Monthly Archives: July 2009

Yahoo Gives In to Microsoft, Gives Up on Search

Posted on July 29, 2009 by admin| Comments Off

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In a long-awaited pairing aimed at taking on Google, Yahoo will handle ad sales while Microsoft gets the real prize: data on who’s doing what online

By Peter Burrows and Daniel Saltman

Ever since Microsoft (MSFT) made its $45 billion bid for Yahoo (YHOO) in early 2008, it was clear the software giant was serious about taking on arch-rival Google (GOOG) in the lucrative Internet search business. And now, after years of talks with Yahoo, it seems Microsoft has achieved its goal. In a 10-year deal announced in the early hours of July 29, Microsoft became the clear No. 2 in a market long dominated by arch-rival Google.

In a deal that presages its departure from a market it helped pioneer, Yahoo will scrap its own efforts to best Google in search and instead rely on Microsoft’s recently debuted Bing search engine. Ads placed next to those search results would be served up not by Yahoo’s ad platform, dubbed Panama, but by a Microsoft technology called AdCenter. Yahoo CEO Carol Bartz “is essentially giving up on search,” says Danny Sullivan, editor of Search Engine Land.

Yahoo salespeople will continue to sell search ads that appear on both Yahoo sites and on Bing, and Microsoft agreed to let Yahoo keep 88% of the revenue on ads that appear on Yahoo sites. But Microsoft will nevertheless reap a reward that’s more valuable in the long run. The data on computer users’ online search and buying habits would ultimately reside on Microsoft’s computers, thereby improving its ability to automatically serve up the most relevant ads. “If Microsoft is running the underlying ad technology, it doesn’t matter who is selling the ads,” Sullivan says. “In the end, Microsoft will hold all the cards.”

He adds that most advertisers place ads by filling out online forms, with no involvement from salespeople. Maintaining control of sales makes the deal “sound rosier for Yahoo than it really is, because in the end Yahoo won’t have the technology needed to compete.”

Insurance for Microsoft and Bing

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Microsoft wins in other ways. The deal gives a big boost to Bing. The combined search market share of Yahoo and Microsoft would approach 30%. That’s still far below Google’s 65%, but analysts say it may provide enough of a critical mass at least to stave off further Google advances and help the enlarged search engine gain some ground. At a minimum, the deal doubles as a kind of insurance policy for Microsoft, in case all

of the positive buzz about the Bing search engine doesn’t translate into actual market share. By adding Yahoo’s 20% market share, Bing assures its place as the only search engine provider other than Google with size that really matters.

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166871-microsoft-bing_180So what’s in it for Bartz? For starters, Yahoo will slice $200 million in technology development costs, while continuing to bring in or even grow its search ad revenue. That’s because its salespeople will sell not only ads running on Yahoo sites, but also on Bing. Once it’s fully implemented, about two years after regulators sign off, the deal is expected to add an annual $500 million in operating income for Yahoo. The recently appointed CEO also buys time to hone Yahoo’s strategy and improve other moneymakers, such as placing banner-style display ads that appear on Yahoo’s highly trafficked portal and e-mail pages. And by continuing to sell search ads, she maintains relationships with key advertisers rather than let Microsoft walk away with them. “Yahoo doesn’t want to look like they’ve sold off their crown jewel for short-term gain,” Sullivan says. “This creates the illusion that they have more control of the situation than they probably do.”

It’s an illusion that will likely work with Yahoo’s long-suffering shareholders. Indeed, the deal will probably be welcomed by investors in both companies, since it lets each play to its respective strengths. Yahoo is most successful as a media company—and that includes selling advertising.

Microsoft, on the other hand, is a technology powerhouse, with vast software development capabilities and the cash to build the billion-dollar data centers needed to run search engines and ad platforms. The roles represent a stark reversal from half a decade ago, when Microsoft used both Yahoo’s search technology and its search-ad system. “It’s good for both of the companies,” says Sandeep Aggarwal, an analyst with Collins Stewart (CLST.L).

An Antitrust O.K. Is Needed

The arrangement will also have to get a nod from antitrust officials. It probably will, given both companies’ relatively small market share next to Google’s, and advertisers generally are likely to be in favor of the deal since it bolsters a competitor to the market leader. But Google no doubt will raise objections, which could at least slow down the approval of the deal.

Moreover, the complexity of the deal means it will take the two companies longer to integrate operations than if Yahoo simply outsourced search and search ads to Microsoft, as Microsoft originally proposed. “It’s certainly a deal with a bunch of moving pieces,” says Tim Cadogan, CEO of the online ad technology and services firm OpenX and a former Yahoo ad sales and search executive.

But if and when those pieces fall into place, it will become abundantly clear which party gained the upper hand in the arrangement, and which one has a fighting chance against Google.

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Deaths on rise as government anti-knife crime strategy fails

Posted on July 22, 2009 by admin| Comments Off
Knife crime figures published

The failure of the government’s £3m knife crime campaign is a severe embarrassment to ministers.

The high-profile government campaign to tackle knife crime in big English cities has failed to cut the number of fatal stabbings, according to Home Office figures published today.

The number of teenage homicide victims of knife crime remained unchanged at 23, while the number of adults over the age of 20 killed actually went up during the campaign by seven to 103, results of the official monitoring programme show.

The failure of the £3m campaign to reduce the number of teenagers killed in knife attacks in England’s 10 priority police areas is a severe embarrassment to ministers on a highly political crime issue that is likely to dominate the debate on law and order between now and the general election.

Ministers will tomorrow launch a £5m second phase of the “tackling knives action programme” (TKAP) which will see the campaign expanded to 16 police force areas and widened to tackle all forms of serious violence among 13- to 24-year-olds, including gang culture.

Home Office ministers preferred to emphasise the research findings that violent knife crime incidents involving those aged 19 and under were down by 17% during the first phase of the campaign, which ran from July 2008 to March this year.

The home secretary, Alan Johnson, also cited a 32% reduction in NHS hospital admissions for knife crime victims in the 10 target areas.

The Home Office said this compared with an 18% drop in hospital admissions for stabbing injuries outside the targeted areas over the same period.

Controversy has surrounded the knife crime statistics since last December, when the former home secretary Jacqui Smith had to apologise to parliament for the “premature release” of the hospital data when she made public some early results to suggest that the police were making headway against knife crime. Sir Michael Scholar, the head of the UK Statistics Authority spoke out publicly against her “premature, irregular and selective” use of statistics.

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The figures published today show that much of the overall 17% reduction in teenage violent knife crime victims is concentrated in some of the biggest cities, including London and Birmingham. But in three out of the 10 police forces involved – Greater Manchester, Nottinghamshire and Thames Valley – violent knife crime went up during the campaign.

The Metropolitan police have had some modest success in reducing the total number of knife crime murders by three, and the West Yorkshire force succeeded in reducing the number of teenage deaths from seven to none during the campaign period. But Manchester saw the number of teenage murder victims of knife crime rise by four and the death toll on Merseyside rose by three.

The number of robberies involving a knife fell by 13% for those 19 and under but rose by 11% for those involving adults.

The campaign included the extensive use of knife arches and wands at pubs, train, tube and bus stations, after-school police patrols and stop-and-search campaigns. More than 250,000 searches yielded 5,469 knives and other weapons.

Home Office statisticians said the overall findings were encouraging, suggesting fewer youngsters were becoming victims. “While caution must be applied when interpreting these trends, TKAP may have contributed to a decline in some measures and persisting reductions in others,” said the official research report.

Chief constable Keith Bristow, who is in charge of rolling out the second phase, said “public angst” over knife crime was understandable: “In any crime reduction approach the first thing to do is arrest the increase and turn that cycle around.

“This is a long journey. Success when you’re dealing with these sort of problems might be measured in generations, not weeks or months.”

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San Francisco Civil Grand Jury says City Pension Costs Are “Skyrocketing” and Place Unfair Burden On Future Generations

Posted on July 20, 2009 by admin| Comments Off

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(07-16) 18:07 PDT — San Francisco’s skyrocketing pension costs are untenable and both unions and politicians are to blame for abusing the system by negotiating extraordinary pension and retirement benefits without considering the unfair burden on future generations, according to a report issued Thursday.

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City officials acknowledged that San Francisco has some challenges. But Supervisor Sean Elsbernd, who has worked extensively on the issue, said the civil grand jury report grossly overstates the city’s risk. He noted that voters, not politicians, have the ultimate say on the approval of retirement benefits. And because of that, he said, San Francisco is in a far better place than comparable cities and counties, as well as the state of California, over the long term.

The document specifically targets San Francisco’s police officers and firefighters for essentially gaming the system through “spiking” – the practice of artificially inflating retirement benefits by increasing their compensation just before retiring, often through temporary promotions. The jury calls the practice “institutionalized and ongoing” in public safety agencies and estimates it cost the city and other employees at least $132 million over a 10-year period ending in 2008. The report said more than half of police and firefighters who have retired since 1998 receive a pension worth more than their highest pay.

Grand Jury member Craig Weber, an accountant, said the city should conduct an independent investigation into spiking and a review of pension benefits at both agencies. But he said the practice is more pronounced at the Fire Department, and credited Police Chief Heather Fong for bringing it under control.
Civil service tests

Firefighters union president John Hanley flatly rejected the jury’s findings, saying spiking does not occur in San Francisco because promotions are based on civil service tests.

“People get promoted in their last few years because they become smarter and more experienced later in their careers so they do better on tests,” he said. “This is much ado about nothing.”

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Elsbernd, however, said spiking needs to be addressed, but noted that with more than 50,000 beneficiaries, “a handful of spiking employees is not going to bring down the system.”

“Frankly it’s a low-hanging fruit that the grand jury is picking on. … What we do need to deal with is retiree health care costs,” he said.

Elsbernd said Proposition B, which creates a health care trust fund and was passed by voters last year, will make a huge difference funding those costs over the next two decades. And in a statement, Mayor Gavin Newsom’s office said he is “very concerned” about the city’s obligations to its employees and plans to convene “a group of experts to advise him on meaningful pension reform and develop a strategy.”

As prior city reports have found, the grand jury determined that the city’s pension contribution will probably increase by nearly 300 percent – from $178 million a year to $520 million – over the next three years. The increase is compounded, according to the report, by the fact that 40 percent of the city’s employees are now eligible for retirement and another 15 percent will become eligible over the next five years.
Risk to city

If a dramatic increase in the retirement rate occurs, the report said, it would pose a huge risk to the city’s cash flow and funding. Already, about half of the city’s pension payroll is paid to people who retired in the last decade, the report found.

Elsbernd said San Francisco does have short term challenges over the next few years that could impact other city spending. But over the long term, he said, the picture is far more positive.

Part of the problem, the grand jury members and Elsbernd agreed, is that the city’s investment portfolio has sharply declined in value over the past year – 20 percent, according to estimates. But even without the stock market dip, the city has been greatly overstretching itself, the report says. The jury also disputed the argument that public employees should be eligible for more generous benefits because their pay is low compared to the private sector, noting that recent city surveys found San Francisco workers in nearly all jobs paid more in both wages and salaries than other government workers and most private employees.

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Dennis Kucinich: Can You Tell Me How The Secretary Of Treasury Can Ignore Illegal Acts?

Posted on July 20, 2009 by admin| Comments Off

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Poll: Public support for Obama on healthcare dips to 49%

Posted on July 20, 2009 by admin| Comments Off

The Washington Post/ABC News poll shows a slide in support amid rising concerns about the economy and the federal deficit.
By Mark Silva
6:56 AM PDT, July 20, 2009
Reporting from Washington — As President Obama’s campaign-style push for healthcare reform continues, a poll published today found that, for the first time, public support for his handling of the issue has slipped below 50%.

The president’s overall job approval is 59% in the Washington Post/ABC News survey, the first time the poll has measured it below 60%. Other polls, notably Gallup, also have found the president’s approval slipping into the high 50s.

Just 49% said they approved of the way Obama was handling healthcare, down from 53% in June and 57% in April. The share of people voicing disapproval for the president’s handling of the issue has risen from 29% in April to 44% in the July survey.

The slide in support mirrors a loss of support on other domestic issues, “such as the economy and the federal budget deficit,” the Post noted, “as rising concern about spending and continuing worries about the economy combine to challenge his administration.”

Slightly more than half approve of the way the president is handling unemployment, which has climbed to 9.5% nationally and exceeds 10% in 15 states, including California.

Obama, who stepped up his call for Congress to act on healthcare reform last week, was scheduled to meet with healthcare providers at the Children’s National Medical Center in Washington today and deliver a statement on the issue.

The poll was conducted July 15-18. The survey of 1,001 adults carries a possible margin of error of plus or minus 3 percentage points.

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Obama auto task force shifts to automaker owner

Posted on July 16, 2009 by admin| Comments Off

Obama auto task force shifts to automaker owner

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WASHINGTON (AP) — When it brokered the restructuring of Chrysler and General Motors, President Barack Obama’s auto task force repeatedly pledged that it would steer clear of running a car company.

But with both companies exiting bankruptcy with the federal government as a major shareholder, that promise will be put to the test as the task force shifts roles from negotiator to owner.

The government could face a number of pitfalls: It could be tempted to insert itself into the day-to-day operations or sway management if auto sales continue to slide and carmakers’ financial woes continue. Lawmakers may try to use the government’s ownership as a way to push their own interests, such as making more fuel efficient cars. And the administration will need to sell its stake as quickly as possible.

“I take them at their word that they don’t want to run an auto company, the question is whether they will get dragged into it,” said Martin Zimmerman, a University of Michigan business professor who studies the auto industry. “There is a significant chance that will happen.”

Appointed by Obama in February, the task force includes representatives of cabinet members and economic advisers. It is officially headed by Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council. But much of the work was overseen by two senior advisers, Steven Rattner and Ron Bloom. Rattner stepped down last week, leaving Bloom as the leader.

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Wielding power in public companies once thought unimaginable, the government panel’s efforts laid the groundwork for quick bankruptcies that helped Chrysler and GM emerge with smaller debt loads, reduced work forces and streamlined brands and dealer networks.

In the process, roughly $65 billion in government loans and aid was sunk into the two companies. Under the restructuring plans, the government now owns about 8 percent of Chrysler and 61 percent of GM.

Rattner stressed again last week that the task force plans to take a hands-off approach, saying that it wasn’t interested in “picking colors of cars.” But he noted that with such a large financial interest, the government would take a role similar to a large institutional investor.

“We have fiduciary responsibilities to the taxpayers to ensure that investment is well looked after. We will interact with GM, its management and board,” Rattner said.

Both companies face a brutal car market and numerous competitors seeking buyers in a depleted market. Auto companies are on pace to sell about 9.7 million vehicles in the U.S. this year compared with sales of more than 16 million vehicles in 2007. If the bleak conditions persist, it could increase pressure on the government to play a more active role.

Some supporters of the auto industry expect the task force to maintain its arms-length distance, crediting it with giving the two companies new life without inserting itself too much into the way Chrysler and GM conduct their business.

“They have the job to improve the foundations for restructuring without making decisions that require expertise about how you make a car,” said Rep. Sander Levin, D-Mich. “That’s the difference. How you manage is different than how you make a car.”

But critics worry that the task force has wielded too much influence and may do so again.

The plight of hundreds of shuttered auto dealers offers a window into the pressures the administration could face. GM and Chrysler are closing nearly 3,000 dealerships, moves supported by the administration. Key lawmakers including House Majority Leader Steny Hoyer, D-Md., oppose the action, saying it evades state franchise laws and will lead to the loss of tens of thousands of jobs.

“This whole notion is that some brainiac down at the task force came up with the idea that Toyota sells a lot of cars and they have less dealers and therefore we should make GM and Chrysler look like Toyota. It’s stupid,” said Rep. Steven LaTourette, R-Ohio.

The White House said Wednesday it opposed the attempts to restore the GM and Chrysler franchise agreements.

Gerald Meyers, former chairman of American Motors Corp., said the temptation to meddle with the type of cars the companies make, where factories are located, and who runs the automakers, may be too great for the Obama administration and Congress to resist.

“It isn’t in the DNA of the government to stay out,” he said.

For example, House Republicans have questioned GM CEO Fritz Henderson about the company’s decision to maintain a parts distribution center in the district of Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank had urged Henderson to keep the facility open. And the administration’s firing of GM CEO Rick Wagoner also looms large.

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Administration officials said they want to dispose of the government’s ownership interests as soon as practicable. While the U.S. stake is much smaller in Chrysler — the company is now aligned with Italian automaker Fiat — there will be intense scrutiny on the government’s share of GM.

GM is expected to conduct in initial public offering in 2010 and its shares would need to grow in value for the government to break-even or make money.

“We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out,” Rattner said before his departure. “We do want to do well for the taxpayers but the most important thing is to get the government out of the car business.”

The Congressional Budget Office has provided a pessimistic outlook for a full refund, estimating last month that only about $15 billion of the initial $55 billion to GM, Chrysler, its financing arms and suppliers would be repaid. The analysis did not include the $30 billion GM received to help it navigate bankruptcy.

Also unclear is how long the task force will continue to exist. Some lawmakers, such as Rep. Gary Peters, D-Mich., want it to tackle lingering problems of other segments of the auto sector, such as extending loans to auto parts suppliers that are struggling as GM and Chrysler cut back.

Rattner said that the task force will “inevitably get smaller” as it shifts to monitoring the federal government’s investment in Chrysler and GM.

Bloom was an adviser for the United Steelworkers union before coming to Washington, helping guide it through a similar restructuring of the steel industry. His former boss, union vice president Tom Conway, said he has a firm grasp of manufacturing issues. But he wondered how long Bloom would stay with the task force, especially now that most of the difficult negotiating is over.

“You get this thing done and signed off on, you get a new management team in there and you move on,” he said of restructuring deals.

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Has big real estate finally hit rock bottom?

Posted on July 15, 2009 by admin| Comments Off

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John Cannon has been financing big real estate loans for $25 billion-asset Capmark Finance Inc. of Horsham and its predecessors since 1985, and he’s never seen business this slow.

“There’s nothing being bought and sold,” Cannon told me by phone from the vast Virginia headquarters of government-controlled home lender Freddie Mac, one of the few outfits still pumping millions into buildings.

Capmark financed $1.5 billion in apartment deals during the first half of the year, down by half since early 2008. Almost all this year’s lending was refinancing loans, funded by Freddie and Fannie Mae, and the U.S. Department of Housing and Urban Development.

“They’re the only viable lenders in U.S. commercial real estate right now,” and all they do is residential real estate, not offices or industry, Cannon said.

He’s seen slow markets before. The early 1990s, when the savings banks failed. But that “was a supply issue. You saw a lot of empty buildings. Now it’s a liquidity issue.” Banks aren’t lending.

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He’s hoping things have hit bottom. Fannie and Freddie tightened credit sharply last year. Lately, they aren’t requiring quite so many escrow payments, Cannon said hopefully. “Terms are getting looser. Spreads are coming down.”

It’s not that loan rates have fallen. It’s the spread between what money costs and what Fannie and Freddie charge that tells the story, according to Cannon:

Back in the mid-2000s, loans were approved at less than 1 percent above the benchmark 10-year Treasury rate. That zoomed to 3.5 to 4 percent above the benchmark during last fall’s credit crisis, after the Bush administration took control of Fannie and Freddie. Now it’s around 2 percent, Cannon says.

But banks still aren’t coming back into the market. It’s not just that they’re shy. There’s also “the disconnect between buyers’ and sellers’ expectations,” Cannon told me. “Guys bought a building five years ago for $10 million. They don’t want to sell for $8 million.”

NJ to PA

Archer Daniels Midland Co., Decatur, Ill., says it’s closing its Glassboro cocoa plant and ending jobs for 53 workers there. The work is moving to ADM’s new 500,000-square foot plant in Hazleton, says spokesman Roman Blahoski.

Bernanke or Summers?

Democrats in Congress and the Obama White House are plotting to remove Federal Reserve Chairman Benjamin Bernanke and replace him with Obama’s chief economic adviser, Larry Summers, at the end of his term next year, writes veteran bank analyst Richard X. Bove of Connecticut-based Rochdale Securities.

Summers is the brainy Main Line native, Harvard economist, and ex-Treasury Secretary who’s trying to re-regulate the financial institutions he helped deregulate under President Bill Clinton, setting the stage for the current mess.

Bernanke or Summers – what’s the difference? “Mr. Bernanke has demonstrated a willingness to act to defend both the economy and the financial system. Conversely, Mr. Summers has written the bulk of the proposals to regulate the financial industry,” which Bove says “would dramatically restrict fund flow to the economy” and kill the recovery like the government did when it tightened credit rules too soon in 1937. (But when’s the right time?)

Bove credits Bernanke, ex-Treasury Secretary Henry Paulson, and FDIC chief Sheila Bair with “bold, innovative action” that salvaged the banks and prevented a full U.S. takeover. Bush and Obama at that time “did nothing.” Congress was “the proverbial deer in the headlights.”

Yet “the same people who were incapable of acting when there was a clear need for action will now make the decision as to whether the man who helped save the system should be removed.”

Bernanke is set to testify before the House banking committee next Tuesday. Expect Fed critics to ask how he’ll reverse the scary growth in the money supply without stalling the economy.

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