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

A Wall Street Journal story on McDonald's earnings results and strategy for next year:

Reporting an 11% third-quarter profit drop, McDonald's Corp. said it will open far fewer restaurants next year, funneling the money instead into its existing and sluggish U.S. restaurants.

...Jack Greenberg, chairman and chief executive, said the company will " dramatically reduce restaurant openings" to 600 additional McDonald's units world-wide in 2003, down from 1,050 this year and from a high of nearly 2,000 in 1996. In the U.S., it will add 100 McDonald's in 2003, down from about 300 to 350 this year.

The burger chain, with more than 30,000 restaurants world-wide, will reduce spending on new restaurants by 40% to $875 million in 2003. About $750 million is earmarked for new McDonald's restaurants, the rest for its other brands, including Boston Market and Chipotle Mexican Grill outlets.

Microsoft launches MSN 8.0 on Thursday, with Europe being a big focus albeit a different strategy than America Online, according to this Wall Street Journal story (subscription required). Microsft points out that AOL:

is essentially competing with European telecom companies with its own Internet-access service. In Europe, those companies offer Internet access themselves and have made it hard for rivals to enter their markets. After lobbying regulators in Europe, America Online has obtained some concessions and is approaching profitability in the U.K. But it still faces an uphill battle in countries like Germany.

Competing against local telecoms in Europe is "madness," declares Judy Gibbons, MSN's European vice president. "You'll never make any money."

...In the U.S., Microsoft also "seems more focused on content distribution" than on Internet access, says Ross Sealfon, an analyst at research firm International Data Corp. in Framingham, Mass. He notes that Microsoft's market share as a service provider was roughly flat for the first two quarters of this year. All of MSN's nearly nine million access subscribers are in the U.S.; America Online has 26.5 million subscribers in the U.S. and 35 million globally.

Teen decorators are being catered to increasingly according to this Wall Street Journal story (subscription required):

Whatever happened to Princess phones and maybe a few rock-idol posters on the wall? For years, teenagers were happy simply to have a door they could close for a little privacy. Then came the era of McMansions, giving each kid their own room and enough space to express themselves with the decor. Now retailers are scrambling to position their wares for these hip junior decorators, with Kmart dubbing its Joe Boxer flannel sheets "bed pajamas" and Brewster Wallcovering Co. developing store displays to hawk wallpaper with the slogan, "Hey, girls, give your room some attitude."

...In all, the young-decorator set will spend about $17 billion this year on their rooms, double the amount less than a decade ago, according to The WonderGroup, a Cincinnati consulting company. They're getting tips from teen-apparel retailer Delia's, where housewares now account for 10% of catalog sales, up 50% from last year, and from Pier 1 Imports, which has started offering discounts to high-schoolers. Even media outlets like the Learning Channel, with "Trading Spaces," and Seventeen and CosmoGIRL!, are moving in on under-18 decor.

The size of the electric razor business is detailed in this Wall Street Journal story (subscription required):

Electric razors are proving increasingly popular: About half of all households own one, up from about 40% in 2000, according to the International Housewares Association. Travel models in particular have been a big part of the $200 million-a-year shaver business, with manufacturers from Braun to Panasonic saying sales of these take-along models are up as much as 10% over last year.

Why the buzz about travel shavers? Credit new security and baggage rules, with airlines recently limiting carry-on bags to one per passenger. And while safety razors are allowed in carry-ons, old-fashioned razor blades are still contraband. As part of the renewed interest in these mini-models, travel purveyor Magellan's recently began selling them for the first time in years.

The continuing woes of the airline industry are reported in this Wall Street Journal story (subscription required):

In the past three months, which just happens to be the strongest season of the year for airlines, the nation's three biggest carriers posted a stunning collective net loss: $2.14 billion. Though the "Big 3" of AMR's American Airlines, UAL's United Airlines and Delta amount to about 60% of industry, they were responsible for 95% of the losses reported so far by airlines. The Big 3 are in Big Trouble.

United, of course, paced this elite field. It suffered the worst revenue drop as passengers went elsewhere and fares came down. Consider also that you're comparing the most recent quarter with the dismal levels of the third quarter last year, when terrorists struck and airlines were grounded. Net losses for the latest quarter totaled $889 million. For every passenger that got on a United airplane in the past three months, the company lost $47. Every day during the quarter, on average, United burned $7 million in cash....

"American and United really designed their business plans on the extraction of very, very high fares," says J.P. Morgan analyst Jamie Baker. Delta did, too, but to a lesser degree since low-fare traffic into Florida forced it to do a better job relatively at holding down costs.

New, cheaper options are emerging for those travelers tired of commercial flights according to this Wall Street Journal story (subscription required):

It's a major shift in the way private planes are marketed to people who want the use of one -- but don't want to buy the whole thing. The new membership programs allow executives to buy a set amount of flying time with few strings attached. Previously, the only way to do it was to purchase a "fraction" of an actual plane. Several companies sell them in slivers as skinny as 1/16th, but that gets expensive: No matter how you slice it, after all, you're still buying a piece of a jet.

...Delta's AirElite unit tentatively plans to price its memberships between $88,000 (which gets you 25 hours in a small jet) to $783,000 (100 hours in a large jet). The contracts will also come with membership in Delta's frequent-flier program.

...Still, the fractional business has held up relatively well recently. The number of fractional owners rose nearly 14% in the year ended June 30. NetJets, the industry leader and a unit of Berkshire Hathaway, says its sales spiked last fall after the terrorist attacks, but since have flattened. Nevertheless, NetJets recently ordered more than 200 new Gulfstream and Cessna business jets, for fleet replacements and growth.

According to this New York Times Company press release earlier this week:

Daily circulation rose by 3,629 copies or 0.3%, reaching a net paid circulation of 1,113,000. Sunday circulation rose 3,215 or 0.2% for a net paid circulation of 1,671,865.

"We continue to see circulation increases that reflect the value that people place on Times reporting," said Scott Heekin-Canedy, senior vice president of circulation for the newspaper. "Despite two home delivery price increases over the past two years, national growth continues at a strong pace. We remain on track toward our national expansion goals, which we embarked on in 1998, of increasing circulation by 250,000 copies daily and 300,000 copies Sunday by 2008."

The New York Times Company has signed a letter of intent to buy out for less than $75 million the Washington Post Company's half of The International Herald Tribune which has a circulation of 263,878, consisting primarily of American expatriates, tourists and international business executives. This move would dissolve what this New York Times story (registration required) calls an unusual 35-year partnership of two of the newspaper industry's leading journalistic rivals:

The Post memo said that Times Company executives took the position that if they were unable to buy out the Post Company interest, the Times Company would "start its own international edition anyway" to compete with The Herald Tribune, and would block any further subsidy of The Herald Tribune's current deficit.

...The Post memo said that the introduction of an international edition of The New York Times could have crippled The Herald Tribune, which is in the midst of a fierce worldwide circulation and advertising war with The Financial Times and The Wall Street Journal.

...The announcement of the sale marked a clear breach between companies and families that had had close and cordial relations for a generation. The Sulzberger family owns a controlling interest in the Times Company, as the Graham family does in the Post Company.

...While The Post has tied its fortunes closely to those of the wealthy and fast-growing Washington area, Mr. Goodale said The Times has successfully pursued a strategy of selling the newspaper nationally.

The Times's revenue stream from retail and classified advertising aimed at New York-area readers is increasingly bolstered by national advertising. International expansion, Mr. Goodale said, is a logical extension of this strategy.

The International Herald Tribune — founded as The Paris Herald 115 years ago by James Gordon Bennett, the publisher of The New York Herald — has for decades offered its readers a mixture of the journalism of The Times and The Post, including foreign, business and cultural news.

The Times became a part-owner in 1967, merging its unprofitable international edition with the publication then owned by Whitney Communications and the Post Company. The Whitney interests sold their stake in 1991.

An amusing, well-written Salon article by independently-published writer, John F. X. Sundman, who happened to work on the CMGI CEO's mansion on Martha's Vineyard.

Dot-com visionary David Wetherell could do no wrong -- until he started building a mansion on an ancient Indian burial ground.

It was Jan. 20, 1999, my third day on the job as a common laborer on the four-bedroom, 7,000-square-foot vacation home that Internet billionaire David Wetherell -- whose CMGI stock had recently split and was trading at $163 a share -- was building on Squibnocket Point, formerly the most beautiful spot on Martha's Vineyard. In helping build this house I knew that I was participating in a desecration. But I needed the work, and this low-paying job was ideal in some ways. It paid cash, it was interesting work, the setting was spectacular, and I didn't need a car to get to the job -- my boss, Lou, lived next door, and I rode the 18 miles to work sitting on a pile of power cords in the back of his panel van. Also, the job provided lots of exercise and allowed me to work irregular hours; that is, whenever I felt like taking a day off to work on my manuscript, a novel about nanomachines and Iraqi biological weapons that I believed both Hollywood and New York to be interested in, I did. On those days somebody else, one of the Brazilians, vacuumed the table saw and carried the trash barrels to the dumpster....

"It's a fucking abomination," Sandy said one day as I signed for a package of saw blades. "I hate this place. It used to be so magical, and now it's just another Vegas whorehouse." In fact I got the sense that most of us felt at least a little slimy about our work there, even those who had bought stock in CMGI.

...The night watchman's name was Chip, a Wampanoag from Aquinnah, hired by the tribe to protect the dig. We talked about what may or may not have been there, under the earth, where we built that house. He didn't know much more than I did, but had heard some rumors. Like me, he had no opinions about ghosts or jinxes. But he told me something interesting: He said that the old ones, the Tribal Elders, had prophesied that the family "would not have one day of happiness in this house." Chip and I felt sorry for them.

Walter Mossberg, writes in his Wall Street Journal column (subscription required) about the new Internet fridge:

Cheer up, Americans. The economy may be weak and war may be on the horizon, but you can finally buy the dream product of the digital age: the Internet refrigerator.

...Released on Oct. 1, LG's refrigerator (also known as the Multi-Media Refrigerator) is sure to impress your friends and catch the eye of anyone wandering into your kitchen. Once you hook up your cable TV and broadband Ethernet connections to handy ports on the back, this fridge can be a computer for e-mail and Web browsing; a television; a music player; a digital still and movie camera; an address book; and a calendar. But would a normal person -- or even an extremely wealthy person -- use its functions frequently enough to make it worth $8,000?

Frisco, located north of Dallas, is paying companies to move there, offering them cash to sign leases in the few office buildings that have been built there, according to this New York Times story (registration required):

The city's inducement money comes from Stone-briar Centre, a 1.6 million-square-foot mall that General Growth of Chicago opened here in August 2000, and from the Centre at Preston Ridge, 1.1 million square feet of retail stores anchored by an outsize Target discount store.

Together they generate $5 million a year in sales taxes to support the Frisco Economic Development Corporation, which voters here elected to create rather than joining their neighbors to the south in contributing to the Dallas Area Rapid Transit system. Dallas and its more immediate suburbs, having spent their sales tax dollars on buses and trains, typically offer property tax abatements to potential employers....

"They've been able to steal some clients from Plano and Dallas and the Richardson area," said Gregory C. Biggs, a broker with the firm Julian J. Studley. "You run the economics, and the municipal incentives make the difference in the deal."

Frisco has signed deals with about eight companies this year, promising payments of as little as $25,000 and as much as $1.2 million in exchange for a signed lease within the city limits.

Arianna Huffington starts an anti-SUV fund to enable an ad campaign against driving SUVs and making the US more dependent on foreign oil:

Salon and I have been flooded with hundreds of e-mails from readers in response to yesterday's column, "I helped blow up a Bali nightclub -- by driving my SUV to work every day!" The column called for a citizens' ad campaign aimed at getting people to stop driving gas-guzzling cars and SUVs -- and readers loved the idea.

To make it happen, the Natural Resources Defense Council (NRDC) on Tuesday opened a special account for these donations.

More details, including the news that the FBI is investigating the attack, according to this AP story printed in this Wall Street Journal story (subscription required):

One person familiar with the Monday attack described it as the most sophisticated and large-scale assault against these crucial computers in the history of the Internet. The origin of the attack was unknown; the Federal Bureau of Investigations and White House said they were investigating the incident.

Seven of the 13 servers failed to respond to legitimate network traffic and two others failed intermittently during the attack, officials said.

...Monday's attack wasn't more disruptive because many Internet providers and large corporations and organizations routinely store, or "cache," popular Web directory information for better performance. "The Internet was designed to be able to take outages, but when you take the root servers out, you don't know how long you can work without them," said Alan Paller, director of research at the SANS Institute, a security organization based in Bethesda, Md.

Although the Internet theoretically can operate with only a single root server, its performance would slow if more than four root servers failed for any appreciable length of time. In August 2000, four of the 13 root servers failed for a brief period because of a technical glitch.

Intel's venture-capital arm, Intel Capital, has announced plans to invest some $150 million in companies that promote WiFi (or 802.11b) technology, according to this Wall Street Journal story (subscription required). It has already invested $25 million into more than 10 WiFi companies.

Sriram Viswanathan, Intel's director for wireless and broadband investments, said it plans to put money into three principal areas: companies that are helping to add more Wi-Fi-equipped locations or otherwise help improve the wireless infrastructure; companies that attack some fundamental problem associated with the technology, such as improving security or billing technology; and companies that improve the basic capability of the technology, such as to expand the range of Wi-Fi transmission devices. (Broadband refers to the high-speed Internet connections being installed in residences by cable and phone companies.)

One reason for the timing of the fund, Mr. Viswanathan said, is that Intel next year will introduce a chip technology for mobile computing -- code-named Banias -- that offers built-in Wi-Fi technology.

Overture Inc., previously known as GoTo and funded by Idealab, posted a strong third-quarter thanks to a strong jump in revenue, according to this Wall Street Journal story (subscription required):

Overture, which provides paid search listings to partners such as Microsoft Corp's MSN, reported net income of $16.9 million, or 28 cents a share, compared with earnings of $9 million, or 15 cents a share, for the same period last year. Analysts surveyed by Thomson First Call expected earnings of 20 cents a share.

Revenue more than doubled to $172.7 million, from $72.5 million a year earlier.

...The paid-listings sector is one of the only growth areas in the depressed Internet advertising business these days, and Overture has been reaping the benefits of the hot market for the last year.

...Chief Executive Ted Meisel said in a conference call that the paid listings market is becoming crowded, but argued that Overture is leading the pack. Popular search engine Google Inc. launched a rival paid listings service last February, and a slew of smaller paid search engines offer similar services.

The Google CEO Eric Schmidt was quoted in this Wall Street Journal story (subscription required) as saying yesterday at the Jupiter/IAM Advertising Forum in New York, in reference to Google's text ads, "The Internet will transform advertising because of its trackability, not its beauty."

Mr. Schmidt says Google's effectiveness as a "matchmaker" easily translates to advertisers. "These are very targeted ads," he said. "I think you're going to see lots of companies trying to do that."

Mr. Schmidt mocked pop-up and banner ads as ineffective and annoying. Advertisers "are pushing too hard," Mr. Schmidt said. "The presence of an interruption in and of itself is not sufficient."

...As advertising operators such as AOL shift gears, the industry appears to be poised to begin growing again after two years of stagnation. In an updated forecast released Tuesday, Jupiter Research said it expects a 10% jump in online advertising in 2003 to $6.2 billion from $5.6 billion this year, fueled by classified ads and increased spending by traditional advertisers. That figure is expected to grow to $14 billion by 2007 as more households go online. The percentage of U.S. households with online access is expected to grow to 78% by 2007 from the current 62%, putting it on par with the number of homes with cable or satellite TV.

...Of course, some messages may never find an audience. Google recently removed an ad from an Atlanta skydiving operator that said "Only One Death This Year."

"No one clicked on it," Mr. Schmidt said.

A New York Times story on the Internet version of a neighborhood watch:

Internet merchants, weary of a near constant barrage of credit card fraud that costs them more than $1 billion each year, are joining forces in hopes of helping one another identify users of stolen credit cards, catch criminals and perhaps soothe the fears of millions of potential online shoppers.

A group of the Web's biggest e-commerce companies, tentatively called the Internet Merchant Fraud Roundtable, has formed over the last year, with the goal of creating a database that merchants could use to block potentially fraudulent transactions and help snare people who commit credit card fraud. The group hopes to have the database set up by the first half of next year.

...While no e-commerce merchant group has tried to address credit card fraud on such a big scale, there is precedent for a similar type of information gathering. CardCops, a credit card fraud watchdog company, has created a database of what it believes are stolen credit cards, and offers that database on CardCops .com free to users who can check to see if their numbers have been stolen.

According to Dan Clements, CardCops's chief executive, the database, which typically contains about 100,000 card numbers at a given time, is compiled from Web sites he said were frequented by card thieves. Mr. Clements said that to avoid violating the privacy of a credit card holder, only the 16-digit account numbers are carried in the database. He said it was nearly impossible to trace the number to a person's name without other information and that he cleared his methods with Visa before moving forward with his service.

According to this New York Times story,

An unusually powerful electronic attack on Monday briefly crippled 9 of the 13 computer servers that manage global Internet traffic, officials disclosed today.

...The F.B.I. and White House were investigating. One official described the attack as the largest and most sophisticated assault on the servers in the history of the Internet. The origin of the attack was not known.

Seven of the 13 servers failed to respond to legitimate network traffic and two others failed intermittently during the attack, officials said.

...These experts said the attack, which started about 4:45 p.m. on Monday, transmitted data to each targeted root server at 30 to 40 times the normal amounts. One said that just one additional failure would have disrupted e-mail messages and Web browsing across parts of the Internet.

The New York Times reports that Vivendi has agreed to "sell its French publishing business and other non-American assets to Lagardère, the French conglomerate that publishes Elle and Car and Driver magazines, for about $1.2 billion in cash, executives involved in the negotiations said last night."

The decision by Vivendi's board to sell a part of its publishing unit instead of the entire division, which includes the educational publisher Houghton Mifflin, is another setback in Vivendi's effort to pay down its $18.6 billion debt load.

Vivendi decided to sell its French publishing assets like L'Express and other non-American assets separately because bids for the entire publishing unit all came in under $2.9 billion, the executives said, far below the $4 billion the company had anticipated receiving.

...Whatever happens, Vivendi needs cash quickly. Besides paying down its debt, the company must find a way to counter an offer by the Vodafone Group for its stake in Cegetel, the large French phone company. Hoping to take advantage of Vivendi's weak cash position, Vodafone reached an agreement last week to increase its stake in Cegetel to 56 percent by paying 6.3 billion euros ($6.2 billion) in cash for the 26 percent of Cegetel held by the BT Group and the 15 percent owned by SBC Communications.

According to this story on Earthweb, IDC is predicting that the daily volume of e-mail is expected to double by 2006:

According to IDC, about half of the e-mail that crosses the Internet in 2006 will be person-to-person communications. The rest is comprised of automated mailings, such as stock price alerts or newsletters, or marketing messages -- both wanted and unwanted.

That's potentially another worry, since such automated and sales-related communications now only make up about 33 percent of e-mail volume. As a result, ISPs, enterprises and e-mail providers will have to dedicate more time, effort and money to keeping e-mail as efficient a communications channel as it is now -- potentially purchasing services like anti-spam filtering, or developing such capabilities in-house.

ISPs, which estimate that about 10 to 50 percent of the e-mail currently crossing their networks are unwanted spam, are already staggering under the costly mass of e-mail that crosses their systems. That situation is unlikely to improve when non-personal mailings account for a higher proportion of the Internet's e-mail.

IDC also found that Web-based services are currently -- and are expected to remain -- the predominant means for checking e-mail, particularly for Internet users' non-business accounts. As a result, much of the onus for curbing consumer-targeted spam could fall on portals and e-mail providers like MSN Hotmail.