Friday, October 31, 2008

Profile: Majora Carter

Profile: Majora Carter

Urban crime, poverty, and joblessness are surprisingly intertwined with environmental degradation. The challenges they share are widespread—and stubborn. Yet in the U.S., public authorities and nonprofit agencies typically tackle each malady separately, and with only limited success. More police might help dampen crime, but that doesn't help solve unemployment. And boosting welfare payments for the jobless cannot do much to fix pollution hot spots. Majora Carter decided to tackle all of these challenges at once.

Her panacea? Home-grown green jobs and eco-companies. Her holistic approach has fundamentally altered the way planners think about regenerating impoverished, environmentally blighted cities here and abroad. In 2005, the MacArthur Foundation recognized Carter's work for "profoundly transforming the quality of life for South Bronx residents" by awarding her one of its "genius" grants.

It began in 2001 when Carter, then 34, was working with art-focused nonprofits in the Bronx, her New York City childhood home. Her focus switched to green activism when she learned the city planned to add yet another huge waste-processing facility to the neighborhood.

Garbage Overload

For Carter, that was the last straw. At its height, the borough handled more than 40% of New York's solid waste despite having just 16% of the city's population. Likewise, the area is home to two sewage-treatment plants and four power plants. With some 60,000 trash trucks passing through every week, stray garbage and diesel fumes contributed to asthma rates that are among the nation's highest. The toxic environment discouraged physical activity. Obesity and diabetes rates soared.

Carter formed Sustainable South Bronx (SSBx) not just to defeat the garbage depot, which she did. She also wanted to harness what she recognized as a dormant passion among her neighbors to improve their environment. "Who would want to go outside?" she recalls. "There were no trees. It was dirty and dangerous. These people didn't not have a connection to the natural world."

Simply cleaning up weed-strewn lots and planting trees wasn't enough to overcome such distrust. "I was watching the city bring in contractors from outside to do cleanup work," she says. "It was basic work that local people could do as well, and they needed the jobs. That made no sense." Carter concluded jobs could both green up the neighborhood and create a sense of investment if local people helped with the process.

With a small grant, Carter set up a training program for local residents, including many ex-convicts and others with dim employment hopes. The Bronx Environmental Stewardship Training (BEST) program puts those chosen though a multi-month training program. BEST trainees learn specialized eco-skills, such as green-roof installation and maintenance, urban forestry, brown-field cleanup and, more recently, how to retrofit buildings to boost their efficiency. Think: window caulking and insulation. The workers are also given guidance in life skills, such as punctuality, effective communication, how to handle disagreement, and even clothing. "Many of these men have grown up with no reference in their lives for how to behave in a formal job situation," says Carter.

Cleaning Up Lives

Creating jobs was just one benefit. By engaging local residents to do the work, Carter discovered a strong desire for clean, green space, and she helped build trust in the community—believing that if locals did the clean up, parks would be better cared for. Among their first projects: cleaning up the banks of the long-neglected Bronx River to create a new park and new public access to the waterway. After two years, the program has placed over 85% of its more than 100 graduates in jobs. None of the ex-convicts has returned to prison, despite a high rate of recidivism under normal circumstances. Around 10% have gone on to college.

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  • Exxon's Production Falls as Profits Soar

    Exxons Production Falls as Profits Soar

    ExxonMobil's (XOM) third-quarter earnings demonstrate the mixed universe occupied by Big Oil as a whole today—the company reported record profits but its lowest production volume in almost a decade. The Irving (Tex.)-based corporation says it earned $14.8 billion in the third quarter, an increase of 58% from the same period last year. Exxon is on track for a third straight year of record earnings—in both 2006 and 2007, the company earned some $40 billion. In each year, that was the most ever for any company on the planet.

    Despite the breathtaking profit, however, the report weighed on Exxon's share price on Oct. 30. Exxon closed up 0.5%, at 75.05, after falling as low as 71.44 during the trading session. One of the main reasons was its reported production volume. The company produced just 3.6 million barrels of oil per day, an 8% drop from the same period last year. It's the lowest production since Exxon bought Mobil in 1999. Since then, Exxon's production has mostly fluctuated between 3.8 million and about 4.2 million barrels a day.

    Some of the third-quarter drop was attributable to seasonal hurricanes, maintenance outages at Exxon facilities, and production-sharing contracts that reduce volume it receives when oil prices rise, but that accounted for just three percentage points of the 8% decline. The other 5% was independent of special factors. In prior quarters, the company has noted that it has considerable production increases coming online in the next two years. But the decrease seemed to worry Wall Street, nonetheless.

    Stroking Investors

    In an unusual statement in the earnings report, Exxon Chairman Rex Tillerson sought to calm any worries about the company's strength amid the global financial meltdown and reassure investors that the company's capital spending plans remain intact. Some smaller energy companies have trimmed capital spending as oil prices have plummeted from a high of about $147 a barrel during the summer to less than $70 a barrel now.

    "Despite the continuing uncertainty in world financial markets, ExxonMobil has maintained a strong financial position," Tillerson said. "We plan to continue our disciplined capital investments with our full-year capital and exploration expenditures projected to be about $25 billion, consistent with previous guidance."

    Revenue for the quarter was $13.7 billion, 34% higher than the same period last year. The company earned $2.59 a share excluding special items, or 20 higher than the $2.39 expected by analysts.

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  • Alcatel-Lucent: Verwaayen's Plan

    Alcatel-Lucent: Verwaayens Plan

    No one said Ben Verwaayen's job would be easy. But the difficulties facing the new chief executive of Alcatel-Lucent (ALU) were underscored on Oct. 30 when the French-American telecommunications-equipment maker reported quarterly results below analysts' already low expectations. Operating profits fell 43% year-on-year, to $51 million, as revenues from its core business, sales to fixed-line and mobile-phone carriers, slumped 13%, to $3.5 billion.

    In an interview with BusinessWeek, Verwaayen promised to deliver a plan by early December to streamline the company's operations and product portfolio, while sharpening its focus on lucrative new businesses such as services. He also hinted at a shakeup in top management, which has changed little since Verwaayen, the former boss of British telco BT Group (BT.L), took over from former CEO Patricia Russo six weeks ago (, 9/2/08). "We have truckloads of things to do but great opportunities in front of us," he says.

    Despite what Verwaayen agrees are "unsatisfactory" profits, the Dutch-born CEO noted that Alcatel-Lucent is generating positive cash flow from operations, some $134 million during the quarter. And he said the company is sticking with its earlier guidance for 2008, which calls for operating margins in the low to mid-single digits and revenues flat to slightly down vs. 2007. Investors seem reassured: Alcatel-Lucent shares soared 22% in early trading on Oct. 30, though they're still down some 80% since the company was created by a transatlantic merger two years ago.

    Behind Its Rivals

    Alcatel-Lucent's results also continued to lag those of its closest rivals. Sweden's Ericsson (ERIC) beat analyst estimates when it reported third-quarter revenues on Oct. 20 of $6.36 billion, up 13%, though its net income fell 28%, to $384 million. Nokia Siemens Networks, a joint venture of Nokia (NOK) and Siemens (SI), reported third-quarter revenues down 5%, to $4.38 billion, on Oct. 16, with a small operating loss of $1.26 million.

    Verwaayen, who won plaudits for his stewardship of BT, is already signaling he'll be a stringent cost-cutter. He's selling off Alcatel-Lucent's fleet of corporate jets. And rather than hiring consultants to diagnose the company's woes, he has invited customers and employees to e-mail him with criticisms and suggestions. "Engaging in direct dialogue is a better way than bringing a consultancy in. You hear it from the horse's mouth," he says.

    Verwaayen says he sees opportunities for "massive cost savings" by eliminating duplication in operations and in the merged company's product portfolio. But he downplays the possibility of major job cuts, beyond the 16,500 positions—nearly 20% of its workforce—already set for elimination under an earlier restructuring plan. "Everybody immediately jumps to job cuts," he says. "I think it is the wrong focus to start from."

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  • Exxon’s Production Falls as Profits Soar
  • CEO and Chairman Out at Alcatel-Lucent

  • Sirius XM Radio Faces Sky-High Debt
  • Exxon’s Production Falls as Profits Soar
  • CEO and Chairman Out at Alcatel-Lucent
  • GM's Latest Retooling: The Chrysler Merger

    GMs Latest Retooling: The Chrysler Merger

    General Motors (GM) is getting closer and closer to taking Chrysler off the hands of its owner, private equity giant Cerberus Capital Management. If GM can come up with funds—perhaps as much as $10 billion—from the government (, 10/28/08) to solve its problems and help restructure the smallest of the Big Three, it could be a done deal.

    Assuming it happens, show 'em what they won, Vanna. It's an 83-year-old car company that's badly in need of restructuring. That's the problem. GM has been lousy at restructuring.

    GM's strategy all along has been to grab Chrysler and its $11 billion in cash and estimated $35 billion to $40 billion in yearly sales, and then slash overhead, dump unwanted products and plants, and remake the combined company into a profitable business. Industry sources say the two sides still have many issues to settle. There's some agreement on how to resolve them, but ironing out the remaining details could take a week or more.

    GM's Losses Soar in 2008

    You would think GM executives would be good at this sort of thing by now. The company has decades of experience at it. GM had 215,000 union workers in 1998. After 10 years of retiring union workers and buying others out, GM now has about 64,000. But in all of that time, GM has only occasionally made real money selling cars in North America.

    In the past three years, GM bought out 52,000 workers and bragged that it cut $9 billion in structural costs. But in 2006 and 2007, GM lost about $2.3 billion in North America on an adjusted basis. That happened before the mayhem of this year's fuel price spike and credit crunch kicked in. This year's losses have topped $15 billion.

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  • Wednesday, October 29, 2008

    Google Settles with Authors

    Google Settles with Authors

    After more than two years of negotiation, Google (GOOG) has settled lawsuits filed by the Authors Guild and five publisher members of the Association of American Publishers against a Google program that has scanned millions of library books.

    The agreement, subject to approval by the U.S. District Court for the Southern District of New York, provides for the establishment of a book-rights registry, through which scanned books can be viewed in part or in whole and payment made to copyright holders. As part of the deal, Google will pay $125 million to rights-holding plaintiffs and to cover legal fees. Of that amount, $30 million will go to set up the registry.

    Google ran afoul of book publishers and authors when some of the libraries participating in its book-scanning program opted to scan full texts of copyrighted books (, 10/20/05). Publishers argued that scanning an entire book without permission, and storing it on a Google server, violates copyrights. Google argued that because it's creating what amounts to a massive card catalog and would let users view only brief excerpts of books, it shouldn't have to get express permission to scan the books.

    "A 21st-Century Solution"

    All parties to the agreement expressed enthusiasm about the settlement during a conference call with reporters. "This could be the biggest book deal in U.S. publishing history," Authors Guild Director Paul Aiken said. "Millions upon millions of books will find a new home among readers online."

    "This is an innovative, 21st-century solution," added Association of American Publishers Chairman and Bertelsmann Co-Chairman Richard Sarnoff. "The registry will function as an authoritative rights-holder database, distribute money, and mediate disputes."

    David Drummond, Google's chief legal officer, noted that "7 million books are now searchable through Google Book Search, and we're looking forward to many times that number."

    Payments Split Three Ways

    The registry will manage two types of online book searches. Individuals will continue to view samples of in-copyright books much as they can today, and purchase the work online. Institutions such as colleges and universities can pay for subscriptions to the registry and have complete digital access to millions of scanned books. Participants in the conference call noted that the program will make it possible for small colleges and universities to have access to the trove of books in major research libraries at such institutions as the universities of California, Michigan, and Wisconsin, and Stanford University.

    In all cases, payments will be split three ways, with Google getting 37% of the revenue and, after the subtraction of an administrative fee by the registry, the publisher and author splitting the remaining monies. Certain advertising revenues will also be shared with the rights holders, Drummond said, according to the same proportional split. But no ads will appear in the actual pages of books, he noted.

    The registry is several months away from being a reality. Overall, the development seems likely to encourage the sale of books in bits and pieces, or "chunking," as the practice is coming to be known among book publishers, along with "transforming," or delivery of books in a variety of formats, including downloads to e-book readers or for print-on-demand. "The real victors are the readers," Google co-founder Sergey Brin said in a prepared statement. "The tremendous wealth of knowledge that lies within the books of the world will now be at their fingertips."

    Lawsuits Date to 2005

    The publisher plaintiffs, who filed suit against Google in October 2005, included Pearson Education, Penguin Group, John Wiley & Sons (JWA), Simon & Schuster, and the McGraw-Hill Companies (MHP), publisher of BusinessWeek. The Authors Guild class action was filed in September of that year.

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  • Marcial: FPL Group, an Attractive Power Play

    Marcial: FPL Group, an Attractive Power Play

    Who among the beleaguered investing community would be so bold as to predict the market's bottom at this point? Not very many, that's for sure. It's foolish, at best, to make such a prediction amid the current financial and economic turmoil, argue many of the best strategists on Wall Street.

    But several stouthearted pros don't buy that, and they're now placing their money behind their forecasts that the market is finding a floor. (While it may not be a sure signal that stocks have touched their bear-market lows, the Dow Jones industrial average posted its second-biggest point gain ever—889 points, or nearly 11%—on Oct. 28.) "We have become more aggressive in buying stocks because we strongly believe the market is beginning to turn around and starting the process of pulling ahead to much higher ground," says Carl Birkelbach, president of Birkelbach Investment Securities.

    Birkelbach has made several prescient market calls in the past. In September 1981, when the Dow was hovering at around 800, he placed ads in newspapers calling himself the "Lone Bull" and predicting the market had hit bottom and would rise to much higher levels. His forecast: The Dow will hit 8,000. Birkelbach did not specify the timing of the market's move, but 10 years later, in 1998, the industrial average shot up to 8,000—and then surpassed that level some months later.

    Signs of a Bottom?

    Birkelbach uses both fundamental measures and technical indicators in gauging the direction of the Dow. In September 2002, when the Dow stood at 7,900, he made another daring prediction: The Dow would hit 14,000 in the years ahead. True enough, in early October 2007, the benchmark index soared to more than 14,000. (Birkelbach, however, didn't predict whether stocks would retrench after such big moves.)

    That brings us to October 2008 and the market's stunning fall from its year-earlier peaks. Here is Birkelbach's brief analysis of why he assumes stocks are reaching a trough. He notes that the European and Asian markets have retreated from their highs by about 40% to 50%, and the Dow has lost nearly 40% this year. In the past, he says, such huge declines presaged a market bottom. "Much of the financial distress and economic meltdown have already been discounted by the market, given such a massive market decline worldwide," he says.

    If the worst of the bear's rampage is behind us, as Birkelbach figures, what is he buying? His current favorite: FPL Group (FPL), a public utility company that generates, sells, and distributes electric energy using natural gas, nuclear energy, and wind power. "It is the best and safest bet in these times of economic dislocation and financial stress," he says.

    FPL's Florida Power & Light unit is the largest utility in Florida, serving about 4.5 million customers in the southern and eastern parts of the state. Its other unit, the unregulated FPL Energy, is the largest producer of wind power in the U.S., with a 30% share of the market at the end of 2007, generating 5,077 megawatts of wind power. FPL Energy is one of the largest U.S. independent power producers, generating roughly 16,000 Mw.

    Core Holding

    One other thing Birkelbach likes about FPL: its dividend yield of nearly 4%. "That is a comforting payout to shareholders" amid the current turmoil, he says. So the stock deserves to be a core holding in every portfolio, he says.

    The stock, which climbed to a high of 72 a share in 2007, has been clobbered along with other equities and struck a low of 37 on Oct. 10. It has since edged higher, to 45 on Oct. 28. The company posted a 45% jump in earnings in the third quarter, to $774 million, on revenues of nearly $5.4 billion, in spite of the deteriorating economy, housing slowdown, and hurricane conditions in Florida that adversely affected its utility operations there.

    But the stock's drop may indicate investors have discounted the weakness in the Florida market, where the growth in electric usage has slowed. "The stock is attractive for total return," says Justin McCann, an analyst at Standard & Poor's Equity Research, who recently upgraded his recommendation on FPL to a buy from a hold, although he reduced his earnings estimates by 5 a share for both 2008 and 2009. He now projects earnings of $3.84 a share for 2008 and $4.15 for 2009. (S&P, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP).)

    "At the current share price, we consider FPL to be an attractive buying opportunity for investors with a 12- to 18-month time horizon," says Timothy Winter, senior analyst at investment firm Jesup & Lamont (JLI). He figures the shares are worth 55 a share. FPL has added 499 Mw of wind power generation capacity so far this year and continues to expect 1,300 of new wind capacity in operation by yearend 2008, Winter notes. However, the company scaled back its growth plans for 2009 because of the poor capital-market and economic conditions. Its approach to the problems will be to maintain flexibility to quickly ramp up projects should conditions improve and further reduce investment should conditions deteriorate, says Winter. He believes the annual dividend of $1.78 a share is "secure and growing."

    Because of the economic and housing problems in Florida, says Winter, investors should "look beyond the valley of the next 12 months." They will be rewarded, he figures, when the economy improves. Given the company's growing investments in renewable energy, FPL "is the best-positioned power company to capitalize on the long-term macrodynamics of a future green-energy world," he says.

    With the shares down some 40% from their all-time high of 73.75, the prospect of the stock recovering a lot of lost ground is part of FPL's appeal at its current price. You might say it's poised for regeneration.

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  • Tuesday, October 28, 2008

    Testing for Tech Literacy

    Testing for Tech Literacy

    On a recent Monday morning, the eighth graders in Chris Malanga's technology class at Riverhead (N.Y.) Middle School were hard at work constructing Web pages. Scattered across computer screens in this classroom about 75 miles east of Manhattan were Web pages reflecting students' distinct personalities and interests. One blared rap music. Others boasted purple text over garish background images. These were no mere MySpace (NWS) profile pages, constructed with a few clicks of the mouse from a menu. These students built their pages from scratch, writing pure HTML in a text file. "They like that it's something they learned in school that they can take home and use to jazz up their MySpace [pages]," Malanga says.

    Before they embarked on Web pages, the students crafted tiny cars complete with bumpers, airbags, and seat belts designed for an especially fragile passenger—an egg. They watched videos on auto design, drafted 3D models of their cars using Google (GOOG) Sketchup, a free online application, and spent hours gluing together pieces of wood, cardboard, rubber bands, and balloons.

    Technology classes like this are entering the curriculum in schools around the country, but they're not common enough, say educators, company executives, and policymakers. In a bid to make technology literacy more widespread, the National Assessment Governing Board this month announced plans to develop the first nationwide assessment of technological learning in U.S. schools. NAGB, a government-commissioned independent council, awarded nonprofit WestEd, a 40-year-old educational research and service group, a $1.86 million contract to work with educators, school officials, the business community, and the public on constructing the test, set to hit schools in 2012.

    Laying a Foundation

    NAGB officials and others hope the test will help reverse the slide in U.S. test scores and enrollment in such subjects as science, math, and engineering, and ultimately address the more generally waning competitiveness of the U.S. in technology. "If you look at the business community and post-secondary work, those sectors really need students who have science, technology, and engineering backgrounds to fill jobs in these new and dynamic fields," says NAGB Executive Director Mary Crovo.

    Enrollment in graduate-level computer science and engineering is dropping, says the National Science Foundation. The number of full-time graduate enrollments in computer science and engineering courses decreased 11%, to 29,800, in 2004, the last year for which data is available, since peaking in 2002, according to the foundation. The number of foreigners with bachelor's degrees holding jobs in U.S. science and engineering almost doubled, to 19%, from 1990 to 2005.

    No standardized test alone can reverse those trends, but backers hope it will lay a foundation for renewed and deeper emphasis on science and engineering at the earliest levels. To ensure the test's efficacy, San Francisco-based WestEd in December will convene a panel of advisers that includes instructors and representatives of such tech bellwethers as Intel (INTC) and Google as well as other yet-to-be-named companies in manufacturing, civil engineering, and other areas. "Our world is changing, the way we do business is changing, our reliance on each other is changing," says Paige Kuni, worldwide manager of K-12 education for Intel's Education Initiative and a member of the panel. "Kids have to be able to master those types of skills to be ready for a U.S. economy when they come out of the school system."

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  • Focus Stock: Tough Times Favor Family Dollar Stores

    Focus Stock: Tough Times Favor Family Dollar Stores

    In a difficult economic environment, we look for retailer Family Dollar Stores (FDO; recent stock price, $25) to increase sales to its predominantly lower-income customers by expanding its assortment of daily necessities, including refrigerated and shelf-stable foods, and by improving product quality.

    We also expect Family Dollar to benefit from higher-income customers trading down to lower-priced basic goods. In addition, we note easier same-store sales (sales results for stores open more than 13 months) comparisons for the company over the next few quarters and expect to see a lift in average customer transaction value, a same-store sales driver, from Family Dollar's planned acceptance of credit cards in about half of its stores this holiday season.

    By providing customers with compelling values and shopping convenience while aggressively managing its cost structure, we expect the company to maintain its historical record of stable sales and earnings growth, which is reflected in its S&P Quality Ranking of A+. From fiscal 2005 (August) through fiscal 2008, earnings per share increased at a compound annual growth rate (CAGR) of 8%. We project 7% EPS growth in fiscal 2009 and a forward three-year CAGR of 12%. We look for the company to generate sufficient free cash flow to fund its operations, growth initiatives, and dividend program.

    Prices Range from $1 to $10

    The stock carries Standard & Poor's highest investment recommendation of 5 STARS (strong buy).

    Based in North Carolina, Family Dollar operates a chain of over 6,500 retail discount stores in 44 states. The company describes its typical customer as a woman in her mid-40s who is the head of her household and has an annual income of under $30,000. Family Dollar stores are operated on a no-frills, self-service basis, and carry an assortment of consumables such as snacks and food, household chemicals, paper products, health and beauty aids, and pet food and supplies; home products, including blankets, housewares and home decor; family apparel and accessories; and seasonal merchandise and electronics.

    Unlike some dollar stores that are constrained by a maximum $1 price point, prices in Family Dollar stores range from under $1 up to $10. The once cash-only stores now accept PIN-based debit card payments in most locations. Food stamp and credit-card acceptance is also being rolled out. Family Dollar expects to accept credit cards in about half its stores this holiday season. In our view, broader tender options offer the company an opportunity to improve its share of customer spending as shopping is more convenient and available cash does not limit basket size.

    Increasing Its Marketing

    Store inventory is made up of both regularly available merchandise, which provides consistency in product offerings, and a frequently changing selection of brands and products that Family Dollar acquires through closeouts and manufacturer overruns at discounted wholesale prices. Low product costs and store overhead enable the company to sell its value-priced merchandise profitably.

    Family Dollar's primary growth drivers are same-store sales and chain expansion. In fiscal 2008, same-store sales rose 1.2%, reflecting an increase in average customer transaction value and flat customer traffic, as measured by the company in number of register transactions. By quarter, same-store sales were down 1.0% in the first quarter, flat in the second quarter, up 0.1% in the third quarter, and up 5.6% in the fourth quarter. In our opinion, customers are spending more due to an expanded assortment of consumables and "treasure hunt" items that add an element of excitement and interest to the shopping experience. Family Dollar has also increased its marketing efforts to emphasize the value and shopping convenience it offers.

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  • Yen Keeps Rising as Japan Stocks Hit 26-Year Low

    Yen Keeps Rising as Japan Stocks Hit 26-Year Low

    The global credit crunch and market rout are clearly scaring Japanese officials. On Oct. 27, Tokyo took the unusual step of rallying the world's richest nations to warn investors that the Japanese currency's rise to its highest level in years poses a threat to the global economy. In a statement, the Group of Seven specifically singled out the yen's "recent volatility" as a possible factor in undermining "economic and financial stability."

    The G-7's show of solidarity came hours after Japan's Finance Minister, Shoichi Nakagawa, used strong language condemning the yen's sharp rise last week to a 13-year high against the dollar and six-year high against the euro. Traders viewed the remarks as a signal that Japanese financial authorities stood ready to intervene for the first time since early 2004.

    Action can't come soon enough in the view of many market watchers. "This massive strengthening in the value of the Japanese yen," Standard Chartered Bank (STAN.L) currency analysts wrote in an Oct. 24 report, "is coming at exactly the wrong time." They predicted "it may not be long before we see the Japanese authorities intervene to limit the slide."

    Nikkei Index Falls 6.4%

    Help may be on the way, but it didn't arrive today. With critics complaining that the comments from Nakagawa and the G-7 had little impact, the yen kept on gaining strength against the dollar, trading at around 93 yen and the euro at 116 yen. The rising yen, combined with concern that plans by Japanese banks to raise capital may dilute shareholdings, knocked Japan's benchmark Nikkei 225 stock index to its lowest level in 26 years. The index finished 6.4% lower, at 7,162.90, a level not seen since October 1982. This month alone, the Nikkei has given up 36%; since January, it has fallen 53%.

    The concern is that a strong yen and global slowdown will end up hurting Japanese exports, which have long been the one bright spot in the domestic economy. In the past three months, the yen has risen 19% against the dollar, 32% against the euro, 33% against the British pound, and 37% against the Brazilian real. By contrast, the Korean won is down more than 45% against the dollar this year, giving Korean exporters a leg up (, 10/24/08) on the Japanese.

    Unless the yen suddenly retreats, economists think Japan's economy is headed for a recession. "Over the next 12 months, we now expect Japan's gross domestic product to shrink by 0.4%," says Japan Research Institute senior economist Hideki Matsumura.

    For months it seemed that Japan's biggest banks had largely avoided the U.S. subprime mortgages-related losses, especially as Japanese financial institutions were buying up ailing rivals. After the collapse of Lehman Brothers, Nomura Securities bought its European and Asian operations, while Mitsubishi UFJ spent $9 billion on a 21% stake in Morgan Stanley (MS).

    Bleak Profit Outlooks

    But last week, Sony's (SNE) profit warning highlighted the problems Japan Inc., and especially its exporters, faces. The technology giant slashed its annual operating profit forecast (, 10/23/08) by 57%, and said there could be more currency-related pain if the yen holds steady.

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  • The Housing Crisis Spreads to China

    The Housing Crisis Spreads to China

    Autumn is usually the busiest time for real estate salesman Wang Yaodong. Last September and October, for instance, he sold more than a dozen luxury townhouses in western Shanghai, but this year he has sold only one. "Everybody is waiting for prices to fall," Wang says.

    Wang's lament is a common refrain in China these days. During the Golden Week holiday in early October, normally peak season for home buying, sales in the southern city of Shenzhen fell by a third from the previous week and the average selling price was nearly halved. In Beijing, software developer Answer Li has been looking at houses in the $100,000 to $200,000 range, but he's holding off because he fears further declines. "I don't dare take the plunge and buy a home," Li says.

    Across China, property sales fell 15% in August over the previous year. They're off more than 55% in Beijing and by 39% in Shanghai, reports the National Bureau of Statistics. Prices across the country registered a slight decline in August, the first time in years they haven't increased. In the south, where the downturn began last year, prices are off by 30% in the past 12 months. "There is a big likelihood that next year will be even lower," says Li Yong, general manager of real estate brokerage Century 21 China in Changsha, an industrial city located 700 miles west of Shanghai.

    That's a dramatic shift. Since 2005, Beijing had sought to rein in housing prices with measures such as mandatory down payments of at least 30% and a steep tax on profits earned from flipping homes within five years of purchase. Those measures are starting to bite and—with economic growth slowing and the stock market down by more than 60% this year—there's less demand for housing than developers had anticipated.


    Beijing is scrambling to keep prices from falling too fast. On Oct. 22 the government exempted land sales from value-added tax; cut down payments for first-time home buyers to 20%, from 30%; and slashed a property transfer tax for new buyers to 1%, from as much as 3%. After five years of tightening credit, the central bank has cut interest rates twice in the past two months and eased reserve requirements at banks to promote more lending. And some cities have introduced subsidies for buyers of small homes and allowed mortgages of up to 30 years, compared with a previous maximum of 20 years.

    A prolonged drop in property prices could create big problems for China. Real estate accounts for 25% of all investment and roughly 10% of gross domestic product in the mainland, about double the level in the U.S. Because cities in China often pay for infrastructure by selling land to developers, property-related income accounts for as much as a third of government spending, Merrill Lynch (MER) estimates. "Beijing cannot afford a collapse in the housing sector," declares Jing Ulrich, China equities chief at JPMorgan in Hong Kong.

    The slowdown in sales already is taking a heavy toll on China's more than 60,000 developers. Many borrowed heavily to finance growth as real estate values skyrocketed. Now, with prices headed south, dozens have gone belly-up in recent months. Typical of the more troubled companies is Zhejiang Zhonggang in the eastern city of Jinhua. Its chairman skipped the country in October, leaving behind some $20 million in debt and dozens of angry families locked out of homes they had paid for. (The company couldn't be reached for comment.) Next year is looking very tough," says Christopher Lee, director of corporate ratings at Standard & Poor's (MHP) in Hong Kong. "We could see some high-level defaults."

  • Beijing Olympics: Where Are the Japanese Tourists?
  • Monday, October 27, 2008

    The End Is Not Here

    The End Is Not Here

    How does today's financial crisis compare with the beginning of the Great Depression and the 1930s? — Landon Romano, Johannesburg

    Without doubt, you can pick a statistic here and a data point there, lump them together, and cook up a case that it's 1929 all over again.

    But you shouldn't.

    Yes, the current crisis is dire and will certainly worsen. In previous columns, we've predicted tough economic conditions for the next several quarters as the financial system's deleveraging is followed by a consumer deleveraging. But for many reasons, we don't see a second Great Depression looming. To paraphrase Franklin Delano Roosevelt, we believe the main thing to be pessimistic about today is pessimism itself.

    To repeat: We know that real pain lies ahead. But we believe that when the pain eases—and it will—the global economy will be stronger and sounder than ever. We just have to get there—and we will—provided we stop fixating on, well, the exact question you pose.

    Not to criticize you for asking! You're not alone, and we appreciate the chance to counter some financial journalists and all-purpose pundits who, like weather forecasters in a hurricane, are becoming giddy as they describe the biggest "storm" of their careers. Their excitement is understandable, but some perspective has been lost in the fray.

    Let's start with the comparisons to the conditions that surrounded the decade-long collapse some 80 years ago. Sure, current times hold similarities to this period, but they're dwarfed by the differences. In 1930 the protectionist Smoot-Hawley Tariff Act ushered in years of international retaliation and discord. Today's crisis is marked by a high degree of free trade and global cooperation. In 1933 the National Industrial Recovery Act encouraged labor and industry cartels. The result was a decline in U.S. competitiveness—again, hardly the current case: American companies have never been in better fighting form. Finally, a second Great Depression is unlikely because of the institutions created to prevent one, foremost being the Federal Deposit Insurance Corp., with its authority to insure deposits, critical to stabilizing the banking system.

    Instead of another Depression, some doomsayers predict a deep recession like in the early '80s, when U.S. GDP shrank in five quarters over a two-year span, with the worst quarter posting a 7.8% slide. Inflation neared 15%, the prime rate was at 21.5%, and unemployment hit 11%. Our indicators will worsen, but such numbers are miles from where we stand.

    Others say we're marching into French-style socialism. Au contraire. The U.S. government has a century-long history of handling interventions with a fast-in, fast-out approach. In 1984, to take a recent example, it bought 80% of Continental Illinois National Bank but sold it just 10 years later to Bank of America. In 1989 it created the Resolution Trust Corp., which cleaned up the savings and loan crisis, then quickly packed up. TARP, the federal bailout plan, looks to be no exception, as its loan terms give banks flexibility and strong incentives to pay off the government within five years.

    Our bottom line is this: Managers should stop looking back in search of the future. It's counterproductive, if not dangerous. To get through this crisis, leaders need to talk about reasons for confidence. America is loaded with energy and creativity; it's a culture that exalts entrepreneurs, who drive every recovery. Its system of higher education is envied worldwide. The country is brimming with strong companies with sustainable cash flows. And as daunting as the downturn is sure to be, it will also create vast opportunity as people heed Warren Buffet's advice: "Be fearful when others are greedy, and greedy when others are fearful."

    Look, we're not Pollyannas. It's human to view your own difficulties as "the worst of times." But this painful but necessary correction will result in a healthier, deleveraged society with a renewed focus on productivity, innovation, and better governance. The end is not here. A new beginning awaits.

  • Stock Market Crash: Understanding the Panic
  • Why You Shouldn’t Bail on Stocks Now
  • What Gene Tests Can Really Tell You

    What Gene Tests Can Really Tell You

    If Greg Lennon is right, then the personal genome gold rush has a major flaw: There's not much gold there—not yet.

    In the past year, companies have launched high-profile efforts to read the future in people's genes. For $399, a Google (GOOG)-backed startup called 23andMe collects saliva samples from its customers, looks at nearly 600,000 genetic variations in their DNA, and describes what these reveal about the donor's traits, ancestry, health, and risk of diseases. Another company in the headlines, Navigenics, not only extracts information from 1.8 million variations, or "markers," in a tissue sample, but also taps the expertise of genetic counselors and scientists at Harvard and other institutions. The price: $2,500, plus a $250 annual fee to get customized bulletins on the latest discoveries. "The technology lets you know who is at risk for Alzheimer's, diabetes, cancer, and other diseases," says Navigenics Chief Executive Officer Mari Baker.

    Not so fast, says Lennon, a PhD geneticist and entrepreneur. Contrary to the hype about genetic testing, this first wave of direct-to-consumer ventures is likely to be a bust, he believes. The slim, soft-spoken Lennon, 51, is in a good position to know. He's a veteran of both the government's Human Genome Project and biotech startups, and he has ridden the roller coaster of hype and failure. He predicts that the payoff from the explosion in knowledge about human genes—and from the business model espoused by 23andMe and its ilk—won't come for 10 years. Right now, the personal gene-testing companies glean medical insights from individual bits of DNA, rather than from whole genes. So far that may be no better than what is learned the old way, from family histories: "Most people can save themselves $1,000 just by asking Aunt Clara what runs in the family," says Lennon.


    Such skepticism is surprisingly common among scientists. "I see personal genomics as a kind of recreational parlor game rather than a useful endeavor," says Dr. James P. Evans, professor of genetics and medicine at the University of North Carolina, Chapel Hill. "There's a potential for harm in false reassurance and false anxiety, but mostly it's a waste of money."

    Of course, even parlor games can make money. And in the long run, Lennon, Evans, and others think that reading people's DNA will prove to be a tremendous medical boon. Lennon himself is a believer and continues to place bets on the field: His latest venture, called SNPedia, is a repository for all the data streaming from around the world linking genetic variations to health and disease. Launched in 2006 by Lennon and a computer-whiz buddy, it's a Web site supported by ads and licenses, which anyone can browse for free.

    But Lennon and many academics contend that the claims of the new gene-testing startups are premature and overblown. 23andMe, which is also backed by biotech powerhouse Genentech and was co-founded by Anne Wojcicki, wife of Google's Sergey Brin, promises on its Web site to "help you understand how your genetics influences more than 80 diseases, health-related conditions, and traits." Another gene-testing company, deCODE Genetics (DCGN), also makes some grand claims on its deCODEme Web site: "You'll find out where your ancestors came from" and "make more informed decisions about your health." Yet the information we can extract from common DNA variations falls far short of a predictive blueprint for future health. It provides only small statistical links to illness, along with imperfect hints at a customer's origins.

    This reality struck Lennon when he had his own DNA tested several years ago with the same basic technology now marketed by 23andMe, then analyzed it using his SNPedia database. Getting the results seemed exciting at first, he says. He was intrigued to learn he has genetic markers linked with an increased risk of heart disease and decreased risk for certain cancers.

    Flir Leads in Night-Vision Gear

    Flir Leads in Night-Vision Gear

    It's late at night on a foggy country road and you're behind the wheel of a new BMW 7 Series when you fail to notice a deer in your path 30 feet ahead. But an infrared camera, tucked inside the grille of your car, detects its body heat, produces an image of the deer on the dashboard screen, and sounds an alarm. You slam on the brakes, avoiding a potentially deadly collision.

    Once found only in the imagination of science fiction writers, infrared technology is now being deployed to detect land mines in Afghanistan, scan the U.S.-Mexico border for drugs and weapons, and extend the nighttime vision of drivers beyond the distance of their headlights. These and other applications for "dual-use" thermal imaging (which means it's utilized by commercial and military customers) make up a $2.5 billion industry that's growing nearly 20% a year, according to market researcher Maxtech International.

    And the leading provider of infrared technology is little-known Flir Systems (FLIR). The Wilsonville (Ore.) company, founded in 1978, may be less familiar to the public than the bellwethers that dominate BusinessWeek's ranking of Tech Hot Growth companies, such as No. 3 Apple (AAPL), No. 5 Google (GOOG), and No. 6 Microsoft (MSFT), but Flir ranks No. 8 on our list this year. (The company made its first appearance on our list last year, at No. 16).

    Law Enforcement's Eyes

    Flir is an overnight success 30 years in the making. The company's bread and butter has been the high-end infrared cameras it develops for commercial and government use—such as law enforcement and border protection—and then soups up for the military. Mounted on helicopters, ground vehicles, ships, and on the telescoping poles of foot soldiers, the cameras have proven crucial in nontraditional combat zones like Iraq and Afghanistan because they can locate explosives and also help discern civilians from armed insurgents. "What's happened is that there's been a change in the nature of warfare, and finding people in ones and twos and threes is more important now than in battle situations in the past," says Earl Lewis, Flir's chairman and chief executive.

    Wartime has been a boon to Flir: Over the past eight years, the company has seen annual growth rates of nearly 25%. Sales last year reached nearly $780 million. On Oct. 23, the company reported third-quarter revenues of $276.7 million, a 45% jump over the same period last year. Although most of its business still comes from contracts with the U.S. and foreign governments, analysts believe Flir is well positioned to diversify into several emerging commercial markets.

    Flir works with other manufacturers to integrate its technology into the dashboard of a car or the navigational screen of a boat. Vehicle makers then use Flir's technology as a selling point, touting the systems as safety options to customers. Flir also makes its own home-surveillance systems. And it sees potential in what's called thermography—handheld devices that allow building inspectors and homeowners to detect gas and water leaks, poor insulation, other inefficient use of energy, and structural damage invisible to the eye.

    The company hasn't cracked the consumer market because its products are pricey: Most of its low-end consumer products run around $3,000. But the company hopes that its base of government and commercial contracts will help drive volume up across its many businesses, sending manufacturing costs down to the point where average consumers can afford the products.

  • Anheuser-Busch’s Troubled Brew
  • Sony Blames Profit Warning on Yen, Weak Demand

    Sony Blames Profit Warning on Yen, Weak Demand

    So much for the renaissance at Sony (SNE). On Oct. 23, the Tokyo electronics and entertainment company issued a profit warning for this year, blaming the yen's sudden surge and lower expectations for TV and digital camera sales. Sony officials now concede that it's unlikely the company will achieve some of the ambitious targets set by CEO Howard Stringerless than four months ago (, 6/26/08).

    That's a painful admission. For the past three years, Stringer's management team has rebuilt a company that was falling behind more innovative rivals such as Apple (AAPL) and Nintendo. This year was supposed to be the first of a three-year move to recapture some of Sony's past glory (, 1/31/08).

    Instead Sony officials are going back to the drawing board. For the year through March 2009, Sony predicted that operating profits would fall 58%, to $2.04 billion, from last year, despite a 1% uptick in sales, to $92 billion. The company also reset its net profit forecast at $18.5 billion, down 37.5% from what it had estimated in July. "We are considering an action plan that will go beyond the cost-cutting measures we have taken so far," Chief Financial Officer Nobuyuki Oneda told reporters in Tokyo. Though Oneda declined to offer details, he said everything—from research spending to factory investments to plans for new products—would get a second look.

    Not Alone

    Sony isn't likely to be the only blue chip Japanese firm to offer a gloomier earnings outlook. Next week, Panasonic (MC), Nintendo, and Sharp are slated to announce first-half earnings, as are automakers Nissan (NSANY), Honda (HMC), and Mazda. Prior to the announcement, Sony's shares finished the day 6% lower in Tokyo trading, compared with a 4% drop for the industry bellwether electrical machinery index.

    The Sony revision wasn't completely unexpected. The company had based its earlier forecasts on the assumption that exchange rates would be 105 yen per dollar and 160-165 yen for every euro. Normally, Sony hedges against the risk of unfavorable currency swings. But the yen's unpredictably wrenching move appears to have caught the company off guard. As the financial crisis played out over the past few weeks, the dollar and euro have weakened against the yen. Late on Oct. 23, the dollar was trading at around 98 yen and the euro at 125 yen, down significantly from around 109 yen and 147 yen, respectively, in early September. The yen's gains create a problem for a company like Sony, which made nearly three-quarters of its revenues outside Japan. Those revenues get converted back to yen when the company closes its books at yearend.

    And even after Sony tweaked its forecasts, officials didn't rule out the possibility of another downward revision. The new targets are only attainable if the yen weakens to around 100 yen per dollar and 140 yen per euro, Oneda said. "Keeping all other factors constant, if the currencies stay where they are, it could reduce operating profit by an additional 80 billion yen to 90 billion yen ($820 million to $920 million)," Oneda said.

    Bleak Horizon

    Faced with the prospect of a global slowdown, Sony is bracing for lower yearend holiday sales in Europe, the U.S., and China. It trimmed sales forecasts for some of its most popular products, by 9% for Handycam video cameras, 8% for Cyber-shot digital cameras, and 6% for Bravia flat-screen TVs from earlier projections. Competition is also driving down prices faster, Oneda said. Sony's electronics business accounts for 70% of overall sales, so the cuts will dent earnings. Plunging share prices will hurt Sony, too, because its insurance and banking unit invests heavily in stocks and bonds.

    The only good news from the day's press conference, held at a hotel in downtown Tokyo, was that sales of the PlayStation 3 and PlayStation Portable video game consoles are likely to be as strong as—or possibly even better than—earlier projections (10 million PS3s and 16 million PSPs for the fiscal year), thanks to a redesigned PSP and an array of new online services aimed at the PS3.

    Perhaps the toughest part for Sony's management came during the question-and-answer period. Asked whether the company could manage a turnaround of the money-losing TV and video game businesses this year, as Stringer had promised in late June, Oneda said: "It's looking doubtful." TVs have been hemorrhaging money since the fiscal year through March 2005, and games since March 2007. "In my personal opinion, next year could be another difficult one for us," Oneda added.

  • Google’s Profit and Sales Leap, Firing a Rally
  • Sunday, October 26, 2008

    Shifting into Cost-Cutting Mode

    Shifting into Cost-Cutting Mode

    Back in 2002, Scott Chatel's business remodeling brownstones and apartments in Brooklyn and Manhattan was so good that he set a goal to increase annual sales from $2 million to $5 million by 2005. He signed a three-year lease and renovated new office space, expanded his staff, and printed four-color brochures. His firm, Chatel Contracting, was busier than ever, but the costs of expansion erased Chatel's profits, leading him to take on debt. "It was the overhead that was doing us in. The jobs were always profitable," Chatel says. By the end of his lease in 2005, Chatel dropped his expansion plans and went into cost-cutting mode.

    Many small business owners may soon find themselves in Chatel's situation, with rising costs and stagnant sales in a sour economy. Recent surveys of economic trends by the National Federation of Independent Business found weak levels of capital spending over the past six months. And in its latest survey, conducted in September, just 21% of respondents expected to make capital purchases in the next few months. The survey also found businesses reducing inventories, with a net 12% cutting stock rather than adding. While business owners are nervous about the economy, many have refrained from more drastic cuts or layoffs, says Jennifer Rockne, director of the American Independent Business Alliance, based in Bozeman, Mont. "The local folks are typically very reluctant to lay anybody off because a lot of their employees tend to be longtime employees," she says.

    Still, by recognizing the problem early and making moderate reductions, small firms can avoid more severe cuts later on, financial experts say. Companies that ignore warning signs can erode their profits with rising costs, and those that borrow to meet those costs can wind up insolvent.

    Financial Ratios Give Warning

    Chatel took serious steps to cut his overhead. He gave up his office space—gutting the $50,000 renovation he had done when he moved in—and moved the office back into his home. Instead of laying people off, Chatel left vacant positions unfilled until his staff shrank from 15 to five—about the number of employees he had before expanding. He went from doing 60 jobs a year to just 13, and he cherry-picked the most profitable ones that wouldn't require subcontractors. With the help of a workout firm, Paramus (N.J.)-based Corporate Turnaround, he negotiated payment plans with his creditors.

    Today Chatel's sales are down to $700,000, but the firm is far more profitable because of his cost-cutting measures. Eliminating the office saved $500,000 a year in expenses. "Sooner or later you have to know when to say enough's enough," he says. Chatel counts himself lucky for acting when he did, but many small business owners don't see their financial troubles coming. "A lot of [businesses] are financially ill but don't even know it until it's too late," says Sam Bornstein, a CPA and professor of accounting at Kean University in Union, N.J.

    Bornstein advocates using financial ratios as an "early warning system" to signal when a business should cut costs or make other adjustments. Comparing indicators like the gross profit ratio—which shows the proportion of profits to total sales—to industry averages can tell business owners whether their costs are too high or their prices are too low. Other ratios can show whether overhead costs are too high, even if individual transactions are profitable. Bornstein says having an accountant check such figures annually will show business owners signs of trouble before they take on too much debt to cover growing costs.

    Taking New Measures

    Robert Welton wishes he had acted to cut costs earlier. His eight-year-old company, WelTec, based in Egg Harbor Township, N.J., builds and maintains infrastructure for telecom and cable companies. His business was doing well in early 2006, with sales of $3.

    Emerging Markets: Foreign Currency Debt Troubles

    Emerging Markets: Foreign Currency Debt Troubles

    When Daniel Ion bought his first home last year, his monthly mortgage payment was $704. Now it's $939—and rising. "We wanted so much to have our own house, but now we are really starting to feel the burden," says Ion. Soon, he frets, his salary as a manager at a toy factory may not be sufficient to cover the payments.

    Another subprime hard-luck story? Not exactly. Ion lives in Bucharest, and his plight illustrates one reason emerging markets such as Romania are in trouble. Like U.S. subprime borrowers, Ion was lured by a mortgage with easy up-front terms. But a bigger problem is that his loan is in euros while his salary is in lei, the Romanian currency, which is off by 12% against the euro in the past year. Foreign-currency loans are popular in developing countries because they offer lower interest rates than those in local currencies. In Romania, for instance, foreign currency loans run as low as 8%, vs. 10% or more for loans in lei.

    All told, borrowers in emerging markets owe some $4.7 trillion in foreign-denominated debt, up 38% over the past two years. Many developing countries still look strong on paper, with big foreign reserves and healthy trade surpluses. But the statistics can mask heavy dependence on offshore loans to keep economies buoyant. "It's amazing that people don't pay attention," says Mark Mobius, head of Templeton Emerging Markets Fund (EMF). Borrowers have been taking out "mortgages in yen and Swiss francs because they thought the money was so cheap."

    Governments and international lending agencies are scrambling to rescue the hardest-hit countries. The hundreds of billions of dollars the U.S. and Europe are pumping into frozen credit markets also will help. But for some countries, it's already too late to avoid a painful hangover, says Morgan Stanley's (MS) Ronny Rehn in London. "There will be extreme repercussions," he says.

    Who could suffer, and how? Romania, Hungary, and Bulgaria—where more than half of all debt is foreign-denominated—could be pushed into recession, joining the Baltics, where the economies already are contracting. "The only sector that's doing well is collection agencies," says Tomass Barilo, managing director of WorkingDay, a recruitment company in Riga, Latvia. Barilo says he expects WorkingDay's revenues to shrink 25% to 30% this year as consumers and businesses struggle to repay foreign-denominated debts. And Ukraine is bracing for draconian cuts in social spending under terms of a $14 billion emergency loan it is negotiating with the International Monetary Fund. Some 49% of the country's debt is foreign-denominated, and Ukraine's currency is down nearly 9% in the past year.

    Lenders are at risk, too—especially in Central and Eastern Europe, which have gotten some $1.5 trillion in credit from foreign banks. The three biggest foreign lenders—Italy's UniCredit, and Austria's Erste Bank and Raiffeisen International—have all had their debt outlooks lowered recently to "negative" by ratings agencies that cite deteriorating economic conditions in the region. And Sweden's SEB and Swedbank (SWDBY) have written down more than $100 million on credit losses in the Baltics this year.


    In South Korea, the global credit squeeze has sent the won plunging 33% against the dollar this year, making it virtually impossible for local banks to borrow from overseas lenders. Some banks, in turn, stopped lending to small and midsize companies—prompting Seoul to swoop in on Oct. 19 with $100 billion in guarantees on foreign borrowings. But most analysts expect Korea to weather the storm, in large part because of its healthy $240 billion foreign-exchange reserve.

    Other countries are vulnerable not so much because of corporate or consumer borrowing in foreign currencies but because their governments are at risk of default. In Argentina, President Cristina Fernndez de Kirchner wants to nationalize $30 billion in private pension funds. Although Kirchner says the move will protect retirees from falling stock prices, critics say the real reason is to strengthen state finances as Argentina prepares to make billions of dollars in foreign debt payments next year. In Pakistan, meanwhile, foreign reserves have dropped to $4.3 billion, enough to cover only 45 days of imports. Pakistan's rupee has plunged 22% this year as exports have slowed.

    To preserve foreign currency, Pakistan's government has ordered companies to pony up, in cash, one-third of any import bill before banks can issue letters of credit. That has forced businesses to slash imports. "My company is in a pretty deep crisis right now," says Muhammad Imran Khan, chief executive of Lahore-based steel products company Conductor & Cables, which has cut its imports of raw steel and cables by half this year.

    Slumping stock markets aggravate the problem. More than $20 billion flowed out of emerging-market equities in the third quarter, estimates the Institute of International Finance, a Washington association of financial firms. Ukrainian stocks are off 77% this year, shares in Bucharest have plummeted 67%, and Sofia's bourse has dropped 66%. In Moscow, where the RTS stock index is down by 71%, oligarchs who pledged shares in their companies as collateral on loans from Western banks now are having trouble making payments.

    Small wonder, then, that businesspeople around the world feel whipsawed. "The value of the [Turkish] lira doesn't depend so much on the performance of the Turkish economy, but on decisions made by people that have invested in Turkey," laments Mahmut Derya Uras, general manager of Transturk Holding, a machine tool company in Istanbul. Uras concedes, though, that the crisis underscores the need for economic restructuring in Turkey. "It can be used," he says, "as an opportunity to change."

  • Pakistan Faces Default on Its Huge Foreign Debt
  • Pakistan Faces Default on Its Huge Foreign Debt
  • Global Stocks: Should You Pull Out?
  • Saturday, October 25, 2008

    Humdinger's Wind Power Alternative

    Humdingers Wind Power Alternative

    As an MIT engineering undergraduate visiting the rural fishing village of Petite Anse, Haiti, in 2004, Shawn Frayne hoped to devise a way to convert abundant agricultural waste into cheap fuel. But the budding engineer soon found that the community's mainly poor residents faced an altogether more immediate need. Unconnected to the local power grid, they relied heavily on dirty kerosene lamps, which are not only costly to operate but also unhealthy and dangerous. He decided to devise an alternative—a small, safe, and renewable power generator that could be used to power LED lights and small household electronics, such as radios.

    The result is the Windbelt, a miniaturized wind-harvesting power generator that has absolutely nothing in common with the traditional, towering wind turbines that dot the fields and shorelines of developed countries. The simple device was awarded $10,000 in late September as a finalist for the Curry Stone Design Award, a charitable prize that aims to boost design and innovation projects for developing countries. Frayne, now 27, also won a Popular Mechanics Breakthrough Award last fall, earning him a coveted spot on that magazine's annual list of up-and-coming scientists and engineers. Now Frayne and his five-man startup, Humdinger Wind Energy in Honolulu, Hawaii, are working on turning a promising prototype into reality.

    Exploiting Vibrations

    "Wind power has pretty much looked the same for the past 80 years," says Frayne over the crackle of a Skype phone call from Xela, Guatemala, where Humdinger is working in rural locations to develop production-ready versions of the Windbelt. After his initial prototypes proved too expensive or inefficient (or both), Frayne took a different tack, eschewing a propeller-type design for an entirely different idea. About the size of a cell phone, the final Windbelt prototype employs a taut membrane that, when air passes over it, vibrates between metal coils to generate electricity. Frayne claims it is the first wind device of any size not to employ turbines.

    Indeed, the roots of his innovation are unexpected: Frayne says he was inspired by studying the Tacoma Narrows Bridge in Washington State, which dramatically collapsed in 1940 due to powerful vibrations caused by the wind (see here.) The Windbelt harnesses those same dynamics to generate power.

    Adaptable to Developed Economies

    Frayne's device joins a growing array of simple, inexpensive technologies created for developing countries that have also garnered considerable attention in the U.S. and Europe. "Innovations arising from problems in developing economies should meet the challenges of developed economies, too," says Frayne emphatically. With that in mind, Humdinger is taking "a market-oriented approach," he says. That means pitching Windbelt technology as a green way to power air-quality sensors or WiFi transmitters in new buildings in the developed world, for instance. "People are realizing that smartly designed micro-installations can have a big impact," says James Brew, a principal architect with the Rocky Mountain Institute, a green think tank in Aspen, Colo. The Windbelt's small size and negligible cost, adds Brew, make it potentially applicable in developed settings—such as new skyscrapers—as well as the more rugged conditions of the world's rural villages.

    Though he won't reveal how much funding the group has received to date, Frayne says it would cost upwards of $30 million in venture capital to expand the company so it could manufacture Windbelts itself. More likely, Humdinger will end up licensing the technology to other manufacturers, which would assume development costs.

    Undeterred by the obvious challenges of marketing an entirely new type of wind power generator, and even though wide distribution is still some years off, Humdinger is forging ahead. In the past year, the group has established pilot programs in Guatemala and Haiti as well as rapid-prototyping facilities in Hong Kong. They are also working on larger versions that could generate significantly more power. The Windbelt may have started with personal curiosity, but Frayne's mission has changed dramatically. "We're really trying to develop the new building blocks of wind energy," he says.

  • Wind: The Power. The Promise. The Business
  • Career Advancement in Tough Times

    Career Advancement in Tough Times

    The recession we are heading into promises to be brutal and long-lasting. Once the pink slips start piling up—as they surely will—the workplace will become increasingly Darwinian. In times like these, the default setting for many people goes something like this: I'm going to keep my head down, avoid drawing attention, and hope to be standing when the destruction passes.

    That's one strategy, for sure. But the hard times can also be an opportunity to advance one's career—or at least show the boss that you are worth hanging onto. Because if there is one thing you can be certain of in this treacherous season, it's that team leaders will be watching everyone a lot more closely than before. Career guru Marcus Buckingham, whose latest book is called The Truth About You, puts it bluntly: "Now bosses get a chance to see who is really good and who isn't."

    First, a few don'ts. This is not a moment for sudden moves spurred by panic. "When people feel a lot of anxiety, they either shut down or do things impulsively to reassure themselves that they are doing something," says Ben Dattner, an executive coach who consults to such companies as Credit Suisse (CS), Pfizer (PFE), and Goodyear (GT). "But that can backfire." Under this category: rushing to the boss to tell her that one of her favorites is an incompetent lout.

    Another no-no: unseemly ambition. Sure, self-promotion can grate at the best of times. But when the boss is cutting people—and feeling horrible about it—making demands can seem almost sociopathic. A few weeks ago, having just laid off two people from her high-end Manhattan public-relations shop, Jennifer Hawkins gave one of her associates a raise. This person proceeded to ask for even more money. Bad move. "I was like, 'Are you watching TMZ and not CNN? Do you not understand?' " says Hawkins. "Next time, she could be on the block."


    So what is considered appropriately ambitious behavior in a time of savage retrenchment? Making yourself indispensable. Ashley Howard is a 22-year-old manager at Denver-based, an online outfit that supplies kitchen equipment to restaurants nationwide. Months ago, the crumbling economy spooked her. Howard wanted to make herself bulletproof. The world was going green; so would she. Howard got her company to pay her tuition to become accredited in sustainable business practices. Guess what her employer's next big initiative is—and who became the go-to employee? Since reinventing herself, Howard has received a big raise and two bonuses.

    At a time when it's easy to assume that everyone else is putting his own needs first, candor and self-effacement can be tactical weapons. One executive at a Midwestern industrial products business actually argued a few weeks ago that his job made no sense. That honesty so impressed his boss that the executive was rewarded with a different position—at a higher salary.

    While many people lose themselves in the calamity unfolding around them, survivors pull themselves back and calmly survey the landscape for ideas that can help their employer. Sam Brace works for Caliber Group, a Tucson marketing firm. Since the economy started faltering, says his boss, Linda Cohen, Brace has been tireless in his efforts to help his clients get new business in a tough environment. The clients are happy and so is the boss. "When employees can help our clients in these economic times," says Cohen, "their job security increases."

    In the coming months, the hard times will afflict a growing number of companies and industries. And a telling tableau of what is to come can already be glimpsed inside the battered citadels of finance. Look no further than the newly merged Bank of America (BAC) and Merrill Lynch (MER).

    Since BofA is acquiring Merrill, you might expect the latter's employees to be the most forlorn and passive. Not so, says an executive coach working for the company. The coach says some Merrill staffers are coming up with solutions and getting projects done despite constricting resources. By contrast, this person says, some BofA employees are "the ones who are giving in to despair, sadness, and bitterness, and always grousing." And, the coach adds, the sad sacks could be most likely to get the ax. "People never forget how you come across in extremis. If you can shine at this moment, you'll shine forever."

  • Tough Times for eBay Entrepreneurs
  • How Glen and Howard Tullman Became Entrepreneurs
  • How Glen and Howard Tullman Became Entrepreneurs
  • Anheuser-Busch’s Troubled Brew
  • Will Demand for Solar Homes Pick Up?

    Will Demand for Solar Homes Pick Up?

    As global financial markets melted down in October, Congress handed a gift to America's green energy industry: It renewed and broadened a set of tax credits for wind and solar power, geothermal, tidal energy, and more. The move did little to prop up eco-energy stocks, which have followed oil prices down. But the news did send a positive jolt to one of the economy's darkest sectors: homebuilding. Or, more specifically, solar-powered homes. Consumers recognize that green homes "save money month in, month out," says Rick Andreen, president of Shea Homes Active Lifestyles Communities in Scottsdale, Ariz.

    Most of the sweeteners Congress conjured up will go to big projects such as wind farms. But aspiring buyers of green homes will benefit, too. The revised 30% one-time investment credit for solar means that a buyer who installs a typical $25,000 solar panel system on his roof will get $7,500 in income tax credits, up from $2,000 under the old standard. How long that investment takes to pay off will depend on local rules and utility rates. In markets with the most costly power, such as California, Connecticut, and New Jersey, the pretax compound rate of return on a typical home solar system will be better than 15% per year, says Andy Black, chief executive of OnGrid Solar, an industry research firm.

    The fresh credits may mark a turning point for solar-powered homes. During the housing boom, when mortgages and energy were both cheap, green power was not a hot option; typical home buyers preferred granite countertops to solar panels. But even before the subprime crash, builders began to see rising interest in sun-powered dwellings. Ryness Co., which compiles sales data for homebuilders, found in a recent survey that homes with solar systems were outselling others by as much as 2:1 in 13 California communities.

    Today there are about 40,000 solar homes in the U.S., but that number is set to spike. Shea is adding solar to communities planned for Arizona, California, Florida, and Washington State. And, responding to a shift in buyers' attitudes, big builders such as Centex (CTX), Lennar (LEN), Pulte Homes (PHM), and Woodside Homes are following suit. Consider Whitney Ranch, a development south of Sacramento. Sales there softened in the housing downturn, says Kathryn Boyce, an executive at Hanley Wood Market Intelligence. But when Standard Pacific Homes (SPF) put solar systems on a group of new models in the development, they sold out. The builder then decided to install panels on all 304 of the homes.

    The appeal of solar homes could grow as the economic outlook worsens. The more utility bills cut into household reserves, "the more consumers recognize the value of efficiency," says Robert W. Hammon, principal of ConSol, a green building consulting firm. And there's growing consumer awareness that solar homes appreciate faster than ordinary dwellings. They also resell for a premium of up to 5%.

    According to Ben Hoen, a researcher at Lawrence Berkeley National Laboratory who studies the effects of eco-features on real estate values, more homeowners now see solar panels as a long-term asset. Mortgage lenders, however, have been slow to make that link. The loan processes at Fannie Mae (FNM) and Freddie Mac (FRE) don't give special treatment to buyers who make improvements to lower utility bills, says Shea's Andreen. Builders wish lenders would start to take stock of eco-features. "Solar panels free up household cash flow," Andreen says. "Lenders should recognize that."

    Samsung: Good News Despite Bad Earnings

    Samsung: Good News Despite Bad Earnings

    Samsung Electronics executives are putting on a brave face after the company posted disappointing quarterly results. On Oct. 24 the Korean giant announced net profit for the third quarter was down 44% from a year earlier, to $1.15 billion. But, they say, they have reason to stay optimistic about their future.

    And they have a point. For starters, Samsung is outdoing its rivals. The world's second largest semiconductor producer after Intel (INTC), Samsung is the only company in the black among makers of chips used for PC memory and for storing data in portable gadgets such as digital cameras and music players. (Intel is not in the memory chip business.) Chipmakers from Korea, Taiwan, and Japan, in contrast, have all reported big losses. Samsung, the No. 2 mobile-phone maker after Nokia, is also the only major handset company that increased shipments in the three months that ended in September.

    Perhaps more important, Samsung has a big war chest. After it dropped a $5.85 billion bid (, 10/22/08) to acquire SanDisk (SNDK) this week, it is sitting on a cash reserve of some $7.6 billion that will allow it to keep investing in research and development, marketing, and factories—a luxury its cash-strapped rivals in the chip industry can't afford. Samsung will keep "widening the existing gap with competitors," says Samsung Executive Vice-President Chu Woo Sik. "We will have enhanced our leadership [for] when the market recovers."

    Another advantage for Samsung is a weak Korean currency. The won, which has fallen by more than 40% this year against the dollar to become the world's worst-performing currency, is making Samsung much more competitive in export markets (, 9/19/08). This is particularly so as rivals from Japan such as Sony (SNE) and Toshiba (6502.T) are suffering from a strengthening yen (, 10/23/08).

    Memory Chip Glut

    To be sure, the headline numbers are grim. Samsung's third-quarter profit was its worst in more than three years. Its net profit margin in the three months leading up to September was just 6%, down from 13% from a year earlier, although sales grew 15%, to $18.1 billion. That's largely because the memory chip business, traditionally Samsung's cash cow, is suffering from a supply glut. Prices for a typical DRAM chip used for PC memory dropped 17% from the beginning of July to the end of September; prices for NAND flash chips used widely for digital cameras plunged 35%.

    And the worst may not be over. "We foresee the coming months to be an even more challenging period," Chu admits. Many semiconductor analysts say memory chip prices are expected to stay weak until the first half of next year, with a rebound expected in the second half. Samsung's semiconductor division posted an operating profit of $226 million in the third quarter, down 74% from a year ago, but even that small profit is widely seen being wiped out in the fourth quarter.

    Still, as bad as things are for Samsung, things are much worse for its rivals. Among Samsung competitors swimming in the red are crosstown rival Hynix Semiconductor, Japan's Elpida Memory (6665.T) and Toshiba, and Taiwan's Powerchip Semiconductor and Nanya Technology. "Samsung certainly has enough cash to weather the industry meltdown and will be poised to reap benefits from an increased market share in an upturn," predicts Song Myung Sup, chip analyst at brokerage HI Investment Securities in Seoul. Song figures Samsung's DRAM market share will rise to 32% by next June from 21% at the beginning of last year.

    Another good piece of news for Samsung during this time of economic woes comes from its handset business. It sold 51.8 million phones in the quarter, a quarterly record and up 13% from the previous three months—nearly triple the pace of growth for the global handset market, which grew 5%. Senior Vice-President Chi Young Cho at Samsung's telecom unit predicts the company will exceed its target of selling 200 million handsets this year, up from 161 million last year.

    That means Samsung's market share is rising again. The 200 million phones represent a global market share of more than 16%, up from 14.3% last year and 11.5% in 2006. "Samsung is cementing its position as the world No. 2," after overtaking Motorola (MOT) last year, says technology specialist Michael Min at fund manager Tempis Capital Management. Song at HI recommends a "buy" for Samsung shares. "The stock will fluctuate in the short term, but I see it rising by more than 50% in six months," Song says.

    Friday, October 24, 2008

    China's Great Railway Expansion

    Chinas Great Railway Expansion

    Beijing - Two or three times a year, Cargill's joint-venture fertilizer plant in China's remote Yunnan province has to shut down, usually for weeks at a stretch. That's when there aren't any railcars available for shipping its fertilizer to customers across China. Without railcars, the factory's warehouse fills to overflowing, and production has to halt. "There's a huge demand for shipping, but the railroads can only meet 30% of the demand," says Zhang Hong, sales manager of the plant, which shut down yet again in October.

    For decades, China has neglected investment in railroads in favor of building highways. With less than 49,000 miles of rails, China has roughly a third of America's track for an area of similar size. The nation's rails carry a quarter of global train cargo and passenger traffic on only 6% of the world's track, making its system the busiest on the planet. "China's strained railroads have already become a bottleneck for the economy," says Yu Tengqun, secretary of the board of state-owned China Railway Group, which has built two-thirds of China's railroad network since 1949.


    China is now undertaking the world's biggest railway expansion since the U.S. laid its transcontinental line in the 1860s. Beijing plans to spend $248 billion through 2020 on 75,000 miles of new track, for both freight and high-speed passenger lines. At that point, China's high-speed passenger network will likely be the biggest on earth.

    Despite these colossal ambitions, a nagging question remains: Can anyone make money from all this? Equipment suppliers, such as China South Locomotive & Rolling Stock Corp. and multinationals like Siemens, certainly can. But it's hard to profit from running a railroad on the mainland. Analysts at UBS (UBS) estimate China's Ministry of Railways, which operates the railroads, has a net profit margin of less than one percent on revenues of about $35 billion. The Ministry maintains majority control over all rail lines and sets freight rates for farm products and ticket prices for migrant workers at artificially low levels. It wouldn't comment for this article.

    That pricing policy is politically smart but commercially ruinous. Only 16 of China's 26 joint-venture railway companies—each of which involve the Ministry and often local governments as well—are marginally profitable, according to UBS. The rest chug along in the red. In June, China's first private enterprise to invest in a railway project, Guangyu Group, decided to reduce its stake in the Quchang Railway to 19%, from 34%. The company was unwilling to comment.

    Pressure on the Ministry of Railways to find the billions needed for all this expansion may eventually force it to loosen its grip on pricing and cede control of at least some of the railroads. "There is a lot of capital now that is very interested in building railroads," says Zhao Jian, a professor at Beijing Jiaotong University who researches railway reforms. Until that happens, China's rail industry will continue to attract more business than it can handle and fewer investors than it needs.

    GM Cuts Costs to the Bone

    GM Cuts Costs to the Bone

    Cash is getting so tight at General Motors (GM) that management has launched another wave of cost-cutting. The company is even scrutinizing the electricity bills.

    Auto sales are in their worst slump in decades, resulting in a cash burn rate of about $1 billion a month at GM. The company is selling assets to raise money, but as the economic slump appears to be gaining traction, GM is now delaying new models, cutting benefits, laying off salaried workers, and looking at even small items like utility bills.

    The latest round of cuts show just how quickly the world has changed around GM and how much pressure the company is under. In July, Chairman and CEO G. Richard Wagoner announced a plan to boost cash by $15 billion through cost-cutting, asset sales, and some borrowing. He said that the $15 billion would be enough even if sales fell to 14 million vehicles in the U.S. Last year, Americans bought 16.2 million vehicles.

    Cruze May Be Delayed

    But things have gotten worse, including overseas. So GM needs to get leaner for tough times. The company is beginning to delay even some new-vehicle programs that will be pivotal to its turnaround effort. Sources in the company say the Chevrolet Cruze compact will be delayed until 2011, almost a year after it was originally set to launch. The next-generation Chevy Malibu may also be delayed by six months, into 2013, sources say.

    GM spokesman Dee Allen would not confirm specific product delays. He said only that GM will "continue to review the portfolio and concentrate on what's most important." He added that some new-car programs "are going to shift around a bit."

    Delaying the Cruze and Malibu would conserve cash at a crucial time. Suspending projects now would save cash in 2009, which promises to be at least as difficult for carmakers as 2008 has been. This year the car business is on pace to sell just under 14 million vehicles in the U.S. Next year, Waltham, (Mass.) research firm IHS Global Insight says industry sales will be around 13.4 million vehicles.

    Bankruptcy a Possibility

    The delays will save precious cash at a time when analysts say bankruptcy is a real possibility. Yet the delays represent yet another year that GM will have to wait for a car the company hopes would make it a serious player in the compact-car market. GM has bragged that the Cruze would not only be the biggest and roomiest compact car on the market, but it would get at least 40 miles per gallon. "GM doesn't have a choice," says IHS Global Insight analyst John Wolkonowicz. "They have to do whatever it takes to get through until the car market recovers. That won't happen until 2010."

    The Cruze is planned as a replacement for the Chevy Cobalt, which has performed well, with sales rising 6.3%, to 162,000, in this year's woeful market. But the Honda Civic and Toyota Corolla have sold more than 280,000 each through September.

    Elsewhere, GM said it will cut 401(k) contributions for white-collar workers and more salaried jobs. As many as 5,000 workers could go, Dow Jones Newswires (NWS) reported on Oct. 23.

    Staying Alive Till 2010

    These are tough decisions, but the company has to save cash to stay out of bankruptcy in hopes of making it until 2010. By then, concessions in a new labor contract with the United Auto Workers will kick in, saving several billion dollars annually. And hopefully, the car market will rebound. "GM has to save cash until 2010," says James Hall, principal of Detroit-area consulting firm 2953 Analytics. "The trouble is that they're starting to delay some essential car programs to do it."

    GM is also looking at more miserly ways to save money. The company has told engineers and product development staff at its sprawling technical center north of Detroit to turn the thermostats down to 66 degrees and turn lights off after hours. There was also an e-mail circulated saying GM will remove refrigerators from some offices to save on utility bills. Allen, the GM spokesman, said he didn't know about specific plans to save on power bills, but said the company has done things like that in the past when cash got tight.

  • Can GM and Ford Scrape By?
  • Can GM and Ford Scrape By?
  • Chevrolet Pins Europe Hopes on Cruze
  • Baltimore's New WiMAX Service Flies Where Wi-Fi Flops

    Baltimores New WiMAX Service Flies Where Wi-Fi Flops

    Can something called WiMAX succeed where other technologies have failed and bring us ultrafast anytime-anywhere wireless data? A couple of years ago promoters said municipal Wi-Fi would do the job, but projects from San Francisco to Philadelphia have been abandoned or scaled back after smashing into economic and technical realities.

    The fast 3G networks currently offered by the likes of Verizon Wireless and AT&T (T) are a step up from EDGE and other second-generation networks. But they still offer only limited coverage. And while 3G is fast enough to pump Web pages to iPhones and other smartphones, it can be painfully slow feeding the bigger data appetites of laptops, whose users expect to stream music and watch video. And it is pricey, typically $60 a month for a computer connection.

    WiMAX is the latest wireless ­technology to come on the scene, using very smart physics to achieve extra-high speeds. XOHM, a joint venture of Sprint Nextel (S) and Clearwire (CLWR), has just switched on the first U.S. commercial WiMAX net-work in Baltimore. I took a trip there with a new WiMAX-ready Lenovo (LNVGY) ThinkPad X301 to try it. The experience left me encouraged by the promise of this fourth-generation wireless technology.

    XOHM claims average download rates of 2 to 4 megabits per second. When I ran some commercial speed tests, I consistently got downloads at about 3 mb and uploads at 500 kb and 1 mb. That's a bit slower than typical cable service, especially on the download side, but significantly faster than most DSL lines and about three times faster than what I have usually seen on 3G data networks. Perhaps most important, it's fast enough for good-quality video. While someone else drove me around Baltimore's Fells Point neighborhood, I was able to watch's broadcast-quality video with no freezes or pauses to wait for data.

    If you happen to live in Baltimore—in the two-thirds of the city that currently has WiMAX coverage—you can get XOHM on-the-go service for $30 a month for six months, rising to $45 after that. At-home service, which requires the purchase of an $80 modem, costs $25 a month, going to $35 after six months. You can combine both services for $50 a month, guaranteed for as long as you maintain the service. XOHM is also available on a month-to-month basis with no contract required, or you can purchase daily service for $10.

    XOHM behaves like a 3G network in important ways. Once you've signed up, your computer will automatically connect to XOHM without the need for any sort of login. And since WiMAX is a cellular technology, your Internet connection moves from one cell tower to the next as you drive. In my test, these handoffs were seamless.

    WiMAX, like Wi-Fi before it, will require coordination among computermakers. Intel (INTC), which has invested a couple billion dollars in XOHM, is trying to follow its Centrino strategy, which made Wi-Fi a standard, easy-to-use feature in notebooks. The latest Intel laptop chips have WiMAX support baked in, making it cheap and simple for computer companies to add the capability. Lenovo is offering it as a $40 option in four models and plans several more before yearend. Toshiba is building WiMAX into its Satellite U405 laptops.

    This doesn't assure success for WiMAX. Verizon and AT&T, as well as wireless carriers throughout Europe, are betting on a related but rival approach called Long Term Evolution (LTE). And XOHM must raise a lot of capital in a difficult environment to build out its network. On the plus side, XOHM has a two-year head start over LTE, since Verizon and AT&T don't plan to roll out 4G before 2010. XOHM has plenty of spectrum in hand to provide national coverage—far more, in fact, than the 4G bandwidth that AT&T and Verizon bought for nearly $20 billion at a government auction earlier this year.

    However it plays out, consumers are likely to win. At launch, XOHM is providing faster service at lower cost than 3G networks, and it provides both mobile service and a rival to cable and phone companies for home Internet. That's enough of a reason for all of us to cheer for WiMAX.

    Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkWiMAX's Hefty Price Tag

    While Sprint says its roll-out of WiMAX isn't affected by the global slump, InformationWeek reported on Oct. 8 that the company must come up with $1.8 billion, on top of the $3.2 billion it has already raised from investors.

    For InformationWeek's analysis, go to

  • The iPhone’s Impact on Rivals