I confess to being an early adopter, and much of what is adopted ends up at home. In this, there is some collateral damage—namely, my long-suffering family.
One early adoption came in 1980, when I brought home my first dial-up terminal and started telecommuting. This inevitably led to a conversation that goes something like this:
“Bill, you’re always on your @#$&&$ computer!!!”
My typical response—uttered in complete innocence—goes something like:
“But I’m just doing X.”
(“X,” of course, could be almost anything, such as reading my mail, writing to Mom, planning a great vacation, doing the household accounts, playing a game, looking up something in the encyclopedia, working on my book, reading a newspaper, and so on.)
Sound familiar? Anyone who has a home computer and claims not to have had such a conversation in their household is either a chronic liar or a saint. That being the case, have you ever stopped to wonder why our parents never had a parallel exchange? Theirs, of course, would have been along the lines of: “You’re always on your pencil!”
In my parents’ age, the pencil was just as prevalent as the computer is today. Yet, the first exchange is almost universal, and the latter borders on the absurd.
In the pre-computer age, we had specific rooms in our homes where certain activities were centered—for instance, games or study or eating. Hence, one had a fairly good idea of what you were doing from the room you were in. And within a particular room, the fact that you were on the couch, at a table, or sitting at a desk gave some indication of not just your activity, but also your level of “interruptability.” And then, there were generally all kinds of other physical artifacts that gave away what you were doing. For example, when doing household accounts, you might have a pencil, a checkbook, bills, stamps, envelopes, and a scratch pad for making notes.
These days, virtually all of these cues have disappeared. All that remains—in the extreme telling of the story—is a single device onto which all of the associated information is consolidated in digital form, as are all of the tools. Furthermore, this is true not only for any single task, but for a vast multitude of everyday activities. Hence, to any outside observer, you are always on your computer.
Part of the purpose of design thinking is to improve our ability to tease out conflicts such as the one described above, and figure out how not to throw the baby out with the bathwater. In a way, this is a reflection of the second “law” of the historian of technology, Melvin Kranzberg, which states: “Invention is the mother of necessity.” It is also a reflection of Proust’s observation that: “The only true voyage of discovery is not to go to new places, but to have other eyes.”
So when it comes to the matter of “always being on your computer,” the question becomes: “How can we restore the cues around activity that would help recapture the moral order of the home while keeping the benefits of the new technology?”
In many ways, this is the kind of question that we were asking ourselves at Xerox PARC back in the 1980s when we were developing the notion of ubiquitous computing. But that makes it too easy to assume that this is about technology. It’s not. This issue is not just about technology or the user, but also about place: Where is the activity taking place physically, and in what social context? How can we redesign tools and technologies such that they encourage behaviors, and visibility of activity, that are consistent with such places and values?
User-centered design commonly tries to take into account different canonical user types through the use of persona. Perhaps one thing we need to do is to augment this tool with the notion of “placona,” that is, capturing the canonical set of physical and social spaces within which any activity we are trying to support might be situated. After all, cognition does not reside exclusively in the brain. Rather, it is also distributed in the space in which we exercise that knowledge—in the location itself, the tools, devices, and materials that we use, and the people and social context in which all of this exists.
By way of example, let me refer to my 89-year-old mother. She loves music, lives where there is terrible radio reception, and has access to my 90-year-old father’s computer, which is connected to the Internet and which has speakers in her living room. But despite the fact that all of the right streaming audio and associated software are available in the right room for music listening, the obfuscating cyberbabble of today means the radio is now a browser specialized for accessing streaming audio over the network, while radio buttons are bookmarks. It is simply beyond her understanding and my mother will never gain any benefit from it. Our lack of attention to place, time, function, and human considerations means these fancy new technologies fail to deliver their real potential to real people.
If one of the purposes of design and innovation is to improve our lives—for business, artistic, or familial purposes—then design that does not consider the larger social, cultural, and physical ecosystem is going to miss the mark. Increasingly, the results will make the “Bill, you’re always on your @#$&&$ computer!!!” rant seem mild by comparison. The design and innovation that we deserve and need to strive for should reduce the complexity of living in this world, and improve the quality of life in so doing. Without a conscientious effort to understand that world, we stand little chance of achieving this.
On the other hand, if would-be innovators can integrate these kinds of considerations into their very DNA, the opportunities are limitless, and the path to them far better illuminated.
An Innovation Needs Three Parents
March 30th, 2009 | Posted by innovAs you will remember, we are big fans of idea parenting.
We believe the people who come up with a clever innovation idea should be the ones to shepherd it through the entire execution process and help introduce it into the marketplace. That way, the insight won’t get diluted along the way and we can make sure that the new product, service, or business model gets all the loving support it needs during development.
And we are also big believers in drawing the left and right brains of the organization. Some people are better at coming up with ideas (right brainers), and others are better at the implementation (left brainers). So it makes sense to involve everyone to make sure all the bases are covered.
Combining the two ideas, here’s where we come out: It is important to have an idea parent involved at each stage of the innovation process.
To review a bit, we know that innovation occurs when: 1) There is a significant need or insight. 2) A product, service, or business model meets that need. 3) There is clear communication that connects No.1 to No.2.
From our experience, we know it is absolutely critical to create an innovation team with a “parent” for each of these three elements. These expert parents need to be deeply involved throughout the process.
Specifically, you need an insight parent whose “job” it is to make sure that the clarity of the insight she has found does not get blurred as the innovation process moves forward. You don’t have a good insight parent if:
• The team can’t answer precisely the problem they are trying to solve.
• Your customers don’t agree that your idea precisely meets their needs.
• Your insight does not remain focused on one core target that meets key criteria, e.g., a market that is growing, profitable, and open to your brand.
• You continually engage in more and more research and your instincts tell you that it is a “CYA” (cover your ass) exercise or you feel caught in analysis paralysis.
• Your concepts address multiple needs equally rather than doing a superlative job of addressing one specific problem.
An idea parent fully understands the need that the team is trying to fill and pushes for the most compelling, inventive, and appropriate new product, service, or business model to meet the need. The best idea parents know how to expand the boundaries of the idea while staying completely focused on the customer’s need.
You don’t have a good idea parent if:
• You are only producing safe, evolutionary ideas.
• The insight parent says the ideas you are producing are off base.
• The ideas don’t meet the criteria set by the leadership team.
• You are not scared by at least some of the ideas.
• You are producing too few ideas.
Parents are responsible for making sure the communication links the insight and the idea. Remember, a great idea poorly communicated is as effective as a bad idea brilliantly communicated—i.e., not very.
You don’t have a good communication parent if:
• You are not squarely speaking to the target about the identified insight.
• You are using language the consumer would not use or recognize.
• The other parents are disappointed with the less-than-evocative execution of the messaging.
The clear sign that you have a good communication parent is when your customer says “Finally someone listened to me.” It’s important to note here that there are very few renaissance people who can be a solid insight, idea, and communication parent. This is a marriage of varied skill sets and passions, where the right brain complements the left brain and the true respect of different experiences and expertise really matters. So don’t be surprised if you need three different parents to make sure your best ideas remain your best ideas as you move from idea to launch.
It’s usually easy to identify the maverick innovator in an organization, but when you dig deeper, you’ll find there’s always a doting parent (or three) responsible for the insight, the idea, and the communication. They may not get the glory, but like the best parents everywhere, they are very proud of the end result.
March 29th, 2009 | Posted by innovSince 1977, Aktion Plagiarus has been has been a thorn in the side of counterfeit-product makers. Each year, the German organization bestows its Plagiarius Awards on manufacturers or distributors that flood the German market with the most egregious of knockoffs. (Here, check out the 2007 and 2008 winners). These booby prizes for product plagiarists are given at Ambiente, the annual consumer products fair in Frankfurt, with the hope that the negative press will deter would-be pirates. It has worked, too. Some manufacturers have pulled their products from the market as soon as they were nominated. But the Plagiarius Awards don’t just aim to embarrass culprits. They are also a chance to bring awareness to the many dangers of counterfeiting.
As managing director of Berlin’s Action Group against Product & Trademark Counterfeiting, Doris Moeller is more familiar with those dangers than most. Moeller, one of the judges of this year’s awards, has spent 15 years raising public awareness about the issue. Moeller recently spoke to BusinessWeek‘s Damian Joseph about the Plagiarius Awards and problems associated with counterfeiting, including issues of consumer safety, organized crime, and the large sums of money businesses must pay to protect their patents. An edited version of their conversation follows:
How exactly did you judge these awards?
The jury [which also included several lawyers, professors, and journalists] looked at about 30 infringements. Products are included if the [counterfeiting] behavior is incredible, former employees are involved, or there are hints that the [plagiarist] got the information in an incorrect way. Each of the products in question has to be sold on the German market.
What are the repercussions of receiving an award?
There is a press conference that goes with the awards at which the companies are publicly blamed for bad behavior. That affords an opportunity to make issues like counterfeiting and piracy public. I think the media coverage really harms the producers hit by an award.
Why should businesses care about plagiarism?
I think they should care especially in this moment of financial crisis as it takes a lot of money away from the [makers of the original product]. If you have to fight against copyright infringement, spend money on an investigation, track down the plagiarist, and then file complaints for civil prosecutions, that takes a lot of time. And time is money. If counterfeiting steals part of the market, the original product won’t be bought any more. It’s dangerous for employment and could lead to bankruptcy.
Why should consumers care?
Most counterfeited products are consumer products: textiles, perfumes, anad other merchandise. A lot of the entries in the awards system are fake technical equipment that might harm the consumer. You never know the ingredients that are used which could be toxic. Also, organized crime is often behind these counterfeit products. It’s very dangerous. The whole of society must be aware, because very often it’s criminal.
Starbucks on the comeback trail with Clover
March 27th, 2009 | Posted by stock
“Wow,” I said.
“Yeah, wow,” said the guy behind the counter.
“That is so cool. Can I take a picture?”
“Well, it’s not allowed but go ahead – quick.”
And so I surreptitiously snapped the pic you see above. Looks like a weird, black contraption of unknown purpose, you say. Actually, it’s nothing less than the potential savior of that little $13 billon coffee chain from Seattle, Starbucks Corporation. It’s called the Clover 1s, it costs like $11,000 and it brews one of the tastiest cups of coffee this side of the moon. Starbucks bought Clover’s maker a few weeks ago and plans to put the machines in lots of stores soon. For now, it’s only in six, one of which happens to be in Harvard Square in Cambridge, Massachusetts, a few miles from my house.
As a primary observer of the coffee wars, I had to get to the front lines and check out the new artillery. As you’ll recall (and as we’ve been blogging about for the past two years), Starbucks is under assault from all manner of opponents, but most especially McDonalds and Dunkin Donuts. Both downscale chains have moved up in the coffee ecosystem with fancier blends and Starbucks-like menus of lattes and frozen frappacino concoctions.
And of course the current economic weakness is hurting the entire industry, making Starbucks all the more out of favor. After peaking close to $40 a share in early 2006, the stock has lost more than 50% and sits at $17.66 right now, about where it was three years ago. The stock drop has got the company refocused on the business of making coffee and that’s where Clover comes in. This fine and fancy brewer is piece of the successful turn-around strategy you’ll be reading about all over two years from now.
I learned of the nearness of Clover from the New York Times, wherein a reporter accompanied by a friendly neighborhood coffee guru tried almost every single blend of coffee beans in the store as brewed up by the Clover. You may or may not be surprised to discover the resulting review comes across as ridiculously pompous. I was interested in the appeal of Clover-made coffee to we the less high falutin’, coffee-swilling masses who make up the bulk of Starbucks customers.
But when I arrived at the Harvard Square Starbucks I knew of there was no Clover present. I inquired and the helpful barista explained that it was at another store, a few blocks away. Cannibalization, shmannibalization. “I’ll understand if you want to go over there,” she said. And so I did.
The hype was visible before I even breached the door – signs outside touted “New PRESSED Coffee,” explaining in smaller type: “Fine small-batch coffees, brewed by the cup.” And just inside, isolated as its own coffee shrine, stood the unassuming black box (it looks nicer in Clover’s official portrait, of course). I tried a cup of Kona blend, $2.25 instead of the usual buck sixty-five. The barista, who let me snap my pic and shall therefore remain nameless, ground me up a cup’s worth of beans, poured them into an opening at the top of the machine and hit a button. Hot water poured down on the grinds – the process started out in the open. The smell was terrific. Then a vacuum something-or-other sucked down liquid and my coffee was ready.
Despite what the foodies at the Times say, the Clover-brewed Kona was tasty and complex, starting with a sweet, mellow flavor and leaving a nutty slightly spicy after-taste. And I’m not even that big a fan of Starbucks – I’m patronizing the local brewstand most mornings. After the event, Mister Barista grabbed a tiny squeegee and shoved the cake-like pile of grounds into a waste bin. No fuss, no muss. The Harvard Square branch also showed other signs of CEO Howard Schultz’s turnaround plan including a lower height main espresso machine and a bar to sit at and chat with the baristas.
The question for investors, however, is whether an extra 60 cents a cup from an $11,000 machine will help get the stock moving in the right direction. As we’ve noted before, Starbucks opened the door to competitors by diluting its own coffee house mystique. Clover and the various other moves in the works will certainly help fix the chain’s image. I’m already trying to figure out how to justify a return trip. Anyone need a Harvard sweatshirt from the university book store?
And there’s also the matter of basic investing discipline. Buy low and sell high means buy when everyone else is selling and sell when they’re all buying. With Starbucks trading at the lowest price-to-earnings ratio in years and suffering (in part) from the effects of high dairy prices and an economic slowdown that will inevitably end someday, this is one of those times to buy low. Sure, the stock could drop further if the recession deepens but long-term investors know to wait it out. Order up a few custom Clover brews while you wait and the time will pass quickly.
Minor update: The local chowhounds agree with me — Clover makes a fine cup of coffee.
More Concerns for Airline Stocks
March 26th, 2009 | Posted by stockBy Kyle Shen
In 2007, Warren Buffett lamented that “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
Unfortunately, for modern investors, airline stocks are as uncontrollable and prone to failure as that rickety, by-the-seat-of-the-pants first flight.
On March 23, Hunter Keay, an analyst at Stifel Nicolaus (SF), downgraded the stocks of five major airlines: Delta (DAL), Continental (CAL), United (UAL), Southwest (LUV) and AMR (AMR), the parent of American Airlines. The ratings on all five were switched from ‘Buy’ to ‘Hold.’ Of all these companies, Delta seemed to be in the best shape due to its large size and cash position, but was still vulnerable to the trends plaguing the market.
Keay warns at least one airline bankruptcy could be in the cards:
We see the potential for a credit event for at least one major U.S. airline later this year or early next year if current demand trends continue and the capital markets remain effectively inaccessible.
The reasons for this poor diagnosis are factors beyond the control of the industry.
The downward spiral of the economy means an increase in unemployment. When people are out of work, they tend to save more and spend less on luxuries such as travel. Plus, cargo volumes have followed a steeper downward trend, with a 23% decrease in January.
The one aspect looking up for the airlines is cheap fuel costs. But even cheap fuel is a bright spot that Keay predicts is likely to darken. “It appears crude oil prices are stabilizing and potentially ready to rise,” he writes.
Airlines used to file bankruptcy as a way out of tough financial situations. But, unlike in previous downturns, declaring bankruptcy now means not salvation as much as possible destruction. A few months ago, BusinessWeek’s Dean Foust addressed the possibility major U.S. airlines could disappear in the current downturn.
Cost-cutting can help airlines, but only so much. Most carriers can merely pray the economy will improve and pull them out of their nosedives.
March 22nd, 2009 | Posted by stockPosted by: Ben Levisohn on March 22, 2009
In the age of TARP, TALF and other acronyms, government action is the market wild card. For this week’s government intervention, Treasury Secretary Timothy Geithner is expected to announce details of Treasuries plan to purchase toxic assets. And one way or another, the markets will be on the move.
But trying to play react to the government can be deadly. Last week, the Federal reserves sent the market into a tizzy when it announced it would spend over $1 trillion if necessary to buy long term Treasuries and restore the economy. The Standard & Poor’s 500 had been testing a key resistance level around 780, when the Federal Reserve made its announcement. As the news broke, traders pushed the S&P 500 through 780 as if it were cotton candy and the market a swarm of hungry kids at the amusement park, pushing the market as high as 803. The ride was over however by the end of the week. By Friday, the S&P 500 settled in at 768, still 13.6% above its March 9 close of 676.53, but lower than the close the day before the Fed announced its plans for quantitative easing. It’s enough to give an investor whiplash.
So how about ignoring the government altogether?
I talked to Savita Subramanian, Quantitative Strategist at Merrill Lynch, about the market’s rally on Friday and her advice is to stop trying to play the wild gyrations, but instead to find a safe entry point. To do so, she relies on market indicators, data that give a sense of the overall health of the market, that show momentum has shifted from the downside to the upside. For instance, she looks at earnings visibility – the ability to accurately gauge corporate earnings – as measured by analyst estimates. (If analysts tend to agree, that’s bullish. If not, it’s bearish). She also looks at share buybacks to determine if “the smart money” is bullish and bearish. And at the bottom and at last week’s top, they still said the same thing: wait. “All of our indicators are deeply negative,” she says.
That doesn’t mean investors should stay out of the market. Some sectors actually do have strong and visible earnings. They’re still in the defensive sectors – consumer staples and health care. But Subramanian is also starting to see opportunities in the large, blue chip tech companies that are flush with cash. “The old technology companies that have cash look attractive,” she says. “They have ability to weather a liquidity crisis.”
For investors who feel they have to jump in at every sign of an up-tick, Subramanian says not to worry. “Typically you see a fundamental earnings recovery that persists for a cycle a couple of years,” she says. “It’s hard to miss.”
March 20th, 2009 | Posted by innovThere’s a reason why cocky Silicon Valley startups fancy themselves the “The Next Google.” The search giant embodies Silicon Valley at its best: product developed by nerds in a Stanford dorm room; humbled venture capitalists who turned down the chance to invest, declaring Web search “done;” now-defunct companies such as Excite that refused to buy Google (GOOG) for peanuts when they had the chance; and of course, a storied initial public offering, stellar balance sheet, market dominance, and entrenched, multiyear position as the tech stock darling. In a downturn that’s ravaged every industry and most companies, Google is holding up quite well.
Turn back the clock to the last recession, and you could have said almost all of those things about another company: eBay (EBAY). But I bet in a few years Google doesn’t want to look anything like eBay does now: a company with a solid core business whose growth is nonetheless slowing rapidly and has little to pick up the slack, despite billions of dollars spent on acquisitions. I’d also wager Google’s shareholders don’t want their stock to drop more than 80%, suffering the same fate as eBay investors in the years since that stock peaked in December 2004.
No one says Google is headed for a rapid descent any time soon. It commands 63.5% of Web search and none of its rivals has been able to mount a credible threat for years. Yet this do-no-wrong tech darling can’t afford complacency, especially when some of its best and brightest are heading for the exits. As venture capitalist Peter Thiel explains, the further a startup gets from its initial share sale, the more quickly it loses star employees—one of the main reasons even the best newcomers don’t stay on top for long.
In the interest of avoiding eBay’s fate, let me humbly suggest five ways Google might retain its edge.
1. Buy Twitter. Google CEO Eric Schmidt earlier this month likened Twitter to “poor man’s e-mail.” At best, the remark was an attempt to negotiate publicly; trash the asset so you don’t want to appear to need. At worst, the analogy signals Schmidt isn’t aware the new battlefield online is not organizing information, but organizing people, and Twitter is quickly demonstrating prowess in that regard.
In fact, Twitter may end up becoming the first company to crack so-called natural-language search, where the user types in a question using common language. Interactive Corp.’s (IACI) Ask.com tried it with scant success. But with Twitter, I can type in exactly what I seek—and real people actually respond. I recently bought an Amazon (AMZN) Kindle 2 and wanted to get recommendations for a carrying case. So I Twittered, “Taking the plunge and getting a Kindle 2. What do you guys think about cases?” I got a flood of real-time, digestible 140-word reviews from people I know who’d bought a Kindle cover already. In fairness, I have quite a few followers on Twitter, but others who have fewer followers say they experience comparable responsiveness. What took about 10 minutes on Twitter would have taken substantially longer on Google, and I still wouldn’t have had as good an answer.
The marketing capabilities are clear as well. A savvy company monitoring Twitter might have taken the opportunity to push a review of their product or offer me a coupon the way keyword ads operate on Google.
Obviously, Twitter is still a youngster. That’s precisely why Google should do what Yahoo didn’t have the guts to do in 2001. Yahoo’s then-CEO, Terry Semel, met with Google founders Sergey Brin and Larry Page, asked what it would take to buy the company, and balked at their $3 billion asking price. Mr. Schmidt, no one wants to be a Terry Semel. Make an outlandishly large offer to buy Twitter before someone else does. It’s a startup with no revenue; it has to listen.
2. Get better at acquisitions. Like eBay, Google is great at spotting promising companies. And like eBay, it’s bad at getting the most out of them. Google recognized the potential of Blogger early on but has failed to make the most of the purchase. If it had, competitor WordPress wouldn’t have had the chance to get as big as it is. And Blogger is a success story compared with smaller acquisitions like DodgeBall and Jaiku, which Google has already shuttered.
Google has wisely let YouTube run mostly independently. But while YouTube is growing, it still hasn’t solved its two greatest challenges: copyright issues and making money. Meanwhile, NBC-owned Hulu has come out of the gate with permissions to show copyrighted content, a better video search engine, and soaring U.S. traffic. It’s still Google’s market to lose, but it’ll be a huge embarrassment if they do after spending $1.65 billion on YouTube.
3. Step it up in mobile. When the rumors first started flying about a Google phone, many tech watchers predicted a battle royale between the two hottest companies in Silicon Valley: Google, backer of Android, a new open-source smartphone operating system, and Apple (AAPL), maker of the iPhone.
But so far, the first device featuring Android has failed to dazzle. Carrier T-Mobile USA has gotten nowhere near the sales bump Apple partner AT&T (T) is getting from the iPhone.
The most surprising part of this is that Google executives continue to talk up how important mobile is to the future of their business. Perhaps there’s more to the Android than we’ve seen so far. Investors should hope so.
4. Don’t neglect your good in-house products. Google famously throws dozens of test projects at the wall, giving little idea which ones it really backs. Google has shuttered several, but there are some real gems there.
One is e-mail. Despite all the talk that young people don’t even use e-mail, it’s still the No. 1 application on the Web by several measures. And what’s more, Gmail is a shining example of what Google does best. As with search, Google took a category of the Web that everyone considered “done” and reinvented it with massive memory and threaded conversations. Gmail has actually outranked YouTube as the 10th most trafficked site on the Web, according to Hitwise.
But Google can’t get complacent in e-mail. Yahoo is having its own success in that area; newly hired CEO Carol Bartz has said e-mail is a core part of the company’s strategy. Thanks in large part to Yahoo’s $350 million acquisition of Zimbra in 2007, Yahoo’s Web mailboxes make up more than one-third of Yahoo’s gargantuan traffic and more than 50% of all U.S. Web e-mail traffic. And remember that Zimbra’s 40 million customers are paying. Google’s 30 million are not.
5. Keep innovating in search. From early on, Google raced ahead of search engines that came before it. It’s still better than any on the market today. But it’s still not very easy to find what you’re looking for online, especially if it’s buried in the so-called deep Web that’s mostly hidden from Web crawlers.
It may not be any of the incumbents like Yahoo or Microsoft (MSFT) that gives us better search. And it may not even be any of the search startups like the ill-fated Cuil. But some company will—because there’s too big a need.
Again, look at eBay. The company got complacent with its core auction business, the one former CEO Meg Whitman said a monkey could run. It charged users more, but didn’t deliver any more value. And while it’s still the largest auction site, eBay faces very real threats as small businesses defect for Amazon or build their own sites.
Nearly every technology has started out with a great, groundbreaking service people loved. But technology and users don’t stand still, and companies that want to profit from that relentless appetite for innovation can’t either.
For Gloomy Times, New Products for the Home
March 20th, 2009 | Posted by innovWith all the dismal economic news, it might feel strange to think about buying more stuff. But at this year’s International Home & Housewares Show in Chicago, from Mar. 22-24, more than 2,000 exhibitors from 30 countries are aiming to persuade you (or the retailers that’ll sell to you) to do just that. They’re showing off new wares for the home that are designed to make life easier—or perhaps just a little more stylish.
You might expect housewares manufacturers to be concerned about the impact of the economy on their businesses. Instead, they’re putting a brave face on things. Jeffrey Siegel, president and CEO of Lifetime Brands (LCUT), which sells cutlery, kitchen tools, gadgets, and other products, says sales are steady because housewares can save people money in the long run. “As people eat more at home, they need to acquire the products that enable them to prepare, cook, and serve food at home,” he says. So while buying a new home or car might be off the agenda for the near future, these products, many priced under $100, could prove this era’s affordable treats.
According to NPD Group, 2008 sales for some specific housewares categories were actually up, while sales at U.S. retailers in February fell less than forecast, according to the Commerce Dept. And while some smaller international companies have canceled their appearances at the Housewares Show, some 400 new exhibitors jumped in to pick up the slack. Many are upbeat, claiming the new spirit of frugality and an increasing focus on healthy cooking provides a prime opportunity to get products into people’s homes. Several CEOs with products in the show predicted low to mid-single-digit growth in 2009. “We don’t see consumer spending continuing to shrink. It’s going to start to come back up,” says John Roscoe Swartz, co-CEO and chief design officer at Built NY, which will be previewing a line of designer bags and cases. “I think that the shock is over.”
Certainly, these companies appear to remain focused on innovation: 10,000 new products are being released at this year’s show. Of course, those aren’t all new-to-the-world designs intended to revolutionize your home. Many companies choose to innovate through evolution, simply adding color or flourishes to an existing product line. “In difficult times innovation is an indispensable tool,” says Siegel of Lifetime, which will be introducing some 1,500 new products and line extensions. “The two main ways for a retailer to drive business are through promotions and unique new product offerings.” Thomas Perez, CEO of Bodum, agrees, adding: “Particularly right now, we feel that consumers are looking for innovative products that will actually improve their everyday life.”
Peek behind GE’s curtain did more damage than good for investors
March 20th, 2009 | Posted by stockTired of getting relentlessly pummeled in the press, Jeffrey Immelt, CEO of GE (Symbol: GE), decided to fight back with a little transparency this week. Top execs spent six hours — six HOURS* — explaining the inner workings of GE’s complicated finance arm to big investors yesterday. The presentation included how GE Capital’s profits might be hit under different economic scenarios. And that seems to be where the company’s executives lost the investment community.
GE’s shares, down 75% over the past year, closed down 6% to $9.54 share today. As the conference call was getting rolling on Thursday, the shares had rallied slightly, topping out at $11.35. But as more details poured forth, investors lost faith.
GE offered three scenarios. Its GE Capital unit could make $5 billion if growth in the U.S. drops 1.8% or less and unemployment averages 7.7%. That’s the profit estimate GE offered back in December. If the economy shrinks 2% and unemployment averages 8.4% — the Federal Reserve’s baseline estimate — GE Capital would make only $2 billion to $2.5 billion, the company now says. And if unemployment averages 8.9% and the economy shrinks 3.3%, the unit would just break even. Last year, GE Capital reported profits of $8.6 billion.
But by offering a worst case scenario that seems a bit tepid for the economic times, GE prompted investors to ask what if things get even worse? It’s certainly possible. Analysts at Citigroup, Deutsche Bank, Morgan Stanley and Credit Suisse aren’t waiting around to find out. All four dropped their estimates for GE’s 2009 profit.
Another concern arising out the meeting was GE’s explanation of how some of GE Capital’s net income would come from the accounted value of tax credits, not actual cash profits, as losses from bad debts mount. Under the worst-case “break even” scenario, for example, GE Capital would have a pre-tax loss of $4.5 billion wiped out by tax credits.
* Bloomberg called a six hour meeting while at Dow Jones it was only five.
Citi Mulls Reverse Stock Split: Anger and Applause
March 20th, 2009 | Posted by stockPosted by: Lauren Young on March 20, 2009
The blogosphere is filled with opinions from folks who are either angry or applauding news that Citigroup (C) is considering a reverse stock split to boost its share price. Citigroup closed up slightly Friday at $2.62.
While you often see reverse splits from smaller companies in trouble with low share prices, “you rarely see it from 
companies that are the size of and that are important as Citi,” writes 24/7 Wall Street. Dave, who commented on the NYT’s DealBook blog, captures the sentiment of some frustrated retail investors who simply want to short Citigroup’s stock: “I hope it goes over $5 after the reverse split because my broker won’t let me short unless its over 5.”
As for my own post, Is Citi’s Reverse Stock Split a Smart Move?, the comments range from laudatory to angry to constructive. For example, reader Hugo suggests “demerging” (read: breaking up) up Citigroup into 100 separate business units. “Then let them sink or swim or be bought out. It’s likely there are highly profitable parts of Citi that could be worth more than $3 a share right now…” Hugo says.
Several readers also mentioned that a reverse split would help attract institutional investors who are unable to invest in a company when the stock falls below a certain level, such as $5.
I’ve done a considerable amount of digging on the threshold rules for institutional ownership in the past week. As far as I can tell, it is an urban myth that institutional owners must sell when a stock falls below a certain price, such as $5 or $20. (I checked this out with the largest mutual fund and pension funds.) If you know of a mutual fund firm or pension fund with specific threshold rules requiring funds to sell stocks when the price goes below a certain watermark, please tell me who they are.
And tell us what you think about Citigroup’s future, too. Is a reverse stock split the best way for Citi to increase its stock price? If not, what’s the right way to make this company more appealing to investors?
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