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

The University of California at San Diego has ordered a student organization to delete hyperlinks to an alleged terrorist Web site, citing the recently enacted USA Patriot Act.

School administrators have told the group, called the Che Cafe Collective, that linking to a site supporting the Revolutionary Armed Forces of Columbia (FARC) would not be permitted because it violated federal law.

In a letter to the Che Cafe Collective, UCSD University Centers Director Gary Ratcliff said the hyperlink violated a law that bans "providing material support to support terrorists." Ratcliff warned that the student organization would face disciplinary action if it did not immediately remove the link to FARC.

Gerald M. Levin, the former chief executive of Time Warner who agreed to sell the company to AOL, publicly defended his decision for the first time since he retired last spring amid mounting disappointment with the deal.

It is too early to judge the merits of the merger, Mr. Levin told Reuters yesterday, while appearing in London at the World Congress of the International Confederation of Societies of Authors and Composers.

...Yesterday, Mr. Levin took a more philosophical tone, suggesting that the merger would eventually bear fruit. "People are just too impatient with the emergence of new business cultures," he said. "It doesn't happen overnight. It doesn't happen in the first year, particularly when you have transforming transactions."

The signs appeared a week ago, on the morning of the AOL Time Warner Inc. board meeting in New York. Red letters on a white background spelled out "We Support Steve." They popped up on cubicle walls, elevator banks and high above the lobby near the ceiling.

...Last week, there was some speculation in the news that the AOL board might oust Mr. Case, but that didn't turn out to be the case. But the America Online troops in Dulles were armed with their pro-Steve message just in case. One employee even scrawled the word "Strongly" in between "We" and "Support Steve" on one of the signs. "They must have worked," quips an AOL spokesman.

A growing number of the technology world's largest corporations are trying to dump stakes in their in-house venture-capital portfolios, attempting to salvage some of the millions of dollars they invested in once-promising but now-troubled start-ups. In one of the biggest sales, Hewlett-Packard Co. has hired Credit Suisse Group's investment bank, Credit Suisse First Boston, to help it unload stakes in 46 companies, in which H-P invested $214 million, to bargain-hunting secondary buyers.

1902 The air conditioner was actually designed to protect printed paper. Willis Carrier, working for the Buffalo Forge Co., designed a device to remove moisture from the air in printing and food production plants. But before too long department stores and factories started ordering units not to dehumidify but for comfort. In 1915, Carrier started his own company. Thirteen years later he introduced a consumer model.

Donna Dubinsky talks relates the Palm and Handspring story in this Fortune feature:

The PalmPilot was born out of frustration. At first almost all we did at Palm Computing was sell handwriting-recognition software. But we got tired of seeing our great software run on others' so-so handheld computers. We'd tell them what we thought they could do to improve, but they wouldn't accept our little company's influence. Bruce Dunlevie got sick of Jeff and me complaining about our partners' lack of innovation and vision and said, 'You know, if you guys know what to do, why don't you go do it?' The next day Jeff shows up with a little cardboard and wooden model he'd glued together in his garage. That model became the PalmPilot.

...You have to be nimble. I doubt there's any entrepreneur who's succeeded on his original business plan. Situations change, the dynamic changes, the competitive environment changes, the technologies change. You have to be able to adapt.

You also have to be able to stop things. One of the disciplines I'm most proud of at Handspring is that we kill projects. That is so hard to do when people have invested their time and effort. And they're good projects. But you have to decide, Hey, when we started, it made a lot of sense. Today, for whatever reason, it doesn't. We can't keep doing it just because it's got momentum.

Great column by David Fitzpatrick in Fortune on why AOL Time Warner's board should be keeping Case, not villifying him, especially as Microsoft starts to come after them with all guns blazing.

Case is a proven watchdog of the value of his shareholders' investment. He did well for them in the merger of AOL with Time Warner, something that cannot be said for decision-makers at Time Warner. If anyone exercised poor judgement it was participants from that side of the deal: then-CEO Jerry Levin, Parsons, and all those board members who are now said to be out for Steve. They, after all, were the ones who voted in favor of what turned out to be a bad deal for their shareholders -- at least by the evidence so far. In the current Newsweek, columnist Allan Sloan, with the help of financial research firm Aronson & Partners, calculates that had the merger not occurred, AOL's stock would today be $6 or $7, and that Time Warner's would be in the vicinity of $44. The stock in fact is at about $12. So who paid a bigger price? Is it fair to punish a manager because he did what was best for his shareholders?

...For now, AOL Time Warner dominates the consumer Internet business. Why? Because Steve Case had the vision and the tenacity to build the pre-merger AOL in the face of enormous odds, shifting strategy as necessary. Nobody but Case has ever built a business of scale directly in the face of Microsoft in an area it considered a strategic priority. OK, Rob Glaser of RealNetworks is doing it now, too. But such skills are rare -- and invaluable.

Interesting tidbits in this Wall Street Journal story (subscription required) about the spy photograph industry that gives any web surfer the ability to check out photographs of certain parts of the world on sites such as  Globalsecurity.org, a military watchdog group:

It used to be that only the spy agencies of the two superpowers had the ability to take snapshots from space. That changed 16 years ago when a French commercial-government joint venture launched the world's first satellite offering photographs for sale. The quality of those early pictures wasn't particularly good, but in late 1999, an American company, Space Imaging, launched the first high-resolution satellite, Ikonos. It can take pictures with a clarity 10 times that of the French satellite — enough to spot a car on the ground or an American airfield.

...A 1992 law allows the government to declare any part of the earth off-limits to American commercial satellites to "meet significant national security or significant foreign policy concerns."...But news media organizations and freedom-of-information advocates contend that the provision, known as "shutter control," is so vague that it is unconstitutional. "There has long been a standard in which national security concerns can be invoked to limit the free flow of information," said Ann Florini, a fellow at the Brookings Institution. "It's that there must be a clear and present danger. This law forgets that."

The issue remained theoretical until last October. That's when the government, concerned that Al Qaeda or the Taliban could use the satellites to peek at American maneuvers in Afghanistan, paid Space Imaging about $4 million for exclusive rights to photographs over the war zone....

The Wall Street Journal story on Dell needing its "float" more than ever.

Dell is decidedly not cash-poor. But if its balance sheet weakens, the company could lose one of its key advantages: the ability to strong-arm suppliers into waiting 37 days, on average, to be paid for their goods. Dell is paid by its customers instantly, so the company makes the most of this "float."

Working capital, a measure of liquidity, has declined markedly at Dell in recent years. It is used to finance production of goods before they are sold and consists of current assets minus current liabilities.

In 2000, the company's working capital was $2.5 billion; in the August quarter, it was $238 million.

The company said the decline was a result of its ability to stretch out payments to its suppliers.

Dell's liabilities are up 48 percent in two years, to $9.5 billion; assets are up only 17 percent, to $14 billion.

From today's New York Times story:

Under the deal, KaZaA's owner, Sharman Networks Ltd., will advertise high-speed Internet access provided by Tiscali, an Italian Internet provider, to its tens of millions of European users. In return Tiscali, which serves around seven million customers in 15 countries, will pay Sharman a "bounty" for each KaZaA user who signs up for its high-speed access service.

...The deal also underscores the potential common interests of high-speed Internet access providers and organizations that deliver complex digital media. Internet providers, including Tiscali, have said that one way to convince consumers to pay for more expensive high-speed access is to offer them content, like movies and music, that takes more time — an often excruciating amount of time — to download using slower dial-up connections.

...Jonathan Zittrain, an associate professor at Harvard Law School, said the significance of the deal between Sharman Networks and Tiscali is likely to be more a cultural one than a legal one, noting that "all hands to this conflict recognize we're at a cultural point of inflection."

This deal, he said, implicitly lifts peer-to-peer networks out of the online demimonde of casino sites and tasteless pop-up windows to the better tended world of Internet access providers.

Wall Street Journal details how Credit Suisse First Boston rewarded certain technology company executives:

The brokers who worked with Mr. Quattrone set up accounts for select executives of companies that hired the Quattrone group to take them public or could give the firm other investment-banking assignments, according to people familiar with the matter. The accounts, which were all managed by the brokers in a similar fashion, would receive a few hundred shares of each IPO, reselling them within a few weeks at a profit and engaging in other trading as well. The number of these accounts grew from just 26 in January 1999 to about 160 in early 2000, according to one CSFB e-mail.

...CSFB's "Friends of Frank" accounts generated profits for executives of about $80 million or more after the IPOs were sold off gradually over several weeks, according to people familiar with the accounts.

...Some executives who got "Friends of Frank" accounts closed them after clashing with the CSFB brokers who ran them -- either over IPOs they didn't want, or lack of control over the accounts, according to people familiar the matter. The accounts generally got all the CSFB IPOs led by the Quattrone group bankers, but some clients only wanted the hot deals, or wanted to sell them immediately instead of over a period of weeks.

Jeffrey A. Dachis, former chairman and CEO of Razorfish Inc., a New York Internet-service provider, says he had a misunderstanding with the CSFB brokers about the discretionary nature of his account, which he opened soon after CSFB led a $55.2 million IPO for Razorfish in April 1999. When Mr. Dachis questioned why some IPOs he had never heard of had been put in his account, the brokers shifted him out of the program. After that, he says he kept an account he managed himself with the same broker at CSFB.

With lawsuits being filed against fast-food restaurants, and school districts beginning to ban soft-drink sales and junk food next on the list, Pepsi is attempting to overhaul itself according to this Wall Street Journal story (subscription required):

Now fast-food chains and snack makers are launching defensive maneuvers. Earlier this month, McDonald's Corp. announced it would take some of the unhealthy oils out of its french fries. And PepsiCo is developing its healthier snacks.

By doing so, the company is tampering with its biggest driver of growth. Frito-Lay alone accounted for just over two-thirds of PepsiCo's profit last year of $2.66 billion. Though slowing lately, the unit's strong growth in operating profit -- 10% in North America last year -- has helped PepsiCo outshine Coca-Cola Co. in recent years despite trailing the Atlanta company in beverage sales.

...The answers are coming in fits and starts. PepsiCo executives are still trying to define a "nutritious" snack. (Their current answer: servings containing no more than 150 calories, five grams of fat -- including one gram of saturated fat -- and 250 milligrams of sodium.) They're starting to work on the same thing for beverages. Among the questions: Is a "juice drink" -- which isn't 100% juice but may have reduced calories -- a "nutritious" product?

Mr. Reinemund says the trend is clear: More consumers are concerned about nutrition, and "we need to be prepared to deal with it." Already, low-fat snacks such as baked potato chips and pretzels account for 20% to 25% of Frito-Lay's sales. What's more, sales volume of such products is up about 20% so far this year, reflecting a growing desire by some consumers to cut back on fat and calories.

An Associated Press story in the Wall Street Journal on Yahoo's ongoing quest to deliver revenue generating subscription-based servies:

In its latest move to generate revenue outside online advertising, Internet portal Yahoo Inc. is launching a fee-based service Monday that lets users download and play videogames on demand.

...The Yahoo service launched early Monday with prices ranging from $4.95 for the rental of one game for three days to $14.95 for the rental of 10 games for 30 day.

...Once a game is selected, users must download a large file -- up to 200 megabytes. The so-called "precaching" file remains on the computer, so subsequent starts of the same title are faster. The new service only works on Windows-based personal computers with high-speed Internet connections.

Interesting Wall Street Journal story (subscription required):

Of 34,196 people who responded to AutoPacific's questions about what vehicle brand they would consider buying next time, 31.7% considered Toyota, up from 27.6% in 1998. Ford, the No. 1 ranked brand, was considered by 36.8% of the respondents, beating General Motors Corp.'s Chevy brand's 36.6% score by less than a bumper length.

...In the luxury field, the big winners are BMW, Lexus and Acura. BMW has parlayed its "ultimate driving machine" message, and a string of cars that deliver on that promise, to the point where 19.5% of the respondents to AutoPacific's survey said they would consider a BMW as their next car, up from 14.2% in 1998. BMW's arch-rival, Mercedes-Benz, has a more staid, less youthful image that it's trying very hard now to change. Small wonder, as Mercedes ranked behind BMW, Lexus, Acura and Nissan in the AutoPacific survey with a consideration score of 14.6%.

As AutoPacific's Mr. Hall points out, this isn't really about brand image. It's about the cars and trucks. The top three brands, Ford, Chevy and Toyota have all rolled out extensive lines of new trucks and SUVs over the past few years, responding to and capitalizing on the American mania for those vehicles. DaimlerChrysler's U.S. brands, Dodge, Chrysler and Jeep, have had to make do with fewer new products. Dodge has just one SUV, the aging Durango. Toyota has five SUVs -- the small RAV4, the midsized Highlander, the pickup-based 4Runner, the full-sized, U.S.-made Sequoia and the ultra-ritzy Land Cruiser.

Shawn Fanning named his company after his own nickname, which he acquired for having nappy hair, according to this Wall Street Journal story (subscription required):

As trademark lawyers and professors are quick to point out, the strongest trademarks are arbitrary or fanciful -- that is, either made-up words or words that bear no relationship to the goods or services with which they're used. For many business people, who often are eager to select a descriptive name, this is counterintuitive.

...Perhaps that's why an adult entertainment company made an offer valued at about $2.4 million to obtain Napster's trademark and domain name. Private Media Group of Barcelona, Spain, called Napster "one of the most recognized names in [peer-to-peer] file-swapping" and said that "with the Napster trademark," it planned to create a file-sharing network for adult content.

Notably absent from Private Media Group's announcement was any offer to buy the technology or hardware that ran Napster's file-swapping service. Instead, all it wants is Napster's trademark. With name recognition by millions of people and continuing traffic to what is now a defunct Web site, the "Napster" trademark apparently is more valuable than anything else Napster created.

An AP story in the Wall Street Journal (subscription required) states that a new Commerce Department study, compiled from various analyst surveys, cites a need for new applications and services before broadband will become more popular.

Only 10% of U.S. households subscribe to high-speed access, lower than the rate in Taiwan, South Korea, Hong Kong or Canada. About half of American families have some type of Internet access at home.

...The report cites a 2002 poll by Winston Group indicating that telecommuting would make broadband attractive as well. According to the poll, a third of Americans would forgo a pay raise to be able to work from home.

The high relative cost of fast access is also a hurdle. Most people pay about $50 per month for high-speed connections, whereas slower dial-up connections are only $20 a month. In an August 2002 Yankee Group survey, more than 70% of dial-up users cited cost as the main reason they aren't upgrading to faster access.

Wall Street Journal story (subscription required) on the growing role of the rental-car market for product marketing. How long before consumer product companies do the same? "Your midsize car with a Coke is now ready in space #56" or something to that effect....

...The rental-car industry has become a powerful marketing tool for new automotive technologies and new cars themselves (though in some cases car makers still use rental agencies to dispose of slow-selling vehicles). And the marketing has proven equally advantageous for rental operators, who often negotiate for exclusive rights to offer new cars and products first.

Experts say rental cars are a perfect test-drive for potential buyers. They say that after driving a rental car for a few days, customers can end up buying a car and accessories they wouldn't ordinarily consider.

...For Thales Navigation Corp., a closely held Santa Clara, Calif., company that makes the NeverLost system, being in the Hertz fleet has been the prime driver of sales of units that average $1,800 each.

A recent J.D. Power & Associates study of 6,000 car buyers who bought navigation systems found almost one-third had prior exposure to them, with more than half saying they got that experience in a rental car. Thales said it sells about 7,000 units a year -- with no advertising -- because about 80% of its customers try its systems in rental cars.

Continuing problems for the telecom industry are highlighted in this Wall Street Journal story (subscription required) on the Sprint's wireless division's negative net customers in this past quarter, "a virtually unheard-of development for a major cellular carrier."

"The wireless industry is heading toward an end game scenario that looks like the airline industry," said Roger Entner, a wireless analyst for the Yankee Group, a technology-consulting group in Boston. "The airlines are very affordable but nobody likes the service, [they're] not profitable and everybody bounces in and out of bankruptcy. This is right where these guys are headed."

The problems at Sprint PCS could also provide another cautionary tale for the entire wireless industry, where slowing subscriber growth rates means some carriers are planning on targeting potential customers with riskier credit profiles. Sprint attributed the latest bit of bad news to continuing problems with nonpaying customers in its "Clear Pay" program, which allows subscribers with poor credit to sign on for service with a spending cap of $125.

...The program has contributed mightily to the growth of the carrier's total customer base. As of the second quarter, half of the carrier's new customers were signed up through the program, and Clear Pay customers now make up roughly one-third of its total subscriber base of 14.6 million people.

 

The New York Times reports that things are better for the majority of the US population even as we suffer through this downturn. Hmm, very hard for me to believe that.

But just as Americans fell victim to "irrational exuberance" in the late 1990's, exaggerating the underlying strength of the economy, today's equally fashionable pessimism appears overdone as well. And that means there are still plenty of good reasons to be confident about the health of the American economy over the next decade.

...Even after the latest revisions shaved earlier estimates, the annualized rate of productivity growth — which measures our ability to improve the nation's standard of living by producing more in each hour of work — appears to have been a robust 2.6 percent from 1995 through 2000. And despite the usual tendency to fall sharply in a recession, those productivity numbers are holding up well through the current slowdown.

...Those gains have translated into real benefits for nearly all Americans. The official unemployment rate fell below 4 percent in the late 1990's for the first time since the 1960's, reaching the state of economic nirvana that experts call full employment, in which essentially any working-age person who wants a job can find one. The unemployment rate has since risen, but it remains considerably lower than at comparable stages in past economic cycles.

Wage increases for the average worker, whose income had stagnated in real terms for two decades, easily outpaced the low rate of inflation from 1993 through 2001. Poverty fell sharply as those at the bottom of the income ladder shared in the gains for the first time in a generation. Many more people became homeowners and, yes, investors, enjoying improvements in personal wealth that even with falling stock prices remain far above the levels of a decade ago.