax returns are fairly typical of investors with a globalinvestment perspective."

The tax data revealed new details about Mr. Romney's wealthmanagement, including his ownership of a now-closed Swiss bank account as wellas investments in the Cayman Islands, Bermuda and other tax havens.

The Romney camp said the candidate properly reported incomefrom those sources, paid appropriate taxes and in the case of the Swiss account,disclosed it to the IRS.

The 2010 tax return suggests the Romneys maintained arelationship with Bain Capital more than a decade after Mr. Romney left in1999. According to documents, the Ann D. Romney Blind Trust received twoinvestments subject to carried-interest rules in Bain funds in fall 2010.

The Romneys' trustee, signed two statements stating that"services" would be performed to maintain the investments, withoutstating who would offer such services. Such a statement ensures the earningswill qualify for capital-gains treatment, accountants say.

In a written statement, the campaign said The Romneys' trustee’s wording was"boilerplate language" and that no services were provided inconnection with receipt of the interests. The campaign declined furthercomment.

A prominent accountant in Atlanta, and other experts saidsuch services are required in order for the income to qualify for favorable taxtreatment. An UK Tax Planning advocate has to dosimilar things.

The tax filings also provide details on a trust set up in1995 for the Romneys' five sons, which appears to hold a hefty percentage ofthe family's wealth, estimated at more than $260 million. Such trusts generallyare established to minimize future estate taxes.

In the 2010 tax filings released Tuesday, the Romneysreported the family trust had $7.7 million in capital gains in 2010, about 46%of the total capital gains reported that year, not counting a tax loss from aprior year. Capital gains were the Romneys' largest source of income. Much ofthe trust's income came from entities affiliated with Bain Capital, the taxfilings show.

How the US Missed Out on the iPhone

2012-01-25T23:03:00.001-05:00

First appeared in NY Times
When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.
But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
Why can’t that work come home? Mr. Obama asked.
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.
However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.
Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares.
“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.
“If it’s the pinnacle of capitalism, we should be worried.”
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.
“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”
Companies and other economists say that notion is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.
To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers — including G.M. and others — that have shrunk as nimble competitors have emerged.
Apple was provided with extensive summaries of The New York Times’s reporting for this article, but the company, which has a reputation for secrecy, declined to comment.
This article is based on interviews with more than three dozen current and former Apple employees and contractors — many of whom requested anonymity to protect their jobs — as well as economists, manufacturing experts, international trade specialists, technology analysts, academic researchers, employees at Apple’s suppliers, competitors and corporate partners, and government officials.
Privately, Apple executives say the world is now such a changed place that it is a mistake to measure a company’s contribution simply by tallying its employees — though they note that Apple employs more workers in the United States than ever before.
They say Apple’s success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products. And, ultimately, they say curing unemployment is not their job.
“We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”
‘I Want a Glass Screen’
In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.
Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.
People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.”
After one executive left that meeting, he booked a flight to Shenzhen, China. If Mr. Jobs wanted perfect, there was nowhere else to go.
For over two years, the company had been working on a project — code-named Purple 2 — that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality — with an unscratchable screen, for instance — while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?
The answers, almost every time, were found outside the United States. Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.
In its early days, Apple usually didn’t look beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, for instance, Mr. Jobs bragged that it was “a machine that is made in America.” In 1990, while Mr. Jobs was running NeXT, which was eventually bought by Apple, the executive told a reporter that “I’m as proud of the factory as I am of the computer.” As late as 2002, top Apple executives occasionally drove two hours northeast of their headquarters to visit the company’s iMac plant in Elk Grove, Calif.
But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.
In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.
For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.
The impact of such advantages became obvious as soon as Mr. Jobs demanded glass screens in 2007.
For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.
Then a bid for the work arrived from a Chinese factory.
When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
The Chinese plant got the job.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
In Foxconn City
An eight-hour drive from that glass factory is a complex, known informally as Foxconn City, where the iPhone is assembled. To Apple executives, Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.
That’s because nothing like Foxconn City exists in the United States.
The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.
Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.
Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world’s consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.
“They could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”
In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.
Foxconn, in statements, declined to speak about specific clients.
“Any worker recruited by our firm is covered by a clear contract outlining terms and conditions and by Chinese government law that protects their rights,” the company wrote. Foxconn “takes our responsibility to our employees very seriously and we work hard to give our more than one million employees a safe and positive environment.”
The company disputed some details of the former Apple executive’s account, and wrote that a midnight shift, such as the one described, was impossible “because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift.” The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours’ notice of any schedule changes.
Foxconn employees, in interviews, have challenged those assertions.
Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
In China, it took 15 days.
Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.
Some aspects of the iPhone are uniquely American. The device’s software, for instance, and its innovative marketing campaigns were largely created in the United States. Apple recently built a $500 million data center in North Carolina. Crucial semiconductors inside the iPhone 4 and 4S are manufactured in an Austin, Tex., factory by Samsung, of South Korea.
But even those facilities are not enormous sources of jobs. Apple’s North Carolina center, for instance, has only 100 full-time employees. The Samsung plant has an estimated 2,400 workers.
“If you scale up from selling one million phones to 30 million phones, you don’t really need more programmers,” said Jean-Louis Gassée, who oversaw product development and marketing for Apple until he left in 1990. “All these new companies — Facebook, Google, Twitter — benefit from this. They grow, but they don’t really need to hire much.”
It is hard to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.
But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.
Manufacturing glass for the iPhone revived a Corning factory in Kentucky, and today, much of the glass in iPhones is still made there. After the iPhone became a success, Corning received a flood of orders from other companies hoping to imitate Apple’s designs. Its strengthened glass sales have grown to more than $700 million a year, and it has hired or continued employing about 1,000 Americans to support the emerging market.
But as that market has expanded, the bulk of Corning’s strengthened glass manufacturing has occurred at plants in Japan and Taiwan.
“Our customers are in Taiwan, Korea, Japan and China,” said James B. Flaws, Corning’s vice chairman and chief financial officer. “We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that’s 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas.”
Corning was founded in America 161 years ago and its headquarters are still in upstate New York. Theoretically, the company could manufacture all its glass domestically. But it would “require a total overhaul in how the industry is structured,” Mr. Flaws said. “The consumer electronics business has become an Asian business. As an American, I worry about that, but there’s nothing I can do to stop it. Asia has become what the U.S. was for the last 40 years.”
Middle-Class Jobs Fade
The first time Eric Saragoza stepped into Apple’s manufacturing plant in Elk Grove, Calif., he felt as if he were entering an engineering wonderland.
It was 1995, and the facility near Sacramento employed more than 1,500 workers. It was a kaleidoscope of robotic arms, conveyor belts ferrying circuit boards and, eventually, candy-colored iMacs in various stages of assembly. Mr. Saragoza, an engineer, quickly moved up the plant’s ranks and joined an elite diagnostic team. His salary climbed to $50,000. He and his wife had three children. They bought a home with a pool.
“It felt like, finally, school was paying off,” he said. “I knew the world needed people who can build things.”
At the same time, however, the electronics industry was changing, and Apple — with products that were declining in popularity — was struggling to remake itself. One focus was improving manufacturing. A few years after Mr. Saragoza started his job, his bosses explained how the California plant stacked up against overseas factories: the cost, excluding the materials, of building a $1,500 computer in Elk Grove was $22 a machine. In Singapore, it was $6. In Taiwan, $4.85. Wages weren’t the major reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task.
“We were told we would have to do 12-hour days, and come in on Saturdays,” Mr. Saragoza said. “I had a family. I wanted to see my kids play soccer.”
Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.
But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today’s new jobs are disproportionately in service occupations — at restaurants or call centers, or as hospital attendants or temporary workers — that offer fewer opportunities for reaching the middle class.
Even Mr. Saragoza, with his college degree, was vulnerable to these trends. First, some of Elk Grove’s routine tasks were sent overseas. Mr. Saragoza didn’t mind. Then the robotics that made Apple a futuristic playground allowed executives to replace workers with machines. Some diagnostic engineering went to Singapore. Middle managers who oversaw the plant’s inventory were laid off because, suddenly, a few people with Internet connections were all that were needed.
Mr. Saragoza was too expensive for an unskilled position. He was also insufficiently credentialed for upper management. He was called into a small office in 2002 after a night shift, laid off and then escorted from the plant. He taught high school for a while, and then tried a return to technology. But Apple, which had helped anoint the region as “Silicon Valley North,” had by then converted much of the Elk Grove plant into an AppleCare call center, where new employees often earn $12 an hour.
There were employment prospects in Silicon Valley, but none of them panned out. “What they really want are 30-year-olds without children,” said Mr. Saragoza, who today is 48, and whose family now includes five of his own.
After a few months of looking for work, he started feeling desperate. Even teaching jobs had dried up. So he took a position with an electronics temp agency that had been hired by Apple to check returned iPhones and iPads before they were sent back to customers. Every day, Mr. Saragoza would drive to the building where he had once worked as an engineer, and for $10 an hour with no benefits, wipe thousands of glass screens and test audio ports by plugging in headphones.
Paydays for Apple
As Apple’s overseas operations and sales have expanded, its top employees have thrived. Last fiscal year, Apple’s revenue topped $108 billion, a sum larger than the combined state budgets of Michigan, New Jersey and Massachusetts. Since 2005, when the company’s stock split, share prices have risen from about $45 to more than $427.
Some of that wealth has gone to shareholders. Apple is among the most widely held stocks, and the rising share price has benefited millions of individual investors, 401(k)’s and pension plans. The bounty has also enriched Apple workers. Last fiscal year, in addition to their salaries, Apple’s employees and directors received stock worth $2 billion and exercised or vested stock and options worth an added $1.4 billion.
The biggest rewards, however, have often gone to Apple’s top employees. Mr. Cook, Apple’s chief, last year received stock grants — which vest over a 10-year period — that, at today’s share price, would be worth $427 million, and his salary was raised to $1.4 million. In 2010, Mr. Cook’s compensation package was valued at $59 million, according to Apple’s security filings.
A person close to Apple argued that the compensation received by Apple’s employees was fair, in part because the company had brought so much value to the nation and world. As the company has grown, it has expanded its domestic work force, including manufacturing jobs. Last year, Apple’s American work force grew by 8,000 people.
While other companies have sent call centers abroad, Apple has kept its centers in the United States. One source estimated that sales of Apple’s products have caused other companies to hire tens of thousands of Americans. FedEx and United Parcel Service, for instance, both say they have created American jobs because of the volume of Apple’s shipments, though neither would provide specific figures without permission from Apple, which the company declined to provide.
“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”
What’s more, Apple sources say the company has created plenty of good American jobs inside its retail stores and among entrepreneurs selling iPhone and iPad applications.
After two months of testing iPads, Mr. Saragoza quit. The pay was so low that he was better off, he figured, spending those hours applying for other jobs. On a recent October evening, while Mr. Saragoza sat at his MacBook and submitted another round of résumés online, halfway around the world a woman arrived at her office. The worker, Lina Lin, is a project manager in Shenzhen, China, at PCH International, which contracts with Apple and other electronics companies to coordinate production of accessories, like the cases that protect the iPad’s glass screens. She is not an Apple employee. But Mrs. Lin is integral to Apple’s ability to deliver its products.
Mrs. Lin earns a bit less than what Mr. Saragoza was paid by Apple. She speaks fluent English, learned from watching television and in a Chinese university. She and her husband put a quarter of their salaries in the bank every month. They live in a 1,080-square-foot apartment, which they share with their in-laws and son.
“There are lots of jobs,” Mrs. Lin said. “Especially in Shenzhen.”
Innovation’s Losers
Toward the end of Mr. Obama’s dinner last year with Mr. Jobs and other Silicon Valley executives, as everyone stood to leave, a crowd of photo seekers formed around the president. A slightly smaller scrum gathered around Mr. Jobs. Rumors had spread that his illness had worsened, and some hoped for a photograph with him, perhaps for the last time.
Eventually, the orbits of the men overlapped. “I’m not worried about the country’s long-term future,” Mr. Jobs told Mr. Obama, according to one observer. “This country is insanely great. What I’m worried about is that we don’t talk enough about solutions.”
At dinner, for instance, the executives had suggested that the government should reform visa programs to help companies hire foreign engineers. Some had urged the president to give companies a “tax holiday” so they could bring back overseas profits which, they argued, would be used to create work. Mr. Jobs even suggested it might be possible, someday, to locate some of Apple’s skilled manufacturing in the United States if the government helped train more American engineers.
Economists debate the usefulness of those and other efforts, and note that a struggling economy is sometimes transformed by unexpected developments. The last time analysts wrung their hands about prolonged American unemployment, for instance, in the early 1980s, the Internet hardly existed. Few at the time would have guessed that a degree in graphic design was rapidly becoming a smart bet, while studying telephone repair a dead end.
What remains unknown, however, is whether the United States will be able to leverage tomorrow’s innovations into millions of jobs.
In the last decade, technological leaps in solar and wind energy, semiconductor fabrication and display technologies have created thousands of jobs. But while many of those industries started in America, much of the employment has occurred abroad. Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple’s growth and profit margins, they won’t survive.
“New middle-class jobs will eventually emerge,” said Lawrence Katz, a Harvard economist. “But will someone in his 40s have the skills for them? Or will he be bypassed for a new graduate and never find his way back into the middle class?”
The pace of innovation, say executives from a variety of industries, has been quickened by businessmen like Mr. Jobs. G.M. went as long as half a decade between major automobile redesigns. Apple, by comparison, has released five iPhones in four years, doubling the devices’ speed and memory while dropping the price that some consumers pay.
Before Mr. Obama and Mr. Jobs said goodbye, the Apple executive pulled an iPhone from his pocket to show off a new application — a driving game — with incredibly detailed graphics. The device reflected the soft glow of the room’s lights. The other executives, whose combined worth exceeded $69 billion, jostled for position to glance over his shoulder. The game, everyone agreed, was wonderful.
There wasn’t even a tiny scratch on the screen.

Tax Changes for 2012

2012-01-25T18:09:00.001-05:00

First appeared in USA Today
As Americans receive their first paychecks of the new year, there are some tax provisions they can count on.
Individual tax rates will be the same for 2012 as they were in 2011, as will the 15% maximum tax rate on capital gains. People at higher incomes won't see their personal exemptions or deductions phased out. And credits for adopting a child and for college expenses continue.
But several deductions, credits and other provisions that existed for 2011 will no longer be in place.
The alternative minimum tax exemptions will drop to pre-2001 levels if Congress doesn't pass a patch and make it retroactive to cover the entire year. If history is any guide, however, Congress will do that.
Similarly, without congressional action people over 70½ will no longer be able to make tax-free withdrawals from their IRAs for a charitable contribution, and teachers won't be able to take a $250 deduction for classroom supplies bought with their own money.
"During the course of 2012, the IRS will be keeping a close eye on developments in Congress," agency spokesman Terry Lemons said. "There are a lot of open question marks."
The 2012 presidential elections, the partisan discord in Congress and the outcry over the size of the federal deficit all add to the uncertainty. If there's any doubt, just consider the battle over extending the 2 percentage point cut in Social Security payroll taxes. Agreement could only be reached on a two-month extension despite statements by the White House and both Republicans and Democrats in Congress calling for retaining the reduction for all of 2012. That battle will resume later this year.
Tax experts advise people to monitor other developments as well.
The IRS recommends reviewing your withholding sometime during the year to make sure it is in line with what your tax liability is likely to be. There's a withholding calculator on its website, http://www.irs.gov/. By having less withheld, people can get their money upfront, rather than waiting for a refund.
For most of us, checking our withholding and preparing tax returns are among the biggest financial tasks we face, Lemons said.
Some of the tax law provisions still in effect for 2012:
• The Bush tax cuts, which set marginal income tax rates of 10%, 15%, 25%, 28%, 33% and 35%. These rates will increase beginning in 2013 unless they are renewed by Congress.
• Capital gains tax rates of 0% and 15%. Capital gains generally are the increase in the value of an asset, such as stock or a home, from time of purchase until sale. Net long-term capital gains — those on assets held more than a year — are taxed at the 0% or 15% rate. Net gains on assets held less than a year — short-term gains — are taxed at the regular income tax rates.
• The child tax credit of $1,000 per child. The credit will drop to $500 in 2013 unless Congress acts.
• The higher earned income tax credit for families with three or more children. After 2012, families with three or more children will be treated the same as those with two children if Congress doesn't pass an extension.
• The credit for expenses associated with the adoption of a child. However, the adoption credit is no longer refundable and is limited to $12,650 in 2012. It phases out for people with higher incomes.
• The American Opportunity Credit, which allows a maximum credit of $2,500 for tuition and other expenses for each of the first four years of higher education. The credit, which also phases out at higher incomes, is partially refundable.
Some of the provisions that expired at the end of 2011:
• A patch for the alternative minimum tax. Absent congressional action, the exemption will drop to $45,000 for married couples filing jointly, $33,750 for single person or the head of a household, and $22,500 for married people filing separately.
• The deduction for state and local sales taxes, in lieu of state and local income taxes.
• The deduction for qualified tuition and fees.

Apartment Complex Sold for Millions

2012-01-16T09:55:00.000-05:00

First appeared in Times Union

CBRE Albany said Thursday that it assisted in the sale ofthe Wade Lupe Towers and Garden Apartment Complex, a 208-unit complex on QueensBoulevard in Schenectady.

The ten-building complex, which sits on nearly 11 acres andis next to the Stadium Golf Club, sold for $8.25 million to a Rockland Countycompany, Wade Estates LLC.

Involved in the sale for CBRE Albany were John MacAffer, DanSimpson and Ann MacAffer.

Zappos Was Hacked, 24 Million Customers Affected

2012-01-16T09:44:00.000-05:00

First appeared in Forbes

Twenty-four million Zappos customers are getting an unpleasantSunday-evening surprise.

The Amazon-owned e-commerce firm has revealed that it wasthe target of a cyber-attack that gained access to its internal network,including the accounts of 24 million of its users. Though the company says thatno complete credit card numbers were revealed in the breach, the intruders mayhave accessed customers’ names, e-mail addresses, phone numbers, addresses, thelast four digits of their credit card numbers, and encrypted passwords. Zappossays it’s taken the precaution of resetting the passwords of all its customersand directing them to set a new password upon visiting the site.

“We were recently the victim of a cyber-attack by a criminalwho gained access to parts of our internal network and systems through one ofour servers in Kentucky,” the chief executive wrote to Zappos employees in anemail posted to the site, declining to offer more information about the breach.”We are cooperating with law enforcement to undergo an exhaustiveinvestigation.”

Even after choosing a new Zappos password, users should becareful to also change their passwords on any site where they’ve used a similaror identical password, in case Zappos’ intruders are able to decrypt thescrambled passwords they’ve stolen. Zappos is also warning affected customersto watch out for phishing emails that will use their stolen email addresses tospoof official Zappos emails and ask for account credentials or financialdetails.

The chief executive wrote in his all-hands email that everyemployee at Zappos’ Henderson, Nevada headquarters will be assisting in thecustomer response to the breach, and that the company will only be respondingto emails rather than phone calls in its effort to answer the massive number ofqueries that it expects to receive. ”We’ve spent over 12 years building our reputation, brand, and trustwith our customers. It’s painful to see us take so many steps back due to asingle incident,” he wrote in the email. “I suppose the one saving grace isthat the database that stores our customers’ critical credit card and otherpayment data was not affected or accessed.”

Zappos customers can change their passwords.

In the Past?: the Post Office and Kodak

2012-01-16T09:33:00.000-05:00

First appeared in Jewish World Review

The news that Eastman Kodak is preparing to file forbankruptcy, after being the leading photographic company in the world for morethan a hundred years, truly marks the end of an era.

The skills required to use the cameras and chemicalsrequired by the photography of the mid-19th century were far beyond those ofmost people — until a man named George Eastman created a company called Kodak,which made cameras that ordinary people could use.

It was Kodak's humble and affordable box Brownie that putphotography on the map for millions of people, who just wanted to take simplepictures of family, friends and places they visited.

As the complicated photographic plates used by 19th centuryphotographers gave way to film, Kodak became the leading film maker of the 20thcentury. But sales of film declined for the first time in 2000, and sales ofdigital cameras surpassed the sales of film cameras just 3 years later. Just asKodak's technology made older modes of photography obsolete more than a hundredyears ago, so the new technology of the digital age has left Kodak behind.

Great names of companies in other fields have likewisevanished as new technology brought new rivals to the forefront, or else madethe whole product obsolete, as happened with typewriters, slide rules and otherproducts now remembered only by an older generation. That is what happens in amarket economy and we all benefit from it as consumers.

Unfortunately, that is not what happens in government. Thepost office is a classic example. Post offices were once even more importantthan Eastman Kodak, and for a longer time, as the mail provided vitalcommunications linking people and organizations across thousands of miles. But,today, technology has moved even further beyond the post office than it hasbeyond Eastman Kodak.

The difference is that, although the Postal Service istechnically a private business, its income doesn't cover all its costs — andtaxpayers are on the hook for the difference.

Moreover, the government makes it illegal for anyone else toput anything into your mail box, even though you bought the mail box and it isyour property. That means you don't have the option to have some other privatecompany deliver your mail.

In India, when private companies like Federal Express andUnited Parcel Service were allowed to deliver mail, the amount of maildelivered by that country's post offices was cut in half between 2000 and 2005.

What should be the fate of the Postal Service in the UnitedStates? In a sense, no one really knows. Nor is there any reason why theyshould.

The real answer to the question whether the Postal Serviceis worth what it is costing can be found only when various indirect governmentsubsidies stop and when the government stops forbidding others from carryingthe mail — if that ever happens.

If FedEx, UPS or someone else can carry the mail cheaper orbetter than the Postal Service, there is no reason why the public should notget the benefit of having their mail delivered cheaper or better.

Politics is the reason why no such test is likely any timesoon. Various special interests currently benefit from the way the post officeis run — and especially by the way government backing keeps it afloat.

Junk mail, for example, does not have to cover all itscosts. You might be happy to get less junk mail if it had to pay a postage ratethat covered the full cost of delivering it. But people who send junk mailwould lobby Congress to stay on the gravy train.

So would people who live in remote areas, where the cost ofdelivering all mail is higher. But if people who decide to live in remote areasdon't pay the costs that their decision imposes on the Postal Service, electricutilities and others, why should other people be forced to pay those costs?

A society in which some people make decisions, and otherpeople are forced to pay the costs created by those decisions, is a societywhere a lot of decisions can be made despite their costs being greater thantheir benefits.

That is why the post office should have to face competitionin the market, instead of lobbying politicians for government help. We cannotpreserve everything that was once useful.

Mitt Romney May Be Forgiven

2012-01-12T13:55:00.001-05:00

First appeared in the Boston Globe

At first glance, South Carolina seems like a place where attacks on Mitt Romney's experience at the helm of a venture capital firm that cut jobs would resonate in the GOP primary.

The state's unemployment rate hasn't been below 9 percent in three years and a third of its manufacturing jobs have disappeared in the last decade.

But from South Carolina's urban centers to its old mill villages, many workers still view their employers paternalistically, even when their bosses' decisions hurt them. And that may blunt the criticism that Romney is a greedy fat cat who squashes employees while lining his own pockets.

In South Carolina, people have little sympathy for the Occupy Wall Street movement. Low wages and lack of unions are the norm, so much so that economic developers refused to even recruit companies to the state in the 1960s and 1970s if they allowed unions. Less than 5 percent of the state's workers belong to a labor union, one of the lowest rates in the nation, and income per person is just over $33,000, about $7,000 below the national average.

"Once you get hired, the employer has done his part," Kenneth Dock, 59, said outside the unemployment office in Lexington County, a heavily Republican area on the outskirts of Columbia. He was filing for unemployment a few weeks after losing his job in the produce department at a nearby Walmart.

Dock plans to vote in the Jan. 21 GOP primary in South Carolina, but he hasn't decided which candidate to support. Romney is still a possibility.

"People get laid off. People lose their jobs," he said. "It's just a part of business."

Romney, fresh off back-to-back victories in Iowa and New Hampshire, hopes that mindset will have South Carolina Republicans dismissing attacks on his tenure at Bain Capital as he campaigns ahead of the state's primary.

Over the past few days, Romney has faced intense criticism by rivals Newt Gingrich and Rick Perry as they worked to undercut the central rationale of his candidacy -- that his experience in private business makes him the strongest Republican to challenge President Barack Obama on the economy.

Perry likened the private equity firm to "vultures" that ruin workers' lives. And Gingrich has demanded answers about how many jobs were lost under Romney.

The criticism is certain to make its way into hard-hitting TV advertisements in the coming days, with outside groups aligned with the candidates -- called super PACs -- doing most of the dirty work. One supporting Gingrich plans to spend $3.4 million to run ads on this subject as well as air part of a documentary about Bain called "When Mitt Romney Came to Town." In the film, former employees of four companies bought by Romney's firm talk about how they lost their homes, their livelihoods and their dreams as jobs were cut.

Romney's opponents also have the story of a South Carolina company to use against him.

A photo frame factory in Gaffney in what used to be the manufacturing center of the state was owned by a company Bain controlled. It closed in 1992 just four years after it opened. A hundred workers lost their jobs, while the move helped the Bain subsidiary go from a $12.4 million loss to a $3 million after-tax profit the year after the closing.

Rivals also are seizing on a couple of missteps Romney made in the closing days of the New Hampshire campaign.

At one point, Romney said, "There were a couple of times when I was worried I was going to get pink-slipped." Neither he nor his aides provided specifics.

And at another, he said, "I like being able to fire people who provide services to me." The former Massachusetts governor later emphasized he was talking about health insurance and how people should have choices with their health care.

For all the criticism, there's been a collective shrug in South Carolina so far, perhaps because of the way many workers view employers in the state.

It's only about a generation removed from a time when companies essentially created villages by building the houses, schools, ball fields, dance halls and churches their employees used. Wages were low and these companies provided almost everything, creating a society where even surviving outside of an employer's benevolence may have seemed impossible.

Malissa Burnette has seen such bonds between employers and workers in her 35 years as a labor attorney who has represented workers suing their employers in the state.

"When employees come to me, I see a lot of shock and disillusionment and disappointment in their employers because they did have the belief that employers were there to treat them well, look after them, to have their best interest at heart," Burnette says.

Further evidence of how the people in South Carolina view businesses can be found on the Facebook page of Gov. Nikki Haley, who endorsed Romney last month. She spent her first year in office fighting unions and encouraging businesses find to come to the state.

"South Carolina continues to be one of the lowest union participation states in the country," Haley wrote on Facebook in November. "The reason is that our companies understand that they have to take care of those that take care of them. Our employees appreciate the direct honest relationship that they have with their employers. It will continue to be a winning combination."

To be sure, there are voters in South Carolina who are angry with the way businesses operate these days. Just ask Wayne Ott, 64, who was applying for unemployment for the first time in his life after being laid off after 40 years as a truck driver.

"I believe in capitalism. I just don't think we've been doing it right," Ott said. He is deciding between Gingrich and former Pennsylvania Sen. Rick Santorum because he thinks Romney is part of a greater problem of people who get rich without earning it.

Others are taking a more pragmatic approach.

Angela Frost, 41, lost her job as an insurance underwriter in September. She blames Obama for the stagnant economy and has decided to support Romney because she thinks he has the best chance of winning back the White House.

"Cutting jobs and closing businesses are a part of the system," Frost said. "The system has failed a lot of people. You can't blame one person for the system."

Dwindling Middle Class

2012-01-12T13:50:00.002-05:00

First appeared in CNN Money

Nearly one third of Americans who were raised in the middle class dropped down the economic ladder as adults -- and that's before the Great Recession hit.

"Being raised in the middle class is not a guarantee that you'll have that same status as an adult," said Erin Currier, project manager at Pew's Economic Mobility Project. "With all the economic turmoil in the past four years, there's good reason to think that downward mobility is more severe."

Pew looked at children born in the early- to mid-1960s and assessed their economic status roughly 40 years later.

Being middle class in the parents' generation meant a household income of roughly $33,000 to $64,000 in 1979. But their children had to earn between $54,000 and $111,000 to maintain their relative standing in society in the mid-2000s. (These figures are adjusted for inflation.)

The middle class is defined as those between the 30th and 70th income percentile.

Marital status and educational attainment had a great bearing on whether people were able to remain in the middle class, Pew found. Race and gender were also factors.

Those who are divorced, widowed or separated are more likely to fall out of the middle class, particularly if they are women. And Americans who don't attend college are also more likely to slip.

One's foothold on the middle class is more secure if you are a white man. Thirty percent of white women and 38% of black men drop out of the middle class, while only 21% of white men do.

Why I still believe in the American Dream

Things have only gotten worse in recent years. The Great Recession has likely made it harder for many people to remain in the middle class, experts said.

Long-term unemployment has devastated the ranks of the middle class, with many people losing their homes and forced to turn to food banks and government aid after they run through their savings. It takes nearly 41 weeks, on average, for the jobless to find new work. Also, the steep decline in home values has hurt many in the middle class.

Recovering from a huge drop in income is not easy, a separate Pew study found. Half of people who lost more than 25% of their income in 1994 had not recovered four years later. And a third did not regain their economic footing after 10 years.

While it remains to be seen how quickly Americans will recover from the current economic downturn, Currier suspects it could take even longer.

Young adults may find it particularly difficult to hold onto their parents' middle class status. That's because they are having a much harder time landing jobs, particularly well-paying positions in their field. The unemployment rate for 20- to 24-year-olds was 14.4% in December, compared to the national 8.5% rate.

This could hurt their earning potential for decades to come, which has earned them the nickname "The Lost Generation."

"Entering your career in a down economy has lifelong ramifications," said Scott Winship, economic studies fellow at Brookings Institution.

Novo Alternative Introduced to Trade Shows

2012-01-12T12:47:00.000-05:00

First appeared in Market Wire

E&E Exhibit Solutions is proud to announce the launch of its new trade show display product line Novo Displays, a versatile exhibit system designed for today's trade show exhibitor. Novo Displays are lightweight, scalable and customizable solutions that offer exhibitors an alternative choice to custom-built displays. Novo Displays custom modular displays are available exclusively from E&E for purchase or as a cost-saving exhibit rental.

"Novo Displays are modular without limitations and designed to function in the way our clients exhibit. Today's exhibitor needs lightweight, easy-to-assemble and versatile displays to fit a variety of booth sizes. We can scale Novo Displays from table tops to linear and island display configurations without the added cost of retrofit kits," said Daniel Chaddock, president of E&E Exhibit Solutions. "We put our name behind Novo Displays because they are market relevant, cost affordable and fit into our product niche of custom modular display solutions."

Novo Displays feature a sturdy, yet lightweight aluminum framework with scalable components, which allow exhibitors to fit their custom modular displays to any size booth -- from table tops, to 10x10s, to 10x20s, to 20x20 Novo Displays islands and even double deck exhibits. The modern designs are centered around dynamic selling environments and are customizable with conference rooms, kiosk displays, storage counters, trade show graphics, custom lighting and more. Veteran and first-time exhibitors will also appreciate the finer details engineered into the system such as one-tool, no-hassle assembly and the exclusive wire management door, which hides cords and cables but provides easy access when needed in a hurry. All Novo Displays custom modular displays pack into virtually indestructible rotomolded cases and come with a lifetime warranty.

E&E's Novo Display solutions are ideal for any company exhibiting at one event per year or marketers with a busy schedule of trade shows and other events. Exhibitors can also use a Novo Displays exhibit rental at a fraction of the cost of purchasing a new trade show booth. Because of this new exhibit system's lightweight framework, unlimited design capability, scalability and no-hassle installation, Novo Displays have the potential to save exhibitors thousands of dollars in production, shipping, drayage and labor.

About E&E Exhibit Solutions

Founded in 1995, E&E Exhibit Solutions is a trade show display company specializing in custom modular displays, custom portable exhibits, trade show graphics and booth rentals. E&E Exhibit Solutions has a long-standing record of success serving more than 1,850 clients in 45 U.S. states and 15 countries and is recognized as a four-time Inc. 5000 honoree. As expert trade show professionals, our award-winning solutions include custom displays, exhibit rentals, trade show graphics, shipping, installation and exhibit storage.

Chapter 11 Won’t Stop Twinkies

2012-01-11T13:52:00.000-05:00

First appeared on CNN Money

Rest easy, Twinkie lovers: Hostess Brands, the storied American manufacturer of snack cakes, filed for Chapter 11 bankruptcy Wednesday, but said it will continue to churn out Ho Hos, Ding Dongs and other iconic products. Many Bankruptcy Lawyer professionals can help companies like this.

"Throughout the proceeding, we're going to operate business as normal," said Hostess spokesman Erik Halvorson. "They'll keep making Twinkies."

The company, based in Irving, Texas, filed for Chapter 11 protection in U.S. Bankruptcy Court in New York. But Halvorson said the company does not plan to lay off any of its employees or close any plants. So the CupCakes and Sno Balls will keep on coming due to the hard work of a Bankruptcy Lawyer.

The company has about 19,000 full-time and part-time employees, including 10,413 hourly workers and 8,436 salaried workers, according to a court filing. About 83% of the employees are union members.

The company said that it pays about $63.2 million to its employees per pay period, and that it currently owes them $21 million for services rendered.

In its bankruptcy filing, the privately held company said that it owes more than $1 billion to creditors. The debt is spread out among a vast number of creditors -- between 50,000 and 100,000, the company said.

Whoopie pies - a sweet new gig

Pension funds feature prominently in the list of creditors.

The Bakery & Confectionary Union & Industry International Pension Fund has the largest claim, of $994 million.

The next largest claim, of about $12 million, is from Central States, Southeast and Southwest Areas Pension Plan.

Companies with claims include Cereal Food Processors, with a claim of $8.5 million, and Cargill, with about $2 million. Also among the creditors: temporary employment agency Manpower (MAN, Fortune 500), which is owed $754,000, and Goodyear Tire & Rubber (GT, Fortune 500), owed $552,000.

Hostess was founded in 1930, at the beginning of the Great Depression, which the company managed to survive. Many of its products eventually became iconic brands, cementing themselves in American culture. The Twinkie was even used as a metaphor for paranormal activity in the 1984 hit movie "Ghostbusters."

But more recently, Hostess' ability to compete was crippled by its "unsustainable cost structure," said Halvorson.

Hostess has been competing with snack cake makers including Flowers Foods (FLO), which makes Tastykake.

Published reports indicated that Hostess sought potential buyers, including Oreo-cookie maker Kraft Foods (KFT, Fortune 500) and Campbell Soup (CPB, Fortune 500)'s Pepperidge Farm. Many Bankruptcy Lawyer professionals can help with those buyouts.

Hostess has its own plethora of subsidiaries. These include Interstate Brands Corp., the producer of Drake's Ring Dings and Yodels, and Dolly Madison Bakery, producer of Zingers. Hostess also owns bread bakers such as Wonder and Nature's Pride.

Interstate Brands was formerly known as Interstate Bakeries. That subsidiary filed for bankruptcy in 2005, emerging from Chapter 11 in 2009. Layoffs occurred during that time and even since 2009, said Halvorson.

The job reductions took a toll on company morale, according to bankruptcy documents filed by Hostess on Wednesday. A Bankruptcy Lawyer is helpful during these times.

"The employees have been witness to the closing or sale of several operations within the debtors' business as well as company-wide layoffs or reductions in force," the document said. "The increased pressures on the employees, together with layoffs and general concern about the welfare of the debtors, have led to a decline in employee morale."

CEOs Making Money

2012-01-11T13:15:00.000-05:00

First appeared on CNN Money

If you could bluff your way into an S&P 500 CEO job, how many days would you have to rough it to earn your current annual pay?

You'd rack up $24,473 per day 365 days a year if you were just middle of the pack, according to a recent GMI study of S&P 500 CEO pay in 2010. Your annual earnings on a weekly basis would be more than $171,000; for 60 days, that'd be a cool $1.5 million.

Of course, if you were a top negotiator, maybe you'd take home what McKesson (MCK) CEO John Hammergren did in 2010. His daily haul, based on his annual pay, was around $398,000, with a weekly total of $2.8 million and a 60-day payout of nearly $24 million.

Could you put up with the rigors given those rates?

Working the one job 24/7

Maybe you're concerned that if you took a job like that, it might engulf your life 24/7. There'd be no time for extracurricular activities.

Not to worry. You'd have the opportunity to work a part-time job too, earning some pocket change on the side. For example, take Hammergren, who took home the biggest bucks in 2010 ($145 million in total compensation), according to GMI. Beyond serving as CEO of McKesson, he has been a board member at HP (HPQ), which paid him around $387,000 last year. As a member of the board's compensation committee, Hammergren has been busy with CEO pay negotiations in recent years.

In 2010, when HP showed former CEO Mark Hurd the door following an investigation into his behavior, Hurd was given $12 million cash plus vesting of some stock. Based on Hammergren's own 2010 wages, $12 million would translate to just 30 days severance. Is that so unreasonable? Under the original agreement, Hurd was also entitled to stock valued $15 million or more. He gave that up, though, in the kerfuffle related to his decision to join Oracle (ORCL) as its co-president.

Hammergren also reportedly volunteered to be on the search committee that identified Hurd's successor, former HP CEO Leo Apotheker. With less than one year of service, Apotheker was ousted last year and walked away with around $25 million. Sound like a lot? That would only amount to slightly more than 60 days severance based on Hammergren's 2010 pay.

In any event, this one example should ease your mind somewhat. Being a CEO of a major S&P 500 firm does not mean you have to work the one job 24/7.

Cranky investors? Not quite.

What about investor expectations? With large CEO paydays, aren't investors bound to be snarky?

Maybe, but they don't really expect that much, when you consider what they're used to getting in the way of returns. The S&P 500 is down nearly 9% from where it was five years ago. Just working to move the dial a bit forward (rather than backward) will make you a hero. In Hammergren's case, McKesson stock has considerably outperformed the index.

The GMI study notes that some parts of McKesson's executive compensation practices raise eyebrows, like a half a billion dollars Hammergren would be owed if the company were acquired. Still, the board believes his pay is warranted given the company's strong returns, and investors approved his compensation plan last year.

Board oversight, in more ways than one

But what about other boards -- do you need to be concerned that bonus bonanzas could meet their demise, especially since the S&P 500 is now sitting at levels that had already been achieved in the 90s? Isn't pay for performance a major concern of boards today?

The issue is important to boards, according to a recent survey by the National Association of Corporate Directors and compensation firm Pearl Meyer and Partners. But there is no need for alarm. According to the survey, "More than 80% [of board members] …stated they are 'confident' or 'very confident' about how well their current [compensation] programs address the broader challenge of aligning CEO pay with performance."

Populist outrage: Long on anger, short on attention span

What about public outcry -- could that influence high pay? Again, prospective CEOs can put their fears to rest.

The U.S. retail investing public is generally indifferent and does not even monitor the pay votes of mutual fund managers, much less hold them accountable for those made on their behalf. And the Occupy movement (or a successor) would have to significantly expand its reach to truly take CEO pay practices to task.

There is some trouble brewing across the pond. UK Prime Minister David Cameron has called for a binding investor vote on pay (one that would require a response from a company) and some members of Parliament want board compensation committees to have employee representation. There's no immediate threat, though. It took eight years for the U.S. to adopt an advisory say on pay, following in the UK's footsteps.

All in all, it's a rosy picture. So what are you going to do? Any reason you wouldn't aspire to be an S&P 500 CEO?

Is the SAT Necessary?

2012-01-09T16:42:00.000-05:00

First appeared in News Observer

Across North Carolina and the nation, high school seniors are sweating their college applications and fretting about one number: their SAT score. Many students look to Educational Services Centers for help.

But not students aiming for Wake Forest University, which no longer requires students to submit the standardized test score. Wake Forest was the first highly ranked research university to announce the move away from the SAT in 2008. Are other schools like Ferris State University and Marygrove College thinking about doing the same thing?

Since then, the university in Winston-Salem has become more racially and socio-economically diverse. Pell Grant recipients almost doubled. Students of color increased from 18 percent to nearly 23 percent.

Along the way, the university also noticed an uptick in the number of students with an exemplary high school track record, which, research shows, is the best predictor of college success. The percentage of Wake Forest first-year students who graduated in the top 10 percent of their high school classes grew from 65 percent in 2008 to 83 percent last fall.

"We feel like we have attracted students that have achieved a great deal in the classroom, who are very talented, who are very bright, who are very hard working students but who had one thing going against them and that was the SAT," said Martha Allman, admissions dean at Wake Forest.

"When we became test-optional, we started seeing these wonderful students that perhaps we would not have seen in our applicant pool before. We don't have any regrets at all."

The university's results are reported in a new book, "SAT Wars," edited by Joseph Soares, a sociology professor at Wake Forest. The book debunks the notion that standardized tests are a good indicator of future academic achievement. This is in contradiction to Educational Services Centers that see the importance in testing students.

It is published as North Carolina embarks on a new era of testing. Starting in March, the state will require high school juniors to take the ACT, the other major college entrance exam used in the United States. The state does not require the SAT, but it is the most commonly administered entrance exam among college-bound students in North Carolina. Several other states do the same thing, including ones feeding into Ferris State University and Marygrove College.

The effort will cost the state $5.5 million, which includes three types of tests - a diagnostic test for high school sophomores, a standardized test to assess workplace readiness, and the ACT.

Soares has been an outspoken critic of college entrance exams, which he describes as having built-in biases and a discriminatory effect. He said North Carolina's plan makes no sense.

"It's money being flushed down the toilet," he said. "This is a terrible idea."

Focus on content

June Atkinson, the state superintendent, said the ACT will be one useful component in evaluating performance of students and schools.

"What we want to gain from administering ACT - which is more content-based than SAT - is that we want to have an indication of whether students have the content necessary for them to be college-ready," she said.

At least a half dozen other states require the ACT, including Michigan, Illinois and Kentucky. The ACT, which generally has not been used as a college entrance exam in North Carolina, was chosen because it includes a section on science, Atkinson said.

Because most colleges still require the ACT or SAT, all North Carolina high school students will have one test under their belt - paid for by the state. They can then use that score to seek college admission.

And, Atkinson said, the ACT can help the state identify weaknesses in academic content areas. So for example, if North Carolina scored below par in science, the state could pursue professional development for teachers, curriculum changes or even better lab equipment for public school classrooms.

"So it will give us feedback about where we need to make improvements," Atkinson said.

The debate about the value of college entrance exams has raged for years. Some 850 four-year colleges no longer require applicants to submit SAT or ACT scores, according to FairTest, a national organization that tracks testing issues.

Bob Schaeffer of FairTest said Wake Forest had provided useful research and "a very powerful example for their peers."

Schaeffer estimated there are a half dozen nationally competitive universities currently re-evaluating their policies, though the majority of the nation's colleges still require applicants to submit an entrance exam score.

There is too much blind faith in the SAT, which has become a gold standard but lacks any real evidence behind it to show that it improves educational quality or outcomes, Schaeffer said. "The entire high stakes testing venture is based on ideology and belief, not data," he said.

Wake Forest attracted national attention when it went test-optional. In 2009, the university hosted a conference titled "Rethinking Admissions," about the role of standardized testing. It drew admissions officers from around the country.

Increase in applications

That first year, applications at Wake Forest jumped 16 percent, including an increase of 46 percent from students of color overall and 70 percent from African-Americans. North Carolina applicants increased 52 percent and came from all 100 counties - for the first time in university history.

The response was more than Wake Forest expected.

The university revamped its admissions process to stress personal interviews with prospective students and an application supplement with short-answer questions to reveal writing quality and intellectual curiosity. Students were asked questions such as "What outrages you?" "Argue a position you don't support." Or "Define cool."

The Wake Forest staff conducted some 4,000 interviews with applicants, and eventually had to add employees to cope with the crush. The admissions office has a new building designed for the process, with small conversation nooks and interview rooms.

Emily English, 20, a junior psychology major, earned all A's in high school. She desperately wanted to go to Wake Forest, but she wasn't happy with her SAT score, which she described as average. Many Educational Services Centers are hoping to help students improve test scores.

"I know that my scores on the SAT were not indicative at all of how I would do, and am doing, in college now," she said. "It's four hours of your life that you're taking this test, and it's not a good indicator compared to your four years of high school."

English has performed well at Wake Forest, earning a grade point average of 3.9 in a recent semester. She is on track to graduate a semester early and plans to go to graduate school to prepare for a career in counseling.

Allman, the Wake Forest admissions dean, said about 70 percent to 75 percent of applicants still submit their test scores.

But not requiring the score has led the university to evaluate students more holistically, she said.

Many schools, including Ferris State University and Marygrove College are looking for diverse ways to assess students for admissions.

"Our student body has actually gotten stronger. We have not seen different attrition rates among these students," she said. "But I think it's going to be very hard to move the needle because test scores are very entrenched in our culture."

Soares said he hopes more universities follow Wake Forest.

"A high-stakes test produces high anxiety. That is dysfunctional," Soares said. "Score high or score low, it doesn't capture your intelligence, your work ethic or your ability to succeed at college or later in life."

Bank of America Putting Pressure on Small Businesses

2012-01-09T12:29:00.000-05:00

First appeared in the LA Times

Bank of America Corp., under pressure to raise capital and cut risks, is severing lines of credit to some small-business owners who have used them to stay afloat.

The Charlotte, N.C., bank is demanding that these customers pay off their credit line balances all at once instead of making monthly payments. If they can't pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had.

Business owners complain that BofA's credit squeeze is abrupt and could strain their small companies and even put them out of business. The credit cutoff is coming at a time when the California economy can't seem to catch a break, and bucks what the financial industry says is a new trend of easing standards on business loans.

One such customer, Babak Zahabizadeh, was told in a letter that the $96,000 debt carried by his Burbank messenger service must be repaid Jan. 25. A loan officer offered multiple alternatives over the phone that Zahabizadeh called unaffordable, including paying off the debt at 12% interest over two years. That's about $4,500 a month, nearly 10 times his current interest-only payment.

Zahabizadeh, known as Bobby Zahabi to his customers, said he has cut the staff of his Messengers & Distribution Inc. to 80 from 200 to nurse his business through tough times.

"I was like, 'Dude, you're calling a guy who's barely surviving!' " he said. "My final word was that I can double my payment — but not triple or quadruple it. I told them if they apply too much pressure they're going to push me into bankruptcy."

The capped credit lines stem from a corporate overhaul launched by Brian Moynihan, who became Bank of America's chief executive in 2010. He promised to address losses caused by loose lending and rapid expansion by reining in risks and shedding investments deemed non-core.

BofA spokesman Jefferson George said a "very small percentage" of small-business customers have been affected by the changes. He would not provide exact numbers except to say it wasn't in the hundreds of thousands. Some of the affected businesses had been customers of other banks that Bank of America acquired, but most were BofA customers from the start, George said.

"These changes were explained in letters to customers, and they were necessary for Bank of America to continue prudent lending to viable businesses across the U.S.," he said.

The bank still has 3.5 million non-mortgage loans to small businesses on its books. The affected business owners were notified a year in advance that their credit lines were being called, George said, although Zahabi and several others said they had not received the early warnings.

The changes also include added annual reviews of borrowers and annual fees, and often reductions in the maximum amount of credit. George said the aim was to reduce Bank of America's risks and to bring the loan terms in line with more stringent standards imposed after the 2007 mortgage meltdown and 2008 credit crisis.

Scott Hauge, president of the advocacy group Small Business California, called the credit cuts "a tragedy" for longtime BofA clients left vulnerable by years of struggle in a sour economy.

"If small businesses are going to lead the way out of the economic doldrums we now face in this country, they must have access to capital, not only to hire more people but to protect the jobs they are currently providing," Hauge said.

Bank of America was a leader in the banking industry's abortive attempt to impose debit card fees. But it appears to be a laggard in tightening business lending standards. Most other banks, having tightened lending standards in the aftermath of the financial crisis, had eased credit last year as competition for small-business customers heats up, bank analysts say.

"Everyone … is targeting commercial and particularly small-business lending as the real focus area for growth," said Joe Morford, an analyst in San Francisco for RBC Capital Markets.

While Bank of America is advertising its own commitment to small businesses, it needs to send another message to its government supervisors because it has less of a capital cushion against losses than major rivals, said FBR Capital Markets bank analyst Paul Miller.

Restricting credit lines "is a way to show the regulators they are serious about addressing risks," Miller said. "Bank of America is under great pressure, especially with another round of [Federal Reserve] bank stress tests coming up, as the regulators say: 'We want you to tighten up.' "

The analysts said all banks monitor business customers and restrict credit on a case-by-case basis. But they said they were unaware of any other large bank systematically capping credit at this time.

Customers interviewed by The Times said they could understand how the turbulent economy might result in some restrictions. But they complained that the credit cutoffs threatened to undo businesses they shepherded through the downturn by slashing costs, hoping to expand when brighter days return.

Several small-business owners indicated that they had nearly used up all the available credit on their Bank of America lines. However, George said maxing out the lines wasn't a major factor in the bank's reevaluation of the credit terms.

Kathleen Caid's Antique Artistry Studio in Glendale sells elaborately beaded, Victorian-style shades that she makes for lamps, chandeliers and sconces. She said she had understood that her $85,000 credit line would remain in place "as long as I wasn't in default," and she hadn't missed any payments.

Caid and her husband, Tim Melchior, a video producer with a Burbank media company, insist they are not in serious financial trouble despite having laid off her eight full-time employees and downsized her business space by two-thirds during the recession.

Yet Bank of America says that her credit-line debt, totaling $80,000, is due in May.

"I wouldn't have run it up if I knew what was in store," she said, adding that she would be speaking to an attorney and other banks about her options.

Teach Banks to Share and Move Your Money

2012-01-09T09:45:00.000-05:00

First appeared in Contra Costa Times

Dozens of moms, dads and their kids protested the nation's biggest banks Friday with a stroller march that called on bank customers to switch to credit unions.

About 60 parents and their young children took part in Friday's "Teach Banks to Share" demonstration, which was organized by a group called the Colorful Mamas of the 99 Percent.

The stroller-pushing parents marched through downtown Oakland in support of the national "Move Your Money" campaign, which is urging customers of big banks to close their accounts and join credit unions by Saturday, which is being dubbed "Bank Transfer Day."

The campaign has gained momentum with the expansion of the Occupy Wall Street protests nationwide.

The protesters beat drums and chanted "Time out! You better share!" as they marched to a Wells Fargo branch. The group rallied outside while two mothers went inside and closed their accounts.

"We believe that the money needs to go from the 1 percent to all of us to pay for schools, health care, putting food on the table and our kids' future," protester Mimi Ho, carrying her baby, told the crowd after closing her Wells Fargo account.

The protesters said big banks such as Wells Fargo & Co. don't pay enough taxes or contribute enough to their communities, despite having received tens of billions of dollars in federal bailout funds and posting multibillion-dollar profits.

"We want reinvestment in our communities. We want corporations and large banks to pay their fair share of taxes," said Prishni Murillo, 33, an Oakland mother of two.

Wells Fargo spokesman Ruben Pulido said the San Francisco-based bank been an industry leader in charitable giving, modifying mortgages and lending money to small businesses.

"We're doing a lot to strengthen communities in the Bay Area and around the country," Pulido said.

End of Line for Two Homeowners

2012-01-09T09:42:00.000-05:00

First appeared in Contra Costa Times

Business at two Antioch banks was disrupted Friday by protesters demanding help for two homeowners who haven't been able to pay their mortgage.

About three dozen members and supporters of a grass roots social justice organization went to the Bank of America and Wells Fargo Bank branches on Somersville Road asking officials there to intervene on behalf of an elderly Antioch woman who lost her home just days ago as well as a Concord couple that received an eviction notice last month.

Holding signs and chanting, they asked employees to fax a letter to the banks' chief executive officers insisting that the companies work with these people they had victimized with their "predatory lending practices."

Bank of America refused and called the police, who dispersed the crowd by warning that they would be arrested if they didn't leave, said John Adams, local director of the Alliance of Californians for Community Empowerment.

The crowd then walked to Wells Fargo, where the branch manager agreed to fax the plea to rescind its foreclosure on Eva Cader, a 78-year-old Antioch woman who was evicted Jan. 3 while trying to obtain a loan modification, Adams said.

Although the Bank of America branch didn't comply with the group's request, its manager discovered she knew Jessi Koritz, a small-business owner who frequents the Concord branch where she used to work.

The woman promised she would bring his case to the attention of those who mightbe able to forestall his eviction and modify the terms of his loan.

Grappling with financial setbacks from a job loss and workplace injuries, Koritz and his wife, Pamela, have been struggling to keep the first home they have owned for most of the 5½ years they have been in it.

"We're just trying to live the American dream," said Koritz, who hasn't made a mortgage payment since July 2008.

He initially had tried to renegotiate the loan but says the bank told him it couldn't do anything unless he was delinquent.

Although Koritz is reluctant to pin his hopes on Bank of America having a change of heart, Adams says he's optimistic because of what the groundswell of opposition to lending practices already has accomplished.

"We're acting on the knowledge that this is happening across the country," he said. "People are shining a light on their case and -- lo and behold -- the bank will take a look and end up working something out."

That's exactly what Bank of America has been doing, said media relations director Britney Sheehan, noting that the company has made more Home Affordable Modification Program loans than any other lender.

The bank has processed about 200,000 of those loans in California alone since the housing crisis began in 2008, she said.

Moreover, Bank of America works with nonprofits like the housing counseling agency NACA to prevent foreclosures and has opened dozens of customer assistance centers in the hardest hit housing markets around the country -- it's opening one in San Mateo in the next few weeks -- where homeowners can talk to mortgage specialists about their loan, Sheehan said.

It's not in the bank's interest for customers to lose their homes, she said.

"While some would have the public believe that banks make a profit on foreclosures and evictions, the truth is that the process is tremendously costly for all parties," she said.

Barnes & Noble Takes on Technology

2012-01-09T09:30:00.000-05:00

First appeared in the Wall Street Journal

Barnes & Noble Inc. is the latest old-school company to discover how costly it can be to try to reinvent itself for a digital future.

The nation's largest bookstore chain warned Thursday it would lose twice as much money this fiscal year as it previously expected, and said it is weighing splitting off its growing Nook digital-book business from its aging bookstores.

Over the past 15 years, rapid technological change has transformed the company from a dominant retailing force that left smaller booksellers quaking in fear to a struggling giant grasping for a plan to ensure its long-term relevance to the publishing industry.

Barnes & Noble realized early on that e-books could appeal to consumers, but allowed Amazon.com Inc. to get an early leg up. Now it is locked in a battle with Amazon and another deep-pocketed rival, Apple Inc., to sell both electronic books and the high-tech devices consumers use to read them.

Digital technology continues to roil all manner of once-dominant companies. Former giants such as Blockbuster Inc., Circuit City and Barnes & Noble's main book-chain rival, Borders Group Inc., have struggled mightily—and in some cases, disappeared altogether—in the face of digital competitors including Netflix Inc. and Amazon. Wednesday's news that Eastman Kodak Co. was contemplating seeking Chapter 11 bankruptcy protection underscored the severity of the technology threat.

Barnes & Noble's stock fell 17% on Thursday. The company now may be at its most critical juncture since its chairman and largest shareholder, opened his first store in New York's Greenwich Village in 1965.

As recently as the 1990s, Barnes & Noble was known as a carnivorous competitor with the power to wipe out independent bookstores with its steeply discounted books and sprawling stores where customers could sip coffee and read in plush chairs. In New York City, the emergence of a Barnes & Noble on the Upper West Side was partly responsible for the mid-1990s closing of the beloved neighborhood bookseller Shakespeare & Company—the kind of narrative arc that cropped up in the movie "You've Got Mail."

Ironically, Barnes & Noble had been one of the first to recognize the potential of digital books. In 1998, it invested in NuvoMedia Inc., maker of the Rocket eBook reader, and the bookseller actively supported digital-book sales. But in 2003, it exited the still-nascent business, saying there wasn't any profit in it.

It wasn't until 2009 that Barnes & Noble re-entered the business, introducing its Nook e-reader. By then, Amazon had been selling its Kindle device for about two years, and was offering best sellers for $9.99, a fraction of what hardcover best sellers are priced at.

Apple introduced its iPad tablet in January 2010. Amazon responded with its competing Kindle Fire tablet this past September, and in November, Barnes & Noble introduced its Nook Tablet.

E-book sales have skyrocketed, jumping to $863 million in 2010, from $62 million in 2008, according to BookStats, a joint-research venture between the Book Industry Study Group and the Association of American Publishers. One publisher predicted Thursday that e-books could account for as much as 40% of total revenue by the end of the year.

Although Barnes & Noble was late to the game, its devices have won critical praise, and publishers estimate today that it controls as much as 27% of the digital-books market. "We saw more growth with e-books with Barnes & Noble this Christmas than anybody else," said the publisher.

But those sales have come at an enormous cost. Developing, manufacturing and promoting e-readers and tablets requires heavy upfront spending. Barnes & Noble's spending on advertising has more than tripled since 2009, according to Kantar Media, an ad-tracking unit of WPP PLC. To promote the Nook, the retailer returned to national TV advertising in 2010, after a 14-year hiatus, buying spots on popular programs such as "American Idol."

The heavy Nook investment has squeezed Barnes & Noble's bottom line. Largely as a result, its earnings before interest, taxes, depreciation and amortization—a critical measure of earnings—fell to $163 million in the fiscal year ending April 30, 2011, from $281 million in fiscal 2010.

When Barnes & Noble's stock weakened, the company came under pressure from an activist investor. In response, the chairman, who maintains control with a stake of about 30%, put the company up for sale in August 2010. Last May, Liberty Media Corp. made a bid to buy the business. The chairman appeared to support the bid, but Liberty Media eventually opted to invest $204 million for a 16.6% stake, receiving two board seats.

This holiday season has offered a ray of hope. Barnes & Noble said device sales had risen 70% for the nine-week period ending Dec. 31, compared with the year-ago period. It said the Nook business is likely to notch $1.5 billion in sales in the current fiscal year, compared with $880 million a year earlier. That business includes the Nook devices, digital-book sales, accessories, magazine and newspaper sales, app sales and sales of warranties.

On Thursday, Barnes & Noble increased its projected loss per share for the current fiscal year to between $1.10 and $1.40, from the 30 cents to 70 cents it reaffirmed one month ago.

Barnes & Noble blamed an unexpected shortfall of sales of the Nook Simple Touch e-reader on a Christmas where consumers embraced color digital devices, including the Nook Tablet and Amazon's Kindle Fire. The e-reader sales shortfall is significant because of its ripple effect on projected sales of related products, including e-books and accessories.

"We over-anticipated the demand for the holiday season," said the company's chief executive officer.

He said Barnes & Noble has plenty of capital to continue financing the Nook expansion, including a $1 billion credit line.

But in a comment at an investor conference on Wednesday,the Liberty Media Chief Executive hinted that Barnes & Noble might need help to continue building the business. Competing with Apple and Amazon, he said, was a "big-boy game." He said Barnes & Noble may find "partners to help fund that game, meaning the public or strategic partners."

Barnes & Noble said in a statement on Thursday it was "in discussions with strategic partners including publishers, retailers and technology companies in international markets." It said that could lead to expanding the Nook business overseas.

One possibility is that Barnes & Noble could sell a minority stake in the Nook business in a public offering. The two businesses would likely have different managements and different boards. Under such a scenario, Barnes & Noble would continue to have close ties to its Nook devices. Another possibility is selling the Nook business outright.

A portfolio manager for Aria Partner, a Boston-based investment firm that owns a stake in Barnes & Noble, suggested one logical buyer could be Google Inc., whose e-book store has had only a minimal impact so far. "The Nook business alone could be worth $1.5 billion," said the manager. The Nook runs on Google's Android software. Google declined to comment.

Another potential partner is Microsoft Corp., people familiar with the situation said. Microsoft declined to comment.

The idea for splitting off the Nook business may partly reflect the influence of Liberty Media, whose chairman, John Malone, and chief executive, Mr. Maffei, are experienced at devising complex financial structures to highlight the value of businesses. Mr. Maffei and another Liberty executive are on Barnes & Noble's board.

"This is classic Malone," noted a Maxim Group analyst.

The idea came up during the company's long-running strategic-review process, which began in the summer of 2010, according to people familiar with the situation. Barnes & Noble executives and the board discussed how the company could increase shareholder value and improve its stock price, these people said, and separating the Nook business was one suggestion.

The idea was also embraced by Liberty, said another person familiar with the situation.

Barnes & Noble said the decision to explore the potential sale of the Nook business was a board-level decision that had the full support of the company.

Investors have shown they are in favor of companies overhauling their structures to focus their business divisions, applauding moves by McGraw-Hill Cos., Kraft Foods and other companies that separated businesses last year.

Barnes & Noble investors may not have the patience to fund Nook growth here and abroad, said a Forrester Research analyst. "It's going to require sustained investment."

Less U.S. Children Are Born

2012-01-09T09:28:00.002-05:00

First appeared in the Wall Street Journal

The U.S. under-18 population fell between 2010 and 2011, the first time in at least two decades that the country has seen its minor population decline, according to demographers and new Census data.

The U.S. under-18 population was 73,934,272 in July 2011, a decline of 247,000 or 0.3% from July of 2010, according to an analysis of Census data by a demographer at The Brookings Institution. The child population is still up 2.3% from 2000, largely because of gains made in the early-decade boom years.

The child population is falling because fewer immigrant children are coming across U.S. borders, and because fewer children are being born. Meantime, the so-called millennial generation is moving into adulthood. With fertility rates down, The Brookings Institution says “it doesn’t look like a youth boom will reverberate anytime soon.”

The U.S. minor population fell in the 1970s as well, as baby boomers moved into adulthood and women entered the labor force en masse, delaying families in the process. A large drop in fertility was also behind a decline in minors between 1920 and 1930.

States with the biggest drop in children tended to be concentrated in the aging Rust Belt and New England. Every New England state saw its under 18 population fall 1% or greater from April 2010 to July 2011 (state Estimates are over a different time period than the national tally). Michigan and Pennsylvania were also big losers. Also, while the drops were small, states including Arizona and Nevada saw their minor populations fall after huge gains earlier in the decade.

No Solid Sales for Sears

2012-01-06T13:34:00.000-05:00

First appeared on Yahoo! News

Sears Holdings Corp will close as many as 120 of its Kmart and Sears discount and department stores after its holiday sales slumped, sending its shares sliding more than 27 percent to their lowest level in three years.

The retailer, which is controlled by its chairman, the hedge fund manager Edward Lampert, has seen sales decline every year since the $11 billion merger of the two chains in 2005, and likely faces further closings to cut expenses, preserve cash and push back against rivals such as Wal-Mart Stores Inc and Amazon.com Inc, analysts said.

Sears also disclosed on Tuesday that it tapped its credit line to borrow cash and forecast that fourth-quarter earnings would fall by more than half.

Under Lampert, the company, once one of the most successful U.S. retailers with a history going back to 1886, has let stores deteriorate, said analysts, who also faulted poor locations and ho-hum merchandise for its ongoing problems.

"They've neglected this business for so long," independent retail analyst Brian Sozzi said, adding that he expects more closings. "They are letting Kmart and Sears die on the vine."

In a memo to staff obtained by Reuters, Chief Executive Lou D'Ambrosio, who took the job in February, blamed the economy for some of Sears' problems but acknowledged "we also did not execute with the consistency or speed necessary" in areas under Sears' control. "We will do better," he continued.

But Credit Suisse analyst Gary Balter is not so sure. "We do not see how they dig out of these problems," he wrote in a client note.

Same-store sales at Kmart were down 4.4 percent in the eight weeks that ended Christmas Day, and down 6 percent at Sears' U.S. stores. Overall, they were down 5.2 percent compared with the same period a year ago.

The closings follow Sears' announcement last quarter it would shut 10 stores. Kmart and Sears have a combined 2,177 big-box locations.

A list of stores affected will be available at www.searsmedia.com once the retailer decides on the locations.

The declines at Kmart were led by drops in electronics and clothing sales as the low-price chain, founded in 1962, faced stiff competition from a resurgent Wal-Mart which resumed its layaway program this year to make it easier for low income shoppers to make purchases by paying in installments.

Kmart has found itself squeezed between Wal-Mart's low prices and Target's trendier offerings, while Sears has faced more intense competition for electronics and lower prices, and less demand for household appliances.

Sears blamed electronics sales for more than half of the decline in its namesake chain's domestic same-store holiday sales.

Sears' shares finished the day down 27.2 percent at $33.38, their lowest level since December 2008, and have fallen 65 percent since a 52-week high in February.

At the current stock price, Sears Holdings -- home to brands including Craftsman tools and Kenmore appliances -- has a value of $3.57 billion.

The value of Lampert and his hedge fund's stake in the company has plunged nearly 75 percent to $2.25 billion since 2005, when his holdings were worth around $8.5 billion. The stake was worth as much as $12.7 billion in April 2007.

The drop in shares is also a big blow for fund manager Bruce Berkowitz's Fairholme Capital, Sears' second-biggest shareholder with 15.2 percent. Fairholme's stake was worth about $570 million on Tuesday, a potential loss of almost $180 million since the end of the third quarter.

Sears' problems also hit shares of appliance maker Whirlpool Corp, which last year derived 8 percent of sales through the retailer. Whirlpool shares fell 8.9 percent to close at $46.62.

FALLING FURTHER BEHIND

Sears' empire was once so sprawling that it owned everything from a radio station (WLS in Chicago) to Allstate Insurance Co and Coldwell Banker Real Estate Group.

But now the chain, founded in Chicago 125 years ago, acknowledges it has to downsize. Its standard practice in the past would have been to give weak stores time to improve, but the economy is too tough to do that this time, Sears said.

Sozzi, the analyst, went to a Sears in Bayshore, New York, on Monday, one of the busiest days of the retail season, and said it was "deserted." At the northern end of the state, in Plattsburgh, a Sears was similarly quiet.

Wall Street analysts have long faulted Sears for letting its stores become stale, even as rivals ranging from Macy's Inc and J.C. Penney Co Inc to Target Corp and Wal-Mart remodeled and spruced up their stores.

Last fiscal year, Macy's spent $505 million to improve its namesake and Bloomingdale's stores, while Sears spent $441 million despite having more than three times as many stores.

Sears is "effectively asking customers to pay for a poorer shopping environment", Credit Suisse's Balter said.

Balter was also surprised that Sears would borrow money during the holidays, which are typically a peak cash flow period. Sears had $483 million of borrowings outstanding as of December 23, compared with zero a year earlier.

As of October 29, Sears had cash and cash equivalents of $624 million, down from $790 million a year earlier.

Sears Holdings said the lower sales and margin pressure would lead to adjusted fourth-quarter earnings before interest, debt and amortization of less than half of the year-ago quarter's $933 million figure.

The retailer expects to earn $140 million to $170 million by selling off inventory in affected stores and selling or subleasing store space.

Sears also expects to record a noncash charge of $1.6 billion to $1.8 billion in the fourth quarter related to a valuation allowance on certain deferred tax assets.

Troops Leave Iraq

2012-01-06T12:01:00.000-05:00

First published by Associated Press

The last U.S. soldiers rolled out of Iraq across the border into neighboring Kuwait at daybreak in the middle of December, whooping, fist bumping and hugging each other in a burst of joy and relief. Their convoy's exit marked the end of a bitterly divisive war that raged for nearly nine years and left Iraq shattered and struggling to recover.

The war cost nearly 4,500 American and well more than 100,000 Iraqi lives and $800 billion from the U.S. Treasury. The question of whether it was worth it all — or whether the new government the Americans leave behind will remain a steadfast U.S. ally — is yet unanswered.

The 5-hour drive by the last convoy of MRAPS, heavily armored personnel carriers, took place under cover of darkness and under strict secrecy to prevent any final attacks on the withdrawing troops. The 500 soldiers didn't even tell their Iraqi partners they were leaving before they slipped out of the last American base and started down the barren desert highway to the Kuwaiti border before dawn Sunday.

The atmosphere was subdued inside one of the vehicles as it streamed down the highway, with little visible in the blackness outside through the MRAP's small windows. Along the road, a small group of Iraqi soldiers waved to the departing American troops.

But after crossing the berm at the Kuwaiti border, lit with floodlights and ringed with barbed wire, the troops from the 3rd brigade of the Army's 1st Cavalry Division were elated. They cheered, pumped fists in the air and gave each other chest bumps and bear hugs. "We're on top of the world!" shouted one soldier from the turret of his vehicle. Soldiers were looking forward to seeing their families and not using Satellite Phone Iraq anymore.

The quiet withdrawal was a stark contrast to the high-octane start of the war, which began before dawn on March 20, 2003, with an airstrike in southern Baghdad where Saddam Hussein was believed to be hiding, the opening shot in the famed "shock and awe" bombardment. U.S. and allied ground forces then stormed from Kuwait across the featureless deserts of southern Iraq toward the capital.

Saddam and his regime fell within weeks, and the dictator was captured by the end of the year — to be executed by Iraq's new Shiite rulers in 2006. But Saddam's end only opened the door to years more of conflict as Iraq was plunged into a vicious sectarian war between its Shiite and Sunni communities. The near civil war devastated the country, and its legacy includes thousands of widows and orphans, a people deeply divided along sectarian lines and infrastructure that remains largely in ruins.

In the past two years, violence has dropped dramatically, and Iraqi security forces that U.S. troops struggled for years to train have improved. But the sectarian wounds remain unhealed. Even as U.S. troops were leaving, the main Sunni-backed political bloc announced Sunday it was suspending its participation in parliament to protest the monopoly on government posts by Shiite allies of the Prime Minister.

In the final days, U.S. officials acknowledged the cost in blood and dollars was high, but tried to paint a picture of victory — for both the troops and the Iraqi people now freed of a dictator and on a path to democracy. But gnawing questions remain: Will Iraqis be able to forge their new government amid the still stubborn sectarian clashes? And will Iraq be able to defend itself and remain independent in a region fraught with turmoil and still steeped in insurgent threats?

Some Iraqis celebrated the exit of what they called American occupiers, neither invited nor welcome in a proud country. Others said that while grateful for U.S. help ousting Saddam, the war went on too long. A majority of Americans would agree, according to opinion polls broadcast on Internet Iraq websites.

Iraq's military chiefs believe that troops were up to the task of uprooting militant groups. Sunni militants continue to carry out bombing and shooting against police, soldiers and civilians, and Shiite militias continue to operate.

The U.S. convoys were the last of a massive operation pulling out American forces that has lasted for months to meet the end-of-the-year deadline agreed with the Iraqis during the previous presidential administration.

In the middle of the week, there were two U.S. bases and less than 4,000 U.S. troops in Iraq — a dramatic drop from the roughly 500 military installations and as many as 170,000 troops during the surge in 2007, when violence was at its worst. As of the last night, that was down to one base — Camp Adder — and the final 500 soldiers.

On the last evening at Camp Adder, near Nasiriyah, about 200 miles southeast of Baghdad, the vehicles lined up in an open field to prepare and soldiers went through last-minute equipment checks to make sure radios, weapons and other gear were working.

Early the last morning, the brigade's remaining interpreters made their routine calls to the local tribal sheiks and government leaders that the troops deal with, so that they would assume that it was just a normal day.

The Iraqi soldiers were to wake up in the morning without any knowledge of move.

In a guard tower overlooking a now empty checkpoint at the base soldiers talked about what they looked forward to most in getting home. They planned to go for Mexican food at a restaurant in Killeen, Texas. Another joy of home, she said: you don't have to bring your weapon when you go to the bathroom or go on the Internet in Iraq.

At its height, Camp Adder boasted a Taco Bell, a KFC, an Italian restaurant and two Green Beans coffee shops. On the last night, it felt empty, with abandoned volleyball and basketball courts and a gym called "House of Pain." Hundreds of vehicles — trucks, buses — waited in a lot to be handed over to the Iraqi military, which is taking over the site. With the Americans gone, the base reverts to its former name, Imam Ali Air Base.

Despite the President’s earlier contention that all American troops would be home for Christmas, at least 4,000 forces will remain in Kuwait for some months. The troops could also be used as a quick reaction force if needed.

The U.S. plans to keep a robust diplomatic presence in Iraq, hoping to foster a lasting relationship with the nation and maintain a strong military force in the region. The President met in Washington with the Iraqi Prime Minister last week, vowing to remain committed to Iraq as the two countries struggle to define their new relationship.

U.S. officials were unable to reach an agreement with the Iraqis on legal issues and troop immunity that would have allowed a small training and counterterrorism force to remain. U.S. defense officials said they expect there will be no movement on that issue until sometime next year.

Bankruptcy for Kodak

2012-01-06T11:22:00.002-05:00

First appeared in Wall Street Journal

Eastman Kodak Co. is preparing to seek bankruptcy protection in the coming weeks, people familiar with the matter said, and a move that would cap a stunning comedown for a company that once ranked among America's corporate titans.

The 131-year-old company is still making last-ditch efforts to sell off some of its patent portfolio and could avoid Chapter 11 if it succeeds, one of the people said. But the company has started making preparations for a filing in case those efforts fail, including talking to banks about some $1 billion in financing to keep it afloat during bankruptcy proceedings, the people said.

A Kodak spokesman said the company "does not comment on market rumor or speculation."

A filing could come as soon as this month or early February, one of the people familiar with the matter said. Kodak would continue to pay its bills and operate normally while under bankruptcy protection, the people said. But the company's focus would then be the sale of some 1,100 patents through a court-supervised auction, the people said.

That Kodak is even contemplating a bankruptcy filing represents a final reversal of fortune for a company that once dominated its industry, drawing engineering talent from around the country to its Rochester, N.Y., headquarters and plowing money into research that produced thousands of breakthroughs in imaging and other technologies.

The company, for instance, invented the digital camera—in 1975—but never managed to capitalize on the new technology.

Casting about for alternatives to its lucrative but shrinking film business, Kodak toyed with chemicals, bathroom cleaners and medical-testing devices in the 1980s and 1990s, before deciding to focus on consumer and commercial printers in the past half-decade under Chief Executive Antonio Perez.

None of the new pursuits generated the cash needed to fund the change in course and cover the company's big obligations to its retirees. A Chapter 11 filing could help Kodak shed some of those obligations, but the viability of the company's printer strategy has yet to be demonstrated, raising questions about the fate of the company's 19,000 employees.

Such uncertainty was once unthinkable at Kodak, whose near-monopoly on film produced high margins that the company shared with its workers. On "wage dividend days," a tradition started by Kodak founder George Eastman, the company would pay out bonuses to all workers based on its results, and employees would use the checks to buy cars and celebrate at fancy restaurants.

Former employees say the company was the Apple Inc. or Google Inc. of its time. Robert Shanebrook, 64 years old, who started at the company in 1967 and was most recently world-wide product manager for professional photographic film, recalls young talent traipsing through Kodak's sprawling corporate campus. At lunch, they would crowd the auditorium to watch a daily movie at an on-site theater. Other employees would play basketball on the company courts.

"We had this self-imposed opinion of ourselves that we could do anything, that we were undefeatable," Mr. Shanebrook said.

Kodak's troubles date back to the 1980s, when the company struggled with foreign competitors that stole its market share in film. The company later had to cope with the rise of digital photography and smartphones.

It wasn't until 10 years ago that the mood began to sour, said Mr. Shanebrook. By 2003, Kodak announced it would stop making investments in film. "I didn't want to stick around for the demise," he said.

Kodak shares closed Wednesday at 47 cents, down 28% after The Wall Street Journal reported the company was preparing a Chapter 11 filing.

Kodak has lost money each year but one since Mr. Perez, who previously headed the printer business at Hewlett-Packard Co., took over in 2005. The company's problems came to a head in 2011, as Mr. Perez's strategy of using patent lawsuits and licensing deals to raise cash ran dry.

Hoping to plug the hole, Kodak put some of its digital patents up for sale in August. Efforts to sell the portfolio have been slowed by bidders' concerns that Kodak might seek bankruptcy protection. The company has talked to hedge funds about borrowing hundreds of millions of dollars to bridge its finances until the patents sell, but the talks have faltered, people familiar with the matter said.

The first sign of acute cash pressure came in late September, when Kodak drew $160 million from its credit line at a time when it had told investors it would be building cash. The move sent Kodak's stock tumbling and raised fresh concerns about the company's viability.

Soon after, Kodak hired restructuring lawyers and advisers to help shore up its finances.

The company and its board have weighed a potential bankruptcy filing for months. Advisers told Kodak a filing would make its patent sale easier and likely allow the company to command a higher price, people familiar with the matter have said. The obligation to cover pension and health-care costs for retirees could also be purged through bankruptcy proceedings, the people said.

Those obligations—which run to hundreds of millions of dollars a year—as well as the unprofitable state of Kodak's new businesses, have made the company undesirable as a takeover target, people familiar with the matter said.

During a two-day meeting of the company's board, management and advisers in mid-December, executives were briefed on how Kodak would fund itself during bankruptcy proceedings should efforts to sell its patents fall short, a person familiar with the matter said.

Kodak is in discussions with large banks including J.P. Morgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. for so-called debtor-in-possession financing to keep the company operating in bankruptcy court, people familiar with the matter said.

Kodak has also held discussions with bondholders and a group led by investment firm Cerberus Capital Management LP about a bankruptcy financing package, the people said.

Should it seek bankruptcy protection, Kodak would follow other well-known companies that have failed to adapt to rapidly changing business models. They included Polaroid Corp., which filed for bankruptcy protection a second time in December 2008; Borders Group Inc., which liquidated itself last year; and Blockbuster Inc., which filed for bankruptcy protection in 2010 and was later bought by Dish Network Corp. A bankruptcy filing would kick off what is expected to be a busier year in restructuring circles, as economic growth continues to drag and fears about European sovereign debt woes threaten to make credit markets less inviting for companies that need to refinance their debts.

Mr. Perez decided to base the company's future on consumer and commercial inkjet printing. But the saturated market has proved tough to penetrate, and Kodak is paying heavily to subsidize sales as it builds a base of users for its ink.

The company remains a bit player in a printer market dominated by giants like H-P. Kodak ranks fifth world-wide, according to technology data firm IDC, with a market share of 2.6% in the first nine months of 2011.

As the company works on a restructuring plan, a key issue for creditors is whether the printer operations are worth supporting, or whether the bulk of the company's value is in its patents.

Nortel Networks Corp., a company that also had fallen behind the technology curve, opted to liquidate itself in bankruptcy court rather than reorganize, raising a greater than expected $4.5 billion for its patent trove.

Kodak's founder, Mr. Eastman, took his life at the age of 77 in what is now a museum celebrating the founder and Kodak's impact on photography. His suicide note read: "To my friends, my work is done. Why wait?"

Are Asian's Discriminated Against When Appling To College?

2011-12-09T14:13:00.000-05:00

Story first appeared in The Detroit News.

Lanya Olmstead was born in Florida to a mother who emigrated from Taiwan and an American father of Norwegian ancestry. Ethnically, she considers herself half Taiwanese and half Norwegian. But when applying to Harvard, Olmstead checked only one box for her race: white.

For years, many Asian-Americans have been convinced that it's harder for them to gain admission to the nation's top colleges.

Studies show that Asian-Americans meet these colleges' admissions standards far out of proportion to their 6 percent representation in the U.S. population and that they often need test scores hundreds of points higher than applicants from other ethnic groups to have an equal chance of admission. Critics say these numbers, along with the fact that some top colleges with race-blind admissions have double the Asian percentage of Ivy League schools, prove the existence of discrimination.

The way it works, the critics believe, is that Asian-Americans are evaluated not as individuals, but against the thousands of other ultra-achieving Asians who are stereotyped as boring academic robots.

Now, an unknown number of students are responding to this concern by declining to identify themselves as Asian on their applications.

For those with only one Asian parent, whose names don't give away their heritage, that decision can be relatively easy. Harder are the questions that it raises: What's behind the admissions difficulties? What, exactly, is an Asian-American — and is being one a choice?

Olmstead is a freshman at Harvard and a member of HAPA, the Half-Asian People's Association. In high school she had a perfect 4.0 grade-point average and scored 2150 out of a possible 2400 on the SAT, which she calls pretty low.

College applications ask for parent information, so Olmstead knows that admissions officers could figure out a student's background that way. She did write in the word multiracial on her own application.

Still, she would advise students with one Asian parent to check whatever race is not Asian.

Not to really generalize, but a lot of Asians, they have perfect SATs, perfect GPAs ... so it's hard to let them all in.

Amalia Halikias is a Yale freshman whose mother was born in America to Chinese immigrants; her father is a Greek immigrant. She also checked only the "white" box on her application.

As someone who was applying with relatively strong scores, she didn't want to be grouped into that stereotype. She didn't want to be written off as one of the 1.4 billion Asians that were applying.

Her mother was extremely encouraging of that decision even though she places a high value on preserving their Chinese heritage.

But leaving the Asian box blank felt wrong to Jodi Balfe, a Harvard freshman who was born in South Korea and came here at age 3 with her Korean mother and white American father. She checked the box against the advice of her high school guidance counselor, teachers and friends.

Other students, however, feel no conflict between a strong Asian identity and their response to what they believe is injustice.

Immigration from Asian countries was heavily restricted until laws were changed in 1965. When the gates finally opened, many Asian arrivals were well-educated, endured hardships to secure more opportunities for their families, and were determined to seize the American dream through effort and education.

These immigrants, and their descendants, often demanded that children work as hard as humanly possible to achieve. Parental respect is paramount in Asian culture, so many children have obeyed — and excelled.

Of course, not all Asian-Americans fit this stereotype. They are not always obedient hard workers who get top marks. Some embrace American rather than Asian culture. Their economic status, ancestral countries and customs vary, and their forebears may have been rich or poor.

But compared with American society in general, Asian-Americans have developed a much stronger emphasis on intense academic preparation as a path to a handful of the very best schools.

Does Holmes think children of American parents are generally spoiled and lazy by comparison?

Asian students have higher average SAT scores than any other group, including whites. A study by Princeton sociologist Thomas Espenshade examined applicants to top colleges from 1997, when the maximum SAT score was 1600 (today it's 2400). Espenshade found that Asian-Americans needed a 1550 SAT to have an equal chance of getting into an elite college as white students with a 1410 or black students with an 1100.

Top schools that don't ask about race in admissions process have very high percentages of Asian students. The California Institute of Technology, a private school that chooses not to consider race, is about one-third Asian. (Thirteen percent of California residents have Asian heritage.) The University of California-Berkeley, which is forbidden by state law to consider race in admissions, is more than 40 percent Asian — up from about 20 percent before the law was passed.

Steven Hsu, a physics professor at the University of Oregon and a vocal critic of current admissions policies, says there is a clear statistical case that discrimination exists.

Yale, Harvard, Princeton and the University of Pennsylvania declined to make admissions officers available for interviews for this story.

Kara Miller helped read applications for the Yale admissions office when she was an undergraduate there, and participated in meetings where admissions decisions were made. She says it often felt like Asians were held to a higher standard.

Highly selective colleges do use much more than SAT scores and grades to evaluate applicants. Other important factors include extracurricular activities, community service, leadership, maturity, engagement in learning, and overcoming adversity.

Admissions preferences are sometimes given to the children of alumni, the wealthy and celebrities, which is an overwhelmingly white group. Recruited athletes get breaks. Since the top colleges say diversity is crucial to a world-class education, African-Americans, Latinos, Native Americans, and Hawaiian/Pacific Islanders also may get in despite lower scores than other applicants.

A college like Yale could fill their entire freshman class twice over with qualified Asian students or white students or valedictorians,says Rosita Fernandez-Rojo, a former college admissions officer who is now director of college counseling at Rye Country Day School outside of New York City.

But applicants are not ranked by results of a qualifications test, she says — "it's a selection process."

In the end, elite colleges often don't have room for Asian students with outstanding scores and grades.

That's one reason why Harvard freshman Heather Pickerell, born in Hong Kong to a Taiwanese mother and American father, refused to check any race box on her application.

She considers drawing lines between different ethnic groups a form of racism — and says her ethnic identity depends on where she is.

Holmes, the Yale sophomore with the Chinese-born mother, also has problems fitting herself into the Asian box.

"I feel like an American," she says, "... an Asian person who grew up in America."

Susanna Koetter, a Yale junior with an American father and Korean mother, was adamant about identifying her Asian side on her application. Yet she calls herself "not fully Asian-American. I'm mixed Asian-American. When I go to Korea, I'm like, blatantly white."

And yet, asked whether she would have considered leaving the Asian box blank, she says: That would be messed up. I'm not white.

She didn't check the box, even though her last name is a giveaway and her essay was about Asian-American identity.

Looking back I don't agree with what I did, Zhuang says. It was more like a symbolic action for her to rebel against the higher standard placed on Asian-American applicants.

Hsu, the physics professor, says that if the current admissions policies continue, it will become more common for Asian students to avoid identifying themselves as such, and schools will have to react.

The lines are already blurred at Yale, where almost 26,000 students applied for the current freshman class, according to the school's web site.

About 1,300 students were admitted. Twenty percent of them marked the Asian-American box on their applications; 15 percent of freshmen marked two or more ethnicities.

Ten percent of Yale's freshmen class did not check a single box.

Google Receives AdMeld Acquisition Approval

2011-12-09T13:52:00.000-05:00

Story first appeared in USA TODAY.

The Justice Department approved Google's acquisition of online advertising service Admeld after concluding the deal wouldn't diminish competition in one of the Internet's most lucrative marketing niches.

The decision announced Friday clears the way for Google (GOOG) to take control of Admeld six months after the companies agreed to the deal. Google said it plans to take control of Admeld within the next few days, although the two companies' products will remain separate for a while longer.

It's the fourth time since 2007 that that the U.S. government has taken a close look at a Google acquisition to determine if it would stifle competition or drive up prices. Google has gained regulatory approval in each instance. In 2008, though, Google backed out of a proposed partnership with Yahoo (YHOO) to avoid a legal battle with the Justice Department.

The Justice Department is still reviewing Google's proposed takeover of cell phone maker Motorola Mobility Holdings (MMI). That $12.5 billion deal is the biggest in Google's 13-year history.

The Federal Trade Commission is in the midst of a broader inquiry into whether Google has been abusing its dominance of Internet search to make it harder for people to find rival services and apply pressure on advertisers to pay higher prices. Google has consistently predicted that investigation will be resolved in its favor.

Google hasn't disclosed how much it is paying for Admeld, a New York company that works with websites to help them figure out how to make the most money from the amount of space they have available for display ads. It's a steadily growing field of advertising that emphasizes photos, video and illustrations instead of Google's specialty of distributing text-based commercial links alongside search results.

The Justice Department said that privately held Admeld, formed in 2007, raised about $30 million in 2010 to help fund its operations.

Google generated revenue of about $29 billion last year and analysts expect it to surpass $38 billion in revenue this year. Most of Google's revenue still comes from search advertising.

In an attempt to diversify beyond search advertising, Google bought DoubleClick for $3.2 billion in 2008. That deal is turning display advertising into a major moneymaker for Google, but the company's market share in the segment still lags behind Facebook and Yahoo, according to the research firm eMarketer Inc.

That apparently helped sway the Justice Department to approve the Admeld deal.

UAW Continues Negotiations

2011-12-09T13:13:00.002-05:00

Story first appeared in the Detroit Free Press.

The UAW is continuing to negotiate with a General Motors supplier owned by the Ambassador Bridge's Moroun family, but union leaders are considering whether to protest or even strike the supplier's operations inside GM's Orion Township plant.

The union had planned to protest LINC Logistics on Wednesday morning, but called off those plans ahead of a renewed effort to make progress in contract negotiations. Talks continued into the evening Wednesday, said Pat Sweeney, president of Orion's UAW Local 5960. This would be the LINC employees' first union contract, Sweeney said.

The outcome will determine whether the UAW takes any action. A strike could disrupt production of the Chevrolet Sonic subcompact or the Buick Verano compact, which are built at the GM plant. LINC's employees, who work inside the GM factory, voted unanimously in June to strike if UAW leaders call for a walkout.

Negotiations have dragged on for months between the UAW and LINC, which organizes and distributes parts at automakers' plants. LINC workers currently make less than $10 an hour.

The Orion Township factory restarted production this year after getting a reprieve from GM's plan to close it as part of its 2009 bankruptcy. GM now employs about 1,600 hourly workers in Orion -- about 60% at the $28-an-hour first-tier wage and the rest at about $16 an hour. A couple of suppliers also have employees working inside the GM factory, in part thanks to space freed up by the plant's redesigned body shop.

Separately, the Orion Township factory had a small fire around 8 a.m. Wednesday in its body shop. GM called the fire department as a precautionary measure and evacuated the body shop, but restarted production by 9 a.m. The fire did not impact production and no one was injured.

Deception Charges for FB

2011-11-30T09:21:00.000-05:00

Story first appeared in USA TODAY.

Facebook on Tuesday agreed to a Federal Trade Commission order that bars Facebook from deceiving consumers about its privacy practices and requires it to submit to monitoring for 20 years.

The sanction stems from privacy setting changes that Facebook made in December 2009, without asking users' permission. The company told users they could keep their information on Facebook private, when, in fact, it repeatedly allowed information to be shared and made public.

Facebook CEO Mark Zuckerberg insisted in a blog posting that the company has a good history of providing transparency and control over who can see your information, but acknowledged that they've made a bunch of mistakes.

The FTC's sanction comes as Facebook readies itself for a high-profile initial public offering of stock, expected next spring. Meanwhile, the company has come under rising criticism in the U.S. and Europe for using Like buttons embedded on millions of websites to monitor Web surfing.

Facebook compiles tracking logs of the webpages viewed by each of its 800 million members, and millions more non-members, the company disclosed in exclusive USA TODAY interviews.

New federal laws are needed to help consumers protect their personal information from companies surreptitiously collecting and using that personal information for profit, says Sen. Jay Rockefeller, D-W.V., sponsor of a Do Not Track law that would restrict online tracking.

Rockefeller commended the FTC's action. Consumer privacy is a right, not a luxury, he says. This action against Facebook is just the first step toward protecting consumer privacy.

Facebook improperly disclosed information to advertisers and continued to display photos and videos even after the accounts were deactivated, according to the FTC.

The consent order, which must be approved by a judge, requires Facebook to:

•Obtain express consent before overriding users' privacy preferences.

•Cut off access to a user's material within 30 days after deletion of an account.

•Establish a comprehensive privacy program covering new and existing products and services.

•Submit to privacy program audits within 180 days and every two years after that for the next 20 years. Monitoring would be handled by an independent professional yet to be named.

Even after the consent order takes effect, Facebook users may not notice anything different.

It's not clear how the FTC's order could affect Facebook's plans for new services, including Timeline, which digitally maps everything a user has ever done on the popular social network, and "Open Graph" applications designed to broadcast user's surfing patterns and interests widely across the social network.

Chris Conley, a tech and civil liberties attorney at the ACLU'S Northern California chapter, notes that Facebook's privacy settings make no reference to Like button tracking.

There's no setting for (the) user to control that, says Conley. It's questionable if something that doesn't have a privacy setting today is covered by the FTC's order.

The FTC stopped short of ordering Facebook to restore the more rigorous privacy settings it had prior to December 2009, noted Marc Rotenberg of Electronic Privacy Information Center.

EPIC and nine other non-profit groups filed the complaint that triggered the FTC probe. If it was unfair to change the privacy settings, then the right response would be to change the settings back.

The order is expected to give technologists and privacy advocates a new, more effective tool to monitor Facebook's privacy practices, says Jeff Chester, executive director of the non-profit Center for Digital Democracy.

Federal lawmakers focusing on privacy issues will also be closely monitoring the aftermath of the FTC's order, says Rep. Mary Bono Mack, R-Calif.

Exports to Panama Could be Reduced

2011-11-29T17:07:00.000-05:00

Story first appeared in USA TODAY.

Members of Congress weighed in Wednesday on long-delayed free-trade deals with South Korea, Colombia and Panama. Proponents claim the deals will create or save as many as 380,000 jobs, while skeptics contend the accords will lead to 214,000 lost U.S. jobs. To mollify opponents, officials coupled the free-trade deals with extra unemployment insurance and other benefits for displaced workers. USA TODAY's Tim Mullaney breaks down the impact of each deal.

South Korea

•How much we trade: $38.8 billion of U.S. exports to South Korea, $48.9 billion of U.S. imports from South Korea last year, according to the Census Bureau. Biggest sources of the trade deficit include cars, wireless communications equipment and appliances.

•What it does: Cuts Korean tariffs on U.S. autos immediately, while more slowly phasing in cuts of U.S. levies on Korean-made cars and SUVs. Lets up to 100,000 U.S. cars into Korea annually that don't meet Korean safety or environmental standards, but do meet U.S. rules. Also opens up Korean markets for U.S.-based sellers of services such as accounting and banking.

•Why business liked it: Companies with European-based competitors feared being left out after South Korea made a trade deal with the European Union. White House claims the pact will boost U.S. exports by $11 billion a year and add 70,000 jobs.

•Unions were split: The UAW backed the deal, while the steelworkers union, which represents many auto parts workers, said U.S. tariff cuts should have taken effect only after Koreans actually bought more U.S.-made cars. The Economic Policy Institute says this deal will cost 159,000 American jobs.

Panama

•How much we trade: $6 billion in exports last year, with a $5.7 billion trade surplus to the U.S. Biggest exports included construction equipment, refined petroleum products and telecom gear.

•What the deal does: 88% of U.S. exports will see Panamanian duties eliminated. Agricultural duties would be cut immediately, and phased out completely in 10 years. The U.S. International Trade Commission declined to quantify its impact on U.S. jobs, citing the small size of Panama's economy. This may be welcomed news for Ag Tires dealers.

•Why business liked it: It lets U.S. companies pursue lucrative deals linked to Panama's plan to upgrade its infrastructure.

•Why unions were critical: Opponents focused on Panama's history as a haven for shady banking activities and money laundering, and said the deal would take away legal tools used to fight fraud.

Colombia

•How much we trade: $12.1 billion in U.S. exports, $15.7 billion in U.S. imports. More than half of U.S. imports represent crude oil. The biggest exports are finished chemical and energy products.

•What it does: The deal eliminates Colombian duties that average nearly 17% on most agricultural goods. Also eliminates duties on manufactured goods that range from 7% to 15%.

•Why business liked it: U.S. farmers who used to supply nearly half of Colombia's imported food have seen market share slip to 21% as other nations lowered trade barriers with Colombia. The U.S. International Trade Commission estimates the deal will boost exports by $1.1 billion and support thousands of jobs.

•Why unions were opposed: Colombia has a history of violence against union organizers and workers, including 23 suspicious deaths this year, U.S. unions say. The Economic Policy Institute study says the pact will cost 55,000 U.S. jobs.

Could the US Follow in the Muddy Steps of Japan?

2011-11-29T16:43:00.001-05:00

Story first appeared in USA TODAY.

If you wonder what haunts Federal Reserve Chairman Ben Bernanke's dreams, it's Japan.

Japan has suffered more than two decades of subpar economic growth, made all the more miserable by falling consumer prices, a stagnant real estate market and a moribund stock market. The worry: that the U.S. economy devolves into something like Japan's.

Some of the similarities between Japan's economic woes and the U.S.' are striking. Both countries have aging populations. Both have ultra-low interest rates, which don't seem to be having much effect in stimulating the economy. And both countries are struggling with high debt loads.

Could the U.S. be entering a multi-decade recession like Japan's? Probably not, experts say: Japan's main problem was reacting too slowly to its problems, and the U.S. has reacted fairly swiftly to the economic crisis. Nevertheless, some of the problems the U.S. faces now could take another two to five years to fix — and investors could learn a thing or two from the Japanese experience if hard times drag on.

The U.S. recession officially began in December 2007 and ended in June 2009, according to the National Bureau of Economic Research. To most people, though, it still feels like a recession. Unemployment stands at 9.1%, according to the Bureau of Labor Statistics, and gross domestic product grew at a tepid 1.3% in the second quarter and is estimated to have grown at an annual rate of 2.5% from the second quarter to the third.

Miserable as current conditions are, they pale in comparison with Japan's problems. It's not the lost decade — it's the lost two decades, says a portfolio manager for Fidelity International Discovery fund. Japan's period of malaise began in 1990, and the country is still struggling today.

How bad is it? The Nikkei stock index is down 80% from its 1989 peak. Property prices fell more than 80%.

Could the U.S. see a period like Japan's? It's an increasing possibility. Some of the similarities are striking.

For example, Japan's woes started with an overheated real estate market and frenzied borrowing — two problems that will sound familiar to anyone in the U.S. Home prices in the U.S. have fallen more than 30% since 2006, according to Standard and Poor's. The Japanese real estate market has yet to fully recover from its 1980s excesses.

Both the U.S. and Japan have seen heavy losses in their stock markets. The Wilshire 5000, a broad measure of the U.S. stock market, is down 18% from its 2007 high. Both countries suffer from high debt: Consumer debt in the U.S., and corporate debt in Japan. And the aging populations in both countries mean fewer younger workers will have to support more retirees.

The Japanese made matters worse in three ways:

• Japanese banks were slow to write down bad debt. They took 10 years to recognize the non-performing loans.

Japan's corporations gradually paid down their debt, but during that time, they weren't making investments, says a portfolio manager for the Matthews Asia funds. Because the companies weren't investing in factories and employment, economic growth remained anemic.

• After the initial meltdown in 1990, the Japanese central bank kept rates too high for too long. Japan's short-term prime lending rate was 6.88% in 1991 and 3.91% in 1992, even though property values plunged 5.11% in 1992. Japan didn't drop rates to nearly zero until 1995.

• Worried by threats of a credit downgrade because of the country's high level of debt, Japan raised its consumption tax in 1997, which slowed the economy just as it was beginning to recover. It's fair to say that the Japanese repeated what we did in 1937 — raised taxes too soon.

Japan now has persistent deflation — a period of falling prices. Part of that is because China can supply low-priced, quality goods. Even though Japan is cutting supply, for every one unit that Japan cuts, China is there with three more units. Also, Japanese consumers have a deflationary mentality: If you wait long enough, prices will fall.

Japan's declining population plays a role, too. The median age in Japan — half are younger, half are older — is 44.8 years, according to the Central Intelligence Agency. In the U.S., it's 36.9 years. In both the U.S. and Japan, the median age is creeping higher, meaning there are fewer young people to contribute to pensions and health care. But the U.S. population continues to grow, which eventually translates into GDP growth.

Finally, Japan has been hit with bad luck. The balance-sheet recession ended in 2006. Companies became more willing to take on debt to finance growth. The 2008 financial crisis soon put an end to that, and the 2011 earthquake, tsunami and nuclear power station meltdown put a big cramp in Japan's GDP.

Why it's different in U.S.

Economists say that the U.S. may avoid a Japan-like period of malaise. The Federal Reserve was very quick to react to the 2008 financial crisis, pushing interest rates down to near zero.

U.S. consumers are paying down their debt and saving more. Although that's a slow process, consumers have come to realize that paying off a debt is like getting a raise: It increases your disposable income. Eventually, that will translate into more spending.

What could go wrong? Plenty. When I look at the argument between political parties about whether to rein in spending or raise taxes, it reminds me of what happened in Japan, referring to Japan's increase in consumption taxes. In the short term, raising taxes or slamming on the brakes in spending would be a terrible idea.

Similarly, a rate increase could weaken economic growth further. Housing starts are continuing to struggle with mortgage rates at 4%. Raising rates would make the struggle even worse.

Lessons for U.S. investors

For investors, the specter of a long period of malaise means a long period of low returns. Nevertheless, despite the chronically bad market, some Japanese stocks fared well. What investors can learn from Japan:

•Profits. Stock prices follow earnings. Although the broad market fared poorly in Japan, some industries fared better than others. Japanese financial services companies, for example, were a disaster. It's appalling how much wealth destruction they caused. Not surprisingly, Japanese bank earnings have been poor.

But some Japanese industries did well. Autos, for example, prospered until competition from South Korea cut into sales. (The rising value of the Japanese yen also made Japan's autos more expensive abroad.) Japanese factory automation is now doing well, although it, too, may be threatened by competition from China.

•Price cutting. In a deflationary period, people love bargains. Companies that can undercut competitors with quality items flourish in a deflationary environment. So it's no surprise that domestic Japanese stores that cater to bargain-hunters fared well. Any area where the consumer feels like he or she is getting a good deal.

One example — not in Kennedy's portfolio, according to Morningstar — is Don Quijote, a discount store that has grown to 150 stores since 1980. The company offers an eclectic mix of bargain products and amusements, including a yet-unfinished roller-coaster in downtown Tokyo.

•Flexibility. The downfall of many Japanese companies was that they didn't react quickly enough to change. Japan's automakers, for example, have struggled against their Korean competition, as have electronics manufacturers. The big difference between U.S. and Japanese companies is the ability to reinvent themselves.

In the U.S., the low value of the dollar has given manufacturers a boost: U.S. goods sold abroad are now cheaper because of the swooning greenback. And, while the U.S. manufacturing sector is always described as shrinking, that's because U.S. factories are highly efficient. The U.S. manufacturing sector remains the largest in the world.

If you're betting on a long, subpar period — and many investors, such as Bill Gross of Pimco are doing just that — then you can learn some lessons from Japan. Look for domestic companies with rising earnings and an ability to cut prices.

Financial Aid Goes to the Rich Instead of the Poor

2011-11-28T09:31:00.000-05:00

Story first appeared in USA TODAY.

Universities and colleges are giving $5.3 billion in aid this year to students who the federal government says don't need financial help, according to figures from the College Board.

An additional $4 billion in federal tuition tax credits went to families making $100,000 to $180,000 — at least double the median income for U.S. households for students such as those getting a Nursing Degree.

The schools use the money — more than 20% of all U.S. financial aid — to compete for applicants who have high grade-point averages and SAT scores. Some discounts serve another purpose: They lure high-income families that can write a check for the rest of the tuition.

The strategy is not unlike department stores that use discounts to encourage customers to spend. Giving $5,000 against a $25,000 tuition charge is just like the discounting you'd see in a retail operation to bring traffic to the door.

Elite universities such as Harvard, Yale and Stanford give aid to families earning as much as $200,000, which less-selective schools say puts pressure on them to also offer grants to higher-income families. Education experts say such subsidies mean less help for lower- and middle-income students, who fall deeper into debt to pay tuition.

The share of financial aid going to low-income students has declined steadily over the past 10 years, and two-thirds of students borrow to pay for college degrees such as an Auto Degree. The Project on Student Debt, a research group that tracks borrowing for college, reports that students graduate owing an average of $25,250. They raised tuition tremendously, and they are giving a lot of the money to people who could be fine without it, says Sandy Baum, a higher-education analyst who collected the statistics for the College Board, an association of colleges that administers the SAT.

Baum found that colleges and universities awarded $5.3 billion worth of grants to families beyond what they qualified for under the federal government's definition of financial need, which is based on income, assets and the cost of the institution a student chooses to attend.

Families with incomes up to $180,000 also get tax breaks toward tuition under the American Opportunity Tax Credit. The credit cost $14.7 billion in 2009, the most recent data available — twice what it cost in 2008.

That's money that goes to students either who have no financial need, or who already have grant aid to meet that need. They're not giving money only to students who can't afford to pay.

One reason universities do this, according to financial aid directors and observers, is to vie for applicants with good grades and high test scores, who often come from affluent communities with top-rated school systems.

If they want to increase their rankings in U.S. News & World Report, an easy way to do that is to bribe high-scoring students to come to your university with non-need-based aid.

Universities say they have been forced to pay out more to people who don't need it since Harvard, Yale, Stanford and other elite schools started waiving tuition altogether for families that earn as much as $130,000 in a battle for cream-of-the-crop students that may go after an Honors Degree.

Families making as much as $200,000 pay an amount equal to no more than 15% of their income. That competition — Brown Admissions Dean Jim Miller calls it the war between the haves and the have lots — has put pressure on less-selective colleges, already contending with huge budget cuts and endowment shortfalls, to give support to families that don't necessarily need it.

Corporations have more debt than cash

2011-11-28T09:10:00.000-05:00

Story first appeared in USA TODAY.

Hardly a day goes by without some politician or pundit pointing out that companies are hoarding cash — roughly $3 trillion of it. If only they would spend it, the thinking goes, the economy might get better.But the story is not as simple as that. Though it seems to have escaped nearly everyone's notice, companies have piled up even more debt lately than they have cash. So they aren't as free to spend as they may seem.
U.S. companies are sitting on $358 billion more cash than they had at the start of the recession in December 2007, according to the latest Federal Reserve figures, from June. But in the same period, what they owed rose $428 billion.

Before the recession, you have to go back at least six decades to find a time when companies were so burdened by debt.

Companies borrow money all the time, of course. They borrow to build factories, cover expenses, even make payroll. The problem: Debt doesn't go away. A business can cut costs during a recession. But it can't just shred the IOUs.

Heavy debt means companies could have to dip into those reserves of cash to pay their lenders. And when interest rates eventually go up, companies will have to spend more money just to service the debt.

In the last recession, which ended in June 2009, small businesses that depended on credit cards and bank loans got slapped with higher rates just as sales began to drop. Some got cut off all together.

Peter Boockvar, equity strategist at Miller Tabak & Co., says business debt is too high even if the U.S. manages to stay out of a second recession. If economic growth doesn't pick up, they'll be more bankruptcies, and more defaults, he predicts.

Even if companies used cash to pay off what they owe, they would be left with plenty of debt — in fact, an amount equal to 83% of all the goods and services they produce in a year, according to Federal Reserve data for incorporated businesses.

In March 2009, the low point of the Great Recession, companies owed 95%. To stay afloat, companies tapped credit lines at banks, increasing debt while they were bringing in less money. They burned through cash to meet expenses.

Before that, though, it has been at least six decades since companies owed so much money as a share of what they produce, says Andrew Smithers, a London consultant who has written extensively about debt.

In short, American business is awash in cash like a man who borrowed from a bank is rich. He may have plenty of money in his pocket, but he still has to return it.

Already, there are signs that companies are struggling to pay off debt. Since this summer, buyers of bonds issued by deeply indebted companies — called junk bonds because they're so risky — have been demanding 14% more in annual interest. Some companies haven't been able to sell bonds at all.

The financial picture is at least better for the biggest, publicly traded firms. Non-financial companies in the Standard & Poor's 500 are making more money than ever and adding to their cash fast. It's middle-sized and small companies that appear to be most vulnerable.

But this sunny picture for the largest companies is marred by debt, too. Since the start of the recession, S&P 500 companies have borrowed an additional 44 cents for every additional dollar they've hoarded in cash. For many companies, debt has risen more than cash.

Drugmaker Pfizer added $3.5 billion to cash from the start of the recession. But it added $28 billion of debt, according to FactSet. PepsiCo added $22 billion more debt than cash. Hewlett-Packard added $16 billion more, Wal-Mart $13 billion.

The lack of fear about debt is an about-face from the recession. Back then, Wall Street was worried that many companies had borrowed too much during the boom, and would suffer for it in the bust.

The expectation was that this "wall of debt" would cause some companies to fail. Others would struggle but ultimately pay their lenders. Either way, borrowing would ultimately fall.

But that didn't happen. Instead, the Federal Reserve slashed benchmark interest rates to near zero, lowering yields for conservative investments like money market funds and pushing frustrated investors into riskier corporate bonds offering higher returns. As demand for those bonds rose, businesses were able to issue more of them than ever, and use the proceeds to pay off old ones coming due soon.

That problem could upend the expectations of investors. Many are banking on companies using cash to buy back more of their own stock, which might lift sagging prices.

Smithers thinks high debt will eventually force companies to do the opposite — cut buybacks.

And given the big role these purchases play in the market, that could wallop stocks. Smithers says that buybacks by non-financial companies over the past decade have more than compensated for the wave of selling by individuals and mutual funds.

The problem with debt is you don't need an actual recession to cause trouble for companies, just the fear of one. Spooked lenders can hike rates on new loans needed to pay off old ones, or cut companies off completely.

For companies issuing those risky junk-rated bonds, that day has already arrived.

A maker of private planes in Kansas saw rates on its bonds jump 40 percent in just a month. And on Wednesday, a shipping company in Florida filed for bankruptcy because it was unable to borrow to pay off old loans.

Tech Start-Ups in the Midwest

2011-11-28T09:05:00.002-05:00

Story first appeared in USA TODAY.

Ten of the top 20 most visited websites are based in California, with the remainder in New York, Washington and Georgia.

Is there room in techland for hard-working entrepreneurs from the middle of the USA?

Yes, say members of the close-knit tech community here, best known as the headquarters for the world's largest electronics retailer, Best Buy, retail giant Target and several medical technology companies.

Some 150 young businesses are working to get companies off the ground here, according to tech.mn, a local website which tracks area start-ups.

USA TODAY visited several start-ups here at CoCo, a shared workspace in a bright, open former grain exchange. Allen works from CoCo, as do the founders of Qonqr, a game app planned for iPhone, Android and Windows phones in early 2012.

The game first was seen publicly at the South By Southwest (SXSW) conference in Austin this year; Qonqr was one of 40 companies out of hundreds that applied to present. Even though they're here in Minnesota, there's chances to get out there.

Ben Kazez was a student at the University of Minnesota when he came up with the idea for the Flight Tracker app. Strolling through an airport, he realized there must be a better way to find gate connections and keep abreast of arrivals and departures. His $4.99 app (the pro version is $9.99) gives travelers the lowdown on gate numbers and flight times. More than 1 million downloads have been sold. In November 2010, travel site Expedia bought Mobiata, the company he founded, for an undisclosed fee.

Half of Mobiata's staff is in Ann Arbor, Mich.; the rest is split between Minneapolis and San Francisco. That gives Kazez a good perspective on the Midwest advantage.

Kazez says San Francisco, Boston and Seattle are the big three for tech start-ups. The middle tier: Minneapolis; Austin; Boulder, Colo.; Chicago; and Ann Arbor — home to the University of Michigan, alma mater of Google co-founder Larry Page.

Would you have been an active user of Facebook before it moved from Cambridge, Mass., to California and struck it rich? That question inspires Wahooly, a Minneapolis-based website that marries start-ups with active users. If all goes as planned, new sites get to grow quickly, with help from their readily acquired fan base.

Users who spend a lot of time on the site and exert some online influence get to share in up to 5% of the equity in the firm.

Wahooly works with San Francisco-based social-influence site Klout to spread the word. So far, about 16,000 have signed up to participate, along with 111 companies. Sign-ups close in January.

Some 90% of start-ups will fail.

Gabe Cheifetz left Chicago for the Twin Cities in 2002, a fan of the music scene. He founded several start-ups, then in 2009 moved to CrumplePop, which makes special effects that work with Apple's Final Cut Video editing program. CrumplePop is in a small $725-a-month studio on Minneapolis's south side, next door to a bakery. The four team members work on Macs and have sunlamps on their desks for dark Minnesota winters. They've sold more than 50,000 effects at $75 each in the three years, Cheifetz says.

The Minneapolis advantage: low rent, low cost of living, and the team gets to bike to work — even in the winter.

Jeff Pesek, who runs the tech.mn website, says the difference with a Midwest start-up vs. those in the Silicon Valley is stamina.

Gene Munster, a Piper Jaffray analyst who covers Apple and Google — from Minneapolis — says Chicago, thanks to huge hits such as daily deals leader Groupon and food service company GrubHub, has a more thriving tech scene, but not forever. He says they are emerging, but they're going to give Chicago a good run. They've got more people, but we've got the schools, our people, big companies and a history of innovative thinking.

UNEMPLOYMENT FAILING TO REDUCE

2011-11-28T08:57:00.001-05:00

Story first appeared in Bloomberg News.

The pace of hiring in November of 2011 probably failed to reduce unemployment in the U.S., showing employers remain concerned growth will slow, economists said before reports this week.

Payrolls climbed by 120,000 workers after rising 80,000 in October, according to the median forecast of 59 economists in a Bloomberg News survey before a Dec. 2 report from the Labor Department. The jobless rate probably held at 9 percent.

DirecTV is among companies saying they will keep a tight rein on spending and employment in 2012 on concern Europe’s debt crisis and election in the U.S. will restrain the world’s largest economy. The lack of jobs will probably pressure wages, depriving consumers of the means to boost spending, which accounts for about 70 percent of the economy.

Other reports this week may show manufacturing picked up, new-home sales stagnated and property prices declined.

The jobless rate has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948.

The projected gain in payrolls would bring the average for July through November to 118,000, compared with 131,000 in the first six months of the year.

Shares Slump

Concern is growing that a European country will be forced to default.

The Standard & Poor’s 500 Index fell 0.3 percent to close at 1,158.67 at 1 p.m. close in New York on Nov. 25, falling for a seventh straight day, the longest streak since August.

The payrolls report may also show private employment, which excludes government jobs, climbed 145,000 after an October gain of 104,000, economists forecast.

The crisis in Europe and presidential election in the U.S. make it difficult to predict the level of economic expansion, causing DirecTV to slow their growth rate.

Holiday Hiring

At the same time, companies like Macy’s Inc. are among those adding workers for the holiday season. The second-biggest U.S. department- store chain increased the hiring of mostly part- time employees by 4 percent for the November-December shopping season. See’s Candies Inc., a chocolate maker owned by Berkshire Hathaway Inc., said it would add 5,500 mostly temporary workers to help meet increased holiday production.

The scant number of jobs may explain why Americans’ moods are even more terrible now than during the economic slump. The Conference Board’s index of consumer confidence rose to 44 this month, according to the Bloomberg survey median ahead of a Nov. 29 report. The gauge averaged 53.7 during the 18-month recession that ended in June 2009.

Federal Reserve Chairman Ben S. Bernanke and his colleagues this month cut economic growth forecasts for 2012 and said unemployment will average 8.5 percent to 8.7 percent in the final three months of next year, up from a prior range of 7.8 percent to 8.2 percent.

Manufacturing Pickup

Manufacturing is one area of the economy that continues to grow. The Institute for Supply Management’s factory index of climbed to 51.5 in November, economists surveyed by Bloomberg projected ahead of a Dec. 1 report. Readings above 50 indicate expansion.

Housing remains a laggard as distressed properties depress prices and keep buyers on the sidelines. The Commerce Department may report tomorrow that new houses sold at a 313,000 annual rate in October, the same as in the prior month, the Bloomberg survey showed. That would put the monthly average for the year at 304,000, less than the 323,000 in 2010 that was the lowest since data-keeping began in 1963.

Property values in 20 cities fell 3 percent in September from a year earlier, economists predicted ahead of a Nov. 29 report from S&P/Case- Shiller.

Slow Economic Growth

2011-11-23T16:52:00.002-05:00

Story first appeared in USA TODAY.

Federal Reserve Chairman Ben Bernanke on Wednesday acknowledged that the pace of economic growth is likely to be "frustratingly slow," after the Fed downgraded its forecast for the next two years.

Bernanke said the central bank is looking for growth and the job market to improve gradually over the next two years, but at a sluggish pace.

Bernanke cited the debt crisis in Europe as a particular concern. He said it could have adverse effects on confidence and growth. As a result, the central bank is closely monitoring the situation, he said.

When asked if the Fed would purchase more mortgage-backed securities to help the depressed housing market, Bernanke said that was a "viable option." But he declined to say if, or when, the Fed would pursue such action.

"We remain prepared to take action as appropriate to make sure the recovery continues," Bernanke said.

Bernanke's comments came at his third news conference this year, a practice he started in April to provide more background on the Fed's actions and its thinking behind its latest economic forecast.

The central bank's latest forecast released Wednesday predicts that the U.S. economy will grow no more than 1.7% for all of 2011. For 2012, growth will range between 2.5% and 2.9%. Both forecasts are roughly a full percentage point lower than the Fed's projections from June.

The unemployment rate has been stuck near 9% for more than two years. The Fed doesn't see that changing this year. It predicts it won't fall below 8.5% next year. In June, the Fed had predicted unemployment would drop to as low as 7.8% in 2011.

The new forecast takes into account the substantial slowdown in growth that occurred earlier this year.

Bernanke said he sympathized with Occupy Wall Street protesters complaints about the state of the economy.

"I am dissatisfied with the state of the economy," Bernanke said. "Unemployment is too high."

But the Fed chairman said criticism from Republicans, both in Congress and those running for president, was not valid. They have charged that the central bank's efforts have set the stage for higher inflation in the future.

Bernanke said he felt the central bank had a very good record on inflation. He said where the Fed has fallen short was in dealing with unemployment.

He declined to comment directly on a letter senior Republican leaders sent in September, which cautioned the central bank not to take further steps to lower interest rates.

At the September meeting, the Fed agreed to shuffle its portfolio to try and lower long-term interest rates.

The Spread of Malicious Internet Ads

2011-11-23T16:45:00.002-05:00

Story first appeared in USA TODAY.

The online-advertising industry is scrambling to quell a long-standing problem that has taken a turn for the worse: the spread of malicious ads on the Internet's top commercial websites.

Several new twists have made so-called malvertisements a fast-rising threat to consumers — and a big headache for publishers, advertisers and ad networks, say technologists and security researchers.

The spread of infected online ads has spiked tenfold over the past year, according to research disclosed by security intelligence firm RiskIQ at a recent Online Trust Alliance conference in Washington, D.C.

RiskIQ documented a peak of 14,694 occurences of malvertisements in May of this year, up from 1,533 in May 2010. Each corrupted ad could have infected the PCs of thousands or millions of website visitors, based on how long the ad ran, says Elias Manousos, CEO of RiskIQ.

Organized crime gangs have streamlined the process of sneaking viral ads into the distribution system run by advertising networks, causing billions of tainted ad impressions to appear on the top 500 websites over the past 12 months, say technologists and security researchers.

Website security firm Armorize recently discovered criminals selling tutorials, tool kits and ad placement services to anyone who wants to get into the malvertising game. "There is a whole ecosystem designed to do this," says Matt Huang, Armorize's chief operating officer.

A recent rash of infections have been triggering bogus security warnings, followed by an offer for fake antivirus protection.

Last month, SpeedTest.net, a site that measures home broadband connection speeds, began displaying legit ads carrying instructions to load pitches for Security Sphere 2012. Simply navigating to the site launched the promos, which locked up the visitor's PC until he or she purchased worthless "protection" for $35.

Doug Suttles, chief operating officer of Web diagnostics firm Ookla, SpeedTest's parent, says his engineers spotted the attack and cleaned it up within three hours. The criminals, in this case, pioneered a novel technique. They corrupted legit advertisements as they arrived in the ad-handling program, called OpenX, used by the SpeedTest site.

However, tens of thousands of other websites that use the free OpenX ad-handling platform are wide open to this new type of attack, says Armorize's Huang.

In another twist, consumers bedeviled by bogus anti-virus pitches have started bad-mouthing websites they believe triggered the fake promos. Armorize has documented numerous consumer complaints that have gone viral on Twitter and other social networks, causing a drop in visits to the sites in question.

Some ad networks have begun participating in a working group discussing "information-sharing about malvertisers and their ads," says Steve Sullivan, the Interactive Advertising Board's vice president of digital supply chain solutions.

The Online Publishers Association, the industry group of major website publishers, has yet to closely examine malvertising. Obviously, stuff like this is disconcerting to the industry, says Pam Horan, OPA's president. They haven't done any research in this area, and she has not specifically heard anything from the members about this.

Even so, validating ads has become a major conundrum. Web publishers trust the ad networks to continually rotate ads to their Web pages. Meanwhile, the big ad networks, such as Google, Adobe, Microsoft and Yahoo, use automation to pull ads into rotation from a series of smaller networks and agencies.

Malvertisements are also used to spread stealthy infections that quietly take full control of the victim's PC, which is then used to steal data, probe deeper into corporate networks and pilfer from online financial accounts.

Consumers can protect themselves by making sure anti-virus programs and all updates for their Web browsers and popular applications, especially Adobe Flash and Adobe PDF, are current. Consumers who want to protect themselves further can use browser plug-ins, such as NoScript and AdBlock, that block all online ads.

Craig Spiezle, the Online Trust Association's executive director, says publishers, advertisers and the ad networks realize what's at stake.

The good news there is growing interest of some of the key stakeholders — including Yahoo, Microsoft and Google — on the need to employ countermeasures. It's clear that validating the ads everyone depends on is a shared responsibility. If consumers don't trust ads, they may not go to the site, or they'll start running ad blockers, and that will compromise everyone's ability to monetize.

New Facebook Timeline Feature

2011-11-23T16:41:00.002-05:00

Story first appeared in USA TODAY.

When Lisa Hope King created her Facebook account in 2004, things were much simpler. Facebook was a new website with a straightforward format. King's status as a sophomore at Rutgers University granted her access to a social-networking site aimed at college students.

She said it felt very personal. The amount of information Facebook members could share was minimal.

Now, members can share everything from their employer to their current location. Facebook's coming overhaul of its members' profile pages will more prominently show users' Facebook pasts all the way back to the creation of their accounts.

The feature, dubbed Timeline, will roll out to all 800 million Facebook members and is designed to give a more comprehensive view of people's online identities, the company says. Facebook declined to say when it would launch. The come-on to members: "Tell your life story with a new kind of profile."

As with past moves, Facebook's plans are sparking privacy concerns among some members and privacy advocates.

The new emphasis on past posts means Facebook users have to be vigilant about screening who sees old posts to prevent potentially uncomfortable situations, especially for those who have matured since creating their account as students and would rather leave the past in the past.

King said she doesn't think something she did four years ago is really representative of who she is today.

Up until now, Facebook accounts have focused on the most recent posts. With the new profile format, the most recent Facebook activities will be at the top. But as users go back in time, Timeline will summarize past posts — emphasizing the photos and status updates with the most "likes" or comments.

The new profile gets rid of the practical obscurity that has always been part of Facebook, says Marc Rotenberg, executive director of the Electronic Privacy Information Center.

Privacy concerns

Rotenberg's privacy advocacy group has voiced concerns about Timeline and other Facebook features in recent letters to the Federal Trade Commission. Rotenberg worries people won't take the time to screen all their past posts and says that Facebook should honor its past commitments to privacy settings.

Privacy concerns run highest among those who frequent Facebook less often, according to a recent USA TODAY/Gallup Poll. Just 26% of respondents who use the social site at least daily said they were "very concerned" about privacy. That compares with 35% who are "very concerned" and use the social network at least once a week, and 39% who use Facebook less often.

The kind of photos college students post of themselves at parties aren't necessarily the pictures they want others to see when they're entering the workforce, Rotenberg says. Facebook plans to opt all of its users into Timeline and put the responsibility on them to carefully review every bit of past information, he notes.

When users first get Timeline, they will have five days to emphasize or hide aspects of their profiles, Facebook says. And users can still add and delete aspects of their Timeline after they're published.

Facebook declined to comment on its opt-in decision and questions raised over privacy settings.

People have shown that they really want privacy and transparency, Jeschke says. "It looks like these steps Facebook is taking with the Timeline are steps in the right direction."

'Digital grooming'

Keeping tabs on her profile page as Facebook evolves is nothing new for King, who calls herself a digital groomer.

She goes through the information on her account every few weeks and deletes statuses, messages and other things — such as posts on an ex-boyfriend's wall — that she doesn't want to keep on her Facebook page.

Timeline creates an opportunity for everyone to become this aware about their privacy online, says Chester Wisniewski, senior security adviser at security firm Sophos.

But it seems that Facebook continually encourages people to share more and more personal information, says Nadia Bhuiyan, 23.

She doesn't want people to see how many pictures she was tagged in or how many she took in a given year or how many friend requests she got.

And she said Facebook's planned change to members' profiles probably will limit how often she visits her friends' profile pages.

Thomas Kerr-Vanderslice, 22, says he doesn't use Facebook for personal use as much as he did when he was in college. But a large portion of his job at a small Washington, D.C., lobbying firm is spent on Facebook and other social-networking sites.

He has no plans to spend time taking information off his profile once it changes to the Timeline. And he's never been nervous about sharing information online, including where he lives, his employer and his birthday. If identity theft was a major concern, he wouldn't be on Facebook.

What the Frack?

2011-11-23T16:32:00.000-05:00

Stories first appeared in Bloomberg News.

In late 1998, Chesapeake Energy Corp., an independent natural-gas producer based in Oklahoma City, exemplified an industry in decline.

The company’s stock price had fallen over two years from above $34 a share to 75 cents. Its market value tumbled 93 percent, to $72 million.

Aubrey K. McClendon, Chesapeake’s chief executive officer and co- founder, announced he might sell the company, however there was little interest.

Falling gas prices had reduced the value of Chesapeake’s reserves from $2.1 billion to $661 million.

Good thing Chesapeake Energy decided not to sell their company.

Thirteen years later, Chesapeake’s market value exceeds $18 billion.

Its stock shares are up 8 percent this year.

Chesapeake Energy's 120-acre neo-Georgian corporate campus bustles with construction crews building new office space. Its workforce has grown 30 percent in a year, to 12,200, and its recruiters have 700 jobs to fill in the United States. Chesapeake has been rumored to become the Saudi Arabia of natural gas.

A tall man who wears his wavy silver hair long by CEO standards, McClendon, 52, exudes the confidence of someone who’s certain he’s seen the future.

Exploitation of newly accessible supplies of gas embedded in layers of what’s known as shale rock, he predicts, will help revive domestic manufacturing and change the terms of debate about global warming.

Diverting Billions

You’d expect that kind of exuberance from a man with everything to gain from seeing his vision made real, but it’s not just independent drillers such as Chesapeake that are talking big. ConocoPhillips is investing $2 billion in gas in 2011, up from $500 million two years ago.

Other multi-national oil giants, such as Exxon Mobil Corp. and Royal Dutch Shell Plc, are likewise diverting billions into domestic shale gas projects.

Conoco CEO James J. Mulva recently told an audience at the Detroit Economic Club that his company has made natural gas a significant portion of it's portfolio.

Last month, the potential for U.S. shale gas spurred Kinder Morgan to acquire rival pipeline operator El Paso Corp. for $21.1 billion. It also drove the proposed $4.4 billion purchase of Brigham Exploration Co. by Norway’s Statoil ASA.

Cheaper Gas

Encouraged by the availability of inexpensive and cleaner domestic gas, some electric utilities are replacing their coal- burning capacity with gas-fired units. Energy-intensive manufacturers of chemicals, plastics, and steel are beginning to bring home operations that they exported years ago.

Natural gas must be part of any discussion on strengthening the United States long-term economic health.

Natural gas is projected to improve energy security, protecting the environment, and helping to create jobs.

On the economic potential of the nascent shale revolution, even some career environmentalists sound impressed, if cautious.

Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30 percent of the country’s natural-gas supply.

Cleaner Than Coal

That proportion is heading toward 50 percent in coming years. The U.S.

passed Russia in 2009 to become the world’s largest producer of natural gas. An Energy Dept. advisory panel on which Krupp sits estimated in August that more than 200,000 jobs, both direct and indirect. In the last several years the development of domestic production of shale gas has created many new domestic jobs.

At a moment of 9.1 percent unemployment nationally, additional decently paid work is just one potential benefit.

Natural gas burns cleaner than coal, emits less in the way of greenhouse gases, and avoids mercury and other pollutants.

Geologists have known for generations that immense, deeply buried shale formations contain copious reserves of methane, or natural gas, which can be burned efficiently to make electricity and run factories.

Until recently, however, industry lacked the tools to get at shale gas profitably.

Casing Protects Wells

In the early 2000s, the combination of two existing techniques led to a breakthrough. One method is horizontal drilling. The other is hydraulic fracturing, or “fracking,” a scary-sounding and controversial process involving the high- pressure pumping of millions of gallons of chemical-laced water deep underground to create cracks in shale rock and release trapped gas.

When in 2007 environmentalists began raising reasonable concerns about fracking, industry executives responded with dismissives asking skeptics to trust them the industry for years took the additional step of refusing to disclose the chemicals it uses in fracking.

Lost amid the suspicion and recrimination was a potentially more constructive discussion over improving industry standards for drillers’ concrete-lined steel casing, which, when installed correctly, has successfully insulated wells from drinking water.

Safe and Profitable

Now, though, there’s some surprising good news: Despite all the vituperation on both sides, some people from business and environmental circles are quietly at work in Texas, New York, and Washington on guidelines that should ensure a safe, profitable gas revival.

The Environmental Defense Fund, for example, is drafting model state regulations with Southwestern Energy Co., a producer based in Houston.

The collaboration is rooted in the recognition that the choice between polluting fossil fuels and pristine alternatives is not simple. For the foreseeable future, the U.S. has to burn a whole lot of something to produce power.

The nation now gets 45 percent of its electricity from coal, 25 percent from natural gas, 20 percent from nuclear, 7 percent from hydro, and 2 percent from wind. Solar barely registers. With current technology, wind and solar probably can’t reach into double digits, let alone bear the bulk of the load.

Bridge Fuel

If you want to continue to turn on the lights with the flip of a switch, the real short-term choice is whether to stick with the current mix or replace a substantial amount of coal capacity with less dirty natural gas.

Analysts contend that natural gas can serve as a bridge fuel to a 21st century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels. Exploring where that bridge will lead should be one of the country’s most important economic priorities.

Like petroleum, natural gas is a hydrocarbon, a product of decomposed organic material that simmered underground for hundreds of millions of years. Simple in structure--one carbon atom and four hydrogen atoms-- gas has a convoluted history in the U.S.

In the 1970s, federal price restrictions contributed to underproduction and shortages, leading to wintertime shutdowns of Midwestern schools and factories. Utility executives and consumers came to view natural gas as unreliable.

Attractive Alternative

A titanic political fight during the Carter Administration ended in a bizarre compromise: price deregulation combined with restrictions on burning gas to generate electricity. (The coal industry, it should be noted, sponsors a long-established and adroit K Street lobby.) By the 1990s, the limits on using natural gas for power had been eased, and new turbine technology made gas an attractive alternative to coal.

Furious construction of gas-fired power plants ensued, only to be followed by dismay: Gas supplies were not expanding apace. At the turn of the 21st century, some natural-gas basins were nearly tapped out, and once again many utilities, homeowners, and energy-intensive manufacturers dismissed domestic gas as a sucker’s bet.

It might have stayed that way if not for the stubbornness of a Texan named George P. Mitchell. The son of an immigrant Greek goat herder, Mitchell worked his way through Texas A&M University in the late 1930s waiting tables and repairing clothes for students.

Mitchell’s Influence

After World War II, he went into the oil and gas business in Houston, working from a tiny office above a drugstore. All through the ‘80s, Mitchell pondered geological studies showing that gas could be found not only in conventional reservoirs but also in deeper, denser “unconventional” shale formations.

Shale is where gas is actually created. Energy men call it “the kitchen,” where hydrocarbons “cook,” and where large amounts of gas remains trapped. Mitchell wondered: Why not drill all the way down to the kitchen? His exploration company probed the Barnett Shale, a slab sprawling 7,000 feet beneath Dallas and Fort Worth. Competitors scoffed.

He invested his faith and capital in hydraulic fracturing, which had been introduced in rudimentary form in the late ‘40s. Injected at enormous pressures and in huge volumes, fracking fluid creates narrow cracks in the shale. Sand diffused in the fluid stays behind and props open the cracks, allowing gas to flow out and up through the well.

Horizontal Drilling

“Mitchell Energy,” the industry consultant Daniel Yergin writes in his new book, The Quest: Energy, Security, and the Remaking of the Modern World, “cracked the code.”

In 2002, after 60 years in the business, George Mitchell decided to cash out. Devon Energy Co., a better-capitalized independent in Oklahoma City, acquired his company for $3.5 billion.

Devon brought to the Barnett a knack for horizontal drilling.

Improvements in equipment controls and measurement methods allowed its crews to drill down and then turn the gnawing diamond-tipped bit sideways. Drillers penetrate the shale laterally rather than just vertically. This exposes more of the surface area of the formation to extraction and enables multiple wells to be created from each drill pad.

Shale Stampede

Devon could not keep the field to itself. Rivals rushed in to lease tracts in Texas, Arkansas, Louisiana, and Oklahoma. Following geologists’ amazingly precise three-dimensional subterranean maps, the drillers went as far east as the Marcellus Shale, a formation that extends below Western New York State, over into Pennsylvania, and all the way down to West Virginia and Tennessee. Few people outside the industry noticed, but a shale stampede was under way.

After almost selling his company during the late-’90s doldrums, Aubrey McClendon dramatically switched strategy and wagered Chesapeake’s future on shale. (A few years later, he lost much of his personal fortune during the financial crisis of 2008 before gaining it

back.) Today, Chesapeake is the most active driller of new wells in the U.S., with 177 rigs in operation.

It is the country’s second-biggest overall producer of natural gas, behind only ExxonMobil, which announced in late 2009 that it would join the gas rush by buying XTO Energy for $41 billion. Anadarko Petroleum Corp. is the third-largest producer, followed by Devon.

Haynesville Play

McClendon is descended from a prominent Oklahoma oil family, the Kerrs of Kerr-McGee fame. Prospecting is in his DNA. In 2003 he instituted what he called his “land rush plan”: Chesapeake borrowed heavily and bought leases in the Barnett, some of them in built-up parts of the Dallas-Fort Worth metro area. At midnight after the jets stopped arriving at Dallas/Fort Worth International Airport, workers drilled next to the quiet runways. In 2005, McClendon’s geologists discovered gas in a rich shale play in Northwest Louisiana and East Texas called the Haynesville. (Shale projects are commonly referred to as

“plays.”)

Also in 2005, Chesapeake paid $2.2 billion for the second- largest gas producer in Appalachia, becoming the biggest presence in the Marcellus play. McClendon, who got his start in the business as a “land man,”

or oil and gas lease broker, built a one-of-a-kind database of millions of property records from obscure county courthouses. The digitized trove has allowed Chesapeake to beat rivals to the doorsteps of landowners whose farms or backyards sat atop buried shale gas.

Margin Calls

A runup in gas prices--to nearly $14 per thousand cubic feet in mid-2008--made McClendon look like a genius. A few months later, he seemed less smart when the economy imploded, dragging down the price of energy and of Chesapeake’s stock (which fell from a high above $69 a share in July of that year to $11 in December).

McClendon personally had borrowed against his large individual holdings to buy yet more company stock. When the bottom fell out, he was hit with margin calls that forced him to liquidate a big chunk of his investments.

Like most entrepreneurs in the up-and-down energy business, McClendon takes occasional setbacks in stride. It helps to have a loyal board of directors. In 2009, the Chesapeake board gave the CEO a $100 million pay package. The company also paid him $12 million for a collection of 19th century maps he owned.

Better Than Coal

Why the well-timed company largesse? McClendon, citing pending shareholder litigation over his pay, answers guardedly. He was properly rewarded for his work during 2008, he said, and received an appropriate “retention package” to ensure his remaining as CEO.

As for the maps, he said he had paid out of his own pocket for years to decorate the halls and conference rooms of the company, and it was time for Chesapeake to make him whole. The company denies any impropriety. On Nov. 1, the litigation was settled, and McClendon agreed to rescind the map sale and repay Chesapeake the $12 million, plus interest.

Today, he has assets valued at more than $1 billion, including a 19.2 percent stake in Oklahoma City’s National Basketball Assn. franchise, the Thunder.

Burning natural gas for power, McClendon proudly points out, results in about half the equivalent carbon dioxide emissions of coal. Such observations, however, have not kept him from becoming a target of activists who are trying to shut down fracking --- and have succeeded in some places, such as New York State.

Shale Gas Welcomed

Environmentalists, McClendon believes, should feel much more warmly toward him. He readily acknowledges that human activity contributes to global warming. “Why take a chance,” he said, “when we can reduce our carbon emissions through consuming more natural gas and less coal and oil?” It’s in his pecuniary interest to hold that opinion, of course.

Many residents of Louisiana, Oklahoma, and Texas--places accustomed to oil and gas development--welcomed the “shale gale” and its accompanying jobs, packed cafés, land royalties, and rising local tax revenue. The reaction was far more mixed in New York and Pennsylvania, despite the latter’s history of oil and coal exploration.

In the Northeast, some residents objected to heavy truck traffic and rural vistas marred by towering steel rigs and murky wastewater pools.

Even more intense were concerns about the effects of shale drilling on drinking water supplies. Some homeowners complained that after gas operations began, well water started tasting bad and children fell ill.

Industry Defends Fracking

Activists raised questions about whether the chemicals in fracking fluid were contaminating drinking water with benzene, methanol, and other dangerous substances. In 2008, Businessweek published an article by the nonprofit journalism organization ProPublica that identified episodes of water contamination near (although not all definitively caused by) gas activity in seven states: Alabama, Colorado, Montana, New Mexico, Ohio, Texas, and Wyoming.

In 2010, New York stopped issuing permits for fracking to give environmental authorities there time to study the situation.

Hit with pollution lawsuits, Chesapeake and other producers denied that fracking caused water contamination. For one thing, the companies said, the procedure typically takes place a mile or more below drinking water aquifers and is isolated by massive layers of impermeable rock.

According to the industry, drillers had done more than a million frack jobs going back to 1948 without proof of widespread pollution problems. Drillers also pointed to a study of fracking released in

2004 by the U.S. Environmental Protection Agency that supports their position.

Film’s Impact

O.K., environmentalists said, so what chemicals are you mixing into fracking fluid? That’s secret, the industry answered.

The producers blame the furtiveness on big drilling contractors, companies such as Halliburton Co., that actually devise and inject the frack fluid recipes. The contractors insisted that their recipes were safe, but deserved confidentiality as proprietary trade secrets.

The industry’s conduct fueled protests in New York and Pennsylvania, which adopted as their manifesto Gasland, a documentary that made its official debut in January 2010 at the Sundance Film Festival, went on to air on HBO, and was nominated for an Academy Award. The film memorably showed homeowners near drilling operations lighting their tap water on fire and complaining about contaminated waterways.

Fracking Dangers Overstated

While Gasland raised relevant questions, it overstated the dangers related to drilling shale gas. It suggested rampant water contamination caused by gas operations. In contrast, a study by researchers at the Massachusetts Institute of Technology released earlier this year found about 20 reported cases of groundwater contamination between 2005 and 2009.

Some of these problems were traced to flawed cement used in well construction, though not to the fracking process itself. Pennsylvania and other states have since toughened drilling construction standards.

Flammable tap water is a real phenomenon in some areas, albeit a rare one. It’s caused by methane seeping into household wells, and it can happen regardless of whether gas drilling is going on nearby. The challenge in tracing the source of methane seepage is that the gas can occur naturally and contaminate water without any industrial activity.

(Not that anyone would want an incendiary kitchen faucet, but methane gas in water isn’t toxic, and it evaporates quickly.)

Methane Occurs Naturally

This August, Josh Fox, Gasland’s director, accompanied a woman named Natalie Brant when she testified before a hearing on fracking held by members of the New York State Senate. Brant, whose family lives south of Buffalo, testified that before the state’s moratorium on fracking went into effect, several of her eight children developed headaches and nosebleeds, which she attributed to nearby gas drilling. “We’re constantly worried about our children and if they’re going to come down with cancer or other illnesses because of what they’ve been exposed to,” she said. State environmental officials have said that methane occurs naturally in well water in Brant’s part of the state, and that the gas turned up in other water wells in the area before drilling began.

New Casing System

Chesapeake’s McClendon (whose company wasn’t specifically implicated by Brant) said claims such as Brant’s, compelling though they may seem, aren’t based on hard evidence pointing to hydraulic fracturing. But in a speech in September at a conference in Philadelphia, he acknowledged a series of limited gas migration incidents in Pennsylvania in the past three years.

One of those led state regulators to impose a $900,000 fine on Chesapeake for polluting drinking water in Bradford County. “These incidents were not related to fracking,” McClendon said. Instead, they were caused by faulty well casing. “Only a couple dozen homeowners claim to have been affected,” he said. “And more importantly, the industry worked closely with Pennsylvania’s Environmental Protection Dept. officials to implement an updated and customized casing system that has been effective in preventing new cases of gas migration. Problem identified. Problem solved.”

McClendon has a tendency to exacerbate hostilities by belittling his antagonists.

Fracking Chemicals Disclosed

Such condescension notwithstanding, Chesapeake and other natural-gas producers have made concessions. Overcoming some of the concerns of their contractors, Chesapeake and other producers (and the contractors

themselves) have begun to disclose the chemical additives used in fracking. An industry- sponsored website, www.fracfocus.org, allows companies voluntarily to report the additives on a well-by-well basis.

“We just decided to do what we should have done from the start,”

said Chesapeake’s Gipson. Disclosure isn’t universal yet, but it’s headed in that direction. Arkansas, Texas, and certain other gas- producing states have enacted legal requirements for full disclosure as a condition of continued fracking.

At fracfocus.org, visitors will find that some of the stuff in fracking fluid is definitely not what you’d want in your water glass.

Ingredients may include hydrochloric acid (initiates cracks), methanol (inhibits corrosion), glutaraldehyde (kills bacteria), and ethylene glycol (winterizes product).

Accidents Are Rare

Frack fluid is typically 98 percent to 99.5 percent water and sand, with the additives making up the remainder, according to the industry.

When the nasty stuff passes by any drinking water supply, it is supposed to be contained securely within at least two layers of steel casing and two layers of heavy-duty cement.

No one disputes that there can be problems if there are flaws in the steel or concrete. The industry said such accidents have been exceedingly rare.

The 2011 MIT study estimates that between 2005 and 2009 there were some 50 incidents nationwide involving a variety of gas drilling

mishaps: groundwater contamination, surface spills, offsite disposal issues, air quality problems, and well blowouts. To provide guidance on how to reduce gas drilling risks, the DOE set up its seven-person shale committee.

Sniping, Distrust

The EDF’s Krupp sits on the panel, which is chaired by John M.

Deutch, a Director of Central Intelligence during the first Clinton Administration. Other members include the consultant and historian Yergin and several scholars and former regulators.

Despite Krupp’s participation, some environmentalists have written off the DOE committee as an industry-influenced rubber stamp. These critics note that Deutch, a professor at MIT, holds a directorship on the board of Cheniere Energy, a Houston-based liquefied natural-gas company, and formerly served on the board of Schlumberger Ltd., a major drilling contractor.

Even Krupp “has his own connections to the industry,” Dusty Horwitt, senior counsel at the Environmental Working Group, a nonprofit in Washington, said in a radio interview in May.

The sniping reflects distrust of the pragmatism Krupp embraces. A 57- year-old lawyer by training and the son of a New Jersey businessman who recycled rags and cardboard, Krupp heads a nonprofit that promotes the use of market forces to protect the environment.

August Report

He regularly takes flak from harder-line activists who oppose his willingness to work with industry. His “industry connection” to shale gas consists of having hired as a senior policy adviser a former employee of the Texas Independent Producers and Royalty Owners Assn.

After conferring with the Sierra Club, the Natural Resources Defense Council, and other nonprofits, Krupp had considerable influence on the 41-page preliminary report the DOE committee released in August.

The paper calls for mandatory state-enforced disclosure of fracking ingredients, stricter standards on conventional air pollution created by shale operations, and additional research on underground methane migration and greenhouse gas releases associated with gas drilling.

The panel persuasively explains the need for government inspection of casing and cementing and for more careful disposal of wastewater that comes up from wells.

The report doesn’t address the sticky question of whether the EPA should be given more authority over gas drilling. At present, state agencies regulate the industry. Gas executives grimace when asked about the EPA being given responsibility for permitting their operations.

Fracking’s Exemption

“There’s no evidence the states aren’t doing the job adequately,” said Henry J. Hood, Chesapeake’s senior vice- president and general counsel. “The EPA doesn’t have the manpower or the state-by-state expertise.”

Some environmentalists angrily stress that in 2005 Congress made explicit that another federal law, the Safe Drinking Water Act, doesn’t cover fracking. The exemption certainly reflects the strength of the oil and gas lobby, but with a U.S. House of Representatives controlled by anti-regulatory Republicans, the chances of getting the provision reversed at this point are exactly zero.

Debating it is more of a distraction than anything else and obscures that the EPA has authority to take action against gas drillers and producers that violate the Clean Air and Water Acts. Rather than drawing another bull’s-eye on the EPA’s back, a savvier approach would be to use the DOE report as a blueprint for broadly framed principles that state officials enforce vigorously.

Education Needed

Smart industry executives should accept tough standards as the cost of resolving environmental anxiety. In January 2010, one such corporate leader, Southwestern Energy’s executive vice- president and general counsel, Mark K. Boling, picked up the telephone and called Scott Anderson, the Texas-based EDF gas expert whose industry experience makes him suspect in the eyes of some fellow environmentalists.

Southwestern traces its roots to an Arkansas gas concern incorporated in 1929.

Boling, a former partner with the Houston law firm Fulbright & Jaworski, has spent his entire legal career promoting the interests of oil and gas clients. Now, he said in an interview, those interests include demonstrating that fracking is safe. “It’s not enough to say we’ve been fracking for 60 years and no one has proved there’s a problem,” Boling adds. “We’ve got to get out there and educate, encourage better regulation, and pick up our performance in every aspect.”

Working Out Differences

Boling’s phone call to Anderson produced a cautious series of negotiations leading to a 37-page draft state regulatory code for gas operations. “Our idea is not that this should be adopted word for word by any state,” Anderson explains. “This is not one size fits all. Instead, it’s an attempt to show what a responsible producer and a responsible environmental organization consider best practices.

It’s something to work toward.”

The incentives for working out those differences are compelling. In New York, where local opposition to fracking remains strong in some communities, Governor Andrew M. Cuomo inherited a permitting moratorium on the procedure imposed by his predecessor, David A.

Paterson. Since taking office in January, Cuomo has encouraged the drafting of more stringent rules.

Jobs at Stake

Released for public comment in September, the proposal would allow fracking subject to rules suited to New York’s geology and regional politics. It would prohibit drilling within 2,000 feet of public drinking water supplies or 500 feet of the state’s 18 primary aquifers. Drilling within the watersheds that provide unfiltered water to New York City and Syracuse would be banned altogether.

Even with these and many other restrictions, the Cuomo plan would make more than 80 percent of the Marcellus Shale within New York viable for drilling, said Joe Martens, the state’s commissioner of environmental conservation. “Our most conservative estimate is that we could add more than 13,000 jobs, direct and indirect,” Martens said. “The higher estimate is nearly 54,000 jobs.”

Fracking’s Economic Benefits

The potential for creating jobs goes beyond the bereft former farm towns of rural New York. Every day, Dow Chemical alone uses the equivalent of 700 million cubic feet of gas and ethane (a natural gas derivative).

That’s as much as all of Australia consumes on a daily basis. More plentiful domestic gas supplies now priced at around $4 per thousand cubic feet have allowed Dow to announce multibillion-dollar expansions of facilities in Louisiana and Texas, according to Executive Vice- President James R. Fitterling.

Impact on Dow

“We expect to employ up to 1,300 workers per project to construct our two new propane dehydrogenation units and a new ethylene cracker,” he told an energy conference in Houston on Sept. 26. “We also expect between 400 and 500 new, long-term Dow jobs to operate and maintain the facilities.” That’s just one chemical company.

Some electric utilities are overcoming their deep-seated uneasiness over natural gas to shift parts of their operations from coal to gas.

The switch is inviting because many coal- burning facilities are antiquated, and the country already has large amounts of more modern, underused natural-gas utility capacity (a holdover from overbuilding in the late 1990s.)

The coal industry is fighting fierce rear-guard battles to prevent the move to gas. But a variety of federal antipollution rules taking effect in coming years will provide an additional reason to consider gas. Power companies in 15 states, including California, Florida, and Pennsylvania, have recently announced expanded use of natural gas, often at the expense of coal, according to America’s Natural Gas Alliance, a trade group.

Steady Power

We need to find a way to take advantage of this historic opportunity to cut back on burning coal, which is the worst energy option, said the EDF’s Krupp. And he said that as an advocate of more wind- and solar-generated electricity. The best way to exploit renewable power on a large scale is to use it in conjunction with natural-gas plants.

Gas-fired generation ensures steady power when the wind isn’t blowing or the sun isn’t shining.

Pricey Meats Sales Are Up

2011-11-23T16:28:00.002-05:00

Story first appeared in the Wall Street Journal

Here's food for thought: Despite being fed a steady diet of conflicting news about the global economy, consumers around the world are still tucking into pricey steaks and juicy pork chops with gusto.

U.S. exports of beef and pork are on pace to set records this year, and domestic demand is rebounding with surprising strength, indicating that slower growth world-wide and high unemployment at home haven't choked off appetites for some everyday luxuries.

Those consumer cravings have helped keep livestock futures consistently high this year, even as other commodities' prices have swung wildly. They have also pushed up domestic retail prices for many beef and pork products in recent years. The average price for sliced bacon in September was $4.82 a pound, up 34% from two years earlier, while uncooked beef roasts cost $4.52 a pound, up 15% over the same period, according to government figures.

Live cattle prices are up 13% this year in Chicago futures trading, making cattle among the few widely traded commodities besides gold to be up by double digits. Lean hogs futures are up 9% this year. Both meat contracts also jumped in 2010, climbing 26% and 22%, respectively.

Among U.S. consumers, the appetite for nicer cuts seems particularly strong. In recent months, the difference has widened between prices for choice cuts of beef typically sold in restaurants and for less costly select beef, which usually is purchased in supermarkets, says Glynn Tonsor, an assistant professor of agricultural economics at Kansas State University.

The booming prices are providing an added boost to pocketbooks in rural America, which has also been benefiting from higher crop prices and soaring land values. For livestock producers, the rally is also offsetting the cost of animal feed, given big spikes in corn and soybeans last year.

Longer term, some see more price pressures. A harsh drought in the southern plains has driven ranchers to send more cattle to slaughter, according to the U.S. Department of Agriculture. While that is adding to the supply of beef right now, it is likely to create a dearth of supply down the road. With fewer cows to bear calves, beef production is likely to be curtailed. And it takes some three years to raise cattle for slaughter, creating upward pressure on prices in the meantime.

With exports booming and prices climbing, U.S. pork production is forecast to rise 2% next year, according to the USDA.

At the moment, expensive meat isn't sending customers fleeing. The U.S. had shipped nearly 1.9 billion pounds of beef and veal abroad this year through August, almost as much as in all of 2009.

U.S. beef exports are on track to top the all-time high of 2.5 billion pounds set in 2003 by roughly 10%, according to the USDA.

Pork exports also are poised to top the 2008 record of 4.7 billion pounds. Through August, the U.S. had already sent more pork abroad, 3.3 billion pounds, than in 2007, and twice as much as in 2002.

The trade has gotten a significant boost from a cheaper dollar, which has made U.S. meat cheaper abroad, particularly among major customers in Asia, where faster-growing economies are making people wealthier and more inclined to add costly protein to their diets.

An outbreak of foot-and-mouth disease in South Korea, America's fourth-largest beef customer in 2010, is also driving U.S. beef purchases higher. Through August, South Korea had imported 277 million pounds of U.S. beef, a hair under its total for all of last year, according to USDA data.

Disease, however, can also curtail U.S. exports, which is what happened in 2004 after an outbreak of bovine spongiform encephalopathy, known as mad-cow disease. Exports plunged 82% from the 2003 record and have taken years to recover.

The Obama administration is lobbying Japan to ease restrictions it still has on U.S. beef due to the outbreak, and the chief agricultural negotiator for the U.S. trade representative was in China recently, pushing China to allow U.S. beef.

Americans are expected to consume less beef per capita this year than last, according to USDA figures. But Kansas State's Mr. Tonsor compiles an index of U.S. beef demand that weighs consumption and prices, and it has risen for five consecutive quarters on a year-over-year basis, through the third quarter. A similar pork index is up four quarters in a row, he says.

Small Business Waiting to Hire This Holiday Season

2011-11-23T16:17:00.002-05:00

Stor first appeared in USA Today.

For small business owners, at this time of year thoughts usually turn to hiring. Whether it's part-time help or paying the regular workers overtime, it's a holiday tradition to put that "Help Wanted" sign in the window.

But this year, concerns about depressed consumer sentiment are translating into weak hiring trends.

To bring on workers, there has to be an expectation that business is going to be good. But companies are worried that customers are still holding onto their cash as consumer confidence remains low, says John Challenger, CEO of Challenger, Gray and Christmas, an outplacement firm in Chicago.

Bottom line: Don't count on the little guy to hire a lot of seasonal help between now and the end of the 2011.

For starters, the consumer confidence index fell to 39.8 in October. This is down from the previous nine-month average of 59.6, and lower than the 49.9 reading during the same month last year. If consumers don't spend, Challenger expects retail employment will be lower than last year, when, according to the Bureau of Labor Statistics, in the three months ending December 2010, the net change in retail jobs was approximately 630,000. This was up from 495,000 for the same period in 2009, but off from 746,800 in 2006.

How important is small business to the indicators for holiday hiring? According to the Small Business Administration's Office of Advocacy, small businesses employ half of U.S. workers. They also pay 43% of total U.S. private payroll, and have generated 65% of new jobs over the past 17 years. For holiday hiring to show a bump, small business must be a part of it.

CBIZ, a company in Roanoke, Va., that tracks hiring, found that in September, small business employment shrank by 0.81%. The CBIZ Small Business Employment Index, a barometer for hiring trends among companies with 300 or fewer employees, showed that for the third month in a row, hiring in the small business sector trended slightly downward.

According to the National Federation of Independent Business, small business optimism saw a modest gain of 0.8 points in September, ending a six-month decline. While that number is up from recent months, says Holly Wade, senior policy analyst at the NFIB, the figure was still outweighed by those expecting sales to decline.

Still, the good news is that 7% more small business owners say they are planning to hire rather than cut employees in the fourth quarter compared with the same time last year. "It might be better than last year, and even better than it was two years ago, but we are not seeing the dramatic jump that we were hoping for," says Wade. The last time this number was healthy was when it was 14% in 2007.

So, while the numbers are trending up, it's a slow climb. One reason, according to the 350,000-member NFIB, whose largest segments are in retail, construction and services: poor sales have been its members' number one problem the past three years. They are certainly not going to hire workers just for the holiday season if they don't see the sales coming in the front door. She points out that any increases in the cost of running a business — higher taxes, more regulation, or increases in fuel prices — will affect the ability of an owner to pay for an extra employee.

But there are some indications that Santa will win the stare down with the conservative consumer. Commerce department numbers released at the end of October showed spending in the third quarter was the highest it had been all year. It's been three long years of frugality for many shoppers, and, whether they need to replace a worn out appliance or just want to freshen their wardrobe, Noftsinger notes, "Americans like to spend money, and they have been waiting for an opportunity to do so."

Case Systems Solutions’ parent company, Case Systems, Announced the Purchase of The Assets of CIF Lab Casework Solutions, Inc. of Ontario, Canada

2011-11-23T16:09:00.001-05:00

Midland, MI (November 7, 2011) – Case Systems Solutions L.L.C., a Michigan based dealership that delivers casework, countertop, millwork and total project management to the primary education (K-12), higher education, laboratory casework and healthcare market segments, has announced that CIF Lab Solutions LP has purchased the assets of CIF Lab Casework Solutions, Inc. and will maintain operations in Vaughan Ontario, Canada. The purchase is a joint venture between the ownership group of Northeast Interior Systems and Case Systems Inc.
CiF is a manufacturer of the highest quality wood casework for the university, college, research, government and healthcare casework for laboratory environments, as well as, the K-12 institutional market segment; in the United States and Canada.
“In our continued goal to supply our customers with a full range of quality products, we are enthusiastic about the addition of this solid product line.” said Brad Laackman, General Manager of Case Systems Solutions. “Our manufacturers include, Case Systems for plastic laminate products, BOSTONtec for adjustable table systems and overhead service distribution, along with other various suppliers that complement our core partners to meet our client’s expectations. These partners have been integral to our success.”
“Now, with the addition of CiF Lab Solutions, we have improved our portfolio with premium wood casework for our clients. Their products have the acceptance of the laboratory design community, including nationally recognized architectural firms and lab planners. They meet and exceed the design criteria of our clients at a competitive price point.”
Laackman went on to add, “By accessing Case Solutions’ success in sales, project management and installation services, along with Case System’s operational excellence in manufacturing, CiF will offer all of us something that the market is ready for; premium wood casework that is complete, on-time and at a competitive price.”
“We are excited to announce another “Best in Class” offering to our customers with the addition of CiF to our companies”, says Robert Bowden, Chairman of the Board for Case Systems. “For thirty-four years we have continued to build organizations focused on customer needs, excellence of product and flawless execution. We accomplished this by starting at the foundation, directly serving our customers through our expanding dealerships. To better serve our customers we added manufacturing companies including Case Systems Inc and BOSTONtec with our combined synergies and resources we were able to control our quality and service, develop innovative products, and in all ways enhance our customer’s experience.”
“The addition of CiF will allow us to further integrate and expand our offerings, as well as, deliver the confidence of financial stability, best in class quality products, on time and complete delivery, dependable service, product esthetics and innovation, which have always been the core of our companies. Bowden added. “We look forward with much excitement to the added opportunities and solutions that CiF will bring to our clients.”
For More Information
If interested in learning more about Case Solutions, Case Systems or CiF Lab Solutions, or the purchase, please contact Brad Laackman at 989.496.0824 or brad.laackman@cs2direct.com. In addition, you may visit our websites for further company details at www.casesystemssolutions.com, www.casesystems.com and www.cifsolutions.com.
About Case Systems Solutions
Case Systems Solutions started in 2010 as a direct contracting extension of Case Systems. Delivering a superior, long-term customer experience from custom design to installation of a full product line package. Using a high level of communication and professionalism, Case Systems Solutions is focused on delivering our products in a prompt, efficient fashion to meet your deadline. As part of Case Systems, we have the capabilities of combining steel workstations and casework to achieve superior product responses. In addition, all Case Systems Solutions products can be treated with our ÆGIS Microbe Shield® technology.
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About Case Systems, Inc.
Case Systems is a leading designer and manufacturer of durable, versatile, laminate casework systems for the healthcare, education and laboratory markets. Case Systems purchased BOSTONtec, a former supplier, to produce high quality, steel furniture for industrial and technical environments. All Case Systems and BOSTONtec products are designed and fabricated in Midland, Michigan, and sold throughout North America.

What is Yahoo Doing!

2011-11-23T15:56:00.000-05:00

Story first appeared in USA TODAY.

Even as Yahoo rolls out a fresh batch of social and mobile products and services, its strategic moves continue to baffle investors and analysts alike.

And at least one major shareholder isn't happy. Hedge fund manager Daniel Loeb, in a letter to Yahoo's board on Friday, pushed for the ouster of director and company co-founder Jerry Yang. Loeb, who owns a 5.2% slice of Yahoo through a fund called Third Point, asserts that Yang has too many conflicts of interest.

Chief among them is Loeb's contention that Yang is in discussions with several buyout firms about joining forces to acquire a controlling stake in Yahoo. Loeb's letter names the Blackstone Group, KKR, Providence Equity Partners, Silver Lake Partners and Texas Pacific Group as firms talking to Yang, who co-founded Yahoo in 1995 with David Filo.

Yang had no comment.

The shareholder hullabaloo is just the latest distraction for the scuffling Internet pioneer. Though the online display ad market is growing in the U.S.— especially in the sale of targeted ads based on unique data — Yahoo badly lags behind Facebook and Google. At the same time, Yahoo made "no strides forward in the dominant technology trends — social, mobile and cloud. And, if anything, they've lost even more ground," says Jonathan Yarmis, an independent tech analyst.

In September, Yahoo booted Carol Bartz as CEO after she failed to reverse its flagging fortunes despite 2½ years on the job. Then the board hired investment bankers Goldman Sachs Group and Allen & Co. to help the company explore its strategic options. In recent months, Yahoo has padded its editorial ranks, stealing key execs from CBS Interactive. Last week, the company bought online ad network Interclick for $270 million and bolstered its mobile and social efforts.

The confluence of seemingly conflicting strategies has confounded followers of the Internet company, inspiring the latest parlor game in Silicon Valley: What, exactly, is Yahoo's end game?

Yahoo's answer is that the board is exploring a wide range of options. The company says they can assure all Yahoo shareholders that whatever the outcome of the strategic review process may be, it will serve the best interests of all the company's shareholders.

In a Sept. 23 memo to employees, Yang, Filo and Yahoo Chairman Roy Bostock said the search is on for a full-time CEO and that company advisers are fielding offers from potential business partners. USA TODAY obtained a copy of the memo.

In the weeks since Bartz was bounced, Yahoo has had a flurry of activity under interim CEO Tim Morse. Last month, it announced a content-sharing and distribution partnership with ABC News and rolled out more than a dozen original Web series featuring actors such as Morgan Spurlock and Judy Greer.

But the purchase of Interclick — which reaches more than 120 million unique users a month, according to market researcher ComScore — is a head-scratcher because Yahoo already owns ad network BlueLithium, which has not panned out, analysts say.

Yahoo executives are betting the addition of Interclick makes it a stronger company or a more attractive acquisition target, Lee reasons. However, he said, "it is odd Yahoo decided its best option was to buy rather than to build on top of what" it already has.

Potential bidders

Yet the saber rattling by private-equity firms and other buyout shops storming the gates of Yahoo is building pressure on management. The company needs to move fast to prove its relevance or be sold at a bargain-basement discount. The problem: Yahoo isn't growing like it used to. And its prospects in the face of competition aren't great, either. Still, it's profitable and boasts a massive audience of 700 million users worldwide.

Much of the problem is leadership. Yahoo still doesn't have a permanent CEO. And then-CEO Yang's resistance to Microsoft's offer to buy the company in 2008 for $47.5 billion — double its current market value — has landed him in the doghouse. Yahoo's board ultimately rejected the bid.

Should Yahoo opt to sell, a long list of prospective suitors possibly awaits. Even Google's name pops up, although Alibaba Group, a Chinese Internet company partially owned by Yahoo, is the only bidder that has publicly declared its interest in mounting a takeover attempt.

Google and Yahoo declined to comment.

Others reported to be mulling an offer include Silicon Valley venture-capital firm Andreessen Horowitz and buyout firms KKR, the Blackstone Group and Silver Lake Partners.

Microsoft has been reported to be weighing whether to help finance a Silver Lake bid.

It would be folly for Microsoft, sitting on a heap of cash (more than $40 billion) to make another go at Yahoo, cautions independent analyst Damon Vickers. "These are two companies slowly fading away," he says. "If they merge, it would be like two cinder blocks sinking in water."

Despite its well-documented problems — three CEOs in a few years, for starters — Yahoo's audience of some 700 million people worldwide and its stakes in prized assets such as Alibaba and Yahoo Japan make it an attractive takeover candidate, says David Hallerman, an analyst at eMarketer.

By acquiring Yahoo, Google or Microsoft could eliminate a competitor and pick up valuable pieces from Yahoo in the process, says Carl Tobias, a professor at the University of Richmond's School of Law. But Google and Microsoft face antitrust scrutiny if they pursue Yahoo, he adds.

The takeover talk has helped lift Yahoo's stock price by more than 30% since Bartz's departure. Yahoo's shares rose nearly 3%, to close at $15.69 Monday.

Still, it is unclear if Yahoo will put itself up for sale as it explores ways to appease shareholders. Many stockholders are frustrated with the company's declining revenue at a time when the overall Internet advertising market is growing.

Yahoo's profit and revenue slipped year-over-year during its third quarter. Profits were $293 million, or 23 cents a share, compared with $396 million, or 29 cents a share, in the year-ago period. Revenue was $1.07 billion, vs. $1.12 billion a year ago, but in line with Wall Street expectations.

What the future holds

Yahoo's travails aren't likely to go away as it increasingly faces competitive pressure from Facebook and Google for users and advertisers.

Searches on Yahoo, for instance, were up only 1% in its third quarter, while search page views slumped 3%, the company said.

That, in no small part, has adversely affected Yahoo's online advertising business. While Yahoo's annual revenue from display ads is expected to improve 15% to $1.86 billion in the U.S. in 2012, Facebook's is expected to soar 45% to $2.9 billion and Google's 58% to $1.82 billion, according to eMarketer.

Yahoo said it has agreed to extend the revenue-per-search guarantee in its partnership with Microsoft through March 2013.

Earlier this year, however, Yahoo admitted the two-year deal was taking longer than anticipated to pay off because of technical imperfections in the search-advertising system.

Yahoo is being squeezed by Google's dominance in search and Facebook's in delivering targeted advertising to its 800 million members. With these two monster competitors offering scale, relevance and the power of the social graph — and with AOL's new Devil ad unit slowly gaining traction — the room for Yahoo to grow dramatically is narrowing.

In that Sept. 23 memo to employees, Yang, Filo and Bostock acknowledge Yahoo needs to "accelerate innovation, reignite inspiration, and give our users what they want now — great content that is engaging and easy to use on any device and provide an experience in which they can participate and contribute."

Such strategy dovetails with the advice of several industry observers, including Don Dodge, a former Microsoft executive who closely follows Yahoo.

He suggests that Yahoo hire a "product-driven CEO" who focuses on customers and eschews business deals; hold onto valuable equity holdings in Yahoo Japan and Baidu; and concentrate on Yahoo strongholds, such as Yahoo Sports and Yahoo Finance.

Web Suffixe Debate

2011-11-23T15:43:00.002-05:00

Story first appeared in Bloomberg News.

A program to let companies acquire their own Web suffixes is failing to win over U.S. brand owners such as Procter & Gamble Co. and Hewlett- Packard Co. that don’t see a need to expand beyond .com.

P&G, the world’s largest consumer products company with more than 50 brands including Tide detergent, Pampers diapers and Crest toothpaste, won’t apply for new suffixes, said Paul Fox, a spokesman. HP, the biggest computer maker, considers the program costly and has no plans to take part, said Gary Elliott, vice president of global marketing.

The Internet Corporation for Assigned Names and Numbers, the nonprofit group managing the Web’s global address system under a U.S. Commerce Department contract, is preparing to consider almost any word in any language as a Web suffix, including company and brand names or terms such as .shopping or .nyc. The group will accept applications from Jan. 12 through April 12, 2012, for as many as 1,000 new suffixes a year. The application fee is $185,000 for each domain name.

Not one of 21 companies in the Standard & Poor’s 500 that Bloomberg informally surveyed in the past month said they plan to apply. Other responses ranged from still researching options to not commenting.

Six-Year Deliberation

Rod Beckstrom, the group’s chief executive officer, said the program isn’t for all companies when he told a meeting of the organization on Oct. 24 that “anyone who might be interested needs to do their own homework, develop a solid understanding of the program and then determine” whether a new name is worthwhile. “The clock is ticking,” he said.

The naming group, overseer of the Internet’s address system since 1998, currently manages 22 so-called generic top-level domains, including the commonly used .com, .org and .net. After six years of deliberation, the Marina del Ray, California-based group’s board voted June 20 to expand the number of those domains as a way to spur online innovation.

The expansion may foster competition in the domain sector, support new business models online and provide consumers with new ways to find products, according to an analysis prepared for the oversight group in June 2010.

The Commerce Department should delay the domain-name expansion to give businesses more time to assess the program, including brand and legal issues, the National Retail Federation wrote in an Oct. 21 letter to the agency.

‘Uncertainty Reigns’

Mallory Duncan, general counsel of the Washington-based retailers group, said in an interview that with the application date just months away, there’s not time to think all this through.

The Commerce Department is reviewing the letter and plans to respond in a timely manner, Moira Vahey, a spokeswoman for the agency’s National Telecommunications and Information Administration, said in an e-mail.

The Association of National Advertisers, a Washington-based organization where HP’s Elliott serves as chairman, criticized the domain-name expansion as increasing costs for businesses and sowing confusion among consumers.

The association represents more than 400 companies including Bloomberg LP, the parent of Bloomberg News.

Canon Inc. and Hitachi Ltd. are among the few large companies that have expressed public interest in the new domains.

Watching Competitors

General Motors Co., the largest U.S. automaker, has “thoroughly evaluated” the domain-name program and is weighing its options, Tom Henderson, a spokesman, said in an e-mail. Wal- Mart Stores Inc., the world’s biggest retailer, is assessing the program, Ravi Jariwala, a spokesman, said in an interview.

Adobe Systems Inc., the largest maker of graphic-design software, is opposed to the “unnecessary, wholesale expansion of generic top-level domains and is very concerned it will cause confusion for consumers and increase the potential for online and consumer fraud,” John Travis, the company’s vice president of brand marketing, said in an e- mail. Even so, Travis said the company is still evaluating whether to apply for domains.

Companies may ultimately apply for domain names because they don’t know what their competitors are doing and the next application round hasn’t been announced, said Josh Bourne, managing partner at FairWinds Partners LLC, a domain-name consulting firm in Washington.

Competitive Risk

Brands are looking at the risk of being left behind. If all of your competitors are using their .brand or .keyword in marketing campaigns and you don’t have one, it may make you look out of touch, out of date.

Bourne is president of the Coalition Against Domain Name Abuse, a nonprofit group that has criticized the structure of the expansion, including the lack of a timeline for a second application round. The group’s members include Eli Lilly & Co., Morgan Stanley and Nike Inc.

Hewlett-Packard will use its HP.com website rather than “fracture our dollars” on new domains, Elliott said. He estimated the cost of operating a Web suffix may eventually reach $1.5 million, including legal and consulting fees, Web development and other costs for the Palo Alto, California-based company.

Procter & Gamble, based in Cincinnati, will “focus on our existing .com sites and other ways to connect with consumers,” Tonia Elrod, a spokeswoman, said in an e-mail.

The program requires resources that they would prefer to focus on building relationships with customers. P&G already operates a range of .com brand sites, including Gillette.com for razors and Charmin.com for toilet paper.

Contract Scrutinized

The U.S. companies join corporations in Europe such as Porsche AG, Vodafone Group Plc and Puma SE that have said they aren’t attracted to new suffixes.

The name oversight group is operating under a Commerce Department contract that expires in March. The agency is reviewing public comments on whether the terms should be amended and plans to open the contract for bidding this year.

The Commerce Department should include ethics and conflict- of- interest rules in a future contract to manage the domain-name system, Senator Ron Wyden, an Oregon Democrat, wrote in a September letter to the agency.

Two Washington-based government watchdogs, the Center for Responsive Politics and Public Citizen, have raised concerns about the departure of the naming group’s former chairman, Peter Dengate Thrush.

Dengate Thrush left the organization four days after the vote on domain-name expansion and within a month joined a London company called Top Level Domain Holdings Ltd., which intends to acquire Web suffixes created by the new plan and offer Internet registry services.

Fast Retailing Co Looking to Purchase Rival

2011-11-23T15:36:00.002-05:00

Story first appeared in Bloomberg New.

Fast Retailing Co., Asia’s largest clothing chain, may buy a bigger rival in the U.S. or Europe after the yen’s advance to a postwar high against the dollar boosted the Japanese company’s purchasing power.

The yen strength and anemic stock markets make this a very good opportunity for M&A, Chief Executive Officer Tadashi Yanai, 62, said . He added that it won’t be something small, but a company of equal size or bigger.”

The billionaire aims to take advantage of the yen’s climb to expand outside Japan, where an unexpectedly long summer damped demand for fall and winter clothing, contributing to a 12 percent decline in profit in the year through August. Fast Retailing opened two New York stores last month and aims to be the world’s top clothing retailer, targeting a sixfold jump in sales from last year to 5 trillion yen

($64 billion) by 2020.

If there is a chance to do M&A in the future, they are thinking of doing it. Yanai, who turned his father’s tailoring business into a company with a market value of 1.4 trillion yen, making him Japan’s second-richest person.

Fast Retailing, the second-biggest gainer on the Nikkei 225 Stock Average in the past five years, “does not need any brands” and isn’t considering companies such as Esprit Holdings Ltd., Yanai said.

Polo Ralph Lauren Corp. probably won’t agree to an acquisition, according to Yanai.

Overseas Sales

Fast Retailing has said it intends to boost overseas sales to be greater than domestic revenue by 2015 as it expands in China, Southeast Asia and the U.S., competing with Inditex SA’s Zara, Hennes & Mauritz AB, and Gap Inc. Sales at Uniqlo stores in Japan that have been open more than a year dropped for a third straight month in October.

Making purchases was one of the ways the company was “investing for the future,” Yanai said in September. He remains Fast Retailing’s biggest shareholder with a 22 percent stake, according to data compiled by Bloomberg.

Fast Retailing has gained about 26 percent in the past five years. In dollar terms, its market value has soared 90 percent. The stock fell

0.2 percent to 13,390 yen as of the 3 p.m. close of trading in Tokyo, paring its advance this year to 2.8 percent, compared with a 14 percent drop for the Nikkei 225 and a 17 percent slide for the broader Topix index.

May List Overseas

Yanai said the company may also list overseas since the Japanese equity market lacks growth. He didn’t give a timeframe for any share sales.

The yen on Oct. 31 hit a post-World War II high of 75.35 against the dollar before the government intervened in the currency markets. The Japanese currency traded at 78.24 to the dollar on Nov. 4.

Fast Retailing had 202 billion yen in cash and short- term investments in August, the highest level since at least 2002, according to data compiled by Bloomberg.

The company bought out apparel maker Link Theory in two transactions in 2009 for $371 million after purchasing a minority stake in 2004, according to data compiled by Bloomberg. That’s Fast Retailing’s biggest acquisition to date, the data show.

Profit Outlook

Sales will probably jump 18 percent to 965 billion yen in the fiscal year ending Aug. 31, the clothing retailer said Oct. 12 in a statement. Profit is likely to rise 31 percent to 71 billion yen in the fiscal year.

Fast Retailing’s overseas sales comprised 18 percent of last year’s 820 billion yen total, compared with a share of about 16 percent in the previous year, according to its annual reports.

Fast Retailing has spent more than $875 million on 22 deals since 2003, according to data compiled by Bloomberg. It acquired a stake in Nelson Finance, owner of the French brand Comptoir des Cotonniers, in 2005, according to its 2010 annual report. Fast Retailing bought a further 64 percent in the company for $192.5 million in 2006, according to data compiled by Bloomberg.

Princesse tam.tam

The clothing retailer also took control of French fashion brand Princesse tam.tam by buying 95 percent of Petit Vehicule for $83 million in 2005, the data show.

The company paid a median of 20.6 times earnings before interest and taxes on seven of its deals, according to data compiled by Bloomberg.

That compares with a median of 11.6 times EBIT for 78 transactions in the clothing retail sector in the same period, the data show.

Fast Retailing in August 2007 dropped out of the bidding for New York luxury chain Barneys as Dubai’s Istithmar PJSC offered $942 million, raising its offer twice to counter the Japanese retailer.

Yanai at the time said Fast Retailing would spend as much as 400 billion yen, or about $3.5 billion, on acquisitions to double annual sales to 1 trillion yen by 2010. The company announced deals worth more than $400 million in the period from August 2007 through the end of 2010 and reported sales of 815 trillion yen in its 2010 fiscal year, according to data compiled by Bloomberg.

Focusing on Uniqlo

“We no longer think there is a reason to buy Barneys,” Yanai said.

“Currently, we are mainly driving our Uniqlo business, so in that sense, there is no meaning to buy Barneys.”

Fast Retailing aims to build a global production system capable of manufacturing 5 billion articles of clothes yearly by 2020, it said in September.

Yanai, with an estimated wealth of $7.6 billion according to Forbes, quit his job selling kitchen items and men’s clothing at a Jusco supermarket in Japan to join his father’s tailoring business, Ogori Shoji, in 1972. He became president in 1984, when he opened the first Uniqlo store, known at the time as Unique Clothing Warehouse.

Fifth Avenue Store

In Japan, Yanai is second in wealth only to Softbank Corp. Chief Executive Officer Masayoshi Son, according to Forbes.

Fast Retailing aims to make 1 trillion yen of pretax profit, excluding ordinary items by 2020, more than 10 times this fiscal year’s. It plans to open as many as 300 stores annually within a year or two, Yanai said last month.

Yanai opened two of Uniqlo’s biggest stores to date in New York last month, with one on Fifth Avenue and another on 34th street. The Fifth Avenue store has a floor space of 89,000 square feet. The company plans to open stores in Los Angeles, Chicago and San Francisco in the next three years, he said.

Birmingham Hurt by Bankruptcy

2011-11-23T15:31:00.000-05:00

Story first appeared in the Bloomberg News

Birmingham, Alabama, the most prominent industrial center in the Southeast before the civil- rights era, has been on a long losing streak that just got longer.

In 1997, Daimler AG opened a Mercedes-Benz factory in Vance, one county west of the state’s biggest city. Honda Motor Co. put a plant to the east, Toyota Motor Corp. to the north and Hyundai Motor Co. to the south. Birmingham lost its minor-league baseball team to a suburb in 1987, and the Iron Bowl football game in 2000. Plans for an entertainment district foundered. The city’s population plummeted almost 13 percent since 2000, even as the state grew.

Birmingham is also the seat of Jefferson County, which filed the biggest municipal bankruptcy in U.S. history under the burden of more than $3 billion of sewer-system debt. The so- called Magic City may need a big trick to persuade residents and businesses that its days of losing are over.

Birmingham was once a manufacturing center whose steel furnaces lit the night sky. A 56-foot statue of Vulcan, the Roman god of the forge, looks down on the city from a 124-foot pedestal that rises from Red Mountain, where he holds aloft the tip of a newly hammered spear.

Dynamite Hill

In 1960s, the city became infamous when violence against civil-rights demonstrators made it synonymous with brutal racism. One neighborhood suffered so many attacks with explosives it was called Dynamite Hill, and the city earned the epithet “Bombingham.”

Over the ensuing years, its steel-making industry withered and its housing and infrastructure decayed. In 2010, the city had a population of 212,237, down 12.8 percent since 2000, according to the U.S. Census Bureau. Jefferson County, which encompasses 33 municipalities, had 658,460 people.

The slide to bankruptcy began in 1996, when the county was forced to rebuild its sewer system after pollution was found spewing into rivers. Risky derivative financing for the project backfired beginning in early 2008, leading the county to become one of the biggest casualties of Wall Street’s credit crisis.

Birmingham’s mayor said he knows he must pull his city out of Jefferson County’s shadow.

That’s Not Us

Mayor William Bell, a former county commissioner who took office in January 2010, told reporters that they are a separate entity. He added that Birmingham’s financial status is very sound, and they have more than enough money to carry out our day-to- day operations.

Birmingham, with 4,160 employees and a $371 million general-fund budget for 2011, carries Moody’s Investors Service’s third-highest bond rating at Aa2.

Jefferson County’s bonds are rated 14 levels lower: Caa1, below investment grade.

The county’s revenue in the fiscal year that ended in September totaled $152.5 million, down from $207.2 million the previous year.

The county has cut about 450 positions since June to bring the workforce to 2,687 employees. More cuts are coming next month, Commission President David Carrington has said.

Mayor Bell said he’ll meet with heads of businesses beginning next week to clarify the city’s financial standing and to distance it from the bankrupt county.

Soldiering On

Birmingham’s companies have struggled along with the region. City- based firms compose almost 90 percent of the Bloomberg Economic Evaluation of States’ Alabama stock index based on market capitalization. So far this year, the index has fallen about 24 percent, compared with about 1 percent for the Standard & Poor’s 500.

Brian Hilson, president and chief executive officer of the Birmingham Business Alliance, which serves a seven-county area, said he’s concerned that employers may be deterred from moving to or expanding in the city.

The mayor isn’t giving up. While there is talk among city leaders that sewer-rate increases might drive business away, Bell said a company he couldn’t name promised 250 jobs by year’s end.

Higher Borrowing

Any higher borrowing costs resulting from the county’s fiscal crisis won’t deter plans for revenue-generating projects such as a new hotel, Bell said. The city is spending almost $60 million to build a stadium and create other enticements to lure back the minor-league team, the Birmingham Barons.

Residents are torn as to what bankruptcy will mean.

Scott Pierce, who came to Birmingham more than 20 years ago to attend college and never left, runs a website called WhyBHM.com where he posts testimonials of residents explaining why they’ve moved here.

Pierce doesn’t anticipate a shortage of stories.

Hilson of the Business Alliance said the city, which has weathered so much, will outlast this storm.

Tire Mess Seen From Space

2011-11-23T14:59:00.002-05:00

Story first appeared in the Traverse City Record-Eagle.

The sprawling pile of hundreds of thousands of tires including tractor tires isn't easy to spot from the ground, sitting in a rural South Carolina clearing accessible by only a circuitous dirt path that winds through thick patches of trees. No one knows how all those tire got there, or when.

But, Calhoun County council Chairman David Summers said of these giant rubber menace, that you can see it from space.

Authorities have charged one person in connection with the mess of roughly 250,000 tires, which covers more than 50 acres on statelite images. Now a Florida company is helping haul it all away.

Litter control officer Boyce Till said he contacted the local sheriff and state health department, which in investigating who had been dumping the tires that are said to include ag tires. But the worst possible penalty that could be imposed locally? A single $475 ticket for littering.

LG Said to Plan to Debut Google TV at Trade Show in January

2011-11-23T14:46:00.002-05:00

Story first appeared in the Bloomberg News.

Google Inc. and LG Electronics Inc. may unveil a television using the search giant’s software at the January Consumer Electronics Show in Las Vegas, according to two people with knowledge of the project.

The product would be LG’s first model with Google TV, said the people, who declined to be identified because the discussions aren’t public.

Support from the world’s second-largest TV manufacturer may boost Google’s attempt to bring its dominance in Internet search to living rooms with the Google TV software. Last month, the Mountain View, California-based company introduced a redesigned television service after sales of its initial version didn’t meet some expectations.

LG a Tokyo-based company, and Google, a US based company, both declined to comment on the discussions between the two companies.

Google, pushing into areas that boost competition with rivals Apple Inc. and Microsoft Corp., unveiled the TV service last year with partners Sony Corp., Logitech International SA and Dish Network Corp.

Google said last month the partners would receive the updated software.

YouTube, Android

LG and bigger rival Samsung Electronics Co. are embracing the Internet and 3-D images to revive TV demand amid a plunge in set prices. Sony, maker of the Bravia models, has forecast an eighth straight year of losses at its TV business.

The revamped version of the TV service Google unveiled last month has a simpler interface. The upgrade was designed to show the YouTube video-sharing service better and opens up the platform for Android developers to build applications for TV. Android is Google’s software platform for mobile devices.

After the debut of the TV service, Google failed to secure programming from the four major U.S. broadcast networks, led by CBS Corp. and News Corp.’s Fox. Logitech, based in Romanel-sur- Morges, Switzerland, cut the price of its Revue set-top box for Google TV in April, citing “a slow start.”

The Electronics Times, a South Korean newspaper, reported this month that LG was in discussions with Google to use the TV service. The report didn’t give a timeframe for the product’s unveiling.

Samsung, based in Suwon, South Korea, also was in discussions with Google to develop a Google TV product, Yoon Boo Keun, head of Samsung’s TV business, said in February.

Google Reaches for the Stars

2011-11-23T14:41:00.000-05:00

Story first appeared in the New York Times.

This story first appeared in the New York Times.

In a top-secret lab in an undisclosed Bay Area location where robots run free, the future is being imagined.

It’s a place where your refrigerator could be connected to the Internet, so it could order groceries when they ran low. Your dinner plate could post to a social network what you’re eating. Your robot could go to the office while you stay home in your pajamas. And you could, perhaps, take an elevator to outer space.

These are just a few of the dreams being chased at Google X, the clandestine lab where Google is tackling a list of 100 shoot-for-the-stars ideas. In interviews, a dozen people discussed the list; some work at the lab or elsewhere at Google, and some have been briefed on the project. But none would speak for attribution because Google is so secretive about the effort that many employees do not even know the lab exists.

Although most of the ideas on the list are in the conceptual stage, nowhere near reality, two people briefed on the project said one product would be released by the end of the year, although they would not say what it was.

At most Silicon Valley companies, innovation means developing online apps or ads, but Google sees itself as different. Even as Google has grown into a major corporation and tech start-ups are biting at its heels, the lab reflects its ambition to be a place where ground-breaking research and development are happening, in the tradition of Xerox PARC, which developed the modern personal computer in the 1970s.

A Google spokeswoman said that investing in speculative projects was an important part of Google’s DNA. While the possibilities are incredibly exciting, please do keep in mind that the sums involved are very small by comparison to the investments we make in our core businesses.

At Google, which uses artificial intelligence techniques and machine learning in its search algorithm, some of the outlandish projects may not be as much of a stretch as they first appear, even though they defy the bounds of the company’s main Web search business.

For example, space elevators, a longtime fantasy of Google’s founders and other Silicon Valley entrepreneurs, could collect information or haul things into space. (In theory, they involve rocketless space travel along a cable anchored to Earth.) Google is collecting the world’s data, so now it could be collecting the solar system’s data.

Sergey Brin, Google’s co-founder, is deeply involved in the lab, said several people with knowledge of it, and came up with the list of ideas along with Larry Page, Google’s other founder, who worked on Google X before becoming chief executive in April; Eric E. Schmidt, its chairman; and other top executives.

Google may turn one of the ideas — the driverless cars that it unleashed on California’s roads last year — into a new business. Unimpressed by the innovative spirit of Detroit automakers, Google now is considering manufacturing them in the United States, said a person briefed on the effort.

Google could sell navigation or information technology for the cars, and theoretically could show location-based ads to passengers as they zoom by local businesses while playing Angry Birds in the driver’s seat.

Robots figure prominently in many of the ideas. They have long captured the imagination of Google engineers, including Mr. Brin, who has already attended a conference through robot instead of in the flesh.

Fleets of robots could assist Google with collecting information, replacing the humans that photograph streets for Google Maps, say people with knowledge of Google X. Robots born in the lab could be destined for homes and offices, where they could assist with mundane tasks or allow people to work remotely, they say.

Other ideas involve what Google referred to as the “Web of things” at its software developers conference in May — a way of connecting objects to the Internet. Every time anyone uses the Web, it benefits Google, the company argued, so it could be good for Google if home accessories and wearable objects, not just computers, were connected.

Among the items that could be connected: a garden planter (so it could be watered from afar); a coffee pot (so it could be set to brew remotely); or a light bulb (so it could be turned off remotely). Google said in May that by the end of this year another team planned to introduce a Web-connected light bulb that could communicate wirelessly with Android devices.

One Google engineer familiar with Google X said it was run as mysteriously as the C.I.A. — with two offices, a nondescript one for logistics, on the company’s Mountain View campus, and one for robots, in a secret location.

While software engineers toil away elsewhere at Google, the lab is filled with roboticists and electrical engineers. They have been hired from Microsoft, Nokia Labs, Stanford, M.I.T., Carnegie Mellon and New York University.

A leader at Google X is Sebastian Thrun, one of the world’s top robotics and artificial intelligence experts, who teaches computer science at Stanford and has developed a driverless car. Also at the lab is Andrew Ng, another Stanford professor, who specializes in applying neuroscience to artificial intelligence to teach robots and machines to operate like people.

Johnny Chung Lee, a specialist in human-computer interaction, came to Google X from Microsoft this year after helping develop Microsoft’s Kinect, the video game player that responds to human movement and voice. At Google X, where he is working on the Web of things, according to people familiar with his role, he has the mysterious title of rapid evaluator.

Because Google X is a breeding ground for big bets that could turn into colossal failures or Google’s next big business — and it could take years to figure out which — just the idea of these experiments terrifies some shareholders and analysts.

Mr. Page has tried to appease analysts by saying that crazy projects are a tiny proportion of Google’s work.

New Leader in the Personal Computer Market

2011-11-23T14:25:00.000-05:00

Story first appeared in the Sacrament Business Journal.

Apple Inc.'s share of the personal computer market is at its highest in 15 years and is likely to pass Hewlett-Packard Co. as No. 1 in the world in 2012, according to an analyst report, the Silicon Valley / San Jose Business Journal reports.

The Palo Alto firm of Canalys said that, counting iPads into the mix, Apple's (Nasdaq: AAPL) share of the market has grown to 15 percent from 9 percent in the past four quarters.

“HP and Apple will fight for top position in Q4, but Apple may have to wait for the release of iPad 3 before it passes HP,” said Canalys analyst Tim Coulling. The report didn't give a specific projected market share for HP (Nasdaq: HPQ).

Both Apple and HP have employees in the Sacramento region.

LESS RETIREES ARE MOVING OUT OF STATE

2011-11-18T10:36:00.003-05:00

Story first appeared in USA TODAY.

Aging Baby Boomers who dreamed of retiring in the sun near Florida beaches or Arizona deserts have hit a speed bump: the bad economy.
One woman stayed within Jacksonville, Fla., when she moved into Sweetwater, an active-adult community. Moving is at a historic low due to the recession and faltering housing market, demographers say.
The number of Americans ages 55 to 64 who moved to Sun Belt states since the economy began to tank has declined dramatically, according to a USA TODAY analysis of Census data released Tuesday.
The slowdown is part of a continued drop in the mobility of all Americans. Only 11.6% — 35 million — changed residence from 2010 to 2011, the lowest rate since the Census Bureau began collecting the statistics in 1948. In the mid-1980s, more than 20% were moving each year.
Two primary reasons for historic lows in all types of moves — within the same county, to other counties and other states.
The oldest of 77 million Boomers who had fueled a rush to "active adult" communities throughout the Sun Belt are staying put because they can't sell their homes or can't afford to retire.
The dismal job market also has kept young people, typically the most mobile of all age groups, in place.
The Census data also show:
•Colorado stands alone among Western states in continuing to attract retirees and young professionals. Largely because of relatively low unemployment rates, the Denver metro area ranked first in net migration of young adults from 2008 to 2010, up from No. 12 in the mid-2000s, says Cindy DeGroen of the state's demography office.
•Most people move for housing reasons rather than family or jobs. For the first time, the Census has identified those related to foreclosures or evictions: 1.2% in 2011.
•For the first time since the turn of the last century, more than half of California residents are natives. Of the non-natives, more are born abroad than in other states.
•Despite the displacement of thousands of residents after Hurricane Katrina, Louisiana continues to be the state with the highest percentage of people born there — 79% in 2010.
States that are attracting fewer out-of-staters are seeing their native population creep up since 2000. Native-born Arizonans increased 3 percentage points to 38% of the population.
Nationally, the percentage of people living in the state of their birth dropped from 60% in 2000 to 58.8% in 2010.
•Net migration to a group of counties across the country that are primarily retirement magnets fell 70% last year.
In response to the slowdown of Boomers moving, one company has designed an online calculator that allows prospective buyers to tally real estate taxes, monthly payments, utilities and other costs for each of the company's developments.
It is also expanding development outside the Sun Belt, recognizing that some retirees don't want to move far from children, grandchildren and friends.
The Carolinas have emerged as the preferred retirement destination, according to Del Webb's most recent Baby Boomer survey, a finding backed by Census data. North Carolina continues to gain a net of about 9,000 retirement-age residents every year from other states; South Carolina, about 6,000.
At the peak of the good times, Nevada was gaining more than 4,000 people ages 55-64 every year. Since the housing market collapsed, it has been gaining about a fifth as many.