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

Wouldn't it be great to have an arrangment like this one just to serve as a director of a large company, as detailed in this New York Times story (registration required). Kellett, who made his millions from the business of nurshing homes, yep, got paid too for serving on the board and attending board meetings. Ah, the corporate good life coming to an end.

A longtime WorldCom director has resigned and agreed to pay hundreds of thousands of dollars for benefits he received in the years before the company collapsed into bankruptcy.

The resignation of the director, Stiles A. Kellett Jr., came Sunday night after months of criticism of a deal he struck with WorldCom while it was still a star of the telecommunications industry. The deal permitted Mr. Kellett to rent a company airplane for $1 a month and a $400 fee.

Richard C. Breeden, the former chairman of the Securities and Exchange Commission who was appointed by the bankruptcy court as a monitor for WorldCom, has attacked the deal as improper, saying in a memorandum to the court that the arrangement saved Mr. Kellett at least $1.4 million. Mr. Breeden called for Mr. Kellett's ouster in the memo and in communications to the board.

This New York Times story (registration required) yesterday was interesting in showcasing the reach and importance of the Web even in the Islamic and Third World. Recently the Paid website has mentioned how its editor Rafat Ali, for example, has been posting from India again compressing the time and distance between the rest of the world and us here in the US.

Inside a run-down building in a middle-class Cairo neighborhood, a hybrid group of eager young dot-commers and idealistic religious messengers produces one of the Islamic world's leading Web sites, Islam-Online.net.

"We all consider this an act of jihad, how to liberate people's minds from ignorance," said Ahmed Muhammad Sa'ad, using "jihad" in its sense of spiritual struggle. Mr. Sa'ad is a recent religious school graduate and a prize-winning reciter of the Koran who helps channel readers' requests for religious rulings, or fatwas, to Islamic legal scholars around the world.

Islam Online says it wants to present a positive view of the faith to non-Muslims, to strengthen unity in the Muslim world and to uphold principles of justice, freedom and human rights. Scholars of the region say they see the Web site as a leading example of efforts by moderate Muslims to push for the Islamization of societies by nonviolent means.

"There's a desire to make it a one-stop shop," said John L. Esposito, a professor of religion and international affairs at Georgetown University. "But obviously no single Web site can do that for anything, let alone the Islamic world."

Changes are beginning to occur in the hotel industry vis a vis the outrageous hidden costs of a room according to this New York Times story (registration required). About time but will it become a standard in all hotels or will Wyndham remain alone?

Who can enjoy a hotel room that tries to peddle you a $6 bottle of water before you get your bags unpacked? I check out the minibar. Here are some prices: Pretzels, 1.5 ounces, $3; M&M's, 3.14 ounces, $3; "Breath Saver Kit," consisting solely of a plastic bag with a five-stick pack of Wrigley's gum and a regular roll of Lifesavers, $3.50.

...Checkout brought additional surprises. On the bill were three room-service breakfasts I never ordered (the clerk removed them); various $95-cent fees for picking up the telephone to dial a toll-free number; and a $10.83 charge for a one-minute call to Manhattan that would have cost less than 40 cents on my home phone bill.

All this is changing at the Wyndham chain of hotels thanks to the CEO Fred Kleisner who is putting caps on the minibar costs and looking into doing the same for phone use. Great move. Hopefully other hotels will follow although when I stayed at the Hilton Towers near Rockefeller Center a few weeks ago, things were just as ludicrous as they always have been at these business hotels.

"The big M&M's and the big Snickers bars, the movie theater size, are set at $1.25," he said. "Last summer I said, let's just fix this. Our policy now is we have a great opportunity to increase revenues in our minibars by lowering our prices on selected items and selling more of them."

Following on the heels of an Ernst & Young and VentureOne survey, here is the latest bad news from PricewaterhouseCoopers famed MoneyTree survey that confirms the worst fears, according to this San Jose Mercury News story:

Investments into the newest start-ups, or in companies receiving their first round of venture capital, dropping to six-year lows, according to the MoneyTree survey released Monday by PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association.

The data suggests entrepreneurs starting new companies are having a harder time raising money than executives at companies a couple of years old, with a working product, and who are searching for so-called ``follow-on'' capital.

Companies receiving their first round of capital got $1.03 billion, down from $1.22 billion in the second quarter, and the lowest level since 1996. The number of such companies dropped from 214 to 159, the lowest in eight years.

The Bay Area mirrored the national trend, with only 36 companies receiving a total of $327 million in venture capital in their first rounds.

Following in the footsteps of Half.com's marketing ploy which made some sense at least since the town it asked to rename had some connection as Halfway (although Half.com is still a little ridiculous as a town name, come to think of it! ;), now one town has been asked to change its name to "Got Milk?" according to this San Francisco Chronicle story:

If the town of Biggs in Butte County changes its name to Got Milk?, Calif. , what's next? Will Mike Bottorff's 15-year-old, now at Biggs High School, become a graduate of Got Milk? High?

...Changing the name of the nearly 100-year-old homey town of 1,793 in the state's rice-growing region is no small matter. But when Mayor Sharleta B. Callaway got a letter recently from the California Milk Processor Board, promising some largesse in exchange -- got money? -- she thought the idea deserved an airing.

...Callaway said Biggs could certainly use a boost. The library doesn't have a rest room, and the streets badly need paving. "We could not handle an influx of people coming to the Got Milk? Museum if the streets are not taken care of, " she said.

Manning's idea is not new. The town of Halfway, Ore. (population 345), near the Snake River and Hells Canyon in northeast Oregon, spent 2000 as Half.com, Ore., having been paid $73,000 by a Philadelphia Internet e-commerce company called Half.com. The online bazaar was later gobbled up by EBay, but not before it sealed the deal with Halfway, which included the payment, 22 computers and some improvements at Lions Park.

Microsoft and other companies have filed objections to the proposed sale of Bluelight.com to United Online, according to this News.com story, "citing software licensing and tax issues among their concerns. The U.S. Bankruptcy Court in Chicago is slated to hear Kmart's motion on the sale Wednesday."

Kmart filed for Chapter 11 bankruptcy protection in January, citing weak holiday sales and fierce competition. At that time, Kmart said it wanted to sell its Internet service provider as part of an effort to focus only on its core retailing business.

...Bluelight.com, which consists of the ISP and Kmart's e-commerce Web site, was valued at about $80 million for the combined company in August 2001. Subscribers to the service once numbered 7 million but have dwindled to about 165,000.

A Fortune story on Intel's $10 billion gamble that "by pushing the state of the art in chipmaking faster than rivals are able to, it will reach a point where it can use sheer manufacturing prowess and capacity to undercut any competitor in price, performance, and variety."

"This is the beginning of the consolidation and bifurcation of the semiconductor industry into a handful of leaders and lots of followers," says CEO Craig Barrett, who headed manufacturing before moving to the corner cubicle at Intel headquarters in Santa Clara, Calif. "There will be an equivalent bifurcation in products and profit margins. The products that should command the highest margins are those at the leading edge of design and performance, which result from only one thing--having the best manufacturing technology."

Sounds like typical saber rattling from a notoriously aggressive company. But there's a second motivation in Intel's bet on Moore's Law--a kind of nerdy idealism that includes a pure, simple faith in technological progress and a genuine desire to help revive IT and telecom. Intel thinks its manufacturing capabilities will speed the introduction of incredibly powerful chips that take the Internet to the next level, enabling hundreds of millions of computers, phones, and other devices to be always tied to wireless networks. "We're talking about a half-billion transistors on a chip, and perhaps even a billion," says Paul Otellini, Intel's president, COO, and likely the next CEO. "Suddenly there will be very little limit to what you can design into a single integrated circuit. If you want to talk about a golden age for semiconductors, that's when it will be, and the IT and telecom and consumer electronics industries will be the biggest beneficiaries."

News.com speculates, based on the fact that the beta of Office 11 does not currently work on older operating systems, that Microsoft may be thinking about limiting the product's ability to run on them so as to encourage conversion of customers to its newest operating system. Such a move would also limit the testing and hassles Microsoft has to go thru to ensure that the product works on every computer already out there.

Limiting the final version of Office 11 to Windows 2000 and XP would potentially encourage users of older operating systems to upgrade, but it could further erode relations between Microsoft and business customers already stung by increases in volume licensing fees, analysts say. Some business customers have indicated that they may explore alternatives to Office, such as Sun Microsystems’ StarOffice and OpenOffice, due to Microsoft’s licensing plan.

Many companies have complained of feeling forced to sign up for the new program, known as Licensing 6. Market researcher Gartner estimated the program raised the majority of Microsoft business customer rates from 33 percent to 107 percent.

"It's definitely a perception issue," Gartner analyst Michael Silver said of Microsoft appearing to push its customers around. "In a lot of things Microsoft does, there are perception issues like that."

Beyond sour customer relations, gauging the impact of such limitations on Office 11 is more difficult to project than it might seem, analysts say. At the end of 2001, Windows 2000, Windows XP Home and Windows XP Professional accounted for only 20 percent of the operating system's installed base, according to IDC. That number could double by the end of 2002.

That means that when Microsoft releases Office 11 in mid-2003, half or more of people running Windows would have to upgrade to a newer version before installing the new product. For Microsoft, which financially stands to gain from customers upgrading to newer versions of Windows, limiting Office 11 to the newer operating systems could be important for getting laggards to upgrade.

This would fall into the post-9/11 commerce boom and did you know? random facts category! According to a New York Times story, the use and acceptance of turnstiles in US is finally catching up to the rest of the world that has already been dealing with terrorism for a while. According to one maker of turnstiles, business is up 150% since 9/11 with sales really picking up since February.

The new turnstiles, called optical stiles, read ID cards and come with or without barrier arms. They cost about $30,000, compared with about $2,000 for the basic rotating tripod — the kind once used in New York subways.

...The optical stiles use sensors to ensure that only one person enters for each ID card presented. They allow up to 30 people to pass through in a minute, compared with 35 to 40 for the traditional tripod turnstile.

"Before 9/11, most people were shopping for the lower-end models," Mr. Lamson said. "Now we have several multimillion-dollar deals pending."

Perey, a leading turnstile maker, has been at it since 1913, selling its products to places like Disney World, New York City and the Pentagon. "I believe that the significant increase in sales will really come in the next two to three years," said Mr. Hendrickson, who estimated that the industry was now only a $100 million market worldwide. "Turnstiles are not impulse buys. It takes a while to come up with new security plans or architectural designs."

Mr. Hendrickson said 16 companies worldwide made turnstiles and estimated that 25,000 turnstiles — including optical stiles — were installed in the last year. Perey's sales, he said, are up 45 percent from this time last year.

More dotcom ideas see the light of day as is obvious from this new company based in London according to this New York Times story (registration required). The UK is the third largest music market after the US and Japan and text-based messaging and services over the wireless networks is already a part of the cellphone-using culture.

The service, available only in Britain for now, works like this: A person dials a four-digit number on a cellphone and points it at a source of recorded music, be it the sound system in a nightclub or a commercial on television. Shazam's computers filter out the background noise and compare the audio sample with a database of 1.6 million songs, a process that takes less than a second. The service then fires off a text message to the phone, identifying the song and the artist. Each call costs 50 pence, or about 75 cents.

So far the name-that-tune service is simply that. There is no way to directly obtain the song in question, which company executives acknowledge is a drawback.

"We don't have a sustainable business if it's just a novelty," said Vijay Solanki, Shazam's marketing director, lounging on a huge beanbag in the company's low-key, dot-com-on-a-budget quarters near Piccadilly Circus. The trick, he and other Shazam executives say, is to turn the service into an everyday tool for a broader crowd — and into a conduit for music sales.

A New York Times story (registration required) about the latest project from Mitch Kapor, the man behind Lotus Notes and who I believe helped fund Ray Ozzie's Groove Networks. Kapor has used $5 million of his own money to set up a nonprofit that's all about open source applications. Based out of San Francisco, the nonprofit has five employees and one full-time volunteer in Andy Hertzfeld, the original Apple Macintosh team member.

The foundation's first software program is to be a personal information manager, or PIM, as such programs are known. Code-named Chandler, the software is to combine e-mail and calendar functions with tools for sharing files among multiple users. Mr. Kapor said he planned to release a functional portion of the program by the end of the year, and hoped to have a finished product by the end of 2003. At this time the Foundation plans to release Chandler, both the production program and the underlying source code, as a free download, but Mr. Kapor said he would not rule out a commercial package, most likely from a third party.

"I actually think the PIM is the central productivity application, not the word processor or the spreadsheet," Mr. Kapor said last week. "Where people spend their time is their e-mail and calendar," he said. "I've felt frustrated that what is out there falls short of something satisfying."

Most large companies use Microsoft's Outlook Express for e-mail and calendars. But the program's more advanced features, like file sharing and collaboration, are available only when it is used with Microsoft Exchange, a more costly product requiring network server computers. Mr. Kapor said Chandler would offer this kind of performance to smaller organizations at much lower cost by using so-called peer-to-peer technology, which relies on the users' PC's and eliminates the server.

"Individuals and small organizations are at a disadvantage today," he said, "and I'm an old PC guy. I'm in favor of end-user empowerment and decentralization." Mr. Kapor said Chandler was aimed at filling an unmet need for smaller organizations, not at unseating Microsoft in large companies. Groove Networks, a company backed by venture capital and founded by the Lotus Notes creator, Ray Ozzie, has also produced a peer-to-peer e-mail and collaboration program, but it, too, is primarily aimed at large companies, Mr. Kapor said.

But Jeff Tarter of SoftLetter is skeptical about the need for such software.

"I haven't seen any evidence that there's a hole in the market here," he said. "But all the rational people have been completely wrong about most of these markets. So the fact that this sounds loony is probably a good thing."

The airlines own travel website, Orbitz, and other competing websites have compounded the major airlines' revenue and profit woes. This New York Times story (registration required) details the birth of how Orbitz came about:

It was, someone in the room said, "a Don Corleone moment." The room was in the New York office of the Boston Consulting Group, to which top Microsoft executives had been summoned in November 1999.

The offer, made by executives of four big airlines, was this: They would give Microsoft's online travel agency, Expedia, access to their discounted "Web fares" and, in return, get half of Expedia. And the threat: If Microsoft refused, the airlines would announce their own travel site the next day, which happened to be the day of Expedia's initial public offering.

Microsoft, unaccustomed to being on the receiving end of threats, refused. So on the morning of Expedia's offering, the airlines said they would start a rival service, ultimately known as Orbitz.

Besides feeling a dire need to compete with Travelocity, which had been the frontrunner, and the threat from the impending launch of Expedia (now part of Barry Diller and USA Interactive's companies), the airlines were also looking for a way to reduce or remove the cost of the middleman.

In the early 1990's, the costs of distribution — for agent commissions, reservations systems and telephone agents — represented more than 20 percent of revenue, and airlines were looking for ways to reduce them....

"The airlines are shooting themselves in the foot," said Edward P. Gilligan, president of American Express Global Corporate Services.

Web fares are so low that more business travelers want them, even with the fares' restrictions. The airlines "are cutting their fares by 50 or 60 percent to save 2 percent in distribution costs," Mr. Gilligan said.

...Over all, 42 percent of business tickets issued by American Express are now discounted and nonrefundable, up from 25 percent in 2000.

Tight corporate budgets have been a big force, but the Internet is, too. In controlled experiments, American Express found that when travelers book tickets for the same route, those who use its Internet site spend 15 to 20 percent less than those who talk to its own travel agents.

Orbitz launched in June 2001 and the airlines had hoped to milk the Internet gold rush with an IPO for the company but things have changed drastically and the airlines have been forced to invest more recently in this venture even as they ask for the government for a bailout.

Once out of the gate, Orbitz became one of the fastest-growing sites in history. In the first six months of this year, it sold $950 million worth of tickets, estimates PhoCusWright, a consulting firm. That gives it a 14 percent share of the online travel agency market. (Expedia has 35 percent and Travelocity has 24 percent.)

So far, Orbitz has not been a financial success. Last year, it lost $103 million on revenue of $38 million. In the first quarter this year, it lost $9 million on revenue of $27 million.

Pet food online is thriving and growing to about $100M this year according to Forrester in this New York Times story (registration required). Even 40-lb bags of pet food are being shipped by companies but this time they're making sure they charge enough to cover shipping, and the website serves as an online version of their catalog stocking items that are difficult to carry in the stores.

For two years, that category has been held out as the prime example of what went wrong during the dot-com craze. Companies like Pets.com and others helped put a face on the e-commerce lunacy — the face of the Pets.com sock puppet — and inspired lore of missteps like companies' giving away 40-pound bags of dog food, with free shipping.

...Mr. Francis [CEO of Petsmart] said, the company uses the site to sell goods that are impractical to carry in stores, like dozens of varieties of 50-gallon fish tanks. He said about 75 percent of the goods sold on Petsmart.com were so-called hard goods like these, whereas in the stores, those items account for just half of sales.

...Like many dot-com executives of the day, in 1998 Julie Wainwright, who left the defunct online movie e-tailer Reel.com to create Pets.com, cited the $15 billion size of the pet supply industry and suggested that if online retailers could take just a small share of the market, they would thrive. The problem, though, was that few e-tailers understood that dog and cat food represent nearly half of that figure and that such bulky, relatively low-price goods are nearly impossible to sell profitably when shipping to remote customers.

But as the pet supply market continues to grow, the share of nonfood items grows, thus lending some hope to the smaller number of companies now in the online pet supply market. According to a study by the research firm Business Communications, the total market will reach $33.5 billion by 2005, despite a soft economy.

"This is a recession-proof industry," said Colette Fairchild, associate editor for Pet Age magazine, a trade publication. "Even in a big recession, people still buy for their pets. It's an emotional buy."

Zachys re-entered the wine auction business with an unusual but successful format for the sale that occurred this weekend according to this New York Times story (registration required). Who says the economy isn't doing so well?! 

In New York, which has displaced London as the wine auction capital, five houses now compete internationally for cellars and buyers. With absentee bidders' purchases strong and the economy weak, auction floors can be sleepy. Daniel's dining room, with merchants' agents and sommeliers seeking good buys, ranged from perhaps 40 to 80 percent full.

Charles Klatskin, a prominent New Jersey collector, said, "The most important thing here is the provenance" — the sources of the lots and established history and soundness of storage conditions.

...The top earner, a case of 1945 Château Mouton-Rothschild, a red Bordeaux estimated at $75,000, fetched $87,000 from an American buyer. Six magnums of 1990 Romane-Conti from Domaine de la Romanée-Conti, red Burgundy estimated at $65,000, brought $69,600. Twelve bottles of 1982 Château Pétrus, a blue-chip Pomerol, estimated at $22,000, earned $25,520.

A New York Times story (registration required) on this past weekend's surprising success:

"Jackass the Movie," a big-screen version of the MTV cable television cult hit in which its star, Johnny Knoxville, and others engage in dangerous stunts and gross-out escapades, became the No. 1 movie in America over the weekend by earning an estimated $22.7 million at 2,507 theaters....

"Older teenagers and college-age students apparently just love to watch people do the things that the people do in this movie," said Paul Dergarabedian, chairman of Exhibitor Relations, a Los Angeles company that monitors box-office results. "It's like people will always stop to see a train wreck."

The film, which was made for $5 million, was not previewed for critics, and drew almost universally dreadful reviews when critics finally saw it on Friday. But the fact that the movie was found noxious by the establishment is a large part of its appeal to young people eager to find ways to prove they are not in thrall to authority figures.

According to an AP story, Priceline, the name-your-own price Internet company, has expanded its hotel service to Asia.

Americans [and others, I'm assuming] can use the Norwalk-based company for major-brand hotel rooms in Beijing, Shanghai, Hong Kong, Singapore and Bangkok.

More than 8,000 hotel properties in 1,300 cities and towns in the U.S., Europe, Canada, Mexico and the Caribbean are in the Priceline.com program.

The newest portal currently in beta is MyWay.com,  a jab at Yahoo and the old way of doing things -- too many ads popping up and every single part of the home page real estate covered in content, services and ecommerce making sites like AOL and Yahoo feel like the equivalent of walking thru Times Square.

In comparison, according to this New York Times story (registration required), MyWay.com is "a zen rock garden of a portal with lots of features quietly presented and no discernable advertising. And no fee."

The site's revenue comes from text advertising links listed above its Web search results. The search results and the ads are provided by Google.

Most improbable about MyWay is its creator, Bulldog Holdings, the owner of Iwon .com, considered by some to be perhaps the most garish and crass of all the portals [founded by two HBS classmates, Jonas Steinman and Bill Daugherty, who also acquired the name and assets of Excite last year]. Iwon's premise is that users earn entries into a sweepstakes with every click. It was among the earliest users of large banner advertisements and those that drive animated minivans and such in front of whatever users want to read.

...Over the summer, they began to look around for yet another site to start.

"We were bantering back and forth for weeks about what the next big thing would be," said Mr. Daugherty. "Jonas said, `Why not an ad-free portal?' "

...Unlike Iwon.com, Bulldog plans little advertising for MyWay. But Mr. Steinman said he took inspiration from another simple site with nothing more than text ads. "Google spent nothing on marketing," he said, "and look where they are."

Thanks to an earlier Naughty Bits post that took me to the Best of the Bay in the San Francisco Bay Guardian:

Is your partner's messy house secretly getting on your nerves? Do you want to improve your partner's living space because you need to say you're sorry for something? Whatever the reason, you can call on Lynne and Lile, who go by the name of Geekmaids, for their housecleaning services. As they say on their Web site, Lynne and Lile are "downsized techies who create order out of chaos." Their services include house cleaning, organizing, gardening, and helping with other home improvements. They'll even set up a wireless computer network for you! Before cleaning, Lynne and Lile will talk with you about the items or clutter in your house they specifically shouldn't touch – and they promise not to peek through private material or crash your computer...

Kidnappings are up in Karachi, Pakistan even as the city makes inroads in the fight against kidnappers by using technology for the police's benefit, according to a New York Times story (registration required):

One minute, Jameel Yusuf, a Pakistani aristocrat turned citizen crime-fighter, curses like a New York beat cop and dismisses the kidnappers who prey on Karachi residents as "scum."

The next, he taps information into his Palm Pilot and calmly explains how he uses a sophisticated computer program to track calls from pay phones and cell phones demanding ransom. Later, he talks excitedly about the bare-knuckle tactic he and the Pakistani police sometimes use after identifying a kidnapper — kidnapping the kidnapper's family in retaliation.

...He and the police also encouraged families to negotiate with kidnappers, as a way to both humanize captives and give the police more time to track phone calls. Unlike the Pearl case, most kidnappings in Karachi revolve around money and involve business executives or children from wealthy families who are worth more alive than dead. Instead of raiding hideouts, the police watch as ransoms are paid and hostages are released, and then make an arrest.

In a worrying sign, kidnappings are up this year, with 20 cases through September, the highest number in five years. Kidnappers are now using satellite phones, investigators said, which police lack the equipment to trace. But Mr. Yusuf vowed to match the kidnappers, step for step.

"I have no sympathy for the criminal," he said. "No sympathy at all."