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

A New York Times story on yet another executive falsifying his resume. Earlier this year Veritas Software was forced to fire its CFO after discovering that he did not have a Stanford MBA as he had previously claimed. What is the problem with these guys?

Ronald L. Zarrella, the chief executive of Bausch & Lomb, a maker of eye care products, admitted yesterday that his résumé contained false information about his education. But, as Bausch shares began to fall on the news, the company's board issued a statement of confidence in him.

Mr. Zarrella, who was named chief executive 11 months ago, had said that he received a master's degree in business administration from New York University when, in fact, he had not. From 1972 to 1976, Mr. Zarrella attended the N.Y.U. business school as a night student while working for Bristol-Myers, but he left before graduating.

"I'm embarrassed that some of this incorrect information appeared in some of our published materials on my background," Mr. Zarrella said in a statement yesterday. "Clearly it's my obligation to proofread such things carefully and ensure their accuracy."

First eBay now Microsoft. A Wall Street Journal story (subscription required) on Microsoft's quarterly results blowing past all expectations thanks to revenue boosted by long-term licensing agreements:

In after-hours trading, shares of Microsoft were at $53.03, according to Island ECN. They had risen 36 cents to $50.77 in regular 4 p.m. Nasdaq Stock Market trading.

Late Thursday, the software giant posted fiscal first-quarter net income of $2.73 billion, or 50 cents a share, which included an after-tax charge for investment impairments of $291 million, or five cents a share. A year earlier, the company had a profit of $1.28 billion, or 23 cents a share, which included an after-tax charge for investment impairments of $1.22 billion.

Revenue rose 26% to $7.75 billion from $6.13 billion a year earlier.

A Wall Street Journal story on eBay's spectacular earnings' announcement at the close of the market today: Ebay more than tripled its net third-quarter net income and grew its user base by almost 50%. Great business model!

EBay, based in San Jose, Calif., said it earned $61 million, or 21 cents a share, compared with $18.8 million, or seven cents a share, a year earlier. Revenue rose 49% to $288.8 million from $194.4 million.

Excluding certain items, eBay said earnings were $62.7 million, or 22 cents a share. The results exceeded eBay's projected earnings of 19 cents a share on revenue of $278 million to $281 million. Analysts had expected earnings of 20 cents a share, according to Thomson First Call.

"EBay continues to deliver terrific performance quarter after quarter," said Meg Whitman, the company's president and chief executive. "Our success results from our thriving community of users -- buyers looking for practically everything and sellers using eBay to build their businesses."

The company said its listings grew 47% to 160 million during the quarter, while the number of registered users surged 46% to 54.9 million users. In another sign of growth, revenue from international transactions more than doubled to $75.3 million.

A Wall Street Journal story on how ConsumerReports.org, the subscription-only Web site for Consumer Reports magazine, has signed up its one-millionth subscriber -- a milestone for any website and a validation that subscription models work. Only about 15% of its online subscribers also subscribe to the print version of Consumer Reports. The site, which employs 30 people, took in $25 million in revenue last year of which half covered its expenses.

Subscriptions have grown sharply, rising from 690,000 subscribers last November. A year's subscription to the site (www.consumerreports.org) costs $24. For users who also subscribe to its magazine, the Web site costs $19 a year.

"I like to think that we've shown that information has value," said Joel Gurin, executive vice president at Consumers Union. "Consumers are willing to pay for credible information."

Charging for content has become a more popular option for Web sites -- especially as the online advertising market has dried up. RealOne, from RealNetworks Inc., has 750,000 subscribers who pay for access to audio and video clips from content partners like Major League Baseball, CNN, FoxSports and others.

The Wall Street Journal Online, published by Dow Jones & Co., said it had 664,000 subscribers as of Sept. 30, up 9% from a year earlier. Pearson PLC's Financial Times recently began charging fees for some of its content. Other online publishers who have expanded into premium content include iVillage Inc., TheStreet.com Inc. and Salon Media Group Inc.

A Wall Street Journal story (along with an amusing cartoon of Bill Tai and Bob Kagle) (subscription required) on how venture capitalists such as eBay director and Benchmark partner may have profited not only from venture investments in technology companies that rose in value rapidly thanks to the stock market boom of the late1990s as well as from their relationships with Wall Street.

Indeed, the practice of allocating hot IPOs to venture capitalists may have been just as widespread as to corporate executives, some investment bankers and VCs say -- "one of the perks of being a player," is how one Silicon Valley VC describes it. Wall Street also showered hot IPOs on executives of private-equity firms, which generally make later-stage investments in young companies.

Critics say such mutual back-scratching was part of a cozy relationship between Wall Street and its investment-banking clients. "A small circle of preferred clients were given vast access by the investment banks to IPO shares and reaped large profits on the sale of these shares ... at the expense of the average investor" who could only buy at much higher prices after the IPO shares began trading, asserted Richard Baker (R., La.), chairman of the capital-markets subcommittee of the House Financial Services Committee, which released the Goldman IPO data earlier this month.

Mr. Kagle and Goldman say there was no quid pro quo for the IPO allocations. Mr. Kagle says he didn't expect quick profits because he planned to hold for the long term. Also, he adds, the value of the IPOs was just a small percentage of the amount of his own investments in the Benchmark companies. The stock underwriters, he says, were generally picked based on which bank could provide the best long-term research coverage, and best understood the company and its business.

As the Segway nears a consumer launch, groups rise in opposition according to this Wall Street Journal story (subscription required):

In San Francisco, where the scooter has been tested by the U.S. Postal Service on a limited basis, political-advocacy groups like Senior Action Network and Walk San Francisco, as well as out-of-state public-safety lobbyists like the Center for Injury Research and Policy have all come out against the Segway. The Senior Action Network has organized rallies in San Francisco against the scooter, with slogans like "Zero Emission Pedestrian Killer." These groups say that the sidewalk is too small for both the zippy Segway scooter and elderly pedestrians.

"We feel that this is a dangerous vehicle to be putting on the sidewalks," says Bruce Livingston, executive director of the Senior Action Network. "It's a wonderful toy, a wonderful piece of technology, but it doesn't belong on the sidewalks."

Some more details on the use and end of pop-up ads on AOL from this Wall Street Journal story (subscription required):

The move to stop selling such ads is part of AOL Time Warner Inc.'s campaign to revitalize its online service after years of benign neglect. During the dot-com boom, the company became intensely focused on selling ads, but now that advertising has dried up, the company is trying to invigorate its service so its 35 million customers won't defect. Among other measures, Tuesday it launched its new 8.0 software.

The loyalty of its customers is increasingly crucial to America Online as it faces mounting competition from Microsoft Corp., Yahoo Inc. and high-speed Internet providers, as well as internal pressure from its parent to stop crimping the entire company's profits. The unit's earnings before interest, taxes, depreciation and amortization, or Ebitda, this year are expected to be $1.7 billion to $1.8 billion, down from $2.9 billion last year.

America Online began selling pop-up ads in 1995. The ads are the first thing subscribers see when they log on and the last thing they see before they log off. They are often pitches for items such as computer accessories and language lessons -- and don't make up the core of America Online's advertising revenues.

According to a Wall Street Journal story (subscription required):

Walmart.com, a unit of the Bentonville, Ark., retailer, is entering the growing market pioneered three years ago by Netflix Inc. Blockbuster Inc. and Columbia House, as well as several small dot-com companies, also are exploring offering subscription DVDs on a large scale.

...So far the test has "exceeded expectations," says Jim Notarnicola, chief marketing officer for Blockbuster. But the chain, a majority-owned unit of Viacom Inc., hasn't made a final decision on whether to enter the subscription market. "If the information we have now holds up, we will be going forward," he said, noting the pricing hasn't yet been finalized.

Still, Mr. Notarnicola said Blockbuster is skeptical about the size of the online subscription market. Most movies are rented on impulse, he noted, whereas the online subscription requires planning in advance.

But Netflix already has 742,000 subscribers, a number that's twice what it had a year ago, and I'm pretty much ready to stop renting from Blockbuster!

...Columbia House, the music and video club majority owned by Blackstone Group LP, also is planning to launch a DVD subscription service in 2003, either on its own or with a partner, according to Scott Flanders, chairman and CEO. Columbia House's DVD club has about three million members.

About time. While Dell's ads with the goofy, geeky blond-haired college due Steven was great at first, I think he was only irritating by the time later versions of the ads hit the airwaves. According to this Wall Street Journal story (subscription required):

Steven, a blond-haired college dude played by Nashville actor Ben Curtis, has practically blanketed the pop-culture landscape since his creation by Interpublic Group of Cos.' Lowe agency in late 2000. In fact, NBC's "Saturday Night Live" spoofed the character during its regular "Weekend Update" feature this past Saturday night.

...The original Lowe spots featured home videos of Steven trying to harangue parents into buying their high-school offspring a Dell. Three months later, Dell took its account over to DDB, which added the famous tag line "Dude, you're getting a Dell" to the mix.

..."My guess is that Dell found he was not hitting the demographic as strongly as they wanted him to," says Jeff Lotman, chief executive of Global Icons, a Los Angeles branding consultancy, of Steven. If his assumption is correct, Mr. Lotman likens Steven to a popular ad character like Joe Isuzu, who he says enthralled the nation but did little for the overall sales of his backer.

From a Wall Street Journal story (subscription required) on Halloween's new focus. I know I'm invited to a friend's annual large Halloween bash. Last year I went dressed in black pants, white shirt, a bowtie and a towel draped over my arm -- I was, wait for it, a dotcom CEO! :)

Forget the kids. One year after the Halloween industry was dealt a blow by the nation's somber post-9/11 mood, retailers trying to revive the $7 billion business are making a special push toward adults. Indeed, such retailers as Martha Stewart (eyeball soap kit, $34) and Pottery Barn (doormat with ghosts, $24) are trying to boost Halloween sales with spooky goods for grown-ups. Even health-care giant Novartis AG is elbowing into the market with creepy contact lenses that give trick-or-treaters the gaze of an alien.

But nowhere is the Halloween competition -- and the potential for embarrassment -- more fierce than the adult-costume business, where some retailers are reporting a 30% rise from last year. This year the lineup includes Target's $25 monster head ("ghoulish ... with a faux-fur border") and a $1,500 duck suit at Costume Holiday House in Columbus, Ohio. For the horizontally challenged, there's even an inflatable sumo wrestler outfit -- just flip a switch for instant girth.

Broadband in China is moving forward in a very different way than it is in the US according to this Wired story since Chinese cities are much more dense than US cities (and subscribers close to the switching station). "China is attempting (to) leapfrog their technology and skip over ADSL," says Pat Hurley, DSL analyst for market research firm TeleChoice,. "They are moving from what the United States looked like 30 years ago directly to what the U.S. will look like in another five years." China is expected to have 1 million VDSL lines by end of 2002 and 3 million by end of 2003.

Very high data rate DSL, known as VDSL, was originally developed to carry digital television signals in addition to standard Internet traffic, so it can pump data over a standard copper telephone wire at speeds up to 25 megabits per second. ADSL signals max out at 8 Mbps -- although most ADSL services average about 1.5 Mbps.

However, ADSL has a range advantage because the data signals can travel up to 5 kilometers from the telephone switching station over standard copper phone wires. VDSL traffic is limited to 1 kilometer.

Wish this was true for the lower end of the market as well. According to this Wall Street Journal story (subscription required):

After Joe Greene's Tennessee mansion sat on the market for a year without so much as an offer, he decided to take drastic measures: He put the $2.5 million house and its 30 acres of countryside up for auction -- and got about $1 million less than he'd hoped. "Of course, you always want more," says the health-care executive, who'd already bought another home.

Going ... going ... gone. With the upper end of the housing market slowing in many places, the pace of house auctions nationwide has surged -- mostly thanks to owners of big-ticket properties who never dreamed they'd end up selling this way. Overall, 2001 auction sales were up 30% since the mid-1990s to a record $54.5 billion, according to Bloomington, Ind., research firm the Gwent Group. Auction houses say the trend is merely building this year, mostly on trophy-home sales. "Everyone's gone from thinking they're infinitely rich to thinking, 'What am I doing with this house?' " says Steven L. Good, chairman and chief executive of Chicago auction house Sheldon Good & Co., where sales of high-end homes are expected to hit $56 million this year.

Part of the appeal for sellers, of course, is the chance for a quick sale. At a time when pricey houses are lingering 18 months or more on the market, an auction can take as little as six weeks from start to finish. That's a big plus for cash-strapped homeowners. "It cost $2,800 a month just to mow my lawns," says Beverly Moffatt, who recently sold her 29-room place in Oregon at auction. Another factor: In the boom years, many people built what auctioneers delicately refer to as "overpersonalized" homes -- from a 23,000- square-foot mansion plunked down in an otherwise modest Baltimore suburb to an "earthship" built into the side of a mountain in Colorado. "It was a bit special," says Francois Raab, who got $350,000 at auction for that house.

From a Wall Street Journal story (subscription required):

Microsoft Corp. is once again the world's most valuable company.

The Redmond, Wash., software company sports a market capitalization of $262.1 billion based on Friday's close. That's less than half its peak value, but good enough to eclipse the sagging General Electric Co., whose market cap is $240.9 billion.

GE, an industrial and entertainment conglomerate, commanded the highest market value for most of the 1990s until it was unseated by Microsoft in September 1998 amid the technology-stock rally. At the time, Microsoft had a market cap of $261.1 billion and GE had a market cap of $257.3 billion.

According to this Wall Street Journal story, Palm will be one of several investors in the new startup, Mobile Digital Media Inc. headed by "former Palm executives, including former Palm co-chief operating officer Barry Cottle, who has been designated chief executive of the new company, and former Palm chief marketing officer Satjiv Chahil, who is chairman of the new firm."

Mobile Digital Media, which has around 13 employees, will essentially supply content -- such as games, reference guides and back-up memory capabilities -- on secure digital and multimedia cards that Palm users can slot into their devices. Expansion slots for these types of cards are rapidly appearing in a broad array of devices, including in mobile phones, laptops and other hand-held devices.

Last year, Palm sold its own content-filled expansion cards, such as dictionary cards and others, but it will now farm out that business to Mobile Digital Media, say the people close to the situation. Industry experts say these types of expansion cards generated more than $20 million in revenue last year.

About time but is it possible that the timing of this decision is tied to the significant advertising revenue drop and the fact that MSN 8.0 is breathing down AOL's neck? According to this Wall Street Journal story (subscription required):

"This new policy will contribute to our most important goal -- a better member experience," said Jon Miller, America Online's chairman and chief executive. "The most important thing we offer advertisers is the chance to be part of a service that consumers love, and we've determined that pop-ups aren't the best way to do that."America Online also announced that it will make it easier for members to find and change their marketing preferences, and opt-outs -- or member decisions to be removed from promotions -- will no longer expire on an annual basis.

...Mr. Leonsis said the company has been in a "rut of just looking at our advertising backlog," causing it to neglect subscribers, who generate 80% of revenue. Still, he said he stands by the company's full-year earnings guidance of 89 cents a share.

Good news for online music enthusiasts according to this Wall Street Journal story (subscription required):

In a major step forward, MusicNet and pressplay, the online services owned by the major international record labels, are close to reaching licensing agreements that would allow both of them to offer songs from all five big music companies.

The deals will fill one of the major gaps that both operations have faced in competing with free, unlimited peer-to-peer song-swapping outfits. Despite their ties to the top names in the music business, the two services have been unable to offer full catalogues of artists from all five companies. MusicNet is backed by AOL Time Warner Inc., EMI Group PLC and Bertelsmann AG, along with RealNetworks Inc. Pressplay is owned by Sony Corp. and Vivendi Universal SA, and it has already had a licensing deal with EMI.

...People familiar with the matter said the new deals are expected to include several features that online-music users favor, including permanent downloads. These songs also can be "burned" onto compact discs. In addition, MusicNet is expected to secure similar rights from its current three label backers and aims to roll out a new version including those features by year end.

The New York Times story on Slashdot.org, "an online publication with a fanatical community of millions of readers that combines a rich view of technology with quick, off-kilter wit." Most importantly, Slashdot continues to thrive because its expenses are low and its following significant. As Internet entrepreneur and author of "Web Business Boot Camp," Richard Seltzer puts it, "Publishing without paper is cheap and cheap is good."

Could it be that this is the 21st-century model for Internet publishing?

The highest-flying print publications of the dot-com bubble burbled about technology and the businesses that it fertilized. But now they and their glossy paper have fallen to earth. Just last week, Forbes ASAP and Upside joined the once-fat Industry Standard in the glossies' graveyard. "There is no market for a dedicated new-economy publication," said Monie Begley, a spokeswoman for Forbes.

But far away from the buzz and the glamour, Slashdot survives and thrives. Run out of a basement office in a suburb of Ann Arbor, Mich., Slashdot has remained true to the slogan: "News for nerds. Stuff that matters."

New York Times Magazine story (registration required) on German painter Gerhard Richter, as the Guggenheim prepares to stage a retrospective in February, and the SFMOMA is opening an exhibition this week:

Since the mid-60's, Richter has been celebrated and attacked, pretty much equally, for the extreme physical precision, maddening opacity and daunting intellectual quality of his work, which switch-hits, sometimes almost as if arbitrarily, between realism and abstraction. The realist pictures -- landscapes, flowers, skulls, portraits, candles, among other things -- copy postcards, news photos and his own snapshots in a style that is mechanically exact but calculatedly blurry in parts, daring a viewer to figure out what, if anything, the pictures are about. The abstractions sometimes perversely turn improvisational gestures into deliberate, mechanical-looking, freeze-dried marks. They have the quality of blue ice, pristine and cool. Richter's paintings are disciplined, contradictory, strange, melancholic, even sometimes morbid.

And they are among the great works of the postwar era. At a time when art is full of doubt, Richter is the most self-critical of artists, putting painting to the most extravagant tests and taking nothing for granted. In the process, he makes disturbing and often utterly beautiful art. Other artists, like Jasper Johns, ask what is the meaning of a brush stroke. Richter asks what is the value of art itself -- what is its use in the world.

...''Idiots can do what I do,'' he says, although of course he doesn't really think so. ''When I first started to do this in the 60's, people laughed. I clearly showed that I painted from photographs. It seemed so juvenile. The provocation was purely formal -- that I was making paintings like photographs. Nobody asked about what was in the pictures. Nobody asked who my Aunt Marianne was. That didn't seem to be the point.''

The point, among other things, was to distance himself from the cliches of artistic expression -- all the spontaneous, fiery, warm and fuzzy modes of painting -- so as to make people really look and not reflexively swoon. By using deliberately banal photographs, impersonally mimicked, he was doing the exact opposite of what painting was expected to do, not grabbing a viewer by the lapels but methodically copying an everyday image. In time, some of the pictures have come to look expressively painted, perceptions having changed, but making methodical copies was Richter's intent.

''The abstracts are the opposite to work on,'' he says. ''That process is more like walking, step by step, without an intention, until you discover where you are going. When I paint a landscape from a photograph or an image like this one, I can see the end point before I start, although in fact it always turns out slightly different than I imagined. What I have is not facility, because this really doesn't take skill. I have an eye. I couldn't make a drawing of you sitting here right now. I would love to have that ability, in the same way that I would love to play the piano. Virtuosity is a precondition for pianists, but in addition you have to be good. These are not the same thing. This is the big problem for painting today, the terrible side of modern art, because you can now do anything and simply declare it to be art -- with no sense of quality.''

The New York Times story by Jonathan Dee exposes the myth behind the

...if you consider that a TV network's true audience is advertisers, then you're on your way to understanding why Tuesday night is, in fact, a big moneymaker for the WB. The network more than makes up for its abysmal ratings by charging an inflated ad rate for those few viewers its shows manage to attract. A 30-second commercial spot on ''Gilmore Girls'' costs about $82,000 -- nearly threequarters of the fee for advertising on an episode of, say, ''Law and Order: SVU,'' an NBC program that regularly has about three times the number of viewers. The WB gets away with this because its overall ratings, poor as they appear, were up 5 percent in the 18-to-34-year-old category last season, and while ''Gilmore Girls'' may be among the least-watched series on television, it's also No. 2 in its time slot among viewers aged 18 to 34.

Eighteen to thirty-four: for decades, conventional advertising wisdom has attached the adjective ''coveted'' to this slice of the viewing audience. According to an analysis by the former NBC News president Lawrence K. Grossman, advertisers pay an average of $23.54 to reach 1,000 viewers in that age bracket, versus $9.57 per 1,000 over the age of 35. And since commercial television, whatever else it may be, is fundamentally a system for delivering audiences to advertisers, network executives lose a lot of sleep trying to figure out what will hold fast the slippery attention of people in their late teens, 20's and early 30's. It is, as it has been for 40 years, the principle by which a great deal of our popular culture -- not just TV, but music, movies, radio -- comes into existence.

...To be sure, there was a hard-numbers aspect to the initial explosion of youth-targeted advertising in the 1960's and early 70's. By 1966, 48 percent of the U.S. population was under the age of 25. Failure to speak their language meant kissing off half of the market.

But this is not valid any more.

It was a long time before anyone cared to notice that the target demographic itself, and its status in American society, had gone through some profound changes. The population bubble caused by the baby boom kept floating up; whereas in 1940 only 6.8 percent of the population was 65 or older, as of 2000 that number was 12.4 percent. And the economic news wasn't bullish either. Between 1973 and 1990, median real income for families with children headed by persons under 30 fell an amazing 16 percent. And in 1990, three out of four men between the ages of 18 and 24 were still living at home, the largest proportion since the Depression.