April 1, 2023

A Million Users Desert BlackBerry, and Revenue Falls 48%

It reported other bad news as well, a month before introducing its new BlackBerry 10 phones to the public. Revenue fell 48 percent in the company’s fiscal third quarter, ended Dec. 1, to $2.7 billion from $5.2 billion a year earlier.

After a favorable tax gain, RIM reported net income of $9 million, or 2 cents a share. A year ago during the same period, RIM earned $265 million, or 51 cents a share. The company said that using nonstandard accounting methods to adjust for the tax gain and other pretax charges led to an adjusted net loss of $114 million for the third quarter, or 22 cents per share.

Analysts had expected a larger loss of 35 cents a share, according to a survey by Thomson Reuters. Nevertheless, RIM’s shares fell about 9 percent in after-hours trading. Before RIM’s announcement, shares closed at $14.12, up for the day by 3.6 percent.

The company has pinned all its hopes on the BlackBerry 10 to win back customers who may have defected to iPhones or phones using Google’s Android operating system. RIM said 79 million customers were using BlackBerry devices.

“We believe the company has stabilized and will turn the corner in the next year,” Thorsten Heins, the chief executive, said in a conference call with analysts. “We are realistic about our competitors, but we know that customers in this industry demand and respond to innovation.”

Until now, RIM had been able to offset the sharp drop in the BlackBerry’s popularity in its traditional markets, particularly the United States, through increased sales to users in developing countries. Because every BlackBerry user generates high-margin monthly fees from carriers for RIM, the last quarter’s loss of subscribers is more than just a symbolic setback.

In the conference call Mr. Heins indicated that RIM had been reducing those fees, which account for 36 percent of RIM’s revenue, in a bid to keep BlackBerry’s current product offerings alive. And in an announcement that seemed to concern some analysts on the call, Mr. Heins said that the new BlackBerry 10 phones would substantially revamp how RIM set service fees.

With BlackBerry 10, Mr. Heins said, corporate and government users will be able to pick and choose what services they purchase from RIM, a step that he said could mean that some of them would no longer generate any user fees. The company was unclear about what fees BlackBerry 10s sold to consumers would produce. Last month Mr. Heins said that consumer BlackBerry 10 models would no longer benefit from RIM’s special Web compression technology, the chief service provided to consumers by RIM.

RIM, which has no debt, pleasantly surprised analysts by increasing its cash on hand by $600 million, to $2.9 billion. The company was vague about how it achieved that beyond saying that the newfound cash came from “working capital conversion.” In the past, several analysts have speculated that the company has mainly become better at collecting its outstanding bills.

Mr. Heins said that the introduction of BlackBerry 10, however, would bring an end to the company’s cash hoarding. RIM, he said, will dig into its cash reserves during the quarter to stockpile BlackBerry 10 phones in advance of their release and to finance advertising and other marketing campaigns for the devices.

Nevertheless, Mr. Heins predicted that RIM would still hold more cash at the end of its fiscal year than the $2.1 billion it had on hand at its beginning.

RIM shipped 6.9 million current-model BlackBerry phones during the quarter and 255,000 of its BlackBerry PlayBook tablets. During the call, company officials indicated that those products were being heavily discounted.

Article source: http://www.nytimes.com/2012/12/21/technology/a-million-users-desert-blackberry-and-revenue-falls-48.html?partner=rss&emc=rss

Today’s Economist: Simon Johnson: The Real Fiscal Risks in the United States


Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management.

A great deal of attention is currently focused on the notion that a “fiscal cliff” of higher taxes and spending cuts awaits at the end of this year. The good news is that politicians are finally talking about the budget – and working hard to communicate their competing messages regarding what should be done to put public finance on a more sustainable footing.

Today’s Economist

Perspectives from expert contributors.

The bad news is that almost the entire national conversation on deficits and debts misses the real fiscal risks that we face.

There are three major issues.

First, the main risk is that in the near future the government will do too little by way of fiscal adjustment.

The drama of the word “cliff” and the image of falling off it makes things seem more worse than they are. To be sure, if all the scheduled tax increases and spending cuts go into effect, 2013 would be a difficult year – although there is no sign that this kind of fiscal adjustment would lead to the problems of the financial crisis of 2008.

The politicians will do a deal. Probably not now, when the Republicans are pressed to raise tax rates – this goes too deeply against what has become an ideology over the last 30 years.

It will be much easier to reach an agreement in January or February, when tax rates have gone up — which they will do automatically, if there is no agreement by Dec. 31 – and the Republicans are being asked to vote for what would presumably include cutting tax rates for middle-class Americans relative to those new levels.

But the deal to be struck between the White House and the Republican House will probably be too small to adequately address our fiscal issues.

If we want to start putting federal government debt on a more sustainable path, we should find a path to fiscal adjustment that undoes the net effect on the budget of the George W. Bush-era tax cuts, which represent about $4 trillion over the next 10 years. You can do that through revenue or through spending reductions, but that is the right goal to aim for – putting our federal finances back closer to where they were in the late 1990s. (For a primer, I recommend this piece by my colleague James Kwak.)

Such a change would put government debt on track to stabilize around 40 to 50 percent of gross domestic product by 2030 – an entirely reasonable and responsible goal. (In “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You,” James and I run through alternative scenarios and discuss the policy options. You can tweak the numbers up or down somewhat, but the most important goal is to take debt off its current explosive path.)

President Obama has suggested a headline number for fiscal adjustment of $1.6 trillion, while the recent Republicans counterbid was $800 billion – both over 10 years (a standard accounting convention for this kind of discussion.)

Irrespective of how you feel about the policy combination each side is proposing, the “big numbers” are too small.

The United States doesn’t need to do more immediately. In contrast to many parts of Europe, we have some time to make our fiscal adjustments – particularly while interest rates remain low. The country should phase in a big part of its needed fiscal adjustment as the economy recovers. For example, part of any budget adjustment should be linked to employment relative to G.D.P. – any tax cuts in the new year could be phased out as the economy recovers.

Second, the working assumption of all American politicians is that the dollar will remain the predominant reserve currency indefinitely – the United States is the safe haven for investors and governments around the world. They particularly regard United States government debt as a safe asset in troubled times – and this is what allows us to borrow so much at low interest rates. (For a brief history of public debt in the United States – including how it has been useful in the past and how overreliance on foreign borrowing now makes us vulnerable, see the PBS NewsHour profile of “White House Burning.”)

About half of all federal government debt outstanding is held by foreigners. Sooner or later, foreigners will want to buy less United States debt. Either they will want to hold other assets – the fashion in currencies comes and goes over time, just like everything else – or they will save less (in which case they may hold onto their existing United States government debt but not want to buy so much of new issues).

Many countries hold their foreign reserves in dollars and have built these up over time. China, for example, holds over $1 trillion (the exact number is not public information; some people say the true number is significantly higher). This is far more than China needs, and it is no surprise that its interest in buying more United States Treasury debt is waning (see the latest official data).

No American politician wants to talk in public about what the implications of shifts in China’s savings and investments would be on our ability to finance federal government debt at reasonable interest rates. The middle class will pay more tax or receive fewer benefits, or both, over the coming decades – that’s the inconvenient math of the Congressional Budget Office. Which politician wants to level with voters on the scale of this issue?

The third risk is that our process of fiscal adjustment will undermine social insurance, primarily Social Security and Medicare.

We insure each other against outliving our assets and encountering an expensive version of ill health in old age. This insurance is mostly run through the federal government, for one simple reason. There was no private insurance market for older Americans before Medicare was created – and there will be none if Medicare is phased out or withers.

The most likely situation is this. After much shouting, a fiscal deal is reached in the new year – with a headline adjustment of around $1 trillion over 10 years, and perhaps with a 50-50 split between tax increases and spending cuts. Public attention recedes. Commentators proclaim that the budget problem has been fixed.

But then we hit a real fiscal crisis, with foreigners declining to buy newly issued Treasury paper and interest rates on that debt – and interest rates more broadly throughout the economy – rising sharply. The Federal Reserve fights to keep interest rates down, but its monetary policy in that instance is regarded as inflationary, further destabilizing the situation.

That crisis – date unknown but intense for sure – forces much more damaging fiscal cuts, including cuts in Medicare but also across the board (and bringing higher taxes). This is exactly the kind of disruptive fiscal austerity that damages an economy. One such dramatic, even humiliating, potential scenario is described in gripping detail in the opening pages of “Eclipse” by Arvind Subramanian (my colleague at the Peterson Institute for International Economics).

We end up poorer, more unequal and struggling to remember how we ever cared for one another in old age.

Article source: http://economix.blogs.nytimes.com/2012/12/06/the-real-fiscal-risks-in-the-united-states/?partner=rss&emc=rss

Media Decoder Blog: Martha Stewart Living Omnimedia to Lay Off Staff and Reduce Magazines

Martha StewartFernando Leon/Getty Images Martha Stewart

Like many New York companies, Martha Stewart Living Omnimedia had a difficult week. The basement of the company’s offices in west Chelsea were flooded by Hurricane Sandy, sending staff members home for the week and forcing the company to twice reschedule its quarterly earnings report, now set for Friday.

On Thursday, there was more bad news when the company announced it was scaling back two of its four magazines and laying off about 70 employees, or 12 percent of the nearly 600-person company.

Everyday Food, the company’s middle-market cooking digest, will be cut from 10 issues a year to five and will no longer be sold as a stand-alone publication. Instead, it will be delivered as a supplement to subscribers of Martha Stewart Living.

Whole Living Magazine, which the company purchased in 2004, is on the market. The magazine, with a circulation of 760,606, has suffered a 24 percent decline in advertising pages in the last year. While company executives say they are already in discussions to sell the magazine, they plan to stop printing it by year-end and fold its content into Martha Stewart Living if a sale is not concluded.

“It’s a significant event in the history of the company,” said David Bank, an analyst with RBC Capital Markets, about the publishing cuts. Unlike bigger publishing companies with dozens of magazines, Martha Stewart is now heavily dependent on only two titles, Martha Stewart Living and Martha Stewart Weddings.

“There’s really one flagship title carrying the operations. The magazine industry no doubt is headed for structural transformation,” Mr. Bank said. “But the bigger you are, the longer you can put it off for. These guys, they’re just subscale.”

The announcement follows a steady stream of bad news from the company, including declining income in all three of its divisions: publishing, merchandising and broadcasting. Last year, the company hired Blackstone Advisory Partners to explore what was considered a sale of the company and ultimately formed a merchandising deal with J. C. Penney. Earlier this year, the company cut $12.5 million in broadcasting costs by not renewing its daily programming deal with the Hallmark Channel, breaking its lease on its television production studio and ending its live audience for “The Martha Stewart Show.” In April, it was announced that a new weekly show, “Martha Stewart’s Cooking School,” would be distributed on public television.

The cuts announced Thursday go to the heart of Martha Stewart’s publishing business, the foundation of her company, which still provides 64 percent of total revenue, according to the latest public filings.

Lisa Gersh, the company’s president and chief executive, said, “We’re taking it really from four separate magazines down to two.” She added that the decision was driven by declines in magazine advertising and newsstand sales and the potential for greater profits in video. The company’s magazine titles have also attracted more digital subscribers than their competitors.

“In light of the clear trends we are seeing across the media industry, and following a careful evaluation of our own publishing segment, we are taking decisive action to drive the company’s return to sustainable profitability,” Ms. Gersh said.

The announcement will not change the relationship of Ms. Stewart herself with the company that bears her name. Last year, Ms. Stewart, who was convicted in 2004 and sent to prison for lying to federal investigators about a stock sale, was allowed to resume an official role in the company. In July, the company agreed to extend her current contract to June 2017.

The company’s publishing fortunes now rest heavily on magazines with very mixed results. Martha Stewart Living’s advertising pages declined by 30 percent in the first half of the year, according to data tracked by the Publishers Information Bureau. While its overall circulation has grown slightly, its newsstand sales dropped in the last year to 163,571 copies in June from 198,700 copies the same time the year before, according to the Audit Bureau of Circulations.

Martha Stewart Weddings has had more success with its advertising pages, which in the last year grew by 49 percent. Ms. Gersh said the magazine’s December issue was expected to be the biggest issue in terms of advertising revenue. But even brides have been buying fewer copies of Martha Stewart Weddings. Its newsstand sales declined to 155,406 copies in the first half of the year from 200,159 copies the same time the year before.

Even with these problems, analysts seemed pleased that Martha Stewart’s executives had finally made a move to cut its publishing costs. Michael Kupinski, director of research for Noble Financial Capital Markets, noted that so far this year the company’s publishing division generated a $12 million loss, while its merchandising division brought in $38 million in net income for the company. Last year, merchandising generated $30 million in net income, while publishing generated a loss of $6.5 million.

“All of the cash flow at the company is driven by merchandising,” Mr. Kupinski said. “It’s been a really tough environment for magazines.”

In a statement, company executives estimated that the latest publishing cuts would save $33 million to $35 million a year on staff, circulation and distribution.

These recent cuts may also put Martha Stewart in better shape for a sale. Mr. Kupinski noted that last year the company hired Ms. Gersh, who was involved in founding and making Oxygen Media profitable and then selling it to NBC Universal. It also brought on Kenneth West, former chief financial officer of Marvel Entertainment, who was involved with selling that company.

“There was a point it was for sale. But Martha wasn’t getting the price that she wanted,” Mr. Kupinski said. “If this management team comes in and at breakneck speed, they’re cleaning up this business, I wouldn’t be surprised at one point that it’s on the block.”

A version of this article appeared in print on 11/02/2012, on page B1 of the NewYork edition with the headline: Martha Stewart Living Will Scale Back Magazines and Reduce Its Staff.

Article source: http://mediadecoder.blogs.nytimes.com/2012/11/01/martha-stewart-living-to-lay-off-staff-and-reduce-magazines/?partner=rss&emc=rss

It’s the Economy: A Mess on the Ladder of Success

By the end of the 19th century, as the frontier vanished, the U.S. had a mild panic attack. What would this vibrant, entrepreneurial country be without new lands to conquer? Some people (I’m looking at you, Teddy Roosevelt) decided to keep on conquering (Cuba, the Philippines, etc.), but eventually, in industrialization, the U.S. found a new narrative of economic mobility at home. From the 1890s to the 1960s, people moved from farm to city, first in the North and then in the South. In fact, by the 1950s, there was enough prosperity and white-collar work that many began to move to the suburbs. As the population aged, there was also a shift from the cold Rust Belt to the comforts of the Sun Belt. We think of this as an old person’s migration, but it created many jobs for the young in construction and health care, not to mention tourism, retail and restaurants.

For the last 20 years — from the end of the cold war through two burst bubbles in a single decade — the U.S. has been casting about for its next economic narrative. And now it is experiencing another period of panic, which is bad news for much of the work force but particularly for its youngest members. The U.S. has always been a remarkably itinerant country, but new data from the Census Bureau indicate that mobility has reached its lowest level in recorded history. Sure, some people are stuck in homes valued at less than their mortgages, but many young people — who don’t own homes and don’t yet have families — are staying put, too. This suggests, among other things, that people aren’t packing up for new economic opportunities the way they used to. Rather than dividing the country into the 1 percenters versus everyone else, the split in our economy is really between two other classes: the mobile and immobile.

Part of the problem is that the country’s largest industries are in decline. In the past, it was perfectly clear where young people should go for work (Chicago in the 1870s, Detroit in the 1910s, Houston in the 1970s) and, more or less, what they’d be doing when they got there (killing steer, building cars, selling oil). And these industries were large enough to offer jobs to each class of worker, from unskilled laborer to manager or engineer. Today, the few bright spots in our economy are relatively small (though some promise future growth) and decentralized. There are great jobs in Silicon Valley, in the biotech research capitals of Boston and Raleigh-Durham and in advanced manufacturing plants along the southern I-85 corridor. These companies recruit all over the country and the globe for workers with specific abilities. (You don’t need to be the next Mark Zuckerberg to get a job in one of the microhubs, by the way. But you will almost certainly need at least a B.A. in computer science or a year or two at a technical school.) This newer, select job market is national, and it offers members of the mobile class competitive salaries and higher bargaining power.

Many members of the immobile class, on the other hand, live in the America of the grim headlines. If you have no specialized skills, there’s little reason to uproot to another state and be the last in line for a low-paying job at a new auto plant or a burgeoning green-energy cluster. The surprise in the census data, however, is that the immobile work force is not limited to unskilled workers. In fact, many have a college degree.

Until now, a B.A. in any subject was a near-guarantee of at least middle-class wages. But today, a quarter of college graduates make less than the typical worker without a bachelor’s degree. David Autor, a prominent labor economist at M.I.T., recently told me that a college degree alone is no longer a guarantor of a good job. While graduates from top universities are still likely to get a good job no matter what their major is, he said, graduates from less-exalted schools are going to be judged on what they know. To compete for jobs on a national level, they should be armed with the skills that emerging industries need, whether technical (computer science) or not.

Those without such specialized skills — like poetry, or even history, majors — are already competing with their neighbors for the same sorts of mediocre, poorer-paying local jobs like low-level management or big-box retail sales. And with the low-skilled labor market atomized into thousands of microeconomies, immobile workers are less able to demand better wages or conditions or to acquire valuable skills.

So what, exactly, should the ambitious young worker of today be learning? Unfortunately, it’s hard to say, since the U.S. doesn’t have one clear national project. There are plenty of emerging, smaller industries, but which ones are the most promising? (Nanotechnology’s moment of remarkable growth seems to have been 5 years into the future for something like 20 years now.) It’s not clear exactly what skills are most needed or if they will even be valuable in a decade.

What is clear is that all sorts of government issues — education, health-insurance portability, worker retraining — are no longer just bonuses to already prosperous lives but existential requirements. It’s in all of our interests to make sure that as many people as possible are able to move toward opportunity, and America’s ability to hurl people and money at exciting new ideas is still greater than that of most other wealthy countries. (As recently as five years ago, U.S. migration was twice the rate of European Union states.) That, at least, is some comfort at a time when our national economy seems to be searching for its next story line.

Article source: http://feeds.nytimes.com/click.phdo?i=8164d42802b7f86b02a5884ee1332c90