The title comes from a hard-nosed saying of Harold Geneen's, quoted in Jim Kilts new book "Doing What Matters", reviewed in the WSJ(The Man Who Sharpened Gillette) and pointed out by one of the few business-focused blogs(The importance of execution.) around and it's worth quoting from the review at greater length. Especially since it's a central, perhaps THE central thesis, of this blog.
When the hard-nosed Harold Geneen was driving the growth of ITT in its heyday in the 1960s and '70s from a $760 million company to a $17 billion conglomerate, his management philosophy was blunt: "In business, words are words, explanations are explanations, promises are promises, but only performance is reality."
When Jim Kilts showed up at Gillette in 2001, the first outsider to run the Boston-based company in more than 70 years, he found a business with great brands losing market share. Its acquisitions of Duracell and Braun were not delivering. Sales and earnings were flat, the company had missed its earnings estimates for 15 straight quarters, the stock had plummeted, and Wall Street had lost patience. Yet two-thirds of the top managers were getting top ratings. People were being rewarded for effort; performance, under Mr. Kilts's regime, became the new measure.
Floyd Norris reinforces the point in a rather telling NYT column focused specifically on the finance industry and the lack of reality in the last 18 months earnings report, which fall under the old rubric that if it's too good to be true it likely is:
As Bank Profits Grew, Warning Signs Went Unheeded We should have known something was strange. The banks were doing a lot better than they should have been doing. When the history of the financial excesses of this decade is written, that will be a verdict of financial historians. There were signs that banks were either lying about their results or were taking large risks that were not fully disclosed, but investors were oblivious. What were the signs? Consider how banks make money. They pay low rates on short-term deposits and charge higher rates on long-term loans. So they love what are known as positively sloped yield curves. And they like to see big credit spreads, where risky borrowers are charged much more than safe ones. Put them together, and banks should clean up. By that light, nothing was going right in 2006 and early this year. The yield curve was inverted, or at best flat. And credit spreads were at historic lows. Risky loans, whether to subprime mortgage borrowers or junk-rated corporations, were readily available at rates that seemed to assume there was only the slightest risk of default. And yet the bank stocks were buoyant, and so were reported profits.
There are a couple of CNBC clips worth watching(Financial Analysts Over-reacting ?,Bo's Rules)which also reinforce the argument.(). The key here is that however the economy and markets are running at the end of the day "performance is reality" and it's up to you whether as investor, employee or other stakeholder to dig into and understand the underlying characteristics of a particular business and the industry in which it operates. It's a point that we've hammered on a few times here as well. The way to do we've sketched in some of these prior posts.
At the end of the day our point is that performance matters, performance matters, performance matters !
AND as the artificial impacts of excess liqidities dry up we're going to be more and more in what we like to think of as Warren's economy where understanding the roots of enterprise performance, which has always been important no matter what the level of neglect, will be increasingly critical on many levels. As you sort thru and review the following links please look at them with this in mind.
Business
And Then There Were Six… Standard & Poor’s, the credit rating outfit, says only six nonfinancial U.S. firms are still rated AAA, down from 25 in 1992 and 12 in 2002. And the gilt-edged ratings of two of the six are in doubt. “Part of the change is due to the shift in corporate financial strategy. Firms have become much more focused on shareholder return and have begun to manage their balance sheets accordingly. Firms that previously were ‘AAA,’ have applied more leverage and increased their risk profile
Small Firms Hire Guides as They Head Abroad A growing number of smaller U.S. companies are leaping overseas sometimes before they have the experience and personnel to handle it. International operations used to be the province of big corporations with the staff to handle cross-border complications. Now, a growing number of smaller U.S. companies like Boggs & Partners are leaping overseas -- sometimes before they have the experience and personnel to handle it. Some firms are drawn by low-cost labor in countries like China or India; others seek to sell into exploding foreign markets. Cheap phone and Internet connections encourage the trend. Small companies rushing to go abroad sometimes underestimate the difficulty, says Mr. Harding. Complicated cross-border taxes and duties can trip up companies not used to selling in different countries. Hiring employees abroad means tracking labor laws and benefits practices. Dealing with foreign languages and currencies makes everything harder, he says. Some little firms stumble.
How to avoid hiring a jerk Despite a labor shortage in many sectors, some employers are pickier than ever about whom they hire. Businesses in fields where jobs are highly coveted - or just sound like fun - are stepping up efforts to weed out people who might have the right credentials but the wrong personality. Call it the "plays well with others" factor.
Why workers stay with the company The critical factor is having a good, effective manager.. When they go wrong, where do managers do wrong? "A lot of it has to do with treating employees with dignity and respect. I don't know that that can be overestimated in terms of its impact and value," Wiley said. Over years of research and consulting work, he's found that often "employees were simply asking to be recognized, for the manager to say 'hi' to someone in the morning, to say 'thank you' for the work performed," Wiley said. "It doesn't really cost you anything in many respects to be considered a more effective manager." Also, it's important managers organize the workload fairly, provide feedback on workers' performance, and work to improve poor performers. "People want to work for a winning team," he said.
CEO job hunt Wall Street's annual conference, the Securities Industry Financial Markets Association's annual meeting in Boca Raton, Fla., begins in less than 48 hours. Hop a plane and bring your resume. The credit crunch has already claimed two chief executives, Merrill Lynch & Co.'s) Stanley O'Neal, who stepped down last week and Charles Prince, Citigroup Inc.'s CEO who left the company over the weekend. Another, Bear Stearns Cos.' Jimmy Cayne, may not survive fourth-quarter results if deeper write-downs or in Cayne's case more damaging personal information surfaces. Already more than $30 billion is being slashed in the wake of the credit crisis and there is no guarantee that amount will not rise significantly in the coming months. Below the executive suite, most bankers and traders are trying to prove their worth to avoid layoffs. It has been a rapid descent from the first half of the year when estimates suggested everyone's record 2006 bonus would rise as much as 20% in 2007. Singh and Donohue's appearances illustrate the growing role of hedge funds and derivatives in the marketplace. The Chicago Merc is trading 12 times the number of contracts it traded four years ago and retail brokers are offering derivative investing to clients. Hedge funds had only $625 billion under management at the end of 2002. They had $1.8 trillion at the end of the third quarter, according to Hedge Fund Research. Hedge funds, known for their heavy trading strategies, also provide huge fees to prime brokerage operations on Wall Street.
Calpers, and Where Private-Equity Funds Go to Die The California Public Employees’ Retirement System, the nation’s largest public pension plan, might think twice before it tries to sell any of its private-equity investments again. Calpers decided this year to sell the stakes it holds in about 60 private-equity funds — many of which were older and had ceased to generate significant returns. For an illiquid market such as the private-equity sphere, that means the pension system had to offer up the portfolio on what is known as the secondary market, where a handful of firms specialize in buying second-hand fund shares. Calpers’ decision to dip its toe in the secondary waters was widely noted in the industry and is considered a test of whether the secondary market is efficient enough for big investors conducting such sales. The funds Calpers put up for sale had assets valued at about $1 billion, making it one of the largest portfolios ever offered on the secondary market. Ever since Calpers started marketing the portfolio around Labor Day, hiring UBS to oversee the process, the sale process has been characterized by confusion and delay, people tell Deal Journal
· Lombard: Private equity investors should prepare for trouble Gloom-mongers within the industry have been talking about the looming wave of distress for some months. Poorly thought-out deals are now getting squeezed from both ends. In the glory days of the first half of this year, such buy-outs were done on the basis of leverage at eight or nine times earnings before interest, tax, depreciation and amortisation, against the previous industry norm of four times. But those ratios are not comparable: in normal times, the ratio was based on debt to historic ebitda, but at the peak of the sellers’ market, debt was being raised at higher multiples against prospective, pro forma earnings and credulous buyers were also prepared to accept such innovations as “vendor due diligence” – the M&A equivalent of self-certified sub-prime mortgages. When flimsily structured, highly leveraged deals, based on optimistic forecasts and self-interested risk assessments, collide with a downturn in the real economy, the risk of default – or at least disappointment – is bound to increase.
Brokerages set sail with boomer dollars Once considered the safe havens for conservative investment dollars, such as retirement assets, banks face new competition from the brokerage industry. The race for all that money is pitting the perceived safety and security banks afford against the broad menu of financial services the brokerage industry offers. In new study, the Bank Administration Institute says banks have steep competition from brokerages and need to step up to win the retirement money competition. Moreover, a majority of affluent consumers (59%) cite saving for retirement as their top financial priority. This, of course, puts savings together with retirement, something banks could and should easily be able to integrate into their service offerings. Of course, they haven't. Instead, banks have strong credit-card offerings and have incorporated mutual funds and other current investment programs into their offerings nicely. They've just never taken it to the next step. Indeed, as the BAI numbers show, banks have hemorrhaged retirement assets. With so much money on the line, however, banks are bound to change. And BAI sees three areas that banks could and likely will be seizing on in the future:
Cisco’s Chambers: IT Spending Could Get Lumpy Look out: Cisco CEO John Chambers says tech spending in the U.S. might get a little “lumpy.” Cisco is often viewed as a barometer for the business-tech industry. The company makes equipment that businesses use on their computer networks. Most businesses buy at least something from Cisco, and consequently Cisco’s revenue tends to rise and fall with information-technology budgets. By that measure, the first quarter was obviously good for IT departments: Cisco’s revenue increased 17% from the year-ago quarter to $9.6 billion.
But lately there’s been speculation that corporate tech budgets may start to shrink. Companies worried about an economic downturn as a result of the housing slowdown are likely to cut IT spending. A recent Goldman Sachs study predicted IT budgets will drop in 2008, and the tech-research firm Gartner Group has started warning its clients that they need to prepare two budgets: one in which they spend more and one in which they don’t. What does Cisco think? On a call with analysts, Chambers said to expect revenue growth of about 16% at the company next quarter, about the same as this quarter. But when asked, Chambers said a lot of that growth would come from international markets and that U.S. revenue might suffer. That’s when he used the L word. These calls are usually a lesson in equivocation, so Chambers’ statement is pretty strong. To all those Gartner clients trying to decide which budget to go with, the hits from Cisco suggest it will end up being the smaller one.
Who Buys Technology? Not Just IT, Anymore This used to be true by definition: Information-technology departments provide companies with their technology. But increasingly, it isn’t IT that’s buying tech. No, this isn’t another post about employees using iPhones and Gmail to get their work done. It’s about finance and marketing execs, who say it’s often them – not IT – who are making tech-buying decisions these days. A new survey by Forrester Research found that 25% of business execs said that they were either completely responsible, or more responsible than IT, for managing tech vendors. Another 23% said that they were completely responsible, or more responsible than IT, for selecting technology.
This change has been a long time coming. Tech vendors used to target their pitches to the IT department. But a few years ago, we started noticing pitches that clearly weren’t meant for techies: Vendors started talking about the business problem their product solves, not how it solved it. Eventually, we started asking whom these companies were selling their products to. They said finance, marketing or HR execs and rarely IT. Business units were the ones with the budgets.
Vendors used to add that they always worked with the IT department. Now, they may not even need to do that. A lot of the software being sold these days doesn’t have to be installed on company servers, the back-office computers IT uses to process data and run applications. Instead, it can be accessed over the Internet through a Web browser. IT never has to get involved. We talk to a lot of techies who say that it creates problems when non-technical folks make technical decisions, because they invariably overlook something important. But the way around that is for tech departments to let business leaders know that they’re willing to work as consultants. It isn’t to try to wrestle back tech decision making. Forrester’s numbers show that th
Companies
Citigroup's Profit Engine Breaks Down as Prince Exits, Writedowns Increase Citigroup Inc., the profit engine built by Sanford ``Sandy'' Weill, has seized up. The biggest U.S. bank by assets said yesterday that subprime mortgages and related securities lost as much as $11 billion of their value in the past month, a decline that may wipe out half of the company's profit so far this year. The New York-based company also said in a statement that Charles O. ``Chuck'' Prince III, Weill's hand-picked successor, stepped down. Former Treasury Secretary Robert Rubin will become chairman, and Citigroup's most senior executive in Europe, Win Bischoff, will be interim CEO. Analysts at CIBC World Markets and Morgan Stanley told clients last week to get rid of Citigroup shares. CIBC's Meredith Whitney said Citigroup may have to sell assets because it needs to raise $30 billion of capital. The combination of $25 billion of acquisitions in the past 19 months and the lowest cushion for losses ``in decades'' increases the risk of owning the stock, she said. Citigroup reported lower third-quarter earnings from consumer banking, corporate banking, investment banking and credit cards, and the company's stock market value has fallen below that of Bank of America. Net income slumped 57 percent to $2.38 billion in the three months ended Sept. 30.
- Amid Turmoil, a Shake-Up at Citi Citigroup named Robert Rubin chairman and Sir Win Bischoff interim CEO after Charles Prince resigned amid billions of dollars in losses on mortgage-related securities. A special committee, including Mr. Rubin and board member Richard Parsons, chief executive of Time Warner, will conduct a search for a permanent CEO. That could be a tall order: A decade after Mr. Weill built the insurance-to-banking-to-stockbroking behemoth through a run of acquisitions, his creation remains an often-dysfunctional collection of businesses whose employees sometimes ignore or even compete against each other. The bank's retail network isn't hooked into other parts of the company -- meaning branch tellers can't see whether a customer in front of them has been preapproved for a credit card so they can offer it. Until recently, capital markets and consumer businesses within the bank's European operations duplicated basic office functions because each had its own legal and human-resources staffs. Citi's core problem -- and Mr. Prince's core failure -- isn't just the recent market losses. It's also the conspicuous lack of successes elsewhere to compensate for them. That potential was the big strategic idea behind the "universal bank model" created by Mr. Weill a decade ago. The universal bank could generate more revenue from clients by offering a slew of related financial services. Meanwhile, the collection of varied businesses is supposed to provide a cushion, with downturns in some areas balanced by upturns in others. It's a model that banks in Europe have relied on for years.
- Now Citi Needs a Plumber Prince's lawyerly response to Citi's regulatory problems -- mostly over its stock research and initial-public-offering practices -- may have stifled innovation, dimming its earnings potential and hurting its ability to recruit and retain talent.
- Citigroup's Subprime Explanation Defies Belief Citigroup Inc. says it isn't sure how much its subprime-related assets have fallen in value this quarter. Maybe it's $8 billion. Maybe it's $11 billion. On one point, though, Citigroup isn't budging: It says none of these declines began until after last quarter ended.
- Prince Alwaleed: Chuck had to go In a Fortune exclusive, Citigroup's biggest single investor talks about his disappointment in Chuck Prince, the bank's colossal losses, and his views on a successor CEO.
Breaking Citi News: Pandit’s Planned Reorg Pandit, the newly minted CEO of Citigroup’s Institutional Clients group, is likely to begin his makeover of the embattled firm’s investment bank in the coming days, people familiar with the matter say. The initiative, which could be unveiled at a town-hall meeting Nov. 14, would be Pandit’s first big move since he joined Citi in April and was promoted last month to his current position. One option for the makeover could be referred to as the Morgan Stanley-ization of Citi. A few years ago, Morgan combined separate debt and equity capital markets groups. A person familiar with the matter cautioned that no final decision has been made, and that other executives who prefer the status quo could still win out. (Read more about importing Morgan Stanley’s model at Citigroup in this post we did earlier.) It is unclear which executive would spearhead the project or who they would report to. Should Pandit prevail, he would collapse the walls between bankers selling various products, be it high-yield bonds, equities, or derivatives. The point would be to make bankers agnostic to what they are selling and focused only on what the client needs. Citi is notorious for having an army of bankers that often work at cross purposes and have been derisively referred to as the “Citi swarm.” Tales are told of one group of Citi bankers unexpectedly running into another at a client’s headquarters. True or not, they are symbolic of just one of a slew of woes facing the nation’s largest bank, which is still struggling to make the 1998 megamerger of Travelers and Citicorp work. Of course, with Citigroup in disarray after massive fixed-income write-downs and the recent departure of its CEO, there are no guarantees at the bank right now. Who knows if, for example, Pandit will even be around after the bank chooses a successor to Chuck Prince.
Countrywide, Washington Mutual Play Shell Games: Jonathan Weil The balance-sheet maneuvers are a classic case of earnings management. Last quarter, both companies changed the asset- classifications for billions of dollars of mortgages to ``held for investment'' from ``held for sale.'' While the distinction may look arbitrary, the effect on short-term earnings under the accounting rules can be huge when loan values are falling, as they are now. That's because mortgages classified as held for sale must be carried on the balance sheet at cost or market value, whichever is lower, with any declines hitting quarterly earnings. Mortgages held for investment, by contrast, need be written down only if they have suffered an ``impairment'' that is ``other than temporary,'' which can mean different things to different people. A loan's real-life value, of course, won't stop falling just because the accounting treatment changes. Yet by reclassifying loans as investments, banks can postpone big losses, hoping the values rebound later. The problem is they might not, in which case investors could get blindsided. Countrywide, which reported a $1.2 billion net loss for the third quarter, transferred $12.32 billion of prime mortgages to held-for-investment, after first marking them down by $418 million. The loans all were of the ``non-conforming'' variety that don't qualify for sale to Fannie Mae and Freddie Mac -- which in this market means there are few, if any, buyers. The biggest U.S. mortgage lender finished the quarter with $30.86 billion of loans held for sale and $83.56 billion in the investment category. Other problems lurk. Because the transparency is so poor, investors can't see if the companies might have sold their best loans and stashed the bad ones in their investment portfolios. Such ``gains trading'' was a big problem during the 1980s savings-and-loan crisis, notes Donn Vickrey, editor in chief at Gradient Analytics Inc. an investment-research firm in Scottsdale, Arizona. ``From the disclosures they provide, you really can't tell the extent to which gains trading may have occurred,'' he says. The markdowns the companies took before reclassifying their loans also are open to question. The rules known as Financial Accounting Standard No. 65 let lenders review their mortgages in pools, which are easy to gerrymander, rather than individually. They also can offset loans with embedded gains against those with embedded losses.
Moving at the Speed of Sound at Chrysler It is the management equivalent of zero to sixty in one second. According the chairman of Chrysler owner Cerberus Capital Management, the decision to cut production levels at the auto maker in response to slowing demand this year was made in “seven minutes.” That is what John Snow, the former Treasury secretary, said in an interview Monday with Dow Jones Newswires. (Read more about it here.) In the old days, the same decision would have taken weeks, according to Snow. That, of course, was before the keys of the company were turned over to the private-equity firm in August by the German auto maker then known as DaimlerChrylser.
General Motors Has $39 Billion Loss, Biggest Ever, on Deferred Tax Charge General Motors Corp., the world's biggest automaker, reported a $39 billion third-quarter loss, its largest ever, after writing down $39 billion of future tax benefits. The loss of $68.85 per-share widened from a deficit of $147 million, or 26 cents, a year earlier. The non-cash charge is related to deferred tax assets in the U.S., Canada and Germany, the Detroit-based company said in a statement today. GM is writing down the tax assets because it may not be able to generate enough earnings to use the benefits. The move is another sign of a worsening outlook for the U.S. economy and auto sales, as GM cited mortgage-related losses at its partly owned GMAC LLC finance unit and ``more challenging'' auto-market conditions in the U.S. and Germany.
British food takes U.S. by storm After nosing around U.S. kitchens and refrigerators for nearly three years, Britain's biggest food retailer is putting its conclusions -- along with American shopping habits and meal preferences -- to the test in bringing a new grocery-store format to the western U.S. this month. Tesco is opening 11 Fresh & Easy Neighborhood Market stores, with six Los Angeles-area stores debuting Thursday, followed by five Las Vegas stores Nov. 14. Other openings are slated for San Diego and Phoenix by year-end. Industry observers are labeling the Fresh & Easy launch the most closely watched grocery opening in years, with the arrival of the new concept potentially impacting a wide range of food retailers.
Home Depot May Pare Lowe's Market Share as Blake Repairs Nardelli Blunders Now, Frank Blake, who took over as Atlanta-based Home Depot's chief executive officer in January after Robert Nardelli was ousted, is staking his success -- and that of the retailer's languishing shares -- on winning back contractors like Masters, who provide as much as 40 percent of the $79 billion in annual sales. Taking Lowe's and other hardware stores head-on, Blake increased bulk discounts, added account managers to serve big- spending shoppers and put more workers in areas contractors frequent, hoping to take back market share Home Depot surrendered. Home Depot is focusing on home-improvement contractors because they provide an immediate opportunity for growth during a slumping market for home sales. While nine of 10 contractors shop at its 2,200 stores, they make 10 percent of their purchases there, the company said. The plan is to capture 50 percent more sales from contractors, said Ron Jarvis, the Home Depot executive heading the effort. This may boost annual revenue by $12 billion ``long term,'' he said. Home Depot added account managers to form an outside sales force of 240, each handling about 30 accounts. Salespeople have wireless phones so contractors can reach them directly, and expense accounts, Jarvis, 48, said. Responding to complaints that Home Depot failed to place enough knowledgeable sales help on the floor, Home Depot hired tradespeople to work departments professionals frequent, including lumber, concrete, drywall and doors. Once purchases are made, the company is testing whether to add an extra employee from 6 a.m. to 3 p.m. to load goods into contractors' vehicles.
Time For Change …Parsons is getting ready to wrap up an eventful, nearly six-year stint running the planet's biggest media company, and that Bewkes's era is near. Parsons' contract will expire in May, but several senior people within the company expect him to hand over the CEO reins to Bewkes sooner, perhaps by the time the company's annual top management retreat begins in November in Miami. The betting is that Parsons will stay on as chairman for at least a year. What is making the transition less smooth than either man hoped, however, is the anvil weighing down Time Warner's stock price. Instead of celebrating Parsons' corporate stewardship, frustrated investors are grumbling that Time Warner is today trading slightly below where it was when he took over in May 2002. Now, even before Bewkes has the top job, the stock's malaise has some wondering whether the 28-year company veteran, who was anointed as Parsons' likely successor two years ago, can really lead Time Warner's beleaguered shareholders to the promised land. Through the ups and downs of his tenure, Parsons has consistently argued that Time Warner, which has a market capitalization of $70 billion, is more valuable together than in pieces - particularly since the company has trimmed the portfolio by selling its books and music businesses and the Atlanta Braves, among other things. And he has made the argument, quite rightly, that media stocks are out of favor with a Wall Street that frets about what the digital world is going to do to these companies' cash flows. In fact, Time Warner produces more cash flow than any of its rivals. Yet the two standout stocks in the media sector over the past couple of years - News Corp. and Walt Disney Co. - have also shown that it is possible to break away from the herd. Their share prices have significantly outgunned Time Warner's during Parsons' tenure (see chart). Time Warner had revenues of $44 billion last year, while Disney generated $34 billion and News Corp. reported $25 billion.
Dell to buy EqualLogic for $1.4 billion Dell Inc. continued to break with past tradtions Monday when the world's No. 2 personal-computer company said it would acquire privately held network-storage provider EqualLogic for $1.4 billion in cash as part of an effort to sell more products to small and midsized business customers. For Dell, the four deals represent an acquisition binge, as prior to this year the company had only made three corporate acquisitions since its founding in 1984. Its March 2006 purchase of high-end gaming computer company Alienware was arguably Dell's best-known deal up to that time. The deal also falls in line with Dell's strategy of has been seeking to bolstering its storage business and generating more sales among small-and-medium-sized businesses. In September, for instance, Dell unveiled its new MD3000i storage-area-networking product. It's easier to use and less expensive than similar offerings from rivals such as International Business Machines Corp. and Hewlett-Packard Co., according to Dell. The new push into the storage market represents the latest in a long line of attempts by Dell to reach out to small- and medium-sized businesses with products specifically designed for that market instead of with devices merely reconfigured from larger-market products.
- Dell spends big in virtualization play Dell Inc.'s costly deal to purchase EqualLogic, a storage and virtualization company that was ready to go public, is a sign that the sleeping giant has awakened after losing market share and being beset with accounting issues for months. In this case, Dell is making a play in the red-hot area of virtualization, made popular of late by the latest high-profile newcomer of the moment - VMware Inc. VMware's software makes it easier for system managers to run a network, making multiple servers appear as one, EqualLogic does something similar in hardware. Dell already resells VMware with some systems and this deal gives it more storage hardware that runs the popular virtualization software. What Dell lacks in the invention department, it used to make up for in manufacturing prowess. But now, with more intense competition from H-P, Sun Microsystems Inc. and International Business Machines Corp. in the server business, it has to buy ways to leapfrog rivals.
- Dell Is Getting Serious About the Customer Experience. Dell is getting very serious about transitioning from the PC cube to the consumer experience. I heard in San Francisco recently at the World Design Conference that Dell has hired Ed Boyd from Nike to head up their consumer product design operation. Boyd is part of a new Dell's Design Dozen, 12 people recently hired to build out its brand and experience design operation. This is a very big deal. Nike has been right on top of the move to use social networking to link directly to potential and real customers, through the Nike Plus site. And Boyd has been essential to that. Right now, 85% of Dell's products are in the b-to-b space and it wants to transition to the b-to-c market and for that, you need great expertise in user experience and co-creation. This is a big culture change, that Michael Dell is behind.
Google Crafts Big Plans for Android There is no Google phone, but what Google revealed Nov. 5 could be even bigger. Google unveiled a complete mobile phone stack under an open-source license as an alternative to proprietary platforms from Microsoft and Symbian. Aimed at the roughly 3 billion mobile phone users around the world, Android, as it is called, is a Linux-based mobile software stack, including an operating system, HTML Web browser, middleware and applications. Google will make a software developer kit for Android available within a week to allow programmers to begin testing it. The stack was created under the aegis of the Open Handset Alliance, an alliance of technology and wireless carriers that includes Google, T-Mobile, eBay, Qualcomm and Motorola as just a handful of the 34 founding members. Schmidt noted that the lack of a collaborative effort has made it a challenge for developers, wireless operators and handset manufacturers to work together and build better mobile products. This has resulted in poor, often unwieldy user interfaces that make accessing the Web via mobile phones a chore; a mobile software stack that assuages the usability problem, combined with Google's search capabilities and applications, has the potential to be extremely successful.
- Can Android conquer the mobile world? The search king became popular more than a decade after PCs went mainstream and several years after the Web became a staple. Has Google done exceptionally well? Of course. But it's one of many companies vying for eyeballs on the PC browser. Enter Android. Unlike the PC market, Google joins the contest for mobile access to the Internet with its Android software while there is still much work to be done. Many would argue Apple's iPhone was the first mobile computing device to allow a Web page to look exactly as it does on a PC's browser. The search giant announced the Android platform for mobile devices and the Open Handset Alliance on Monday in a move to break the lock existing carriers and phone makers have on the industry and make it as easy to use the Web on mobile devices as it is on desktop computers. With Android, Google can ensure current and future mobile phone subscribers can see Google services, applications, and ads. Also, the announcement could pave the way for a Google branded phone that would give the company a direct connection to consumers, even more than the ubiquitous search bar. And don't count out a Google phone just yet.
Cisco Shares Fall on Failure to Top Growth Estimates U.S. companies have ``squeezed'' information-technology spending, Chambers, 58, said on a conference call yesterday. Orders fell from Cisco's top 25 U.S. customers, which include eight financial services companies and two automakers, he said. Corporate customers may slash networking budgets as they deal with a collapse in subprime lending and a slowdown in new construction. Cutbacks at U.S. automakers also are threatening Cisco orders. General Motors Corp., the world's largest automaker, reported a quarterly loss yesterday of $39 billion, about twice its market value. Chrysler LLC, the carmaker owned by buyout firm Cerberus Capital Management LP, said last week that it plans to cut as many as 25,100 jobs after losing $680 million last year. To weather the slump, Chambers is investing in emerging markets, making acquisitions and pushing into new products such as television set-top boxes. Sales in developing countries such as Serbia and Turkey grew 35 percent, helping make up for the U.S. slowdown. North America contributes about 55 percent of total revenue. Cisco also is winning sales from phone and cable services, which use its routers and ethernet products to spruce up their systems. The company bought Scientific-Atlanta last year to expand into cable set-top boxes. Telecommunications customers are switching to Cisco from suppliers such as Tellabs Inc. and Ericsson AB
Cisco’s Chambers: IT Spending Could Get Lumpy Look out: Cisco CEO John Chambers says tech spending in the U.S. might get a little “lumpy.” Cisco is often viewed as a barometer for the business-tech industry. The company makes equipment that businesses use on their computer networks. Most businesses buy at least something from Cisco, and consequently Cisco’s revenue tends to rise and fall with information-technology budgets. By that measure, the first quarter was obviously good for IT departments: Cisco’s revenue increased 17% from the year-ago quarter to $9.6 billion.
But lately there’s been speculation that corporate tech budgets may start to shrink. Companies worried about an economic downturn as a result of the housing slowdown are likely to cut IT spending. A recent Goldman Sachs study predicted IT budgets will drop in 2008, and the tech-research firm Gartner Group has started warning its clients that they need to prepare two budgets: one in which they spend more and one in which they don’t. What does Cisco think? On a call with analysts, Chambers said to expect revenue growth of about 16% at the company next quarter, about the same as this quarter. But when asked, Chambers said a lot of that growth would come from international markets and that U.S. revenue might suffer. That’s when he used the L word. These calls are usually a lesson in equivocation, so Chambers’ statement is pretty strong. To all those Gartner clients trying to decide which budget to go with, the hits from Cisco suggest it will end up being the smaller one.
Apple's IPhone Service Fees Prompt Analysts to Revalue Earnings Multiples Chief Executive Officer Steve Jobs jumpstarted optimism about the power of the iPhone, the $399 Web-surfing mobile device he introduced in June, to generate a steady flow of cash. Analysts are revaluing the stock because each sale brings Apple a cut of monthly wireless service fees from AT&T Inc., and sales of the phone are recognized over 24 months. This has led analysts including Credit Suisse's Robert Semple and Deutsche Bank's Chris Whitmore to use multiples of cash flow rather than earnings to estimate Apple's stock price, reflecting an anticipated pileup of deferred revenue. Twelve analysts raised
WiMax on the ropes with Sprint, Clearwire out The setback cannot be good news for proponents Intel and Motorola. News that Sprint Nextel Corp. and Clearwire Corp. have halted plans to build a wireless network around the wider-reaching WiMax technology cannot be good news for some of its major proponents, namely Intel Corp. and Motorola Inc. Sprint could still decide to go ahead with a WiMax network, but it may be months before the rudderless company makes a decision. The carrier, which has not yet hired a new CEO, is reviewing its WiMax plans and could decide early next year. The Sprint and Clearwire projects was estimated to cost $5 billion. Chipmakers Intel and Motorola have made major investments to develop semiconductors to deliver WiMax technology in the next few years, offering faster and broader Internet connections than current WiFi networks. A fact sheet posted on the WiMax Forum's Web site, dated October 25, cites the Sprint and Clearwire services as the key U.S. example of proposed mobile WiMax services, targeted to reach more than 150 million consumers in 2008. Sprint, Clearwire Scrap WiMax Pact
Cisco is often viewed as a barometer for the business-tech industry. The company makes equipment that businesses use on their computer networks. Most businesses buy at least something from Cisco, and consequently Cisco’s revenue tends to rise and fall with information-technology budgets. By that measure, the first quarter was obviously good for IT departments: Cisco’s revenue increased 17% from the year-ago quarter to $9.6 billion. 
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