News Hour: 商业

Unsold Homes Tie Down Would-Be Transplants

Thu, 03 Apr 2008 03:11:43 GMT

Unsold Homes Tie Down Would-Be Transplants

Dr. Michele Morgan migrated last fall from Detroit to Phoenix, taking a job as a psychiatrist. She expected her husband, Sam Kirkland, to soon join her, since he was accepting an early retirement package from his employer, General Motors. But he cannot move, he says, because he has not been able to sell the four-bedroom family home.

Fabrizio Costantini for The New York Times

Unable to sell his Detroit home, Sam Kirkland has been kept apart from his wife in Phoenix.

Fabrizio Costantini for The New York Times

Sam Kirkland expected the home in Detroit owned by him and his wife, Dr. Michele Morgan, a psychiatrist working in Phoenix, to bring $200,000. A similar home nearby sold for $90,000.

“As things now stand,” said Mr. Kirkland, who is 51 and intends to seek work in Phoenix, if he ever gets there, “my wife might decide to give up her job in Phoenix and come back to Detroit for a while, until we can sell the house.”

The rapid decline in housing prices is distorting the normal workings of the American labor market. Mobility opens up job opportunities, allowing workers to go where they are most needed. When housing is not an obstacle, more than five million men and women, nearly 4 percent of the nation’s work force, move annually from one place to another — to a new job after a layoff, or to higher-paying work, or to the next rung in a career, often the goal of a corporate transfer. Or people seek, as in Dr. Morgan’s case, an escape from harsh northern winters.

Now that mobility is increasingly restricted. Unable to sell their homes easily and move on, tens of thousands of people like Mr. Kirkland and Dr. Morgan are making the labor force less flexible just as a weakening economy puts pressure on workers to move to wherever companies are still hiring.

Signaling an incipient recession, nearly 85,000 jobs disappeared in the United States from December through February, and the Bureau of Labor Statistics is expected to announce on Friday that March failed to produce a turnaround in hiring.

“You hear a lot about foreclosure and the thousands of families who are being forced out,” said Joseph S. Tracy, director of research at the Federal Reserve Bank of New York. “But that is swamped by the number of people who want to sell their homes and can’t.”

No government agency counts those who move for a job, either across state lines or just from one town to another in the same state. The Census Bureau, however, calculates how many people move across state lines for all reasons, and that number fell by a startling 27 percent last year, after climbing by almost that percentage for each of the previous three years.

With homes changing hands easily in a booming market, interstate migration reached 2.2 million people in 2006, excluding the effects of Hurricane Katrina. As the economy and home prices began to unravel in 2007, however, interstate migration plunged to 1.6 million people.

“That is still a historically high number,” said Mark Zandi, chief economist at Moody’s Economy.com. “It reflects the relatively strong economy until midyear. But given what’s happening now, I would be surprised if domestic migration isn’t at a record low in 2008.”

Worker mobility — or rather immobility — is making a big contribution to this decline, Mr. Zandi and other economists say. Retirees are similarly stuck in their homes. In normal times, they frequently sell so they can move to condos in Florida or assisted-living facilities or smaller quarters near adult children.

“These older people spent all of their lives earning the money to buy their homes,” said Robert J. Shiller, a Yale economist who is an expert on housing, “and now they resist selling for less than they believe their homes are worth.”

Corporate transfers contribute significantly to worker mobility, and employers often cover at least some of the cost of selling a home in the old location and buying one in the new. That practice can backfire, says Richard Shaw, a vice president of Applied Industrial Technologies, which sells gears, motors, bearings and other industrial parts from 337 centers around the country.

Out of 3,500 employees in the United States, Applied normally transfers 25 to 30 each year from one center to another, or to the headquarters in Cleveland. Almost all are career people rising in the ranks. Despite the opportunity, transfers have fallen by half, Mr. Shaw said. That is mainly because transferred employees too often find themselves owning two homes — one in the old location and one in the new — and paying two mortgages.

Applied tries to minimize the problem by paying one of the two mortgages for up to six months, the expectation being that the old home will sell by then. Increasingly, that does not happen, not with inventories of homes across the country at an 18-year high, according to the National Association of Realtors. That makes employees reluctant to move, even for a raise and a promotion, Mr. Shaw said.

He tells of one transferred executive “who ended up owning two homes for more than six months and, finding himself paying two mortgages, opted to move back to his original city, surrendering his new house to the bank.”

Mr. Kirkland is determined to sell before he moves. But that might take months, he acknowledges. A house that he thought would bring $200,000 — its appraised price three years ago — in fact might bring only $90,000 if he were to sell it today. That was the selling price for a similar 2,500-square-foot home on the next block, and Mr. Kirkland wants more than the $125,000 in debt that he and his wife still have on their house.

“When I stop working at G.M., I am going to devote myself to the house, making it look as pristine as possible,” Mr. Kirkland said.

He is also trying to make a major career transition. After 30 years as a G.M. employee — most recently at a parts warehouse in Pontiac, Mich., serving as a full-time union official of his United Automobile Workers local — he accepted one of the early retirement packages that the company is offering to shrink its work force. Taking courses by mail, he is studying for a master’s degree in organization and development. His goal is to get work in that field in Phoenix, perhaps with a community organization. His wife, who is 47, relocated in October, in time to escape the Michigan winter, and his two daughters are away at college.

But getting to Phoenix is now problematic. He will not leave the house, afraid that if it sits empty, it will be a target for vandals. “I might have to spend so much time living at the house and working on it,” Mr. Kirkland said, “that my wife will say, ‘I can always have a job as a psychiatrist here in Phoenix, but I might have to go back to Detroit for a while.’ ”

Gayle Newton, in a somewhat similar fashion, delayed her departure from Taylorsville, N.C., for two years while she tried to sell her two-bedroom home, on a large parcel of land, for $89,000. She finally gave up, rented the house last September and moved in with her daughter and son-in-law in Baltimore, quickly landing a job there for $15 an hour in the accounts payable department of a granite quarry. Until she left Taylorsville, Ms. Newton, who is 53, did similar work for a furniture company at $9 an hour.

She had put her home on the market in 2006, not long after her husband died and she found herself alone in Taylorsville in a job that did not pay enough to keep her there. She decided to live near her daughter, to find higher-paying work and to apply the proceeds from selling her home toward another one in Baltimore.

“That seemed like a good year, 2006,” Ms. Newton said, “but the downturn in housing had already started in our area. I didn’t realize it. I never imagined that a house on seven acres would not sell. I thought at $89,000 it would be a steal and I could move on to Baltimore much sooner than I did. My daughter finally came and insisted. She could not stand my whining any longer.”

The house in Taylorsville is still unsold.

Distressed Owners Are Frustrated by Aid Group

Thu, 03 Apr 2008 03:08:20 GMT

Distressed Owners Are Frustrated by Aid Group

By LYNNLEY BROWNING

Every day more than 4,500 people call Hope Now, the White House-backed group formed to help struggling homeowners.

Matt Rourke/Associated Press

Joseph Barratt, 55, and others demonstrated at a Hope Now home ownership preservation workshop in Philadelphia Tuesday, seeking to prevent foreclosure.

Jeff T. Green for The New York Times

Harry Smith works at the Spokane, Wash., call center of Hope Now, helping homeowners work out troubled mortgage loans.

But few of them appear to be getting the relief they are hoping for. One reason is that the financial powers behind Hope Now — mortgage lenders, loan servicers and big investors — are reluctant to change loan terms substantially if doing so hurts them.

Almost six months after Hope Now was created, the group is largely resisting calls for broad relief for homeowners. In Washington, a furious debate is under way over whether to help homeowners on the brink of default, and several possible plans are starting to coalesce.

But Hope Now, which President Bush has held up as a crucial tool to fight foreclosures, is coming under fire from within and without, accused of putting the interests of lenders over those of borrowers.

Hope Now says it is succeeding. The group, which also includes nonprofit organizations that advise people on managing their debts, says it has helped more than a million people avoid foreclosure.

But Hope Now does not disclose details about how the loan modifications and payment plans it ostensibly helps to broker actually help homeowners. Many people merely get the chance to catch up on late payments.

Even Hope Now says it is unsure how effective it is. The group does not break out the number of loan workouts that occur as a result of its efforts and those that might have happened anyway. Some people who work with Hope Now say it has done little to keep the housing crisis from deepening.

“Hope Now is a failure,” said Michael Shea, the executive director of the Acorn Housing Corporation, a large counseling agency that is part of the Hope Now alliance. “It’s industry-dominated.”

Hope Now is run out of the Housing Policy Council, which in turn is part of the Financial Services Roundtable, the influential financial services lobby.

William A. Longbrake, the vice chairman of Washington Mutual, the big savings and loan, is a senior policy adviser to the roundtable. He said he has “indirect, inferential evidence” that Hope Now is helping.

But the group itself employs just three people. Most of its work is done through committees staffed by senior bank and mortgage executives who are part of the Financial Services Roundtable. Hope Now’s executive director, Faith Schwartz, is an executive at the subprime lender Option One Mortgage.

People who dial Hope Now’s toll-free number, 1-888-995-HOPE, typically are routed to call centers in Phoenix and Spokane, Wash. Three out of four eventually are connected to credit counselors for a free, informal consultation.

But only a fraction of all callers — about 4 percent — ends up talking in person with a housing counselor, according to the Homeownership Preservation Foundation, a nonprofit group at the center of Hope Now that also has ties to the mortgage industry.

Ms. Schwartz defended the group’s work. She said Hope Now is “leveraging existing infrastructure” to help homeowners.

Kenneth Goodman, a homeowner in Fontana, Calif,. said he did not have a good experience trying to get help through Hope Now.

Mr. Goodman, 53, said he had called Hope Now three times in recent months because he was struggling to pay the mortgage on his two-story tract home. The first time he was referred to a mortgage escrow company. The second time, “I got someone oblivious to everything,” he said. The third time the counselor told Mr. Goodman that he had a choice: Sell his home for less than the value of his mortgage, or face immediate foreclosure.

“It was all unhelpful,” Mr. Goodman said. He worries that he will lose his home.

There are Hope Now success stories, but the group declined to point to any.

During a tour of a Hope Now counseling agency last Friday, President Bush cited the case of Danny Cerchiaro, a movie producer. Through Hope Now and a counselor that he called "the magic lady," Mr. Bush said, Mr. Cerchiaro was able to refinance the adjustable-rate mortgage on his home in Iselin, N.J., at a more affordable rate.

But the Financial Services Roundtable and another big industry group behind Hope Now, the American Securitization Forum, oppose any government housing effort that would require them to take losses on bad mortgage loans.

“We support the broad objectives of the alliance,” said George Miller, the executive director of the American Securitization Forum, which represents financial companies involved in bundling mortgages into securities for sale to investors. “But we represent the interests of investors, and we want to minimize losses on bad mortgages and maximize recovery.”

Hope Now counselors are urged to follow the securitization group’s guidelines on loan modifications, which advise lenders to modify loans case by case rather than across the board. Both the forum and the roundtable oppose calls to open up bankruptcy courts for struggling homeowners, a move that could lead to further losses for their members.

The Homeownership Preservation Foundation, for its part, says little about that part of the mortgage market where all the trouble began: subprime loans. According to a fact sheet from the foundation, which was established in 2003, with a $20 million grant from GMAC-RFC, a lender, foreclosures typically result from “medical issues or abrupt changes in income and expenses.”

The sheet does not mention subprime mortgages. The foundation’s seven-member board includes Sandor E. Samuels, the chief legal officer of Countrywide Financial, the mortgage giant that has come to symbolize many of the excesses of subprime lending.

Colleen Hernandez, the executive director of Homeownership Preservation Foundation, called her organization “a hybrid of corporate and nonprofit cultures.” She said the foundation’s 10 affiliated credit counselors working with Hope Now have special training in default counseling. But such counselors typically provide only generic financial planning advice. Housing counselors, by contrast, negotiate with lenders to reduce a borrower’s mortgage.

The credit counselors “don’t say, here’s my recommendation, let’s call the servicer and insist on that option,” Ms. Hernandez said.

In some cases, she said, servicers and banks listen in on the calls between homeowners and the counselors with the knowledge of the homeowners.

Under a deal set to expire in June, the foundation bills the mortgage servicers $100 for each session, then transfers that money to the appropriate credit counseling agency.

Ms. Hernandez said the foundation also hoped to get paid for the calls that do not go beyond the initial call centers. “It has value to the servicers and banks,” she said.

The American Securitization Forum, for its part, has said that “in some instances” its members will pay for the counseling fees.

Ms. Hernandez said that callers typically wait less than 30 seconds to be connected to a call-center operator. But on Monday evening, a reporter who called Hope Now was kept on hold for 50 minutes before hanging up. During that time, a recorded message urged the caller to “start an online counseling session” at hopenow.com.

In recent weeks, Hope Now has had trouble explaining its mission on that Web site. In mid-March, a link on the site inadvertently directed people to a Florida company that sells foreclosed properties.

The Home Preservation Foundation is considering venturing into foreclosed property itself, a move that might strike hard-pressed homeowners as odd given its name and its role in Hope Now.

Analyzing Your Own Business

Thu, 03 Apr 2008 03:06:01 GMT

Analyzing Your Own Business

By MICKEY MEECE

Glenn Okun, clinical professor of management and entrepreneurship at Stern School of Business at New York University, says that owners should view their business as if they were a prospective outside investor. He outlines six steps to a thorough analysis of a venture:

¶Assess the attractive, or opportune, elements of the venture.

¶Identify the risks of the business.

¶Select the most attractive opportunities to pursue.

¶Decide which risks must be dealt with, given the likelihood of their threat and the extent of their impact.

¶Determine the resources that will be required to exploit the opportunities and manage the risks.

¶Estimate the value that will be created through the expenditure of resources. Plans that result in incremental shareholder value should be considered.

Entrepreneurs must remember, he said, that resources have costs that must be borne by the firm. Financial costs include interest and the dilution of ownership. Financing terms may also constrain the entrepreneur’s flexibility in managing the firm.

Using the Human Touch to Solve Workplace Problems

Thu, 03 Apr 2008 03:03:27 GMT

Using the Human Touch to Solve Workplace Problems

Chris Livingston for The New York Times

Renee Richmond in the parking lot of her employer, Vurv, in Jacksonville, Fla. The company bought Richmond and another employee reliable used cars instead of hiring two new employees when the company moved to other side of Jacksonville.

A SMALL company in Jacksonville, Fla., came up with a novel — and sensitive — solution when two crucial employees had trouble making the commute to its new headquarters across town.

As Derek Mercer, the founder and chief executive of the company, Vurv Technology, tells it, the employees’ supervisor came to him with the suggestion that the company buy two good used cars and give them to the workers outright.

Mr. Mercer said he agreed, and immediately approved the $5,000 expenditure for each car.

Seven years later, the two employees, Tim Gunter and Renee Richmond, are still with Vurv, a developer of human resources software. The company itself has grown from about two dozen employees in those days to about 300 and is now in yet another building.

In looking at the alternative, Mr. Mercer said, it would have cost the company more than the nearly $10,000 it paid for the automobiles to find and train replacements, not to mention the ground it would have lost with customers.

“I felt that they were good employees and responsive to the customers,” Mr. Mercer said, and thus a valuable asset to the company.

Mr. Gunter, who helped clients with software issues, said he was barely six months on the job at Vurv when the family car broke down. He had to ask a neighbor for a ride to work that day, and he feared his new job was at risk.

That same day, Vurv bought him the used car.

“It wasn’t the nicest car,” he said. “It wasn’t the prettiest car. It wasn’t fresh off the lot with new-car smell. But boy, did my overwhelming feeling of dread go from that to enlightenment. This is what this company is about. This is what Derek is about.”

At that point, Mr. Gunter said: “I was just hooked. The 80-hour weeks we worked after that never meant anything. It was give and take. I was giving and the company was definitely giving back.”

Ms. Richmond, who helped companies deploy Vurv’s software, was a single mother of two in 2000. Her Chevrolet Cavalier, with 270,000 miles on it, “finally took its last breath,” she recalled. “I lived 45 miles away from the office, so I had quite a hike back and forth.”

Her supervisor, who is no longer with the company, and Mr. Mercer knew of her troubles, she said, and at her annual evaluation offered to buy her a car instead of giving her a $3,000 raise. They also helped her find the right car, a Diamanti, and paid $4,500 for it, she said. She told them to work out an installment so she could pay the difference. They never did.

And then she got a second pleasant surprise: her raise started showing up in her paycheck as well.

“A company that takes care of their employees,” Ms. Richmond said, “it definitely is returned to them tenfold because their employees are going to take care of them and do a good job.”

Creativity and sensitivity meshed with good business sense at Vurv, and that is a crucial aspect of problem solving, according to Glenn Okun, clinical professor of management and entrepreneurship at the Stern School of Business at New York University. “Entrepreneurs must remember that resources have costs that must be borne by the firm,” he said.

Small-business owners should approach such instances analytically, Professor Okun said, examining risk and opportunity. Act as if you are a third party interested in financing your own company, he suggested, and then decide how to proceed.

Especially now, when economic times are tough, Professor Okun said, business owners will have to weigh unexpected outlays against the knowledge there will be potentially less revenue coming in and less credit extended by lenders and investors to smooth rough patches. In this environment, he said, “problems get magnified, even if the firm is solid.”

The solution at Vurv was a balancing act of trying to help employees while not hurting the bottom line.

The same was true for the Transtec Group in Austin, Tex., which helps public and private agencies in street, highway, airfield and seaport projects. Dan K. Rozycki, its president, recalled what happened when an employee had to get out of her apartment after a relationship broke up. “In a matter of days,” Mr. Rozycki said, “we helped her find a new apartment and we furnished the whole place from sofa to spatula.”

The company has done so many things for employees, he said, that “it’s hard to remember stuff we’ve done over the years.”

“When you’re small and flexible and put co-workers first,” he said, “stuff just happens, but nobody records it or thinks it’s that shocking.”

When another employee had serious personal problems, he said, the company offered and paid for the professional therapy.

And when a new employee from China needed to learn how to drive, colleagues took him for driving lessons and helped him shop for a car.

In addition, he said, over the years, the company has learned how to avoid common pitfalls that could fester as problems. Asking for raises is often tricky for employees and employers, Mr. Rozycki said, “so we give out raises every Jan. 1 to everyone.” No one has complained in the last seven years, he said.

As to industry conferences, he said, the company decided to invite every one rather than select a few so that no one felt left out.

“What it really comes down to,” he said, “is we’re trying to create the ultimate workplace. We believe you can do the right thing and be profitable.”

Google Cutting 300 Jobs at DoubleClick

Thu, 03 Apr 2008 03:00:10 GMT

Google Cutting 300 Jobs at DoubleClick

By MIGUEL HELFT

In the first sizable layoffs in its history, Google is cutting about 300 jobs from the American operations of DoubleClick, the advertising technology company that it acquired recently, according to a person with direct knowledge of Google’s plans.

The cuts represent about a quarter of DoubleClick’s American work force of about 1,200. The company has about 1,500 employees worldwide, and the chief executive of Google, Eric E. Schmidt, has suggested that job cuts would also affect DoubleClick’s overseas operations at a later date.

Google declined to confirm the number of layoffs.

In a statement, the company said: “Since our acquisition of DoubleClick closed on March 11, we have been working to match and align DoubleClick employees in the U.S. with our organizational plan for the business. As with many mergers, this review has resulted in a reduction in headcount at the acquired company.”

Google said it also planned to sell a DoubleClick unit, Performics Search Marketing, that helps marketers place ads on search engines, including those owned by Google and its main rivals, Yahoo and Microsoft.

“It is clear to us that we do not want to be in the search engine marketing business,” Tom Phillips, director of DoubleClick integration at Google, wrote on the company’s official blog. “At Google, maintaining objectivity in both search and advertising is paramount to our mission and core to the trust we ask from our users.”

The decision to sell Performics Search Marketing is not surprising, said Ellen Siminoff, chairman of search marketing company Efficient Frontier. Google’s job is to get paid as much as possible for the ads that appear on its pages.

“If you are a search marketing agency, your goal is to get the most for your customers’ money,” Ms. Siminoff added, noting that those two goals could be in conflict.

Mr. Phillips said Google would retain the affiliate marketing portion of the Performics unit, which helps advertisers establish networks of Web sites that can refer customers to them.

Mr. Phillips did not identify a buyer but said he had “received preliminary interest” from a number of Google’s existing partners.

Some DoubleClick employees were being laid off Wednesday, while others were being offered transitional roles, Google said. The transitional roles are expected to end after the two companies are fully integrated, said the person with knowledge of Google’s plans.

The cuts follow Google’s largest acquisition ever and were widely expected. But the number is higher than some analysts predicted and suggests that Google, which has hired aggressively in the last several years, may have become more cautious.

Google added more than 6,100 workers in 2007 and ended the year with 16,805 employees worldwide. Amid shareholder concerns about its fast-rising expenses, Mr. Schmidt promised investors last year that Google would slow its rate of hiring.

Bill to Regulate Tobacco Moves Forward

Thu, 03 Apr 2008 02:57:14 GMT

Bill to Regulate Tobacco Moves Forward

By STEPHANIE SAUL

The House Commerce Committee approved a bill Wednesday that would give the Food and Drug Administration sweeping regulatory authority over the tobacco industry, clearing the way for a floor vote on the legislation, which has long been sought by antitobacco activists.

The bill is meant to severely curtail tobacco marketing, to emphasize health warnings on tobacco products, to ban many flavored cigarettes, and to prohibit labeling of cigarettes as “light” or “low tar.” Dozens of health groups have supported the bill as potentially life-saving.

But despite broad support in both the House and the Senate, where a similar proposal cleared a committee in July, the legislation faces formidable obstacles.

The Bush administration and the Senate Republican leader, Mitch McConnell of Kentucky, have indicated their opposition.

In a statement shortly after the vote, a White House spokeswoman, Emily A. Lawrimore, said the administration thought that the legislation would do more harm than good, creating a false impression that regulated tobacco products were safe.

“The administration believes that tobacco is not a drug or device to be regulated by the F.D.A.,” Ms. Lawrimore said.

A spokesman for Senator McConnell noted that he had said he would review the bill.

Senator Richard Burr, Republican of North Carolina, has reportedly threatened to filibuster the legislation if it reaches a vote on the Senate floor. In a statement Wednesday, shortly after the House committee vote, Mr. Burr said he remained opposed to the legislation, in part, he said, because it would strain an already burdened agency. The bill is also running up against an abbreviated election-year legislative schedule.

The House committee approved the bill 38 to 12, with much of the opposition from Republicans who argued that the F.D.A. was already overwhelmed and could not handle regulating another industry.

That position has recently been articulated in an advertising campaign by Reynolds American, the tobacco company that sells Camel cigarettes and other brands. But Representative Henry A. Waxman, Democrat of California, who sponsored the bill, said such arguments were “clearly red herrings from those who are fundamentally opposed to regulating tobacco at all.”

And Representative John D. Dingell, Democrat of Michigan and the Commerce Committee chairman, said he was separately working on legislation to “clean up this mess at Food and Drug, and we plan to do it with all vigor and enthusiasm.”

The tobacco bill has been endorsed by the cigarette maker Philip Morris, and some people have criticized it as a compromise that does not go far enough. For example, it prohibits the F.D.A. from raising the legal age for buying cigarettes beyond the current level of 18.

And while the bill prohibits the sale of candy-flavored cigarettes — which account for less than 1 percent of the market — it allows the continued sale of popular menthol cigarettes. One menthol brand, Newport, marketed by Lorillard Tobacco, is the nation’s second-leading cigarette, after the Philip Morris brand Marlboro. Lorillard has not yet taken a position on the legislation, a spokesman said.

Representative Mike Ferguson, Republican of New Jersey, offered an amendment that would have prohibited menthol flavoring. “I think it’s inconsistent to say we want to protect kids from flavored cigarettes, ” Mr. Ferguson said, “but then we have a provision in the bill that allows menthol cigarettes.”

Mr. Dingell acknowledged that the legislation was not ideal. “In a perfect world, we’d ban all cigarettes,” he said. “But the hard fact of the matter is that there are a lot of jobs depending on this. And more importantly, there are a lot of people out there who are addicted to this, and they’ve got to have their fix.”

Antismoking groups have sought regulation of the tobacco industry for years. In 1995, a former F.D.A. commissioner, David A. Kessler, drafted regulations declaring nicotine a drug and cigarettes a drug delivery device subject to F.D.A. authority, but these were struck down by federal courts.

The Senate approved a proposal in 2004, but the House has never voted on one.

Within minutes of Wednesday’s action, statements supporting the committee’s vote were issued by supporters including Senator Edward M. Kennedy, Democrat of Massachusetts, who sponsored the Senate version of the bill; the American Academy of Pediatrics; and the American Cancer Society.

Although the White House had expressed its opposition, it has not yet threatened to veto the legislation. In testimony last fall, Dr. Andrew C. von Eschenbach, the current F.D.A. commissioner, indicated the Bush administration’s reluctance to embrace a new regulatory role, citing wide efforts already begun by both state and federal agencies to reduce tobacco use.

The bill would create a center within the F.D.A specifically for tobacco regulation financed by industry fees projected to exceed $5 billion over the next 10 years.

It would also require disclosure of the contents of tobacco-based products and set standards that would require removal or reduction of harmful ingredients; require that the findings of industry research be made public; prohibit companies from making health claims about tobacco products, and require larger and more effective warning labels.

Wall Street Shows Optimism That Crisis Is Fading

Wed, 02 Apr 2008 02:36:12 GMT

Wall Street Shows Optimism That Crisis Is Fading

By MICHAEL M. GRYNBAUM

Stocks started the second quarter with a soaring rally on Tuesday that sent the Dow Jones industrial average up nearly 400 points, its best performance in two weeks, as investors found reasons to take heart in a fresh round of mortgage-related write-offs at UBS and Deutsche Bank and a capital infusion at Lehman Brothers, the brokerage firm.

The Standard & Poor’s 500-stock index gained 3.6 percent on the strength of a surge in shares of financial services firms. Lehman Brothers, the bond insurer MBIA and the mortgage giant Fannie Mae were among the index’s biggest gainers.

Despite the discouraging numbers — $19 billion in write-downs at UBS and nearly $4 billion at Deutsche Bank in the first quarter alone — investors appeared hopeful that the bad news could signal the last of Wall Street’s credit woes.

“UBS was providing transparency to the market,” said Ryan Larson, a Voyageur Asset Management trader. “That’s something we’ve desperately needed in the face of this current crisis.”

Adding to the good feelings, Lehman said private investors had snapped up a $4 billion offering of preferred stock — far more than expected — in a move to dispel a swirl of rumors about its stability. Shares of Lehman jumped 17 percent. UBS said it would try a similar move with $15 billion in additional funds; its shares rose 15 percent.

Analysts pointed to the successful Lehman offering as a sign that the actions of the Federal Reserve had restored some confidence among banks.

“Lehman demonstrated that not only could they raise the capital at a reasonable cost, but that the Fed really had succeeded at stabilizing the financial system,” said Ed Yardeni, the investment strategist. “Lehman was an important test of that.”

Treasury yields rose and the dollar advanced against the euro, signs of increased confidence among investors that Wall Street will weather the credit crisis.

Oil and gold, traditional hedges against inflation, fell for the third consecutive session. And a pair of better-than-expected reports on the manufacturing and construction industries helped bolster the market, as well.

The Dow finished at 12,654.36, up 3.2 percent, or 391.47 points. The Nasdaq composite index gained 3.7 percent; the S.& P. 500 closed up 47.48 points at 1,370.18. In Europe, benchmark indexes in London, Paris and Frankfurt all gained about 3 percent.

The triple-digit swing in the Dow extends the volatility that has rocked stock markets in recent months, as jumpy investors react quickly and intensely to incremental developments in the tight credit market.

The S.& P. 500 just finished one of its most volatile first quarters since the Great Depression, and the Dow has swung more than 100 points in 7 of the last 11 sessions.

The rally on Tuesday was the best second-quarter opening day since 1938. The recent volatility, however, has left some analysts weary. “Nobody’s kidding themselves,” Mr. Yardeni said. “The financial crisis isn’t over. But the Fed and Congress and other financial regulators have made it very clear that they are going to use all the powers available to them to avoid a financial meltdown and end this credit crisis.”

Investors are also keenly aware that the Labor Department’s employment report, due out Friday morning, could damp any optimism. Economists are predicting that payrolls shrank by 50,000 jobs in March, which may send stocks down.

But Tuesday brought some good news on the state of the nation’s industry. A closely watched manufacturing report, released by the private Institute for Supply Management, ticked up last month, though business is still shrinking within the industry.

Elevated export orders continue to offset flagging domestic demand, but manufacturers are feeling the effects of inflation: a gauge of prices paid for production materials reached its highest level in nearly six years.

The institute’s index edged up slightly to a reading of 48.6 in March, from 48.3 in February, slightly better than expected. Readings below 50 signal contraction.

Spending on construction projects also improved, as overall spending fell 0.3 percent in February after declining 1 percent in January, the Commerce Department said Tuesday. Government-financed building is increasing even as private residential construction remains in a slump.

Investors were also buoyed by a drop in commodity prices, which have reached record levels in recent weeks. The declines in prices for oil, gold and wheat could translate to cheaper prices for consumers.

Crude oil dropped 60 cents on Tuesday, to just under $101 a barrel, its third decline in a row. Gasoline prices also traded lower. Gold, which becomes more expensive in times of crisis, declined to $887.80 a troy ounce after reaching $1,000 two weeks ago.

The benchmark 10-year Treasury note fell 1 8/32, to 99 19/32. Its yield, which moves opposite its price, rose to 3.56 percent, from 3.41 percent.

Microsoft Open Format Standard Said to Get Global Approval

Wed, 02 Apr 2008 02:33:21 GMT

Microsoft Open Format Standard Said to Get Global Approval

By KEVIN J. O'BRIEN

Microsoft won an international standards designation for its open document format, according to a copy of voting results obtained Tuesday, apparently ending a divisive year-long battle with some of its software rivals before a global standards-setting organization.

Microsoft’s Office Open XML, a format for interchangeable Web documents, was approved by 24 of 32 countries in a core group of nations in a ballot by the International Organization for Standardization, according to the document. Approval by the Geneva standards-setting body, which is known by its French acronym, I.S.O., is almost certain to influence software spending by governments and large companies.

The tally reverses Microsoft’s loss in first-round voting before the full 87-nation panel in September in a process that has been marked on both sides by heavy-handed lobbying of members of national standards committees, typically made up of technicians, engineers and bureaucrats.

“This has been a remarkable process, involving literally thousands of technical experts, technology consumers, and governments in 87 countries, whose input has helped to improve” the document format, Microsoft said Monday in a statement that did not mention the results.

In the final round of voting, which ended Saturday, three-quarters of the core members, including Britain, Japan, Germany and Switzerland, supported Microsoft’s standard, called Ooxml, according to the results document. Of the 87 nations total national votes, only 10 opposed the standard, including Brazil, Canada, China, Cuba, Ecuador, India, Iran, New Zealand, South Africa and Venezuela.

Under organization rules, at least 66 percent of core group members must accept a standard for it to be approved, and no more than 25 percent of all voting nations can oppose it.

Roger Frost, an I.S.O. spokesman in Geneva, would not confirm on Tuesday whether Microsoft’s format had been designated as meeting the organization’s standard, saying the organization would disclose the vote on Wednesday after informing its membership. The International Herald Tribune obtained the results from one of the member delegations contacted by the I.S.O.

Microsoft’s request for fast-track approval of its Ooxml standard in early 2007 unleashed an intense lobbying campaign by International Business Machines and Sun Microsystems, which helped develop a rival interchangeable document format called Open Document Format.

O.D.F. was the first interchangeable document format to receive I.S.O. approval in 2006, and its backers used the exclusive I.S.O. endorsement to pitch the technology to governments and large companies. O.D.F. is now being considered for use by 70 nations.

Controversy over the approval process continued into this week.

On Monday, the chairman of an advisory committee to the voting body, Steve Pepper, asked the I.S.O. to suspend Norway’s vote to approve Ooxml until an internal investigation could take place, saying the ballot cast did not reflect the interests of his group. “The vast majority of people were against this,” Mr. Pepper said.

Ivar Jachwitz, the deputy managing director of Standards Norway, the country’s national standards organization and the person who ultimately submitted Norway’s “yes” vote for Ooxml, disputed Mr. Pepper’s assertion that most people involved in Norway’s voting process had opposed Ooxml.

“We had an initial vote back in 2007 of nearly 50 people and the vast majority were in favor,” Mr. Jachwitz said. He did acknowledge that 21 members of the group last week submitted a letter asking for Norway to oppose Ooxml. “Our vote reflected the majority opinion,” Mr. Jachwitz said. “I do not see that it was improper.”

Mr. Frost said he had received Mr. Pepper’s complaint, but upon investigation considered the Norwegian dispute to be an internal matter. “We have received background information from them and have no reason to question the validity of their vote,” Mr. Frost said.

In Malaysia, which abstained on Ooxml, members of the country’s voting delegation barred uninvited employees of Microsoft and I.B.M. from participating in their deliberations. Sweden nullified its support of the standard last year after one member of its delegation reportedly voted twice.

And some members of Germanys delegation complained that I.S.O. rules had not been properly followed and a steering committee of the country’s national standards group, called D.I.N., was called in to rule on whether rules had been followed properly. In the end, the D.I.N. decided to submit no formal second vote to I.S.O., which allowed Germany’s initial approval to stand, according to Jan Dittberner, a spokesman for D.I.N.

Demands for speedy approval of Microsoft’s 6,000-page document sparked objections from many I.S.O. members, who felt the organization was being pressured by Microsoft, whose Office application suite is the standard on more than 90 percent of computers and archives around the world, according to International Data Corporation, a research group in Framingham, Mass.

Contention over the outcome even influenced the remarks of representatives of countries that abstained from the vote, like the Netherlands. “This is like someone with six shopping carts of food trying to go through the express lane at a supermarket,” said Michiel Leenaars, a member of the Dutch voting delegation. “The end result of this will be confusion. The standard is simply too big. There are still a lot of questions out there.”

To See a Stock Market Bubble Bursting, Look at Shanghai

Wed, 02 Apr 2008 02:31:24 GMT

To See a Stock Market Bubble Bursting, Look at Shanghai

Ryan Pyle for The New York Times

Many Chinese investors, like Guan Ling, left, and his business partner spend hours in front of computer terminals at brokerage houses, keeping track of their investments.

By DAVID BARBOZA

SHANGHAI — A year ago, investors like Guan Ling were ebullient. Chinese share prices had climbed over 500 percent in the span of two years, setting off a nationwide stock buying frenzy.

When experts periodically warned about the possibility of a bubble, prices would dip temporarily then soar even higher, breaking records and inciting another mad dash to snap up equities.

“The market was going wild,” says Mr. Guan, 49, who a few years ago closed his real estate company to invest in stocks full time. “Everybody was talking about how much they had earned, how much more they would invest, and which stocks had jumped 20 times, or even 30 times.”

That was last year. The Shanghai composite index has plunged 45 percent from its high, reached last October. The first quarter of this year, which ended Monday with a huge sell-off, was the worst ever for the market.

Suddenly, millions of small investors who were crowding into brokerage houses, spending the entire day there playing cards, trading stocks, eating noodles and cheering on the markets with other day traders and retirees, are feeling depressed and angry.

"These days my family quarrels a lot," says Zhang Liying, 55, a retired hotel waitress who with her husband invested all their savings in the stock market. “My husband asked me to sell; I wanted to hold for a while. Now my husband condemns me as so stupid that we lost our family’s savings.”

Si Dansu, 68, and a retired engineer, is even more distraught, but she blames the government.

“I devoted my whole life to the country. I went to the countryside after graduation, and worked as an engineer in a Shanghai factory until retirement. I invested almost all my savings and retirement fund in the market 10 years ago. But now I’m totally penniless. All my stocks went down.”

Other parts of Asia are as bad, or worse. In India, stock prices have plunged 31 percent in Mumbai; they are off 31 percent in Japan and a whopping 53 percent in Vietnam, another booming economy. Angry investors have burned a securities regulator in effigy in Mumbai, and some are in tears in Ho Chi Minh City, Vietnam.

“Some of them have cried,” says Nguyen Quang Tri, 74, a retired cement company manager who was visiting a Ho Chi Minh City brokerage house this week. “I have my own equity, but most of the people here borrowed money from the bank.”

The market mayhem began after concerns grew late last year about inflation at home and an American financial crisis. Now, even though China’s economy is growing at its fastest pace in over a decade, stock prices have fallen back to earth, crushing small investors on the way down.

Few experts say the stock plunge is a major threat to growth in the real economy here. But there are worries that a prolonged downturn could reverberate through China’s financial markets — especially since a large number of corporations had aggressively shifted money, sometimes secretly, to play the market.

By some estimates, 15 to 20 percent of the profits reported last year by publicly listed companies in Shanghai that are not involved in banking or finance (which usually invest in stocks) came from stock trading gains.

Companies with primary businesses like selling electricity, or even sports jackets, were moonlighting by trading stocks, hoping to bolster their earnings.

“Companies had a lot of excess cash,” said Jing Ulrich, a market analyst at JPMorgan in Hong Kong. “And a lot of that cash did leak into the stock market.”

But the big companies were following the small investor. JPMorgan estimates that 150 million people in China were invested in the Chinese stock market as of the end of last year. That may still be a small slice of China’s 1.3 billion people, but it is a huge new constituency, and it has led to the birth of both a new source of potential popular discontent and a new lifestyle: the diehard investor.

Chen Donghao is one convert. A 22-year-old recent college graduate, he is now a fixture at a Shanghai brokerage house.

In April 2006, when he was still a student majoring in art design, his family gave him about $70,000 to invest in the stock market.

It was an ideal time to get in.

“When I started the stock market was around 1,700,” he says, noting that today, despite the drop, the Shanghai composite index is still up at about 3,400. “I made a lot of money. So since the beginning of this year I decided to open a restaurant. I’d like to open a chain of famous restaurants in Shanghai.”

Shopkeepers, real estate brokers, even maids and watermelon hawkers are said to have become day traders.

A new version of the national anthem made its way around the country last year, beginning, “Arise! Ye who haven’t opened an account! Pour your gold and silver into the hot market!”

The anthem went on: “The Chinese nation faces its craziest time. The passionate roar of our peoples will be heard!”

People responded. Here in Shanghai, brokerage houses with giant electronic screens started to draw huge crowds, including many retirees who were content to spend the entire day transfixed by the sight of rising prices.

In some brokerage houses, entire floors are divided into small and midsize rooms that investors camp out in, from opening to closing bell, with their lunch bags, knitting gear, playing cards and newspapers to help them feel at home.

Only now, many investors cannot bear to look at their screens.

“I’m getting out of the game,” said Yuan Yuan, 23, a researcher at a fund company in Shenzhen who also invests on his own. “The game is over. Big institutions pulled out first, only leaving the small investors.”

In China, the government fears that angry investors can be a social problem. And so while the state-run media report on the ups and downs of the market, and even warn investors of the risks and pitfalls of investing, the press does not usually report on investors’ anger.

“Actually there are a lot of complaints, but the Chinese media can’t report this,” says Mr. Guan, the former real estate company owner.

Now, in the brokerage house corridors — corridors of pain — one can hear complaints about all the market flaws: the government doesn’t regulate the stock market and it participates in it by allowing mostly big state-owned companies to go public.

There are also complaints about insider trading, stock manipulation, and big investors with government connections, pumping and dumping stocks on small investors.

But in China, experts say, the small investor also tends to be a speculator, a gambler, and that may be why the market is so volatile, and so unforgiving.

“You know Warren Buffett?” says Chen Weihua, a 69-year-old retired engineer who once worked in Egypt. “He’s a master. He has a theory to hold stocks for a long time. But this theory doesn’t work in China. Look at Ping An.”

Ping An is a state-owned insurance company that went public last year, with shares that soared to $144 a share in Shanghai, then sank. Today, it is trading at about $50 a share, despite strong profit growth.

This was not the way it was supposed to end. Many investors had been betting that Beijing would not allow the stock market to crash before the Olympic Games come to Beijing in August.

After the Games, the powerful rumor went, everyone would sell, leading to a steep market plunge.

And if anything serious happened before the Olympics, the government would certainly do something to prop up the market.

They are still waiting.

“It’s a deformed market, an unhealthy market,” Mr. Guan says. “We’ve always had long bear markets and short bull markets.”

“Look,” he said, “it took two years to go from 1,000 to 6,000 but two months to go from 6,000 to 3,500.”

Dumb Money

Wed, 02 Apr 2008 02:27:38 GMT

Dumb Money

By MICHAEL KINSLEY

Illustration by Edel Rodriguez for TIME

We don't need a conversation about race. At least not now. What we need is a conversation about money. It becomes clearer by the day that this is not your grandmother's--or even Barack Obama's grandmother's--economic downturn. This time we start with a huge government deficit and record private debt, all run up when times were good and we should have been storing up acorns. This is one that begins with people losing their homes, which is usually the last act of the drama. This is one that is bringing back stagflation--that poisonous combination of economic slowdown and eroding currency we cured at a terrible cost back in 1981. When that red phone rings in the middle of the night, it probably won't be the National Security Adviser saying Osama bin Laden has struck again. It will be the Treasury Secretary reporting that markets have opened in the Far East and the dollar has become worthless.

The three remaining candidates have finally given speeches that addressed the economic crisis. But the presidential campaign is bouncing into its second year inside a hermetic bubble where the discussion is mainly about itself. Who cares about the economy when there is the allocation of superdelegates to worry about?

John McCain has manfully admitted that he doesn't know much about economics. Typically, this comment has been analyzed in terms of its effect on the campaign, not in terms of what it might mean to have a President who doesn't know much about economics. It has become an occasion for the popular Washington game Who Will His/Her Advisers Be? In a speech on March 25, McCain declared that he "will not play election-year politics with the housing crisis" but "will evaluate everything in terms of whether it might be harmful or helpful." He promised to "not allow dogma to override common sense."

In other words, he hasn't got a clue. Another word for dogma is values, and another word for politics is democracy. So McCain, by his own admission, knows little about economics, has no underlying values or principles to apply in considering what action to take and isn't interested in your opinion either.

Hillary Clinton's speech on March 24 blamed everybody for the excessive borrowing at the root of this crisis--except the people who did the borrowing. Her proposal to help is a parody of old-Democrat thinking. Thirty billion dollars to states and cities to spend on "everything from police and fire support to graffiti removal and better lighting." She offers a complex plan to renegotiate the terms of troubled mortgages--ultimately with a federal guarantee, which she insists "would cost the taxpayers nothing in the long run." Republicans believe you can cut taxes and bring in more money. Democrats believe you can turn mortgages that people can't afford to pay into ones that they can and it won't cost anyone a cent. Most pathetically, Clinton calls for an "Emergency Working Group" composed of Paul Volcker, Robert Rubin and Alan Greenspan. Let those guys figure it out if they're so smart.

As with most issues, there isn't much daylight between Clinton's position and Obama's. Obama also blames lenders and excuses buyers, while piling on new subsidies that will nicely compensate everyone involved for the new regulations he also wants them to endure. Obama's unique angle is blaming the war in Iraq. In the business, that is called "message discipline."

Where is the "conversation" about the economy that's even half as sophisticated as Obama's speech about race? One that explains to people that you can't just make everything better by sending out $1,200 checks? That there is a real cost to protecting overextended homeowners from the consequences of their own folly? That, yes, there are villains here, but blaming the whole mess on villainy is missing the point? That immigration and international trade are part of the solution, not the problem?

Journalists don't help. This is a golden age of economic journalism, with wonderful business writers churning out great stuff every day. But they're not the ones covering the candidates. The endless political campaign has produced a permanent class of political journalists (or perhaps it's the other way around). Many are just as wise as the business journalists, but they devote their wisdom to the minutiae of campaign strategy and are mystified to the point of terror about economics.

C'mon, boys and girls--economics may be complicated, but it's no more complicated than the laws about campaign-spending limits or the mathematics of Democratic Party superdelegates, all of which you handle with ease. We all know about the economist who predicted nine of the past five recessions. But you don't want to miss this one. It's going to be a whopper.

20,000 Vietnam Nike Workers Strike

Wed, 02 Apr 2008 02:16:27 GMT

20,000 Vietnam Nike Workers Strike

By AP/VU TIEN HONG

(HANOI, Vietnam) — More than 20,000 Vietnamese workers have walked off the job at a Taiwanese-owned plant that makes shoes for Nike Inc., demanding higher pay to keep pace with skyrocketing prices, officials said Tuesday.

The workers at Ching Luh plant, in southern Long An province, went on strike Monday. They want a 20 percent bump to their $59 average monthly salaries along with better lunches at the company cafeteria, said Nguyen Van Thua, an official with the province's trade union.

The plant has been making sneakers since 2002 and employs about 21,000 workers, most of them young rural women. The company is paying the workers 14 percent more than minimum wage, but soaring inflation is eroding their earnings, Thua said.

"The company has followed the Vietnamese laws in paying their workers, but given the fact that consumer prices are soaring day by day, the workers have had troubles with their daily expenses," Thua said.

Ching Luh plant is one of 10 factories that contract with Nike to produce sneakers in Vietnam. Nike's contractors in Vietnam make about 75 million pairs of shoes each year, and the Ching Luh plant accounts for about 12 percent, said Nike spokesman Chris Helzer.

"We recognize the impact that rising inflation has had on the people of Vietnam, and hope the situation will be resolved quickly and amicably," he said.

Consumer prices in Vietnam are 19 percent higher than they were a year ago, according to government figures. Hanoi responded in January by increasing the minimum wage foreign-owned companies are required to pay by roughly 13 percent.

As inflation has picked up in recent years, strikes have become more common, with workers demanding higher pay and better working conditions.

Thinking Outside the Company’s Box

Tue, 01 Apr 2008 03:09:02 GMT

Thinking Outside the Company’s Box

By G. PASCAL ZACHARY

ONE of the oldest barriers to innovation is “Not Invented Here,” a persistent bias of even the most creative people toward their own creations and against those of people who work for other companies. And the problem of N.I.H. isn’t limited to business; it can also infect the military and government research agencies.

To help counteract N.I.H., large corporations have promoted technology alliances with rivals, as well as the concept of “open innovation,” to draw on a wider circle of big brains — not on their payroll — to work on core technical problems. These efforts arise from the recognition that no single innovator or team, no matter how loyal to an employer or successful in the market, has a monopoly on wisdom.

“That’s why we are always going to live with the make-buy tension,” says Greg Papadopoulos, the chief technology officer at Sun Microsystems.

How much of a company’s technology does it create on its own? How much does it buy from others? These questions, Mr. Papadopoulos believes, are central to “dealing squarely with the dilemma of innovation” and the pursuit of great ideas.

How to resolve the tension between make and buy varies from one organization to the next. Sun, for instance, has created many important technologies in-house, including a family of microprocessors based on an original design and the Java language, popular with programmers.

Yet even companies that maintain their own powerhouse research-and-development units are increasingly aware that valuable ideas can sprout anywhere. For instance, Sun broke with its home-grown tradition this month, when it paid $1 billion for MySQL, which makes the most popular open-source database program.

Sun needs a database program to support its line of powerful server computers, which can be optimized to work with MySQL. To create a viable database from scratch might take Sun 10 years, Mr. Papadopoulos figures. Instead, Sun gets a vibrant product overnight — and immediate contributions from scores of database engineers around the globe.

“There’s no shame in buying technology,” he says.

When acquiring a mature technology, the buyer usually pays more, and the risk of a conflict between the internal and outside cultures is greater. Fear of cultural conflicts looms large in any technology acquisition — witness the concerns over Microsoft’s proposed hostile takeover of Yahoo — because an important benefit is adding talented employees, not only customers.

In technology purchases, the creative people are usually accommodated. Sun has let most of MySQL’s employees stay put; they are so dispersed worldwide that they count 120 different airports as their nearest air hubs. Sun also will keep giving away MySQL’s core programs.

Despite such concessions, there are no guarantees that MySQL will expand Sun’s revenue — or maintain its creative edge now that it is part of a much larger organization.

“This marriage will either be a fantastic success or an enormous failure,” says Marten Mickos, senior vice president of Sun’s database group.

Perhaps the most important reason that large companies are willing to gamble on buying technology is that not doing so carries risks, too.

Two recent examples of hot innovations — YouTube and Skype — came from small groups of visionaries who then sold for high valuations to established companies (in these cases, Google and eBay). While neither acquirer has found a way to profit from these deals, they have gained in several ways. Google and eBay denied these innovators a chance to grow into large, and potentially threatening, companies themselves. They also denied their rivals the chance to buy YouTube and Skype. They bolstered their own pools of talent and bought themselves time to find profitable business models.

“Because great new technologies are coming from people who want to do their own thing, and won’t necessarily work for someone else, acquisition may be the only way for a large company to get them,” says Mitchell Kertzman, a partner at Hummer Winblad, the venture capital firm in San Francisco.

Companies are willing to travel farther than ever to acquire technologies, a consequence of the rise of engineering in China and India. “We haven’t acquired any technologies from these countries yet, but we have full-time people looking, and it is only a matter of time before we do,” says Ned Hooper, senior vice president for corporate business development at Cisco Systems.

Cisco has 50 executives scouring the globe for technology acquisitions. They work closely with leaders of internal product teams. Just as the general manager of a baseball team might fill a gap in his lineup by acquiring a new center fielder or relief pitcher, Cisco’s business managers can ask for specific technology help from outside the company.

In 2005, in response to such a plea, Cisco bought a California start-up, Nemo Systems, for $12 million. Nemo had designed a novel way of using standard memory chips to store data in Cisco’s routers, which needed more costly specialized memory. Routers are a key piece of computer networks and a major source of Cisco’s revenue.

Cisco spent nearly three years refining Nemo’s approach; the memory technique will begin showing up in Cisco routers this year.

While Mr. Hooper feels that he scored on the Nemo acquisition, picking winners isn’t easy, and he warns that buyers of technology must beware.

“There are always people lined up outside my office offering technologies,” he says. “But often they are not the ones you want to buy.”

G. Pascal Zachary teaches journalism at Stanford and writes about technology and economic development. E-mail: gzach@nytimes.com.

A Google Friend Is Now Facebook’s

Tue, 01 Apr 2008 03:07:48 GMT

A Google Friend Is Now Facebook’s

By ELIZABETH OLSON, ANDREW E. KRAMER, MICHELLE LEDER and PATRICK McGEEHAN

In a sign that Google’s status as the coolest place to work may be waning, the company has lost another high-ranking employee to the social networking site Facebook.

Ethan Beard, former director of social media at Google, has joined Facebook as director of business development. The announcement, made last week, came just three weeks after Sheryl Sandberg, Google’s vice president for global online sales and operations, said she was leaving to become Facebook’s chief operations officer.

Facebook’s chief financial officer, Gideon Yu, is also a former Google employee.

Google’s stock price has dropped by a third since January. Facebook, by contrast, is still private and attracting plenty of investment. ELIZABETH OLSON

SAIL AWAY Tom Perkins, the Silicon Valley venture capitalist, is putting his superyacht, the Maltese Falcon, up for sale, just two years after he first set sail on it.

Mr. Perkins reportedly spent at least $150 million on building the yacht. He has asked its builder, Perini Navi, to offer it for $181 million, according to Superyachttimes.com.

The 288-foot, three-masted clipper, one of the world’s largest sailing yachts, has 11,000 square feet of living space. ELIZABETH OLSON

BACKUP PERK The Boeing Company has provided a perk to its chief executive, W. James McNerney Jr., that he probably hopes he doesn’t have to use.

Last year, Boeing spent nearly $90,000 to install a backup generator at Mr. McNerney’s home, according to the company’s annual proxy statement filed with the Securities and Exchange Commission. Todd Blecher, a Boeing spokesman, said the generator would allow Mr. McNerney to work at home if there were a power failure. Mr. Blecher said the money covered the cost of the generator, installation and some soundproofing “to meet the neighborhood standards for noise abatement.”

But why count this as a perk, which requires disclosure, as opposed to a business expense, which doesn’t?

Mr. Blecher said that the company’s lawyers decided that having the generator at Mr. McNerney’s home was a perk because it was both a “personal benefit” and something “not generally available to other employees.” MICHELLE LEDER

POWER TO PEROT Public companies engage in all sorts of extracurricular transactions with their senior executives and directors, like property leases and the purchase of legal and consulting services. But Anurag Jain, a vice president who runs two business groups for Perot Systems in Plano, Tex., may be the highest-ranking executive whose family sells electricity to his employer.

In its latest proxy statement, Perot Systems, founded by the two-time presidential candidate Ross Perot, disclosed that it started buying electric power in India last year from members of Mr. Jain’s family and a partnership owned and controlled by Mr. Jain and his family members.

The company said it paid $200,000 for the electricity and an additional $630,000 to lease property in Chennai, India, from the Jain family last year. PATRICK McGEEHAN

RUSSIAN CHARITY The Russian billionaire Mikhail Fridman has hired Michael Kenneth Moore, a prominent New Zealander, to run one of his charitable foundations. The move is another sign of the growing international hiring power of the wealthy Russian businessmen known as oligarchs.

Mr. Fridman manages an empire in Russia and Eastern Europe whose holdings include oil and mobile phones. He is now going global, riding high oil prices and the strong ruble. And like other Russian oligarchs who are globalizing, he is investing heavily in charity.

Mr. Moore, who was prime minister of New Zealand for two months in 1990, is a former director of the World Trade Organization and has held posts at the United Nations.

He will become chairman of the Altimo Foundation, the charity associated with the telecom arm of the Alfa Group, Mr. Fridman’s holding company. The foundation will focus on fighting poverty in developing countries, according to a statement. ANDREW E. KRAMER

IN HIS SHOES The chief executive of the shoe maker Steve Madden Ltd. has left his job after four consecutive quarters of losses.

The company said the executive, Jamieson Karson, 50, had resigned to pursue other opportunities. Edward Rosenfeld, 32, who has been executive vice president for strategic planning and finance, will serve as interim chief executive.

As at other shoe companies, sales at Madden have been buffeted by a slowdown in consumer spending. Sales dropped 10 percent during the last quarter of 2007 over the quarter a year earlier. ELIZABETH OLSON

An Online Game So Mysterious Its Famous Sponsor Is Hidden

Tue, 01 Apr 2008 03:05:33 GMT

An Online Game So Mysterious Its Famous Sponsor Is Hidden

Eli, a character from The Lost Ring, an online alternate-reality game. McDonald’s sponsors the game, unbeknownst to gamers.

By STEPHANIE CLIFFORD

NOT known for its dark marketing, McDonald’s is more a try-our-new-salad, get-your-Shrek-action-figure, look-at-our-dollar-menu sort of place.

Ariadne, another character in The Lost Ring. The game is part of McDonald’s marketing for the Olympic Games in Beijing.

For that reason, gamers were surprised to learn that McDonald’s was the sponsor of an enigmatic Olympic-themed online game called The Lost Ring, introduced last month. Nothing about the game was branded McDonald’s, and the game’s Web sites — mysterious and hip, like “Lost” mixed with “The Blair Witch Project”— were a far cry from the golden arches.

“The Olympics in Beijing are a very big event for us, and we have a lot of different types of activation, with The Lost Ring being the most creative,” said Mary Dillon, McDonald’s global chief marketing officer. “Our goal is really about strengthening our bond with the global youth culture.”

The Lost Ring is part of a gaming genre called alternate-reality games that blend online and offline clues and rely on players collaborating to solve the puzzles.

While corporate sponsorship of these games is common — a popular one called The Beast was created by Microsoft for the Warner Brothers film “A.I.: Artificial Intelligence” — this is McDonald’s first foray into the genre.

The game began with 50 bloggers receiving packages with an Olympic-themed poster and a clue pointing them to TheLostRing.com. The site presented a dramatic trailer, replete with sci-fi lighting and a narrator with a British-accented baritone speaking over scenes of a woman waking up in a field with “Trovu la ringon perditan” — an Esperanto phrase — tattooed on her arm.

Within a day or two, as players searched for clues, they found the terms of service on the Web site, which revealed that McDonald’s, in partnership with the International Olympic Committee, was behind the game.

“I think finding out that it was McDonald’s was kind of a big shock for everyone,” said Geoff May, a player in Ontario who founded a Web site (olympics.wikibruce.com) on the game. “Obviously it’s McDonald’s, and not everyone likes them,” he said. “Personally, I don’t mind as long as we don’t get products forced down our throat. If we’re getting McDonald’s meals sold by characters, it’s going to be hard to suspend our disbelief.”

That’s part of the reason McDonald’s has remained behind the curtain thus far. A successful alternate-reality game relies on the players’ continuing interest.

“If an A.R.G. is too clearly corporate or commercial, the gamers will not want to engage,” said Tracy Tuten, an associate professor at Virginia Commonwealth University, who studies new-media marketing tools. “It’s very important that the game be written in a way where the branding is not obvious.”

McDonald’s has been careful to reflect that, Ms. Dillon said. “Above all, we want to be credible, authentic and respectful to this new audience,” she said.

With that in mind, development of the game was given to AKQA, a San Francisco marketing agency, and Jane McGonigal, a game developer.

When released in early March, the game was available in seven languages. Ten characters provide clues via YouTube videos, blogs, Flickr photos and Twitter updates. Online clues are supplemented by offline ones: last week, players found documents in a Tokyo mailbox and a bookstore fireplace in Johannesburg.

The clues have helped players deduce the outline of the game, which centers on a lost Olympic sport that one plays blindfolded. Soon, Ms. McGonigal said, players will be asked to participate in the sport in the real world.

The game is scheduled to run through Aug. 24, the Olympics closing ceremony. “I think the players will be very happy to discover that around the closing ceremonies, there is a real-world payoff to their alternate-reality heroics,” Ms. McGonigal said. She was, in keeping with the game’s spirit, cryptic about what that payoff would be, though she hinted that the city of Beijing might be involved.

•

McDonald’s would not disclose the cost of the campaign, though Ms. Dillon said that “in the context of the total Olympics, it’s just a fraction of what we’re doing.” As for measuring the return on the company’s investment, Ms. Dillon said she saw it as more of a learning experience. “You can’t put an R.O.I. on this,” she said.

McDonald’s said the game had attracted 150,000 players so far, with 70 percent of traffic from outside the United States.

Both the quiet sponsorship and the game itself are unusual for McDonald’s. But the company does aim for the youth market, which overlaps neatly with the fan base for alternate-reality games. If those gamers develop new respect for McDonald’s, it would be a marketing coup.

“The players appreciate that they got this good experience for free,” said Sean C. Stacey, the founder of the gaming fan site Unfiction. “That tends to create a stronger bond between the player and the brand than having a straight advertisement.”

New Competition and Cancellations at Heathrow Vex British Airways

Tue, 01 Apr 2008 03:01:42 GMT

New Competition and Cancellations at Heathrow Vex British Airways

Shaun Curry/Agence France-Presse — Getty Images

British Airways fliers at Terminal 5 of Heathrow Airport, London, have struggled with canceled flights since its opening Thursday.

By JULIA WERDIGIER and NICOLA CLARK

LONDON — British Airways canceled 54 more flights at its new terminal at Heathrow Airport here on Monday as it struggled with a computerized baggage-handling system that has already led to the misdirecting of at least 15,000 pieces of luggage.

The airline, which has canceled more than 250 flights since the gleaming Terminal 5 opened last Thursday, said Monday that the situation was improving and that it hoped to fly at full capacity again soon.

But the disruptions at Heathrow, one of the most congested airports in Europe, are expected to last for at least the rest of this week and could not come at a worse time for British Airways.

In addition to the high fuel prices and declining consumer confidence that weigh on the whole industry, British Airways will face increasing competition on the North Atlantic routes, its most important long-haul market, because of the open-skies agreement between the European Union and the United States that took effect on Sunday night.

“It’s a mess,” said Gert Zonneveld, an analyst at the brokerage firm of Panmure Gordon in London. “The reputation damage from Terminal 5 is their biggest headache, and there’s a real chance that people will book away from British Airways.”

Mr. Zonneveld estimated that the disruptions and flight cancellations could cost British Airways more than £25 million ($49.6 million).

Teething problems are not unusual for large new airports. Terminal 4 in Madrid struggled with luggage handling after it opened in 2006, but is now cited in surveys as popular. Chek Lap Kok Airport in Hong Kong, which opened in 1998, had a variety of technical and organizational problems in its first three months.

And the opening of Denver International Airport was delayed more than a year, until early 1995, and its automated baggage system was ultimately abandoned.

But British Airways had promised that the glass-walled Terminal 5, designed by the British architect Richard Rogers, would restore the joys of air travel that have been lost in long lines for security checks through windowless corridors at some of Heathrow’s other terminals. Instead, the troubled first days of Terminal 5, which cost some $8 billion to build, were expected to give the carrier trouble beyond monetary issues.

“The whole point of the exercise was to bring British Airways out of the situation where they had to deal with the least popular airport among business travelers,” Marko Lukovic, an analyst at Frost & Sullivan, said.

The long lines of passengers in the Terminal 5 check-in area on Thursday brought back the image of an overcrowded and overstretched airport that the new terminal was supposed to change. By Monday, a British Airways spokesman said, the lines were clearing and “the atmosphere is calm.”

As of Sunday night, British Airways was also dealing with the new ground rules for air routes as the Europeans and the United States abandoned decades-old rules that had restricted trans-Atlantic competition. All United States air carriers now have the right to offer flights into Heathrow, while European airlines are permitted to fly to any destination in the United States from any European airport.

Previously, only British Airways, Virgin Atlantic, United Airlines and American Airlines had the right to serve routes between the United States and Heathrow. But on Sunday, Delta Air Lines, Continental Airlines and Northwest Airlines all began flights into Heathrow, and Air France-KLM operated its first nonstop flight from Heathrow to Los Angeles under a code-sharing deal with Delta, its partner in the SkyTeam alliance.

“Without a doubt, there is going to be a dilution of revenues from premium passengers for British Airways because of open skies,” said Peter Morris, chief economist with Ascend, an aviation industry consulting firm here.

He said the new entrants to Heathrow would be under competitive pressure to keep fares down, reducing near-term profit margins on the trans-Atlantic routes.

Analysts at Goldman Sachs lowered their recommendation on British Airways shares Monday to sell, suggesting that the share price could drop because of the increased North Atlantic competition, weaker demand and the continuing “operational challenges of Heathrow.”

In London trading Monday, British Airways stock fell 2.4 percent.

Despite other problems at Heathrow, including the terror alerts that disrupted travel in August 2006, Mr. Morris said that British Airways “seemed to have retained its brand and a high degree of loyalty from business passengers.”

“Now you have a situation when even Sicilian shepherds are aware of what’s going on,” he said. “I can’t see how it cannot start to chip away at the B.A. brand.”

Julia Werdigier reported from London and Nicola Clark from Paris.