Ready, Fire, Aim! - Mihail's Public Blog

From the Wall Street Journal (subscription required):

With its home market languishing, Japan's Sony Corp. desperately wants to increase U.S. sales to jump-start stalled revenue growth. The consumer-electronics giant garners about a third of its total sales from the U.S. But Sony President Kunitake Ando worries that American consumers are now less interested in buying televisions, personal computers and other electronics.

"Our only hope was consumer spending," Mr. Ando says, but "it's starting to taper off." Though U.S. consumer confidence seems to be holding strong, he adds, "I feel that [the U.S. economy] is a really risky situation."

Sure, no one wants a Fastow but are the business schools themselves to blame asks this New York Times article. Or are the people headed to business schools already so ethically challenged, and wanting to win at all costs, that it makes no difference?

Admissions officers at Northwestern University's Kellogg School of Management, which awarded Andrew S. Fastow, the disgraced former Enron chief financial officer, a master's in business administration in 1980, are increasingly asking authors of recommendation letters to elaborate on candidates. "People's sensibilities here have been heightened about character and integrity," said Michele Rogers, director of student academic affairs at Kellogg. "Nobody wants another Fastow."

...In perhaps the most-watched screening move, Wharton engaged ADP Avert, a background-checking firm in Fort Collins, Colo., to verify the authenticity of applications submitted by a randomly chosen 10 percent of the about 800 students who accepted offers of admission this year.

...Michael R. Lissack, founder of the Institute for the Study of Coherence and Emergence, a business-ethics research organization in Naples, Fla., said, "A lot of business professors think business students are ethically challenged and there's nothing we can do about it." While plenty of schools are promoting ethics courses this fall and many have made case studies of Enron and WorldCom, Mr. Lissack said most schools were unwilling to make ethics as important to their curriculum as, say, corporate finance.

An amusing New York Times article on the Jack Welch sordid affair having exposed the one thing that New Yorkers love, perks.

These days, unpaid-for excess doesn't play well. Corporate sovereigns walk on eggshells. Faced with stinging criticism, Mr. Welch surrendered most of the perks, which he insisted had been exaggerated anyway.

Ouch. Snubbing perks is easy for Mr. Welch to do. Even without G.E.'s wallet, he can pick up tickets to the Garden, handle the TV bill, no problem. But what about everyone else? Suddenly that all-too-treasured and wonderful nicety of New York life — the corporate perk — is being depicted as a little sleazy, a little insidious, a little, heaven forbid, undeserved.

...I don't know if New York can survive without perks," said Howard J. Rubenstein, the Manhattan public relations man well schooled in the lore and love of perks.

In New York, if you have tickets to the World Series, people don't wonder how much you paid for them, they wonder if you paid for them. You rate only if you got them for zilch.

In the cuthroat publishing business, according to this Financial Times story, publishing houses rely only on a few titles to break out and make them money (like the venture capital and music business):

[A]ll publishers are focusing on new titles - particularly authors with guaranteed fans - because retailers want to stock fewer titles that they know they can sell....For many years, publishing has lived by the "80-20 rule" - whereby 80 per cent of the revenues are earned by 20 per cent of the authors. "Most novels and books in general don't make money and it's always been relatively few authors who made a great deal," says one London literary agent.

...children's books have emerged as the fastest-growing area of the global consumer books market, worth a total of $45bn. According to Merrill Lynch, the US investment bank, the market for children's books has increased at a compound rate of 8 per cent in each of the past five years, compared with a 0.7 per cent annual decline for the industry overall. Even the profitability of children's books, however, is under pressure with the growth of the internet.

More worrying, there has been a steady decline in readership among the crucial 16-24-year-old age group. Some publishing groups fear that industry could be facing the same sort of problems seen in the music sector, where the proportion of under-25s buying recorded music has fallen by 15 percentage points in the past two years. "Among book buyers only 5 per cent are now in this 25 or younger segment," says the chief executive of one publishing group. "I can't believe readership levels will go up in this area."

...At Random House, the world's largest book publisher, author costs have reached 25 per cent of net sales. The company, which publishes 3,500 new titles a year, insists it has no plans to cut back on advances. But it is also one of the lower-margin publishers, at 2.2 per cent compared with 18.5 per cent at Harlequin.

It is the end of BattleBots according to this New York Times story (registration required). After a promising start in 2000 on Comedy Central with an average of 1.5 million viewers tuning in, the audience was down to an average of 500,000 which sealed its demise:

"BattleBots" was not the first forum for mechanized melees. But it was the most popular, spawning toys, video games and dozens of imitators, both on television and off. Will Wright, creator of the computer-game megahit The Sims, and Michael L. Mauldin, one of the founders of the search engine company Lycos, were among the best-known builders of BattleBots....

"We completely appreciate what Comedy Central did for us by giving us that exposure, and making us a household name," Mr. Munson [one of the creators] said. "But in the last season or two, it became less of a sport and more of an entertainment vehicle. And the show needs to be presented as a sport."

Mr. Munson and his partner, Trey Roski, hope to persuade another network to carry "BattleBots." They would like to see the show's new home help build the robot-making teams into marketable sports stars that viewers can relate to.

From a News.com story:

On Thursday, Gov. Gray Davis signed a bill that would prohibit companies from spamming mobile phones and pagers with unwanted text messages. The law, sponsored by Assemblyman Tim Leslie, R-Tahoe City, goes into effect in January.

Davis said he endorsed the plan because he didn't want unsolicited messages on mobile phones to reach the same level of mayhem that spam e-mails have.

"These days, telemarketers and advertisers are intruding on everything--our home phones, our cell phone, our fax machines and our pagers," Davis said in a statement. "Today, California cuts the line on unsolicited faxes, phone calls and text messages."

From the Wall Street Journal today (subscription required):

Earlier this year, TNT tested a tactic that had a message from an American Express Co. financial-services operation appear -- just as Steve Martin faced a particularly thorny money decision during "Father of the Bride II."

..."Every nook and cranny of life in the media business needs to be examined for its advertising potential," says Rich Hanley, a professor of communications at Quinnipiac University in Hamden, Conn. "It's all about the real estate of the screen. With the screen getting bigger, and the need for advertising increasing exponentially, it makes sense that the broadcasters would give first dibs on that space to the advertisers."

...And it's not as if TV viewers are unfamiliar with pop-up culture, suggests Marian Salzman, chief strategic officer of Havas Advertising's Euro RSCG; they've seen it in programs like "Pop-Up Video" on Viacom Inc.'s VH-1, or syndicated social-chronicle "Blind Date." New pop-up promotions, she adds, were "invented by, for and about" people between the ages of 20 and 40. In any case, most cable outlets have for months cluttered the screen with bottom-corner promotions related to programming. Adding actual advertisers simply takes the process one step further.

There's a glut of high-priced houses, half of which were built in the last decade during the stock market boom. according to this Wall Street Journal story (subscription required):

Can a bubble burst from the top? While the rest of the housing market may be holding up in a tough economy, the country's most superpriced homes, the ones that start at eight figures, are in the midst of an unprecedented glut. According to one count, there are at least 44 $20 million houses for sale across the country -- four times as many as just five years ago. Go up to the market's stratosphere and you'll find the same thing: A full dozen homes have been listed in the $50 million range, easily a record. "Many people are testing the waters," says John Brian Losh, chairman of the Who's Who in Luxury Real Estate directory, which tracks this market. Their fear, he says: that they'll miss out.

...According to historians, the country hasn't seen so many monumental new homes since the days of the robber barons a century ago. Corporate scandals and Wall Street gyrations eventually burst that bubble. In the last few decades, the highest end of the market has at times been an indicator for the rest of real estate. In the post-Gulf War slump, for instance, high-price housing in some markets tumbled first -- and furthest -- with prices falling by half in places like Bel-Air, Calif. Now, high-end sellers have to face not only a shaky economy, but a sense that, post-Enron, a megamansion is just too opulent. "It's pretty hard to hide an enormous sprawling mansion," says architectural critic and author Thomas Fisher.

AccuStream iMedia Research has just released the numbers for the first half of the year [via Digital Coast Reporter Daily]:

Online audiences during the first six months of 2002 accessed a total of 1.822 billion video streams across film, Internet TV, news, information, finance, general entertainment, sports and music content categories, 65% higher than the first half of calendar year 2001

Growth has been substantial, but less than the 81.1% rate of growth originally forecast at the beginning of 2002, based on then current usage trends

Slower growth is due primarily to the move of major content and streaming brands like CNN.com, CNET and others to subscription models, and a more measured approach to stream growth by management to keep expenses in check

Based on current run rate projections, total video streams accessed in 2002 are forecast to reach 3.7 billion streams

Based on a run rate analysis of the first six months of streaming in 2002, broadband video streams are now forecast to make up 62.9% of the 3.7 billion streams accessed during the year

The comparable figure in 2001 was 51.7%

The comparable figure in 2000 was 38.9%

The Wall Street Journal reports (subscription required) on the assault by two "shirtless fans" on the Royals first base coach Tom Gamboa:

You can watch the melee for yourself here. But the video clip does little to explain the senseless beating (for the record, the younger attacker said to a TV crew, as he was being escorted from the stadium, "He flipped us off. He got what he deserved." Presumably that's by way of explanation.)

Tom Gamboa was bloodied, and so was baseball. Still, the incident wasn't unprecedented. CNNSI has compiled previous outbreaks of fan violence at sporting events.

Among the incidents listed was the stabbing of Monica Seles by a fan in 1993, which sidelined her for more than two years. Mr. Gamboa had watched that event and felt grateful he wasn't stabbed.

Players were, of course, justified in piling on top of the assailants and restraining them until police could arrive. But some of their postgame comments were overripe with bloodlust. "No punishment could be stiff enough," Sox first baseman Paul Konerko said to Phil Rogers in the Chicago Tribune. "I wish they had left the players out there to beat on them for an hour." Royals first baseman Mike Sweeney told Mr. Dutton, "I wanted to kill him," about one of the attackers.

The Wall Street Journal debunks (subscription required) the claims in a new book on SUVs:

SUVs are not killing a large number of small-car occupants. Only about 4% of occupant deaths in 1990-96 model-year cars involved SUVs...The problem isn't the SUVs; it's the small cars. They are designed with safety-threatening lightness in part because the Environmental Protection Agency requires car manufacturers to meet various gas-mileage demands. But the word "protection" deserves a broader meaning, one that includes drivers as well as air quality. About 38% of light-car occupant deaths happen in single-vehicle crashes, while an additional 23% happen in two-vehicle crashes with other cars.

...The new safety features in SUVs are astonishing. No wonder they are expected to account for 52% of new-car sales. The Ford Motor Co., Mr. Bradsher's favorite whipping boy, recently introduced the Volvo XC90, for instance, an SUV (built on a luxury-car chassis) with gyroscopes to detect and prevent rollovers, traction control, an array of side airbags and seat belts that increase tension automatically when the vehicle senses a crash. The seats are designed to prevent whiplash, and the roof will remain intact even if the SUV rolls over.

Wall Street Journal reports (subscription required) that there are

...an estimated 18 million Americans practicing yoga -- more than triple the number just four years ago, according to Yoga Journal -- the yoga-gear industry is booming. And thanks to celebrity enthusiasts like Gwyneth Paltrow and Madonna, the clothes are actually hip outside the gym -- and because they're made of soft cotton blends with elastic waists, they're also winning over the aging (and widening) baby boomers relaxing on the couch.

Wall Street Journal story (subscription required) on the "fashion's antiglobalization movement".

"People no longer want to go to a department store, spend thousands of dollars on a luxury suit and then see thousands of suits just like it," says Massimiliano Attolini at Sartoria Attolini, one of Italy's most traditional and renowned suitmaking families.

The master tailors at the Attolini workroom have dressed royalty like the Duke of Windsor, executives like Oracle Corp. President Larry Ellison and actors such as Clark Gable or, more recently, Al Pacino. They have supplied politicians, diplomats and generations of Italian families. And like other custom tailors in Italy and elsewhere in Europe, including at London's venerable Savile Row, they are attracting a new young clientele -- mainly men now, though women may not be far behind -- that is renouncing big brands such as Brioni or Armani and making old-worldly tailor shops part of today's fashion world.

The bespoke business is so brisk that large labels want to benefit as well. Menswear makers such as Gucci and Paul Smith have begun to offer made-to-measure suits. Earlier this month, designer Alexander McQueen opened his new New York boutique wearing one of his own customized coats. Even Nike and Levi's offer personalized versions of their sneakers and jeans. All over the fashion world, companies are striving to give customers the individualized style they crave.

The new J.K. Rowlings book is important to all the players involved in the Harry Potter franchise, writes the Wall Street Journal (subscription required); the stock prices of the players involved have been favorably impacted by the revenue from that franchise:

Ms. Rowling's four published titles have sold an estimated 175 million copies world-wide in hard and soft cover, and the books have been published in at least 43 languages.

Partly because the first four Potter books were published every summer starting in 1997, there has been speculation that the fifth book is late. But Ms. Rowling said she never set a publication date for the latest book. She also dismissed speculation that she has suffered from writer's block, describing that as so much fantasy...

"If I sat down and thought that there are 17 million kids anxiously scanning Amazon, I'd freeze. I couldn't do it." [A] factor has been the amount of mail she receives, an estimated 1,000 pieces every week from readers in the United Kingdom alone.

She once devoted one day a month to answering her correspondence, but now it requires one day a week. She said she feels compelled to answer some letters herself because they have been sent by sick children or other needy readers who require an answer. "You have a moral obligation to do certain things," she said.

[Scholastic] is publishing a mass-market version of it priced at $6.99, with a new cover aimed at older kids and adults.

In addition, Scholastic is readying yet another Harry Potter onslaught for the coming holiday season. The company will issue a deluxe, leatherbound edition of "Chamber" priced at $75, a boxed set of the four previously published hardcovers for $85, and a boxed set of the four volumes in paperback priced at $31...

SBC has been eager to enter California's long-distance market because of its size, estimated at $10.5 billion, according to this Wall Street Journal story (subscription required):

Under the Telecommunications Act of 1996, Baby Bells can begin selling long-distance in their home states only after convincing local and federal regulators that their local markets there are open to competition.

SBC dominates local phone service in 13 states and controls a third of the nation's phone lines. About a third of the company's access lines are in California. SBC currently sells long-distance in Texas, Oklahoma, Arkansas, Kansas, Missouri and Connecticut.

For SBC, winning local approval in California has been a long and often bitter fight. The company estimates that it has spent more than four years and $1 billion completing the application. In the past year alone, the company has been fined more than $52 million by state regulators for sales and marketing abuses in the residential phone and high-speed Internet-service markets.

According to the Wall Street Journal (subscription required), Microsoft CTO Craig Mundie said,

the online security of the world's computer networks would be improved dramatically if consumers and companies bought the latest versions of Microsoft's Windows software.

Mr. Mundie said roughly 300 million computers world-wide run Windows versions that are at least two generations old, produced before Microsoft could anticipate some Internet threats.

Such an upgrade would cost hundreds of dollars for each computer.

"If everybody ran the newest version of Windows, we'd be way better off today," he said. "We have no way to go require businesses or consumers to go ditch their old machines."

Wall Street Journal reports (subscription required) that:

According to new data from VentureOne, about 22% of the 1,842 fledgling companies that received an initial round of funding in 1999 have closed their doors, compared with an average of 15% for companies launched over the previous seven years. Start-ups initially funded in 2000 already have a casualty rate of 18%.

The amount invested in start-ups since 1999 that have failed totals a whopping $15.3 billion, data from the San Francisco-based venture research group show.

The fact that boom-era start-ups are failing at a faster-than-normal rate should come as no surprise. The number of new companies that received initial rounds of financing from venture capitalists grew steadily throughout the early 1990s. But, in concert with the dot-com frenzy, such investments nearly doubled between 1998 and 1999. In 2000, the number of initial financing rounds surged an additional 44% as venture capitalists continued to pour money into new ventures.

"The market simply couldn't support this glut of companies," says John Gabbert, vice president of world-wide research at VentureOne. "The pool of early stage start-ups achieved critical mass just as the liquidity markets dried up, with the result that a high percentage of these companies have folded."

As the Wall Street Journal puts it (subscription required),

An unflattering acronym -- LIFO, as in "Last In, First Out" -- sums up the venture capital industry's often skeptical view of corporate venture investing.

The recent boom-bust VC cycle did nothing to improve that general reputation.

...Corporate venture capital, led by some stalwarts such as Intel Corp.'s Intel Capital group, accounted for about 6% of annual U.S. venture investing overall in the years immediately prior to the late-1990s run-up, according to PricewaterhouseCoopers LP, in conjunction with the National Venture Capital Association and Venture Economics.

By 2000 -- when IPO riches had become commonplace and start-ups seemingly went public overnight -- the portion attributable to corporate investing had ballooned to 15%, meaning corporate venture capital grew at more than twice the industry rate even as VC investments overall reached a record $108.2 billion, from a mere $16.5 billion in 1997.

...Corporations, meanwhile, have been at the vanguard of a subsequent major retreat in venture investing overall, with corporate VC sliding to just under 9% of the $12.3 billion total through the first half of 2002.

Tracy Lefteroff, global managing partner for PricewaterhouseCoopers' venture capital practice, expects the trend to continue, saying corporate venture capital likely will stabilize near its pre-boom, 6% level.

Dell Computer spokesman T.R. Reid said Dell Ventures remains committed to gaining access to new technologies through venture investing. But the company simply isn't seeing as many of the late-stage deals that it considers a specialty, he said, because early stage funding has been much harder to come by for start-ups and entrepreneurs.

"What's changed is the flow of deals beneath our objectives," he said.

As of May, the value of Dell Ventures' portfolio had slid to $254 million, off from $719 million a year earlier and from nearly $2 billion during the heady days of the stock-market bubble. Dell took a $370 million charge in last year's second quarter to write off some soured investments, although Reid maintains that gains from VC investing still have outweighed the company's losses.