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Goodbyes and Grief in Real Time

July 31, 2013 by

The ellipsis hinted that he’d have more to say later, and he did. “We never stop learning from our mothers, do we?” he asked on July 25. By then his mother, Patricia Lyons Simon Newman, 84, had spent several nights in the intensive care unit of a Chicago-area hospital. And Twitter users around the world were getting to know her, thanks to the short bursts of commentary by Mr. Simon, the host of “Weekend Edition Saturday” on NPR.

The tweets captured the attention of a significant portion of the social-media world for days.

Mr. Simon wrote on Monday morning that “her passing might come any moment,” and that evening it did, when she died after being treated for cancer. Borrowing from “Romeo and Juliet,” he wrote, “She will make the face of heaven shine so fine that all the world will be in love with night,” and then stopped tweeting for half a day.

“When I began to tweet, I had almost no thought that this was going to be my mother’s deathbed,” Mr. Simon said in a telephone interview on Wednesday, after the outpouring of emotion — his Twitter audience’s as well as his own — had made national headlines. His mother, he said, had originally gone into the hospital for a blood test.

“As it got more serious, she was just so marvelously entertaining and insightful,” he said. “I found it irresistible.”

In the past he might have done that through a book or a recorded segment for his radio program. (Mr. Simon commented on the deaths of his father and stepfather in his 2000 memoir, “Home and Away.”) But the Internet enabled him to celebrate his mother and mourn her in real time, creating the sense this week that an online community was collectively grieving with him.

The online reactions were overwhelmingly positive; some people thanked Mr. Simon for letting them get to know Ms. Newman and described what she had in common with their own mothers. A smattering of online comments, he said, were critical, suggesting that sharing such intimate moments was inappropriate. “Exploiting his mother’s last days for ratings and fame,” read one comment accompanying an ABC News article about Mr. Simon’s tweets.

“Social media is most poignant when it gives us a window on stories that would otherwise go untold,” said Burt Herman, a co-founder of Storify, an Internet company that markets what it calls social storytelling tools. “The stories can be voyeuristic, like a couple fighting at a Burger King. But at their best, these stories give us a deeply personal view into life’s inflection points, whether it’s a revolution abroad or an intimate moment between a mother and son.”

Mr. Simon said he wanted people to know that “I wasn’t holding my mother in my arms and tweeting with my free hand.”

He added: “As you may know, an incurable illness like this is a lot like war. There are moments of panic and anxiety, separated by hours of tedium.”

Sometimes Ms. Newman gave Mr. Simon, and by extension some of his 1.2 million Twitter followers, a reason to smile or chuckle: “Believe me,” she told him on Saturday, “those great deathbed speeches are written ahead of time.” Sometimes, she seemed to want Mr. Simon to share bits of advice. On Sunday, he encapsulated this thought from his mother: “Listen to people in their 80s. They have looked across the street at death for a decade.”

Mr. Simon resumed posting to Twitter on Tuesday; he jocularly recounted how the couple who run a cremation service call themselves “posthealth professionals.” During the interview on Wednesday he cried while expressing thanks for the “love and support and prayers” from people. He said he had given precisely no thought to the societal implications of sharing his mother’s life and death.

But others have. “We have reached a point in the way we think about our lives where our stories of struggle and loss feel like they no longer belong solely to us,” said Joe Lambert, founder of the Center for Digital Storytelling in Berkeley, Calif. Being able to broadcast them, on Twitter or elsewhere online, “feels like a gift to those grieving in our families, our communities and as far as a tweet might reach.”

Article source: http://www.nytimes.com/2013/08/01/business/media/goodbyes-and-grief-in-real-time.html?partner=rss&emc=rss

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Spotify Losses Grow, Despite Successful Expansion

July 31, 2013 by

After five years, the streaming music service Spotify has established itself as a financial force in the music industry, with more than $500 million in revenue last year. Yet its losses have also grown as the company expands around the world and tries to attract paying customers.

The company, which introduced its service in Sweden in 2008 and came the United States two years ago, had about $578 million in revenue during 2012. That’s an increase of 128 percent from 2011, according to filings for Spotify’s holding company in Luxembourg, released this week. But the company, which has been valued at $3 billion by investors, has yet to turn a profit. Last year it lost $78 million, up from $60 million the year before.

Spotify offers streams of millions of songs free and through subscriptions costing around $10 a month, which eliminate ads and offer other features not available to users who don’t pay. The service is now in 28 markets around the world, and in March the company said it had 24 million active users, a quarter of them paying customers.

The company’s finances highlight the music industry’s continuing struggle to reinvent itself in the digital age. Download sales fell for the first half of 2013, according to a recent report by Nielsen SoundScan, but streaming is on the rise. Services like Spotify and YouTube have become such a part of the mainstream of the business that their numbers are now incorporated into Billboard’s chart rankings.

As the most prominent streaming service of its kind, Spotify has become both a symbol of the industry’s hopes and a target for those who do not believe it pays musicians enough in royalties. This month Thom Yorke of Radiohead and his longtime producer, Nigel Godrich, set off the latest debate over streaming compensation when they removed some of their albums from Spotify, saying that its payment structure hurt new artists.

Spotify pays a fraction of a cent every time a song is played, and these royalties are by far the company’s largest expense. According to the filing, Spotify’s “cost of sales,” which includes royalties and other unspecified expenses, was $482 million, or about 83 percent of its revenue. That is an improvement over 2011, when these costs were almost 98 percent of revenue, But as Spotify grows, its other costs, like marketing and payroll, have ballooned as well.

Spotify executives have said that about 70 percent of its revenue goes to pay licensing fees, which are negotiated with record companies. To reassure artists, the company has also repeatedly said that by the end of 2013 it expects to have paid out a total of $1 billion in royalties.

While Spotify has grown quickly, it remains a matter of contention in the music industry whether the company is growing fast enough, and whether the “freemium” model can ever be a viable replacement for lost CD and download sales. Last year, global recorded music sales were $16.5 billion in wholesale value, according to the International Federation of the Phonographic Industry, a trade group. That was up 0.2 percent from the year before — a gain that was celebrated throughout the music industry — but down more than 40 percent from its peak in 1999.

Article source: http://www.nytimes.com/2013/08/01/business/media/spotify-losses-grow-despite-successful-expansion.html?partner=rss&emc=rss

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Fed Meeting Ends With No Sign of New Direction

July 31, 2013 by

The Fed acknowledged the weak pace of growth during the first half of the year, describing the rate as “modest” rather than “moderate,” but maintained its forecast that “economic growth will pick up from its recent pace,” according to a statement published after the committee’s two-day meeting.

The Fed also noted the sluggish pace of inflation, which has dropped to the lowest pace on record, but said that it continued to expect a rebound.

As usual, the Fed maintained its flexibility, noting that it was ready to increase or decrease its stimulus campaign as warranted by economic conditions.

The decision was supported by 11 of the 12 members of the Federal Open Market Committee. The sole dissenter was Esther L. George, president of the Federal Reserve Bank of Kansas City, who has dissented at each meeting this year, citing the risks of financial destabilization and higher inflation.

The committee had little time to digest the latest economic data. The government announced earlier Wednesday that the economy expanded at an annual rate of 1.7 percent in the second quarter, better than economists had expected but below the pace that Fed officials regard as necessary to create enough jobs to bring down the unemployment rate. The Fed has predicted faster growth in the second half of the year.

The Fed’s chairman, Ben S. Bernanke, surprised investors after the committee’s last meeting in June by announcing that the central bank expected to reduce the volume of its monthly asset purchases later this year, and to end the purchases by the middle of next year, provided that economic growth met the Fed’s expectations. The central bank has increased its holdings of mortgage-backed securities and Treasury securities by $85 billion a month since December.

Interest rates rose in response, undermining the purpose of the bond-buying program, but Fed officials have not backed away from that timeline. Mr. Bernanke and others have said that if the economy needs more help, they would rather lean on other tools, like the policy of holding short-term interest rates near zero.

The Fed has said that it intends to maintain that policy at least as long as the unemployment rate remains above 6.5 percent and likely for some time thereafter as long as inflation remains under control. The rate was 7.6 percent in June.

Mr. Bernanke described this as “a change in the mix of tools” in testimony before the House Financial Services Committee earlier this month.

The shift in strategy appears to reflect a reassessment of the potential costs of asset purchases. A number of Fed officials have expressed concern that the bond-buying could destabilize markets, for example by reducing the supply of low-risk assets, thus distorting prices or encouraging speculation. Other economists, including Lawrence H. Summers, a leading candidate to succeed Mr. Bernanke at the Fed, have expressed similar concerns about the purchases.

The Fed has also faced persistent questions about the benefits of the purchases. Mr. Bernanke and his allies say the bond-buying, by reducing borrowing costs, has contributed to a recent rise in home and auto purchases. Other economists, however, regard these effects as minor at best.

Fed officials and supportive economists also have suggested that the central bank’s asset purchases are valuable in convincing investors that the central bank is maintaining its long-term commitment to suppressing borrowing costs. As long as the Fed is buying bonds, it is not about to start raising rates.

Article source: http://www.nytimes.com/2013/08/01/business/economy/fed-maintains-course-on-policy.html?partner=rss&emc=rss

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U.S. Economy Grew at 1.7% Rate in 2nd Quarter, Faster Than Expected

July 31, 2013 by

The gross domestic product grew at an annual rate of 1.7 percent, hardly indicative of an economic boom, let alone enough to bring down elevated levels of unemployment soon. It is also the third quarter in a row in which growth failed to top 2 percent, the average since the recession ended in 2009.

Still, the increase was an acceleration from growth in the first quarter of 2013, which was revised downward to 1.1 percent from an earlier estimate of 1.8 percent by the Bureau of Economic Analysis.

“It was a reasonable performance,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “In the long run, it’s not enough, but I’ll take growth wherever I can get it.”

The economy’s trajectory is being closely watched by the Federal Reserve as it determines whether to ease its huge stimulus efforts. Fed policy makers will conclude a two-day meeting on Wednesday and issue their latest statement on the economy early Wednesday afternoon.

On Wall Street, stocks rose modestly as traders readied for the Fed announcement, watching closely for any change in the language of the statement that might indicate the central bank’s course.

Many economists had anticipated growth of below 1 percent in the second quarter, as automatic spending cuts imposed by Congress and higher taxes that went into effect this year began to bite.

Federal spending did decline by 1.5 percent in the second quarter, but the drop was not as severe as the falloff in government spending in earlier quarters. Exports rose 5.4 percent, reversing a decline in the first quarter.

Most experts predict growth will pick up in the second half of 2013 as the drag from the federal spending cuts and higher taxes begins to fade.

“On balance it was a positive report showing a healthier economy than previously believed,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “But growth has slowed in the past few quarters, reflecting fiscal tightening in Washington.”

The chairman of the Federal Reserve, Ben S. Bernanke, has hinted the Fed will soon begin winding down part of its extensive bond purchases aimed at stimulating the economy, but the timing is uncertain.

On Wall Street, analysts and traders are speculating that the Fed could start tapering as early as September if the economy enjoys healthier growth and the job situation improves, or it could be delayed to December or beyond on evidence of weakness.

While the Federal Reserve is not expected to announce a change in policy later in the day Wednesday, the economic data in the second quarter paints a more vigorous picture than anticipated and may increase the odds that the Fed will taper sooner rather than later.

Indeed, there were pockets of strength in Wednesday’s data from the Bureau of Economic Analysis. For example, residential fixed investment increased by 13.4 percent, a sign the housing sector continues to recover. Personal consumption rose 1.8 percent, as consumers showed some resiliency, especially given the increase in payroll taxes at the beginning of 2013.

The reason government spending stabilized last quarter, rather than falling sharply, was that military spending flattened out, said Steve Blitz, an economist with ITG.

After falling 21.6 percent in the final quarter of 2012, and another 11.2 percent in the first quarter of 2013, military spending last quarter barely budged, sinking just 0.5 percent. One factor that makes Mr. Blitz more optimistic about growth in 2014 “is the presumption that most of the military wind-down will have been completed.”

Higher inventories, always a volatile component of economic reports, added 0.41 percentage point to overall growth. But analysts cautioned that inventory estimates were often adjusted as more data came in, raising the possibility that second-quarter growth could be revised downward in the future.

More clues about the economy’s performance will come on Friday when the Labor Department reports on monthly job creation and the unemployment rate. Economists estimate the economy created 185,000 jobs in July, according to a Bloomberg survey, a bit below the 195,000 level in June, with the unemployment rate falling to 7.5 percent, from 7.6 percent.

The latest data come as the government performed its first comprehensive revision in how the economy is measured since July 2009.

As a result, the estimated growth in 2012 was actually healthier than originally thought. Last year’s annual rate of growth in economic output was revised upward to 2.8 percent, from 2.2 percent. The government also slightly adjusted the estimate of the severity of the recession from 2007-9, saying that the economy contracted at an annual rate of 2.9 percent, instead of 3.2 percent.

In a separate report on Wednesday, Automatic Data Processing reported that private sector employers added 200,000 jobs in July, a bit stronger than analysts had been expected. While the A.D.P. report doesn’t always align with the broader figures released by the Labor Department, the figure was interpreted as another positive sign.

ADP also increased its original estimate of the number of private sector jobs added in June to 198,000 from 188,000.

One puzzle for economists is why job creation has been healthier than economic growth would indicate. For example, the economy added an average of 183,000 jobs a month last year, a figure more consistent with 2.5 to 3 percent growth. But Maury Harris, chief United States economist at UBS, noted that the 2012 G.D.P. figures were revised upward, helping to explain the higher job creation numbers.

Article source: http://www.nytimes.com/2013/08/01/business/economy/us-economy-grew-by-1-7-in-2nd-quarter-faster-than-expected.html?partner=rss&emc=rss

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Comcast Profit Jumps 28.6% on Growth of Broadband

July 31, 2013 by

In the second quarter — Comcast’s first full quarter owning 100 percent of NBCUniversal, in which it had previously held a 51 percent stake — earnings rose to $1.7 billion, or 65 cents a share, from $1.35 billion, or 50 cents a share, in the period a year earlier. Wall Street analysts had been expecting earnings of 63 cents a share.

Total revenue rose 7 percent, to $16.3 billion, from the second quarter of 2012, lifted by the continued growth of the company’s broadband Internet and business products. Free cash flow increased 25 percent, to $1.9 billion. Comcast was the first major television and Internet provider to report quarterly earnings, so its healthy results may augur more good news when others report in the weeks to come.

It is broadband, not cable television, that is generally bolstering cable companies’ results these days, because nearly nine out of 10 American households already subscribe to some sort of TV, but only two-thirds subscribe to broadband. Comcast gained 187,000 new broadband subscribers in the second quarter.

Comcast has been losing TV subscribers to DirecTV and Verizon FiOS for years. It lost another 159,000 in the second quarter, but the rate of loss has slowed lately. The company squeezed a 2.7 percent revenue gain from its television business, largely through rates increases and subscribers who chose more expensive packages.

Its revenue gain on the broadband side, however, was 8 percent.

“Cable had outstanding growth, particularly in high-speed Internet, and NBCUniversal had strong performance across all of its businesses,” Brian L. Roberts, the chief executive of Comcast, said in a statement. He credited the company’s “focus on delivering innovative products and a superior customer experience is driving our success, including stronger video, voice and business services results in cable.”

At midday, Comcast stock was up more than 5 percent, passing the $45 and nearing a record high.

Mike McCormack, a media analyst for Nomura, said in a note to investors that NBCUniversal’s performance also exceeded expectations, “with filmed entertainment and broadcast television revenue offsetting weaker-than-expected theme parks revenue.”

NBC’s cable channels, including USA, Syfy and Bravo, posted a 7.7 percent increase in revenue, to $2.41 billion in the quarter, while its somewhat smaller broadcast business, which has been in a rebuilding mode, had a 11.6 percent bump, to $1.73 billion. Mr. McCormack attributed the broadcast unit’s gains to “better ratings and higher retransmission consent fees.”

With regards to the ratings, Comcast executives credited “The Voice,” the singing competition on NBC that has given the network some much-needed momentum.

Over all at NBCUniversal, revenue was up 8.9 percent year-over-year, to almost $6 billion.

This article has been revised to reflect the following correction:

Correction: July 31, 2013

Because of a rounding error, an earlier version of the headline with this article misstated the increase in earnings for Comcast. Earnings increased 28.6 percent, not 26 percent, in the second quarter.

Article source: http://www.nytimes.com/2013/08/01/business/media/comcast-profit-jumps-26-on-growth-of-broadband.html?partner=rss&emc=rss

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Whistle-Blowers in Limbo, Neither Hero Nor Traitor

July 31, 2013 by

Even as Americans expressed increasing concerns about government intrusions into their life in a recently released Pew Research Center study, they have hardly embraced those who decide to take matters into their own hands.

Leakers, often lionized by members of the press, face an indifferent and sometimes antagonistic public.

On Tuesday, when Pfc. Bradley Manning was acquitted of aiding the enemy and convicted of six counts of violating the Espionage Act, a few dozen protesters showed up on his behalf. There has been an outcry from civil libertarians and privacy advocates, but in general, his decision to unilaterally release hundreds of thousands of sensitive documents did not make him a folk hero or a cause célèbre in the broader culture.

Edward Snowden, the former National Security Agency employee, also released a trove of documents, including ones revealed on Wednesday in The Guardian that suggested that security analysts are able to search through e-mails, chats and browsing history without judicial authorization. Even though many people are glad to learn that, Mr. Snowden remains very much on his own in the Moscow airport — stateless, isolated and frozen in place for the time being.

In some respects, Mr. Snowden and Private Manning were performing a quintessentially American act: lone individuals taking on larger forces. But whistle-blowing has always been fraught with peril; one person’s heroic crusade is another’s betrayal of loyalty. In the case of both Mr. Snowden and Private Manning, each became an army of one, reasoning that there was a moral imperative to rendering secrets visible, acting on behalf of a public that he believed deserved to know more. But some Americans don’t seem ready to embrace this version of informational cowboy.

“Who is he to decide?” suggested a cabdriver in New York on Tuesday, speaking of Private Manning. He could have been speaking of Mr. Snowden as well.

In the view of advocates of civil liberties, both men performed acts of supreme self-sacrifice, but there is an unavoidable appearance of self-aggrandizement as well. We have been treated to hundreds of images of Mr. Snowden and Private Manning.

“Whistle-blowers they are not. These are essentially little people with bloated egos and sense of self-importance,” suggested one reader in comments that appeared with The New York Times’s article about Private Manning’s conviction.

Part of the reason that both men have gotten so much attention is that the Web has made the gathering and dissemination of large amounts of information much easier than it was in the past. Rather than slipping an envelope under a door, many of today’s leakers operate using hard drives jammed with millions of documents. It is far easier to do much more damage, something both the government and the public are struggling to come to terms with.

“The more they reveal, the greater the threat against them,” said Gregg Leslie of the Reporters Committee for Freedom of the Press, referring to large-scale whistle-blowers.

The mixed feelings evoked by those who perform jailbreaks on information was very much in evidence in a report released by M.I.T. on the same day that Private Manning was convicted. The report concluded that in the case of Aaron Swartz, the hacker who committed suicide after being charged with hacking into the M.I.T. computer network, the university “missed an opportunity to demonstrate the leadership that we pride ourselves on.” The report noted that the university had based on its reputation as an institution known “for promoting open access to online information, and for dealing wisely with the risks of computer abuse.”

Time can change things. Daniel Ellsberg, who came in for sustained criticism for his leak of the Pentagon Papers, is now viewed as an important historical figure who brought much-needed accountability to America’s prosecution of the Vietnam War. But for the time being, Private Manning and Mr. Snowden are legally imperiled and living in the place between hero and traitor. As Bill Keller, the former executive editor of The New York Times, said on Wednesday morning on WNYC’s “The Takeaway,” they are “neither Benedict Arnold nor Nathan Hale.”

Article source: http://www.nytimes.com/2013/08/01/business/media/whistle-blowers-in-limbo-neither-hero-nor-traitor.html?partner=rss&emc=rss

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Facebook Briefly Trades Above I.P.O. Price

July 31, 2013 by

On Wednesday morning, shares of the world’s leading social network traded above $38 a share, the price at which the company first sold shares to the public more than a year ago.

The immediate catalyst for the rise was the company’s surprisingly strong second-quarter earnings report last Wednesday, which quelled many investors’ doubts about the company’s ability to make money from its legions of mobile users, and suggested that the company’s profit stream was growing.

Since last week’s report, shares have risen more than 40 percent. Early Wednesday, they touched $38.31 a share, although at midday, they were slightly below $37.

The company’s shares hit a low of $17.55 last fall, but since then investors have warmed to the company. Facebook has shown signs that it can significantly grow its advertising base and keep its 1.2 billion users engaged, despite competition from rival social networks like Twitter and other social sharing sites like Pinterest.

“Facebook was caught flat-footed by the shift to mobile,” said Mark Mahaney, an analyst with RBC Capital Markets. “It took them four or five quarters to catch up.”

Now, he said, “they appear to be set up as a sustainable high-growth business.”

Mr. Mahaney, whose firm has a $40 price target on the stock, said that across Wall Street, analysts had increased their projections of the company’s financial performance. Analysts now expect Facebook to grow its profits 30 to 35 percent a year through 2015.

Since stocks tend to trade as a multiple of a company’s future profits, those upgrades last week sent Facebook’s stock soaring.

Still, there are reasons to be concerned. Mobile messaging platforms like Snapchat and Whatsapp are grabbing the attention of many of Facebook’s younger users. Twitter is mounting a major effort to go after marketers, especially brands that typically advertise on television, as it prepares for its own likely public offering.

And Facebook risks turning off users with too many ads. Currently about 1 in 20 items in the news feed, the main flow of items that a Facebook user sees, are ads. During the company’s quarterly conference call with analysts, Mark Zuckerberg, the company’s chief executive, said that users were beginning to notice the number of ads, suggesting that the company cannot greatly increase their frequency without losing some users.

Although the company raised $16 billion from the initial public offering in May 2012, problems immediately followed.

The Nasdaq stock exchange botched the handling of buy and sell orders on the first day of trading. (A few months ago, regulators fined Nasdaq $10 million fine for the fiasco.) And in ensuing weeks, shares continued to fall. Many Wall Street investors questioned whether Facebook’s stock was truly worth $38 a share at the time of the offering.

Particularly worrisome was Facebook’s seemingly nonexistent mobile strategy at a time when Internet users were abandoning PCs for their smartphones. The company’s smartphone and iPad applications were clunky, and it was generating no revenue from mobile ads.

Facebook’s management, including Mr. Zuckerberg, recognized the problem and embarked on a crash course to revamp the company’s approach to mobile and better position the company for fast-growing emerging markets.

The company overhauled its apps, introduced ads into its users’ news feeds, and created a lucrative new category of revenue called app install ads. With the app install ads, a game maker, for example, can promote its new game in Facebook’s mobile software and give users an easy way to install the app with just a couple of clicks.

At the same time, Facebook introduced new advertising products meant to give marketers ways to more directly target specific groups of customers, which allowed the service to command higher advertising rates.

While mobile advertising continues to grow, and was about 41 percent of Facebook’s ad revenue in the second quarter, investors are also looking to new areas of potential profit growth. Those include video advertising in the news feed, which is expected to begin later this year, and the possible sale of ads in Instagram, the fast-growing photo and video sharing app that Facebook bought in 2012.

“All of those seem like relatively large low-hanging fruit, and they are starting to go after them,” Mr. Mahaney said.

Article source: http://www.nytimes.com/2013/08/01/technology/facebook-briefly-trades-above-ipo-price.html?partner=rss&emc=rss

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NEC to Exit Japanese Smartphone Market

July 31, 2013 by

The retreat in the face of competition from an American and a South Korean company highlighted the country’s shift from electronics industry leader to laggard over the course of the last decade.

“We were late to enter the smartphone market, and we were unable to develop attractive products,” Isamu Kawashima, the chief financial officer of NEC, said at a news conference here. “That’s what it comes down to.”

Like other Japanese phone makers, NEC clung to old-fashioned flip phones — great for making phone calls, taking pictures or playing simple games, but not for much else — as rivals elsewhere were developing smartphones that put the entire Internet and more in users’ pockets. The first NEC smartphone did not appear until 2011, four years after Apple’s iPhone.

The strategic failure cost NEC hundreds of millions of dollars in losses as its share of the Japanese cellphone market slipped into the single digits. And corporate Japan suffered another blow to its once vaunted reputation for innovation.

“NEC was like the face of the Japanese phone industry,” said Nobuyuki Hayashi, a technology consultant and writer. “Losing them will be very upsetting for those who take pride in Japanese manufacturing.”

NEC’s surrender is the latest in a series of consolidations. In 2010, NEC absorbed the remnants of the mobile phone divisions of two other Japanese stalwarts, Casio and Hitachi, with NEC holding a controlling stake. In 2008, Kyocera acquired the phone-making arm of Sanyo. In 2010, Fujitsu and Toshiba combined their handset businesses; Fujitsu bought out its partner last year. Mitsubishi, another big electronics company, got out of the phone business entirely.

Analysts say NEC and other Japanese cellphone makers were tied too closely to Japanese network operators, developing what has come to be known in that country as a “Galápagos” effect; devices were cut off from the evolution of the phone business elsewhere. As a result, the makers failed to grasp the significance of the rise of the smartphone.

As Japanese consumers embraced the smartphone in a big way, the companies had nothing to offer. Although flip phones from NEC and other Japanese makers are still in wide use in the country, smartphones now make up a majority of new sales. Japanese brands struggle to compete with imported smartphones, especially the iPhone.

“As the market for mobile phone handsets, including the rapid spread of smartphones, has dramatically changed, economies of scale have become increasingly important for the maintenance and strengthening of competitiveness,” NEC said in a statement. “However, NEC’s mobile phone handset shipments are following a downward trend, and it is difficult to foresee improved performance in the future.”

By last year, Apple had become the market leader in Japan, where the iPhone had won 25.5 percent of overall cellphone sales, according to the MM Research Institute. Even Samsung, which has been slower to establish a foothold in Japan than elsewhere, surpassed NEC last year, with a 7.2 percent market share.

In smartphones, Apple is even more dominant, with 40 percent of the Japanese market in the first quarter, according to another research firm, IDC.

For NEC, the final straw may have come when NTT-Docomo turned to a Samsung smartphone, the Galaxy S4, in an effort to stem the loss of subscribers to two rival network operators, SoftBank and KDDI, which have been marketing the iPhone aggressively.

Docomo does not offer the iPhone; instead, it has been featuring the Galaxy S4 and a Sony smartphone, the Xperia A, in a summer sales promotion. It is the first time that Docomo has featured a Samsung phone so prominently. Given the longstanding ties between Docomo, a former state-owned monopoly, and domestic phone makers, the decision was widely seen in Japan as a slap in the face to the Japanese industry.

There could be further bad news in store for the Japanese smartphone makers. Docomo has been talking with Apple about adding the iPhone to its range.

“Nothing has been decided and we’re always considering which models to launch,” Docomo said in a statement.

“There will be further consolidation in the industry,” said Jean-Philippe Biragnet, a partner at the Bain Company consulting firm in Tokyo. “There is not space for more than two or three of these players. The question is, Who?”

Among the domestic brands, the leaders last year, according to MM, were Fujitsu, with a 14.4 percent share of the overall mobile phone market; Sharp, with 14 percent; and Sony, with 9.8 percent.

Panasonic and Kyocera are much weaker, though they were slightly ahead of NEC, whose share of the business had fallen to about 5 percent last year from nearly 28 percent in 2001, according to MM.

Among the remaining contenders, only Sony has a significant presence outside Japan. The other Japanese phone makers have been outflanked at the high end of the smartphone business by Apple, Samsung and others, and at the low end by a growing number of Chinese manufacturers.

NEC was in talks with one of the Chinese companies, Lenovo, about a partnership aimed at saving the smartphone business, but the negotiations broke down several weeks ago, making the company’s announcement Wednesday inevitable, analysts said.

For fans of retro-styled Japanese flip phones, which have come to be known here as “gara-kei,” short for “Galápagos phone,” there was at least one saving grace in NEC’s announcement. The company said that even though it was quitting the smartphone business, it would continue “developing and producing conventional mobile handsets.”

Joshua Hunt contributed reporting.

Article source: http://www.nytimes.com/2013/08/01/business/global/nec-to-exit-japanese-smartphone-market.html?partner=rss&emc=rss

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New Siemens Chief Sees Weakness in China

July 31, 2013 by

Only hours after his predecessor was toppled because of operational problems and declining profit at the German industrial giant, Joe Kaeser, a Siemens insider promoted to the top job on Wednesday, warned that China could take longer than expected to resume its rapid growth. China is a crucial market for Siemens and hundreds of other European companies, and a continued slowdown there could delay recovery of the euro zone.

“The economic reorientation of China will take time,” Mr. Kaeser said at a news conference at Siemens headquarters in Munich.

The comments by Mr. Kaeser, who has worked at Siemens since 1980 and previously was chief financial officer, came only hours after the Siemens supervisory board named him to replace Peter Löscher, who took the blame for the mixed financial results also announced Wednesday.

The faltering Chinese economy has become a major concern for Europe and especially Germany. While Germany’s most important trading partners remain the United States and other European countries, demand from China and other developing nations has in recent years grown much faster and has compensated for weakness in the traditional markets.

“Given Germany’s higher dependence on the emerging markets in recent years,” Ralph Solveen, an economist at Commerzbank, said in a note to clients, “much lower growth of the economy there would have a marked impact on Germany and could push the long-awaited upswing further into the future.”

The appointment of Mr. Kaeser, 56, is a return to the Siemens’s tradition of naming insiders to head the company. He promised to restore the company’s reputation for reliability and top-flight engineering, which has suffered recently because of a number of well-publicized fiascos.

Siemens has been late to deliver high-speed trains for the German railroad and had problems connecting a huge offshore wind generation project to the power grid. Those problems contributed to a profit warning last week, and a decline in sales and operating profit that Siemens reported on Wednesday. Those problems led to Mr. Löscher’s departure.

Mr. Löscher, 55, who had previously worked in top management at the American drug maker Merck and at General Electric, was brought aboard in 2007 to lead the company, one of Germany’s largest employers, during a corruption scandal.

The appointment of an outsider made sense at time when many existing Siemens managers were under a cloud, said Christian Stadler, an associate professor at Warwick Business School in Coventry, England, who has studied Siemens.

But over the long run it is difficult for an outsider lacking extensive internal connections to manage a company as diverse and far-flung as Siemens, Mr. Stadler said. Siemens products include trains, medical scanners and equipment for generating and transmitting electricity, and it operates in almost every country in the world.

“It is really hard for an outsider to get a grip on an organization as large and complex as Siemens,” Mr. Stadler said. “Without having the necessary networks, it’s almost impossible.”

Mr. Löscher’s departure was a foregone conclusion after Siemens said on Saturday that the supervisory board planned to vote on his dismissal at a meeting on Wednesday. In a statement on Wednesday, Siemens said Mr. Löscher was leaving by mutual consent.

“During the past week I came to the conclusion that the foundation of trust necessary for me to remain was lacking,” Mr. Löscher said in a statement.

An earnings report by Siemens on Wednesday showed an improvement in net profit and new orders during the three months through June, Siemens’s fiscal third quarter. But sales declined. In addition, third-quarter operating profit fell at the company’s most important divisions, and Siemens said it expected profit for the full year to fall to 4 billion euros, or $5.3 billion, from 4.6 billion in 2012.

Net profit rose 43 percent to 1.1 billion euros, Siemens said, but the gain came largely from the Osram lighting unit, which the company has spun off in an initial public offering.

Among the company’s four divisions, operating profit fell 31 percent to 1.3 billion euros, Siemens said, largely because of the cost of a restructuring program. Sales fell 2 percent to 19.25 billion euros, while new orders rose 19 percent, to 21.14 billion euros.

Much of the jump in orders came from a single contract to provide regional trains for the expansion and improvement of rail service in greater London, known as Thameslink.

Mr. Kaeser, who had been Siemens’s chief financial officer since 2006, is seen as a steady hand who will help regain the confidence of employees weary of constant restructuring plans.

“The key to success is not the strategy,” Mr. Kaeser said. “The key to success is the culture of a company and its values and what it stands for.”

“Our company is certainly not in crisis, nor is it in need of major restructuring,” Mr. Kaeser said in a statement. “However, we’ve been too preoccupied with ourselves lately and have lost some of our profit momentum vis-à-vis our competitors.”

Mr. Kaeser told reporters that Siemens had expected the Chinese economy to recover quickly after the recent turnover in leadership but now realized there were deep structural problems in that country that need to be addressed first. China country suffers from huge overcapacity in steel, mining and cement production — industries that Siemens services.

China must restructure those industries, which could fuel unemployment and cause civil unrest, Mr. Kaeser said. “China clearly needs longer than we originally thought,” he said.

Mr. Kaeser conceded that, as a close associate of Mr. Löscher throughout his predecessor’s tenure, he shared responsibility for decisions that had been made.

“The management board decided the measures,” Mr. Kaeser said. “A lot worked out; some things didn’t work out and need to be improved.”

Article source: http://www.nytimes.com/2013/08/01/business/global/siemens-names-financial-chief-to-the-top-job.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

State of the Art: Chromecast, Simply and Cheaply, Flings Web Video to TVs

July 31, 2013 by

Take the story of the iTunes music store. The instant somebody offered the chance to buy songs individually, the world changed forever. Hello, music à la carte. Goodbye, Tower Records.

Now it’s cable TV’s turn.

We are engaged in a great civil movement, testing whether that business, or any business so conceived and so dedicated, can long endure. The number of people who cut the cord, or cancel the satellite, in favor of getting all their TV from the Internet is still small — maybe 1 percent of us a year. But the online alternatives to cable TV are growing. And once it becomes simple and easy to get Internet video from our laptops and phones to the actual television, well, the term “TV drama” will have a whole new meaning.

Actually, that has just happened. Google’s new Chromecast gizmo is the smallest, cheapest, simplest way yet to add Internet to your TV. It looks like a portly flash drive or maybe a fat keychain — and it costs $35. That’s not a typo.

So what does it do? If you have a Wi-Fi wireless network in your home, the Chromecast can perform two useful stunts.

Stunt 1: It lets you watch videos from YouTube, Netflix and Google Play (Google’s movie and TV store for Android gadgets) on your big screen. You use your phone or tablet (Apple or Android) as a remote control.

Stunt 2: The Chromecast displays Web sites on your TV — by broadcasting from Google’s Chrome browser on your Mac or PC. More on this in a moment.

Google’s promotional videos depict a fantasy of effortlessness: a hand slides the Chromecast into an HDMI jack on the back of a big-screen TV, clicking like a key into a lock. And then suddenly everything good on the Internet seems to be watchable on that TV, to the ecstasy of many young, attractive, multiethnic couch potatoes.

The videos leave out the fact that the Chromecast requires power. You can plug it into a power outlet or a USB jack on the TV itself, but either way, the result isn’t as clutter-free as the ads make it seem. Still — $35, remember?

Then you download a setup program, introduce it to your Wi-Fi network, name your Chromecast and so on. The whole setup process takes about five minutes; a child could do it. (Adults may need slightly longer.)

To perform Stunt 1, you open the YouTube, Netflix or Google Play app on your phone or tablet. Find a video to play. A special icon appears at the edge of the touch screen, resembling a rectangle with Wi-Fi signal waves in the corner. To begin watching that video on the TV, tap that icon and choose your Chromecast’s name.

Your phone is not actually transmitting anything. The Chromecast gets the video from the Internet directly; you use your phone or tablet only to find the movie and control its playback. You can even adjust the volume using the physical volume keys on the side.

The good news: this arrangement means you can do other things on your phone or tablet during playback, like working in another app or even turning the thing off.

The bad news is that the phone/tablet is the only remote control you’ve got. So if you want to pause, rewind or mute the video, you first have to find your phone/tablet, wake it up, enter the password if required, and finally reopen the app that’s doing the playing. It’s not especially graceful.

On Android gadgets, at least the Pause button appears right on the lock screen. You don’t have to unlock the device and reopen the app.

Otherwise, all of this is effortless and excellent. Even if you can already get Netflix and YouTube on your TV because they’re built into the TV, Xbox, TiVo or Blu-ray player, you may prefer the Chromecast; it’s just much easier to search for videos, thanks to the on-screen keyboard and voice dictation. You can also cue up several videos to play in sequence. That’s especially handy for YouTube videos, which are not exactly, you know, epic in length.

Article source: http://www.nytimes.com/2013/08/01/technology/personaltech/chromecast-simply-and-cheaply-flings-web-video-to-tvs.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
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