Tuesday, October 30, 2012

BMW: to Russia with Love.

BMW takes a page from Steve Jobs' ad manual in it's latest web campaign in Russia. In 2010, selling the iPad as Magical, Beautiful, Amazing, Steve Jobs started focusing on emotional response rather than technical features of a hi-tech product. In 2012, BMW sells its car claiming (in Russian) "We Invent Emotions."

In short, ad campaigns hack into human brains, presenting consumer goods as live objects that feel right. We no longer talk about features and benefits. It's all about feelings. 

tags: social, emotion, psychology, advertisement, distribution, control

Monday, October 29, 2012

(BN) Windmills Overload East Europe’s Grid Risking Blackout: Energy

Germany is dumping electricity on its unwilling neighbors and by wintertime the feud should come to a head.

Central and Eastern European countries are moving to disconnect their power lines from Germany's during the windiest days. That's when they get flooded with energy, echoing struggles seen from China to Texas over accommodating the world's 200,000 windmills.

Related links:

  • World's Most Powerful Lasers to Zap Nuclear Waste in EU Project
  • Sustainability news

Renewable energy around the world is causing problems because unlike oil it can't be stored, so when generated it must be consumed or risk causing a grid collapse. At times, the glut can be so great that utilities pay consumers to take the power and get rid of it.

"Germany is aware of the problem, but there is not enough political will to solve the problem because it's very costly," Pavel Solc, Czech deputy minister of industry and trade, said in an interview. "So we're forced to make one-sided defensive steps to prevent accidents and destruction."

The power grids in the former communist countries are "stretched to their limits" and face potential blackouts when output surges from wind turbines in northern Germany or on the Baltic Sea, according to Czech grid operator CEPS. The Czechs plan to install security switches near borders by year-end to disconnect from Europe's biggest economy to avoid critical overload.

Wind Farms

The bottleneck is one of many in the last eight years as $460 billion of wind farms were built worldwide on plains, hills and at sea before networks were fully expanded to deliver the power to consumers. Upgrading Germany's system alone to address capacity and technical shortfalls will cost at least 32 billion euros ($42 billion), its four grid operators said in May.

Germany installed more than 8,885 megawatts of wind energy since 2007, mostly in the north. Now it's studying how to build the power backbone to connect to the industrialized south, home to hundreds of factories such as those of chemicals manufacturer Wacker Chemie AG (WCH) and Siemens AG. (SIE) The electricity detours through the Czech Republic and Poland when German cables can't handle the load as the countries' grids are interconnected.

The problem may intensify with the approaching winter. With an insufficient north-south connection, Germany's power network came close to a collapse last February when high winds in the Baltic sea flooded it with power and the Czech Republic and Poland threatened to disconnect their grids. The coming winter can be critical, German Economy Minister Philipp Roesler said last week.

Aging Plants

Chancellor Angela Merkel's decision to shut down aging atomic plants and exit nuclear power by 2022 following last year's reactor meltdowns in Fukushima, Japan, exacerbated the power imbalance. Germany more than ever will have to rely on power generated in the more windy north.

"We do understand that the Czech and the Polish grid operators are concerned about market and system security," Volker Kamm, a spokesman for grid operator 50Hertz Transmission GmbH, said in a phone interview from Berlin. "We are seeking a constructive solution."

Lack of grid connections, such as in China, or oversupply as in Texas have made wind energy's global rollout a lumpy process. Wind farms in West Texas earlier this year were paying utilities to use their electricity on particularly gusty days because they can still earn $22 a megawatt-hour in federal tax credits.

Excess Flows

Utilities like Prague-based CEZ AS (CEZ) and Warsaw-based PGE SA (PGE) are occasionally forced to disconnect some coal-fired plants in the western parts of the Czech Republic and Poland because of excess power flowing from Germany. CEZ's Prunerov plant is often a casualty of the unplanned flows, CEPS said.

"Measures we're using are costly and at times not sufficient," said Jerzy Dudzik, an executive from Poland's grid operator PSE. PGE had to adjust generation schedules at its Dolna Odra and Turow plants, he said.

Both Poland and the Czech Republic are planning to install so-called phase-shifter transformers in the trans-border area with Germany to regulate power flows and protect their transmission networks. While the Czechs are still negotiating with Germany on other short-term solutions and pushing for a creation of smaller power-trading areas with realistic capacity allocation, they're already counting on installing four transformers by 2017, CEPS said.

'Free Lunch'

"The Germans are using our infrastructure in an excessive manner," CEPS board member Zbynek Boldis said in an interview in Prague. "At this point they're getting a free lunch."

Germany's eastern neighbors have also said that the common German-Austrian power market puts them at a disadvantage since they must reduce cross-border transmission capacity because of trades between the two nations and have to take costly measures to protect their grids.

Southern Germany imports power from Austria's pumped- storage hydroelectric power stations in the Alps during peak periods, again using the Czech grid while excluding the Czechs from the benefits of trading within a single-border area.

"Traders within the Austrian-German common zone don't need to bid for capacity in auctions even though they're using up the capacity of its neighbors, who do have to pay," CEPS's Boldis said. "That's discrimination."

The German-Austrian common market's physical transmission capacity doesn't correspond with the volume of transactions between the two countries, so they end up using the Czech, Polish, Slovak and Hungarian grids, Boldis said. The four countries want Germany and Austria to redraw the power-trading map, creating smaller areas that would better reflect electricity flows.

"Electricity follows a path of least resistance in the grid, according to the laws of physics," Boldis said. "The result is that our transmission system is overloaded, we have security threats."

(BN) SpaceX Completes First Cargo Mission in Commercial Spaceflight

Space Exploration Technologies Corp., headed by billionaire Elon Musk, completed the first regular cargo mission in commercial spaceflight with a splashdown in the Pacific Ocean.

After detaching from the International Space Station, the company's unmanned spacecraft parachuted into the water about 250 miles off the coast of southern California at 12:22 p.m. local time yesterday.

The closely held company, known as SpaceX, has a $1.6 billion contract with the National Aeronautics and Space Administration for at least a dozen resupply flights to the station. NASA is relying on Hawthorne, California-based SpaceX and Dulles, Virginia-based Orbital Sciences Corp. (ORB) to do the work after retiring its shuttle fleet last year.

"This historic mission signifies the restoration of America's ability to deliver and return critical space station cargo," Musk said in a statement after the company recovered the craft.

SpaceX's Dragon capsule was carrying almost 2,000 pounds of supplies, including science experiments and biological samples. It's the only spacecraft capable of returning a significant amount of cargo from the station.

The company sent four boats to the area to recover the supply ship, including a 100-foot-long vessel with a crane to lift the vehicle onto its deck, SpaceX said.

'American Ingenuity'

The spacecraft was shipped to a port near Los Angeles, where NASA officials will within days retrieve time-sensitive cargo such as refrigerated blood samples, NASA said. The capsule itself and its remaining supplies will be taken to the company's McGregor, Texas, facility for processing, the agency said.

"We are reminded American ingenuity is alive and well," NASA Administrator Charles Bolden said in a statement.

The agency plans to begin flying astronauts on private spacecraft in 2017. It currently relies on Russia for rides to space, paying about $63 million per astronaut. NASA wants companies to transport crew and cargo to Earth orbit so it can focus on missions to asteroids and Mars.

SpaceX launched the craft atop a Falcon 9 rocket on Oct. 7 from Cape Canaveral, Florida. It docked with the station three days later. The company accomplished a similar feat on May 25 during a test mission, becoming the first to do so. SpaceX's second regular flight to resupply the space station is planned for Jan. 18.

Orbital plans to test its new Antares (ANT) rocket designed for station missions in December. A test flight to the station has been delayed to the first or second quarter of 2013. The company has a $1.9 billion contract with NASA for eight resupply missions.

Engine Failure

SpaceX is still investigating why one of the rocket's nine engines suddenly lost pressure and shut down during the Oct. 7 launch.

A team of engineers from SpaceX and NASA will continue to "analyze all data in an effort to determine root cause and will apply those findings to future flights," the company said in the same statement.

The failure caused the loss of an Orbcomm Inc. (ORBC) satellite that was flying in the rocket as a secondary payload.

The Orbcomm satellite, a prototype for a communications network, was placed in a lower-than-expected orbit because the SpaceX rocket didn't have enough fuel for a second burn of the upper-stage engine to take it higher and safely out of range of the space station.

As a result, the satellite began to fall and re-entered the atmosphere on Oct. 10, according to Jonathan McDowell, an astronomer at the Harvard-Smithsonian Center for Astrophysics who analyzed surveillance data from U.S. Strategic Command.

'Burned Up'

"My inference is that it burned up," McDowell said in a telephone interview. "From what I can tell, it came down a little west of Vancouver in the northeast Pacific."

The Fort Lee, New Jersey-based provider of wireless messaging services filed an insurance claim for a "total loss" of the satellite, Orbcomm said in an Oct. 11 statement. The policy's $10 million limit would largely offset the expected cost of the prototype and associated launch services, it said.

Spokesmen for Orbcomm didn't return calls seeking comment.

Orbcomm plans to launch more satellites on two Falcon 9 flights in 2013 and 2014.

(BN) Taming Stomachs With Fodmap Diet Spurs $8 Billion Market

Sue Shepherd says she never expected to become famous for taming cantankerous tummies.

The 38-year-old Australian dietician invented a food regimen with a bizarre name in her early 20s to relieve symptoms of bloating and stomach cramps. It's now being adopted internationally, changing the way doctors manage a set of digestive troubles known as irritable bowel syndrome.

Shepherd initially set out to help the 1 percent of people with a gluten intolerance causing celiac disease. She found even those without the condition felt better when they avoided the grain-protein and foods containing certain sugars that she and colleagues at Monash University in Melbourne identified. They named them "Fodmaps," an acronym for potentially tough-to- absorb molecules. Shepherd's diets low in gut irritants have spurred an $8.3 billion market, encouraging the likes of Abbott Laboratories (ABT) to introduce products devoted to food intolerance.

"This approach has really revolutionized the way we treat a common condition," said Jason Tye-Din, a gastroenterologist at the Royal Melbourne Hospital and celiac researcher at the Walter and Eliza Hall Institute. "The significance has been realized around the world."

Screening for celiac disease in Australia alone has increased 25 percent over the past four years, according to Tye- Din, who runs two of Australia's four celiac disease clinics. That's bolstered demand for gluten-free foods and other products for so-called functional gastrointestinal disorders.

"Gluten-free food is flourishing," said Ewa Hudson, head of health and wellness food and beverages research at London- based Euromonitor International Ltd., who predicts retail sales of food intolerance products will reach $10.5 billion worldwide by 2017, especially as more grocery chains carry them.

Food 'Revolution'

The market in developed nations "has undergone a revolution," Hudson said in an e-mail. "Prior to that, gluten- free had been the preserve of pharmacies and specialist health- food stores."

Abbott and Mead Johnson Nutrition Co. (MJN) have about 7 percent each of the global food-intolerance market by value, according to Euromonitor. Abbott, which sells intolerance products under the Vital and Ensure labels, introduced a limited-ingredient, gluten-free nutrition bar called Perfectly Simple in June.

"We expect to launch an additional 20 products and formulations this year and have more than 30 clinical studies," Abbott said Oct. 17, when it reported third-quarter earnings.

Shepherd said she's sold almost 200,000 copies of her eight cookbooks, which include Irresistibles for the Irritable, that help people choose bowel-friendlier foods. The recipes avoid sugars that aren't well absorbed in some people's bowels, found in products ranging from onions to yoghurts.

Too Much Gas

These foods can cause bloating, excess gas, abdominal discomfort and diarrhea in some people -- hallmarks of irritable bowel syndrome experienced by at least 10 to 15 percent of adults, according to the International Foundation for Functional Gastrointestinal Disorders, a research and education group in Milwaukee, Wisconsin.

"I pieced together what was an experimental diet," said Shepherd, who began teaching the regimen in her private dietetics practice in early 1997. "I wasn't randomly picking these foods -- they all had something in common: they were all potentially not absorbed in the small intestine."

Peter Gibson, gastroenterology professor at Monash, coined the term Fodmap to describe the molecules people with irritable bowel syndrome have difficulty stomaching -- fermentable oligosaccharides, disaccharides, monosaccharides and polyols found in dozens of everyday things from apples and wheat to milk, high-fructose corn syrup, and sugarless chewing gum.

'Fell Off My Chair'

Shepherd, who has celiac disease, tested her diet on 25 people, preparing all their meals herself for 22 weeks in a study that formed part of a PhD thesis at Monash. She found the diet quelled symptoms in at least 70 percent of participants, compared with 12 percent given a placebo meal resembling typical Australian fare.

"I honestly nearly fell off my chair because it looked just too good to be true," said Shepherd, who now employs 13 dieticians in a practice that sees about 4,000 people a year. "I still pinch myself at how successful it is and how big it's become. It's literally gone global."

The research drew attention to the role of diet in medicine and gastroenterological diseases especially, said Josh Butt, a gastroenterology fellow at Monash.

'Slow Diffusion'

The diet has gained popularity in the U.S. since Gibson and Shepherd spoke on the topic at the American College of Gastroenterology annual meeting a year ago, said Patsy Catsos, a dietitian and author in Portland, Maine, who keeps a list of more than 90 dietitians who feel comfortable delivering the diet.

"There's a slow diffusion of knowledge among physicians about food intolerance," said Peter Green, director of the Celiac Disease Center at Columbia University in New York. Green, a physician, typically tries to rule out gluten, fructose and other intolerances, as well as bacterial overgrowths, he said.

"If they're excluded, we'll say, 'There's this new diet that's come out of Australia,' and we'll give them the Fodmap diet," Green said.

A typical day's meals might include a poached egg with spinach plus a banana for breakfast, followed by a ham and salad sandwich on gluten-free bread for lunch, and a dinner of grilled chicken, baked potato with sautéed spinach and capsicum, seasoned with the green part of a spring onion, salt, pepper, olive oil and pine nuts. Lactose-free yogurt with blueberries, or peanut butter on a celery stick may serve as suitable snacks, according to the Digestive Health Foundation in Melbourne.

Because it avoids foods with high-fructose corn-syrup, it can be difficult to procure appropriate products in the U.S. where the ingredient is widespread, he said, in everything from jelly to ketchup.

'Laden With Fodmaps'

"Usual diets here in the U.S. are laden with Fodmaps," Portland dietitian Catsos said. "Doctors have pushed high-fiber diets and fiber supplements almost across the board for IBS patients. Therefore, health-conscious Americans are guzzling smoothies filled with yogurt and fruit, juicing, eating loads of cruciferous vegetables, beans and high-fiber nutrition bars and nuts, then they wonder why their IBS has gotten worse."

Researchers at King's College London adapted the low-Fodmap diet and implemented it at Guy's and St Thomas' hospitals. They compared it with standard advice based on the UK's National Institute for Health and Clinical Excellence guidelines and found it reduced flatulence and other symptoms in at least six out of seven patients, compared with half following the NICE- based advice, according to research published last October.

"We have been using the low- Fodmap diet in the UK since 2009 and have very good success," said Miranda Lomer, a consultant dietitian with Guy's and St Thomas' NHS Foundation Trust. "The diet is used quite widely now across the UK."

Enough Nutrients

The low-Fodmap diet is designed specifically for people with irritable bowel syndrome and, like any nutrition therapy, needs to be individualized in collaboration with a registered dietitian to ensure nutritional adequacy, said Vandana Sheth, a registered dietitian in Los Angeles and spokeswoman for the Academy of Nutrition and Dietetics.

Ideally, the low-Fodmap diet should be followed strictly for two to six weeks before other foods are reintroduced, said Jane Muir, head of translational nutritional science at Monash University. Using it too long may disturb helpful bacteria that are important for a healthy gastrointestinal tract, she said.

Scientists had identified some of Shepherd's Fodmap culprits at least as early as the 1940s, though no one had put them into a diet plan supported by scientific evidence until Shepherd, according to Muir.

"Doctors would pretty much say you're crazy, there's nothing wrong with you, go home," she said. "People are looking at it, and see there are things that you can do about it. It's very empowering for both the health professional and the patient to have a solution for a common problem."

(BN) SK C&C, Vodafone Agree on Europe Mobile-Payment Service

SK C&C Co. (034730), a South Korean technology provider, said it will partner with Vodafone Group Plc (VOD) to introduce a mobile-phone payment service as the companies seek to tap demand for transactions without physical wallets.

CorFire, the mobile-commerce business of SK C&C's U.S. unit, will provide the technology under an agreement signed this month, the Seongnam, South Korea-based company said in a statement e-mailed to Bloomberg News. The service will start in the first quarter of next year in Germany and Spain before reaching other countries in Europe, according to the statement.

SK C&C is expanding in mobile payments after signing similar partnership agreements with Google Inc. (GOOG) and Dunkin Donuts Inc. over the past 18 months. More than 1 billion people may use mobile payments with almost $1 trillion in transaction value by 2016, according to IE Market Research.

Vodafone's new service will allow users to download "mobile wallet" applications to their smartphones and use them to pay, according to the statement. The Newbury, England-based carrier also plans to introduce apps that offer discount coupons and prepaid cards, according to the statement.

Vodafone has reached a deal to use smart-chip maker Gemalto NV's technology to manage a new mobile-phone payment product set for release next year, two people familiar with the plan said this month.

SK C&C last year agreed with InComm to introduce a technology that helps shoppers get coupons and pay for items on their phones.


(BN) Pearson, Bertelsmann in Penguin-Random House Merger Talks

Pearson Plc (PSON) is in talks to combine its Penguin book-publishing unit with Bertelsmann SE's Random House as the media companies seek to bulk up in response to a surge in providers of electronic books.

The merged entity would have combined revenue of about 2.3 billion euros ($3 billion), based on 2011 annual reports. No agreement has been reached and the discussions may not lead to a transaction, Pearson said yesterday. Christian Steinhof, a spokesman for Bertelsmann, referred to Pearson's statement and declined to comment further.

Bertelsmann Chief Executive Officer Thomas Rabe, who took over in January, is looking for acquisitions to reduce the Guetersloh, Germany-based company's dependence on Europe and expand its digital businesses. Pearson is seeking to boost its education unit and has selected that division's chief John Fallon to succeed CEO Marjorie Scardino, who will step down by the end of the year.

"It is a defensive deal that helps reduce costs and restore profitability but does not solve the problem of sales growth," said Alex DeGroote, a media analyst at Panmure Gordon & Co. in London. "It does not seem that any money is changing hands, but that it is just a joint venture."

Merging the units could reduce their estimated combined cost base of 2 billion pounds by 2 percent to 3 percent, DeGroote estimates. Bertelsmann will probably have a bigger stake in the entity to reflect Random House's greater revenue, he said.

'Wimpy Kid'

Pearson rose 1.7 percent to 1,233 pence at 9:53 a.m. in London, giving the publisher a market value of 10.1 billion pounds ($16.3 billion). The stock has gained about 3 percent in the 12 months through yesterday. Bertelsmann is closely held by the Mohn family, descendants of Carl Bertelsmann, who founded the company in 1835.

Penguin, which published its first books in 1935 including works of Ernest Hemmingway and Agatha Christie, reported a 3.5 percent decline in sales to 441 million pounds for the first half. Profit fell to 22 million pounds from 42 million pounds a year ago even as its books won two Pulitzer prizes and 132 made the New York Times (NYT) bestsellers list.

"Strategically it makes sense for Pearson as there are synergies to be gained from the merger," said Ian Whittaker, an analyst at Liberum Capital Ltd. in London. "In an industry that is facing structural problems, the easiest way to get profits are synergies and cost cutting."

The combined heft of Random House and Penguin could give the companies more control over the market as book publishers face pressure from big buyers such as Amazon.com Inc. (AMZN) who are able to drive down prices, Whittaker said.


Penguin, publisher of "The Help" and "Diary of a Wimpy Kid" series, is valued at about 750 million pounds, based on 7 times earnings before interest and taxes for "mature" publishers, according to DeGroote.

Random House's revenue increased 20 percent in the first half to 947 million euros. Bertelsmann's publishing unit profited from sales of international bestseller "50 Shades of Grey" and rising e-book sales. Earnings before interest and taxes rose by 64 percent to 113 million euros.

Random House's e-book sales accounted for 25 percent of its revenue in the first half. Penguin, lagging behind in this business, is catching up as its e-book sales grew by 33 percent in the first six months, bringing the unit's revenue from digital books to 19 percent.

Game Changer?

Still, the talks with Random House are "not a game changer" for Pearson, Whittaker said. Penguin accounts for about 17 percent of sales at Pearson, whose business is dominated by its educational software, books and services.

Pearson, which also owns the Financial Times newspaper and a stake in the Economist magazine, has been bulking up its holdings in the more lucrative education business.

Outgoing CEO Scardino had addressed the company's declining print businesses by moving them into digital formats such as e- books and online subscriptions. While those new products have grown, some analysts, including Claudio Aspesi of Sanford C. Bernstein, have said the transition to a new CEO may lead to a restructuring or sale of the publishing businesses and help the company streamline itself around education.

The education business's sales grew 10 percent to 1.93 billion pounds in the first half from a year earlier.

"Some of the items that will be part of the agenda of the new CEO should include what to do with the remaining assets which are not directly supporting the growth of education," Aspesi wrote in a note this month after Scardino announced her retirement. "This may lead to unlocking value hidden in those assets."

(BN) Starbucks Expects to Squeeze Profits From Juice Stores

While its caramel frappuccinos and pound cake haven't helped Americans' waistlines, Starbucks Corp. (SBUX) says its juice can.

After opening Evolution Fresh stores in its hometown of Seattle and Bellevue, Washington, Starbucks is speeding up expansion with a shop in San Francisco now operating and another in Seattle set to open in the next month. It's also quickly introducing the cold-bottled juice to grocery stores and may soon add Evolution Fresh branded food to its juice line-up at Starbucks cafes.

Chief Executive Officer Howard Schultz has said that selling juice and better-for-you food is a significant part of his recent health and wellness pursuit. The company has started opening Tazo tea shops and selling energy drinks made with green-coffee extract, all of part of Starbucks's plan to get healthier.

"We have to look in the mirror and say: 'We were not providing as healthy products as we could have,'" Schultz said during an interview in Houston. "So as the result of that, we began a significant mission within the company to look at health and wellness."

Starbucks, along with restaurant operators including McDonald's Corp. (MCD), has been trying to improve its image as Americans become more concerned with high-calorie foods amid a national obesity epidemic. About 36 percent of adults in the U.S. are considered obese, according to the Centers for Disease Control and Prevention. In response, McDonald's has promoted a "Favorites Under 400 Calories" menu, while Dunkin' Donuts (DNKN) advertises so-called DDSmart items such as egg-white wraps and multigrain bagels.

'More Attuned'

American consumers are "more attuned to healthy eating and what they're eating," Dennis Lombardi, executive vice president at restaurant consultant WD Partners in Dublin, Ohio, said in an interview. Starbucks has an "open and uncontested playing field" to open juice stores in the U.S. as baby boomers and millennials look for more nutritious food and beverages, he said.

The first Starbucks shop opened in 1971 in Seattle's Pike Place Market selling coffee, tea and spices, and has since expanded to more than 17,600 stores worldwide, including about 10,900 in the U.S.

While the chain hasn't been known for health food, it has made some efforts, including introducing sugar-free syrups in 1997 and making 2 percent milk the default for espresso drinks at U.S. locations in 2006. More recently, the company has started selling 140-calorie oatmeal, so-called skinny lattes and smaller-portioned desserts.

Brand Evolution

"Evolution juice is going to take a while to evolve," Larry Miller, an Atlanta-based analyst at RBC Capital Markets, said in an interview. "They've talked about it being a billion- dollar brand, but they've said that about a lot of things. There's a lot of potential for them if they can crack the code on health and wellness."

Starbucks stores with bottled Evolution Fresh juice are already selling more than they sold of PepsiCo Inc. (PEP)'s Naked brand drinks, which are lower priced, Schultz said during the interview.

Last year, Starbucks removed the word "coffee" from its logo, paving the way for its recent non-java acquisitions, which included Evolution Fresh for $30 million in November 2011. Analysts project revenue rose 14 percent to $13.3 billion in the company's fiscal 2012, the third straight annual gain, according to data compiled by Bloomberg. Starbucks shares are little changed this year, compared with a 6.1 percent decline for the Standard & Poor's 500 Restaurants Index.

Extra Calories

America's collective weight gain isn't the result of chili cheese fries -- it's the extra 100 or 200 calories a day that people are consuming, said Margo Wootan, nutrition policy director at the Center for Science in the Public Interest, a Washington-based consumer advocacy group. For that reason, diners should still proceed with caution at healthier restaurant chains, she said.

"You don't want to overdo it, even on healthy foods," she said. "You still have to watch the portion sizes. When you go into a restaurant that has a healthy reputation, in some ways you need to be even more vigilant."

Consumers should limit their juice intake to about six to eight ounces per serving because, while it may be healthier than soda, "it's still a lot of extra calories that most people can't afford," she said. "It's really much better to get your fruit from pieces of whole fruit."

Berrybeet Smoothies

The Evolution Fresh menu includes items such as a 390- calorie turkey and caramelized onion sandwich for $7 and 230- calorie berrybeet smoothies. The flash-pasteurized juice is sold on tap at Evolution Fresh stores and bottled at Starbucks cafes and grocery stores including Supervalu Inc.'s Albertsons chain, Safeway Inc. locations and Whole Foods Market Inc. (WFM)

For breakfast, Evolution Fresh has eggs scrambled with wild rice for $4.95 and 120-calorie steel-cut oatmeal, while dessert options are limited to a bite of dark chocolate, a granola bar, chocolate coconut mousse and an oatmeal cookie.

The stores themselves are a far cry from Starbucks's earth- toned cafes. Evolution Fresh eateries have a more modern feel, with marble countertops and metal furniture, said Arthur Rubinfeld, president of global development and Evolution Fresh retail. The patent-pending taps, which dispense juices just like beer on draught, are below a changing video screen touting nutritional benefits such as antioxidants found in blueberries.

While restaurants hype their tactics to get America to eat healthier -- listing calorie counts on menu boards, cutting sodium and fat and selling more produce -- consumers are eating less fresh fruits and vegetables, according to the U.S. Census Bureau and Department of Agriculture. Americans ate about 184.8 pounds (84 kilograms) of fresh vegetables a person in 2009, a 7.9 percent drop from 2000, the data show.

Schultz is determined to change that as Starbucks looks to sell other healthier food and possibly gluten-free items.

"The health and wellness opportunity we have," he said, "this is just the beginning of what we think we can do."

Dow Chemical Patent Verdict Against Nova Left Intact

The U.S. Supreme Court left intact a $61.7 million verdict won by Dow Chemical Co. (DOW) in a patent fight with Nova Chemicals Corp. over the plastic used in grocery bags.

The justices today rejected an appeal by two Nova units found to have infringed patents held by Dow, the largest U.S. chemical company. The patents cover polymers that are thinner and stronger than conventional plastic.

Nova, owned by Abu Dhabi-based International Petroleum Investment Co., argued unsuccessfully that Dow had transferred the patents to a holding company and no longer had the legal right to enforce them.

The award has grown with interest, and Dow has said it will seek additional damages for infringement in later years and in Canada.

A federal jury in Wilmington, Delaware, sided with Dow in 2010, and the federal appeals court that handles patent cases upheld the verdict. Dow is based in Midland, Michigan.

The case is Nova v. Dow, 12-243.

(BN) Apple, Inditex, Tolkien Estate: Intellectual Property

a federal judge in Albany, New York, has recused himself from the patent suit against Apple Inc. (AAPL) related to the iPhone 4s's Siri virtual assistant.

In an Oct. 23 filing, U.S. District Judge Gary L. Sharp said because of an unspecified interest in Apple, the "objective 'appearance of impropriety' standard" required him to excuse himself from the case.

The suit was filed Oct. 19 by Dynamic Advances LLC of Tyler, Texas, which says it is the exclusive licensee to patent 7,177,798. That patent was issued in February 2007 to Rensselaer Polytechnic Institute of Troy, New York, the oldest technical university in the U.S. According to court papers, the technology was invented by a professor and a graduate student at Rensselaer.

In the original complaint, Dynamic Advances claimed that Siri's processing of natural-language inputs infringes the patent, which covers " a method for processing a natural language input provided by a user."

It asked the court to issue an order barring further infringement and for awards of money damages "in no event less than a reasonable royalty," litigation costs and attorney fees.

The case is Dynamic Advances LLC v. Apple Inc., 1:12-cv- 01579-GLS-CPH, U.S. District Court, Northern District of New York (Albany).

Safeco Gets Patent on Underwriting Method Using Voting Status

Safeco Insurance Co., a unit of Boston's Liberty Mutual Holding Co., received a patent on a method of insurance underwriting that uses voting history, according to the database of the U.S. Patent and Trademark Office.

Patent 8,285,618, which was issued Oct. 9, covers the inclusion of frequency of voting with factors such as age, gender, driving record, place of employment and residence location to determine a potential customer's risk profile.

According to the patent, "an increase in voting frequency, such as an instance of recent voting, correlates with a decrease in risk of insurance loss." Research indicated that a "significant correlation exists between having voted at all and a lower likelihood that the person will claim a loss."

Another aspect of the patent is a method of adjusting an insurance agent's commissions based on the voting status of the customers that agent obtains. Potential customers' applications can be prescreened, based on their voting status, according to the patent.

Safeco applied for the patent in September 2011, with the assistance of Alston & Bird LLP of Atlanta.

For more patent news, click here.


Inditex Unit Forces Name Change for Retailer of Kids Products

Inditex SA's Zara unit demanded an Australian retailer of toys and children's home furnishings change its name, Australia's TodayTonight news website reported.

The founder of the Australian store named her business "Aara and Lily" after her daughter and niece, according to TodayTonight.

Zara, a Spanish clothing company, sent the retailer a cease-and-desist latter demanding the company name and its Internet domain name of ZaraandLily.com be changed, TodayTonight reported.

Even though she claims she faces as much as A$15,000 ($15,560) in rebranding costs, store owner Shelly Tilbrook says she's changing her company name to Peach and Pear Kids, according to the news website.

Tolkien Estate Tells Academic to Stop Using 'Hobbit' Description

The estate of the late author JRR Tolkien has told a New Zealand academic he can't use the word "hobbit" to describe ancient miniature humanoids, 3News New Zealand reported.

Brent Alloway, a volcanologist from Victoria University, was told he couldn't title his lecture about the ancient humans of Indonesia's Flores Island "The Other Hobbit," according to 3News.

He told 3News his fellow scientists had used the term since the Homo florensiensis species was discovered in 2003, at about the same time that Peter Jackson's "Lord of the Rings" film was released.

By coincidence, the average height of the Homo florensiensis is 3 feet, 6 inches high, the same height as Tolkien's Hobbit people, 3News New Zealand reported.

For more trademark news, click here.


Sony, Northrop Grumman Sued Over William Faulkner Quotations

Sony Pictures Classics Inc. was sued for copyright infringement by the holder of the literary rights to the works by the late William Faulkner.

The suit, filed Oct. 25 in Mississippi federal court, claims lines from Faulkner's "Requiem for a Nun" are used incorrectly and without authorization in "Midnight in Paris," a 2011 Sony film directed by Woody Allen.

According to court papers, a character played by Owen Wilson is transported from the present era to the 1920s, where he has conversations with Pablo Picasso, Salvador Dali, Ernest Hemingway, and F. Scott Fitzgerald. In describing his experiences, the character says "The past is not dead! Actually it's not even past. You know who said that? Faulkner."

The correct quote, the Faulkner rights holder said, is "The past is never dead. It's not even past."

According to the complaint, Sony didn't seek or receive permission to use the lines in the film. Faulkner Literary Rights LLC, which is based in Charlottesville, Virginia, said it's harmed by Sony's actions, and that the use of the quote is likely to cause the public to assume falsely that a connection exists between Faulkner and Sony.

It asked the court for an order barring further distribution of the film, together with awards of money damages, litigation costs and attorney fees. Additionally, it seeks an award of profits attributable to the alleged infringement.

Sony told Deadline Hollywood that the suit is frivolous and that its use of Faulkner's words fell into copyright law's "fair use' provision.

A second Faulkner-related suit was filed Oct. 26 in federal court also in Mississippi. In this case, Faulkner Literary Rights sued Northrop Grumman Corp. and the Washington Post over the use of a Faulkner quote in an advertisement that ran in the newspaper July 4, 2011.

That quote, "We must be free, not because we claim freedom, but because we practice it," is taken from a 1956 Faulkner essay, "On Fear: The South in Labor," according to court papers. The Faulkner rights holder claims that quote is also used without permission.

The case against Sony is Faulkner Literary Rights LLC v. Sony Pictures Classics Inc., 3:12-cv-00100-MPM-SSA, U.S. District Court, Northern District of Mississippi. The case against Northrop Grumman is Faulkner Literary Rights LLC v. Northrop Grumman Corp, 3:12-cv-00732-HTW-LRA, U.S. District Court, Southern District of Mississippi (Jackson).

Electronic Arts Seeks Dismissal of Zynga's Counterclaims

Electronic Arts Inc. (EA), the second-biggest U.S. video-game publisher, asked a federal judge to dismiss a claim by Zynga Inc. (ZNGA) that its copyright infringement lawsuit violates a year-old agreement between the companies.

Electronic Arts filed suit in San Francisco in August, claiming Zynga's "The Ville" infringes copyrights for "The Sims Social," an Electronic Arts game that runs on Facebook (FB) Inc.'s social network. Electronic Arts said in its complaint that senior executives who left for Zynga had details about "The Sims Social" strategy and development.

Zynga, the biggest developer of games played on Facebook, countersued last month, seeking to bar Electronic Arts from threatening litigation or interfering with its hiring. It called the copyright claims meritless and said Electronic Arts' suit breached the terms of last year's settlement.

According to the Oct. 26 filing by Redwood City, California-based Electronic Arts, the companies arrived at a "confidential settlement" on Sept. 21, 2011, in which Electronic Arts released claims related to Zynga's recruitment of current or former Electronic Arts employees in exchange for San Francisco-based Zynga's agreement to not solicit other employees.

Dani Dudeck, a spokeswoman for Zynga, didn't immediately return a call seeking comment on the Oct. 26 filing.

The settlement only covered claims through September 2011 and the more recent complaint brings copyright claims that fall "far outside" the 2011 agreement, Electronic Arts said today.

Zynga also claimed in its countersuit that Electronic Arts Chief Executive Officer John Riccitiello instructed company lawyers to get an agreement from Zynga prohibiting future hiring of Electronic Arts employees as part of an "anticompetitive and unlawful scheme" that violates California law.

The "litigation privilege" prohibits statements made in connection with legal actions from being used as grounds for a lawsuit, Electronic Arts argued.

"Alleged threats to sue Zynga in connection with its solicitation, recruitment and hiring of Electronic Arts employees were absolutely privileged," according to the filing.

The case is Electronic Arts v. Zynga, 12-4099, U.S. District Court, Northern District of California (San Francisco).


Saturday, October 27, 2012

(BN) Stakes Rise in Apple Fight

Microsoft Corp. (MSFT) introduced the biggest overhaul of its flagship Windows software in two decades, reflecting the rising stakes in its competition with Apple Inc. (AAPL) and Google Inc. (GOOG) for the loyalty of customers who are shunning personal computers and flocking to mobile devices.

"This is the biggest product we've ever done," Chief Executive Officer Steve Ballmer said today in an interview with Bloomberg Television, comparing it with the arrival of the PC in 1981 and the introduction of Windows 95.

Microsoft packed the new Windows with touch-screen capabilities, designed to vault the company into the tablet market dominated by Apple's iPad. To avoid being left behind as computing increasingly shifts to mobile devices like tablets and smartphones, the company radically altered Windows' familiar design and scrapped a strategy that had it relying entirely on partners to produce Windows computers.

"In creating Windows 8, we shunned the incremental," Windows President Steven Sinofsky said at an event to mark the product's release today at New York's Pier 57. Windows 8 and the company's first-ever computer, the Surface tablet, go on sale tomorrow.

Microsoft shares slipped less than 1 percent to $27.88 at the close in New York. The stock has gained 7.4 percent this year.

1,000 Computers

More than 1,000 computers have been certified for Windows 8, Sinofsky said. That will include the first Windows machines capable of running on chips with technology from ARM Holdings Plc (ARM), instead of Intel (INTC) Corp. Besides Microsoft's own Surface, the list of ARM-powered machines includes computers from Dell Inc., Samsung Electronics Co., Lenovo Group Ltd. and Asustek Computer Inc. These run a version called Windows RT.

Still, Surface and the other Windows RT machines will be constrained in competition with Apple because they don't work with some of the most widely used downloadable applications. The RT-based machines can only run apps from Microsoft's new Windows store, which won't feature applications for Facebook Inc. (FB)'s social-networking service or Apple's iTunes music store.

The Windows store does have some popular apps, including those from media-streaming companies Hulu LLC and Netflix Inc. (NFLX) Still, Microsoft won't say how many apps are available for the operating system, and the lack of a broad range of games, tools and other downloadable software will detract from the Surface in a head-to-head comparison against the iPad and its more than 275,000 apps.

'Promissory Note'

"Part of me had hoped that we'd see more killer apps," said Wes Miller, an analyst at Directions on Microsoft in Kirkland, Washington. "Consumers who buy into the platform on Friday -- unless we start seeing an abundance of apps -- are buying into a promissory note that the apps will arrive."

Machines with Windows 8 that run chips from Intel can run older Windows programs.

Downloadable applications have become central to the way customers use tablet computers, and one of Apple's selling points is its leadership in apps. The company introduced a smaller, lower-cost version of the iPad earlier this week, part of CEO Tim Cook's effort to keep budget-conscious shoppers from turning to inexpensive tablets sold by competitors such as Amazon.com Inc. The iPad mini is available for early orders tomorrow, the same day Surface hits stores.

Consumer Defection

The PC market will contract by 1.2 percent to 348.7 million units this year, according to IHS ISuppli. That would be the first annual decline since 2001. Microsoft is relying on the new operating system to revive interest in the PC and carve out a position for Windows in the tablet market, which is picking up consumers defecting from PCs.

Microsoft has had a lot of interest in writing applications for the operating system and has had to add staff and computers to process and approve the submissions, Antoine Leblond, the vice president in charge of the Windows app store, said in an interview.

Because apps written for the program can be sold not just to tablet users but to hundreds of millions of customers who will get Windows 8 on PCs, Microsoft has a chance to win over more developers, Leblond said.

"Microsoft feels pretty strongly that the platform they have built is compelling to both users and developers," Directions on Microsoft's Miller said. "Time will tell if both are true."

Miller's own examination of the Windows app store indicates there were 7,873 apps worldwide earlier this week, with hundreds being added daily.

Facebook Decision

Still, Facebook, for example, only writes apps for Apple's iOS and Google's Android operating system, and the company opted not to do Windows, a person familiar with the matter said in May. Microsoft could have written a Facebook app on its own using Facebook's open standards, which is what the Windows Phone group did when similarly faced with a possible dearth of apps in 2010.

"Facebook will or will not decide to write an app," Leblond said. "That's their decision to make. We're not going to build a native app for them."

Leblond also notes that Windows RT customers can go to Facebook's website through their browser and get a similar experience to the app.

Instead, the Windows group focused their budget on workshops to train developers and resources to help them write apps, Leblond said. More than 400,000 people have attended developer camps run by the company, he said.

Besides Hulu and Netflix, the new Windows will also have apps such as the Skype Internet-calling service and Evernote Corp.'s note-taking tool. A version of Rovio Entertainment Oy's Angry Birds game will be available Nov. 8.

"When the store opens, we will have more apps in it than any other store when it opened, and to me that's a great sign of momentum," Leblond said. "I'm much more interested in the momentum that we're seeing than what that absolute count looks like."

Home-Video Spending

Fast-growing Internet services like Netflix Inc. (NFLX), online movie purchases and DVD rentals from Redbox kiosks lifted U.S. home-video spending in the third quarter, countering the continued drop in DVD sales.

Total sales rose 0.2 percent to $3.94 billion, the industry-backed Digital Entertainment Group said today in an e- mailed statement. Revenue from subscription streaming more than doubled while online purchases of movies and TV shows rose almost 38 percent, the group said.

Hollywood studios are counting on digital sales and pay services like Hulu Plus to bolster revenue and replace shrinking DVD spending as more consumers watch videos online from televisions and smaller devices. Sales rose 1 percent year to date to $12.3 billion, the association said.

"The growth businesses are all growing consistently, month after month," Ron Sanders, president of Time Warner (TWX) Inc.'s Warner Home Video, said in an interview. "They're starting to offset the downturn we've seen previously."

The major studios and electronics companies are backing UltraViolet, a service to let consumers purchase a film or TV show and watch from a variety Web-linked devices. Studios are working to entice more retailers to participate in the service, according to David Bishop, president of Sony Pictures Home Entertainment.

"We're on the verge of increasing the retail base," Bishop said in an interview. "We need more in the market and will have more in the market. That will help the ownership concept among consumers."

Streaming Accord

Time Warner Inc.'s Warner Bros. yesterday announced an agreement to provide films to Redbox Instant, a new online venture by Redbox owner Coinstar Inc. (CSTR) and Verizon Communications Inc. (VZ) Last month, the pay television channel Epix reached a deal to sell and rent movies through Amazon.com Inc.'s Amazon Prime service.

Third-quarter sales from subscription streaming soared to $579.2 million, the DEG said. Sales of electronic copies of films and television shows rose to $187.1 million. Kiosks rentals, a category led by Redbox, rose up 9.9 percent to $454.8 million.

Sales of physical disks dropped 4 percent to $1.67 billion for the quarter, the DEG said.

(BN) Outsourcing Turns Inside-Out as Indians Open U.S. Centers

Janie James says she was cool at first when Indian outsourcing giant Infosys Ltd. (INFO) approached her about a job near Atlanta, even though she was unemployed. She didn't know much about the company, and it seemed a step down from her old vice-president post at Primerica Inc. (PRI)

In the end, she decided she could use experience gleaned from her work at life-insurer Primerica and another stint at a financial-investment company to help Infosys build its insurance outsourcing business. Now James is an operations manager at the Bangalore, India, company's first predominantly U.S.-staffed center, which opened in April.

"They saw this was a city with a lot of people who were out of work and had the skills they needed for this center," she said. "Anything that can be done to decrease unemployment is a great thing."

James is one of thousands of workers filling outsourced jobs that are coming back to the U.S., or at least not going offshore. Indian and U.S. outsourcing companies, along with corporate icons like General Motors Co. (GM) and General Electric Co. (GE), are reversing a 20-year outgoing tide.

These companies and others, including software developer GalaxE.Solutions Inc., say some complex functions, such as human-resources and software development, are better to have closer to their own operations and to respond to customers. Indian outsourcing companies are finding it tougher to get visas for workers brought from India, and some U.S. businesses want to outsource -- yet keep jobs in the country. State tax breaks also provide incentives to hire locally.

Lowest Cost

"It used to be just about getting the job done at the lowest cost," said Madhusudan Menon, who heads Infosys's Atlanta center and delivery of U.S. business-process outsourcing. "Now companies are saying some jobs are best done closer to where they are, not cheap as possible somewhere else. They're rebalancing their onshore and offshore outsourcing."

U.S. companies with more than $1 billion of revenue sent 1.1 million technology and back-office jobs offshore during the past decade, according to the Hackett Group (HCKT), a Miami-based consulting company. While it forecasts a slowing outflow beginning in 2013, it calculates another 400,000 positions will be lost offshore through 2016.

A survey of 617 outsourcing industry executives by Boston- based HfS Research in July and August found the U.S. is seen as the most desirable region in the world to expand IT and business-services delivery centers in the next two years. India was second.

Largely Satisfied

Respondents have been largely satisfied with the offshoring of low-end jobs, such as call centers and routine IT maintenance, according to Phil Fersht, chief executive officer of the outsourcing-research company. With more complex tasks, the survey showed the headaches may have outweighed the savings.

"We're at an inflection point," Fersht said. "They have picked much of the low-hanging fruit offshore, but they're frequently not getting the quality they need with the more complex functions there." For example, 72 percent of companies said they were satisfied or very satisfied with domestic outsourcing of human-resource services compared with 41 percent who had those tasks done overseas.

The Indian offshore giants are establishing beachheads in the U.S. for political, as well as business, reasons, according to Fersht. President Barack Obama and Republican presidential candidate Mitt Romney have traded charges of being "outsourcer in chief."

Outsource Onshore

Menon sees opportunities for Infosys to capture business from companies that want to outsource some operations while not being accused of sending jobs overseas.

The principal customer at a Milwaukee center Infosys announced in July is Harley-Davidson Inc. (HOG), which insisted that the 75 business-processing jobs it wanted to outsource at lower cost remain in the country, according to Maripat Blankenheim, a spokeswoman for the motorcycle company. Infosys said it plans to have a total of 125 employees at the center by attracting other clients.

Picking up new onshore business from U.S customers could help Infosys buttress its position against competitors such as Cognizant Technology Solutions Corp. (CTSH), which surpassed it in revenue for the first time in the quarter ended June 30, according to data compiled by Bloomberg.

Market Share

Cognizant, based in Teaneck, New Jersey, has doubled its market share during the past seven years to 18 percent for the year ended in March, according to an April 19 report by CLSA Asia-Pacific Markets. Infosys's market share fell 4 percentage points to 21 percent, the report said. Cognizant, whose workforce is mainly in India, has stepped up its high-end outsourcing services and is hiring more employees with relationship management, consulting and deep industry experience, President Gordon Coburn has said.

Infosys has been operating in the U.S. for 25 years, though up until the past two years, only 20 percent of employees were Americans, Menon said. Infosys had about 12,000 workers in the U.S. on H-1B and L-1 visas as of June 30, according to a Securities and Exchange Commission filing by the company.

Infosys and its Indian peers now are having more difficulty obtaining U.S. visas. Last year, 54 percent of Indian petitioners' initial requests for L-1B visas, which allow employees with "specialized knowledge" to work in the U.S., were rejected by U.S. Citizenship and Immigration Services, compared with 4 percent in 2007. Infosys said in an SEC filing that the immigration agency has "increased its level of scrutiny in granting new visas," and cited difficulties meeting the requirements for L-1 visas.

U.S. Presence

Tata Consultancy Services Ltd. (TCS), the biggest Indian outsourcing concern with $10 billion in revenue, also is growing its U.S. presence, opening an outsourcing center outside Minneapolis in September to employ about 300 IT workers.

In 2011, Tata Consultancy augmented the work it already was performing for Dow Chemical Co. (DOW) in Mumbai by setting up outsourcing operations in Midland, Michigan, near that company's headquarters. Tata Consultancy currently has 400 employees there, according to spokesman Michael McCabe, handing back- office functions, including supply-chain scheduling and planning for Dow and other clients.

Even with the 2,000 U.S. workers Tata Consultancy plans to hire this year, which is a 25 percent increase from 2011, Americans remain a minority of its approximately 20,000 employees in the U.S. and Canada, McCabe said. About 92 percent of Tata Consultancy's 250,000 workers worldwide are Indians, according to the company.

Create Opportunities

Still, the onshore outsourcing centers create opportunities in cities such as Atlanta, where unemployment has been above the national average since May 2010. The area's jobless rate was 8.9 percent in August, the latest month available, while the national rate was 7.8 percent in September.

Infosys was attracted to the area because of its many insurance and health-care businesses, according to Menon. His company saw outsourcing opportunities in those industries and a large pool of unemployed, experienced workers, he said.

"When I told the Georgia Department of Labor what I needed, they gave me 5,000 people without a job in those sectors," Menon said. He led an Infosys team that interviewed scores of candidates at that agency's suburban Marietta offices in January. Others, like James, were recruited.

The offshoring reversal also can be seen in U.S. companies such as GM and GE, which were early adopters of outsourcing and now are repatriating jobs.

Innovation Centers

GM said it plans to bring 90 percent of its IT work in- house and, in many cases, onshore, hiring 10,000 workers over the next three to five years. The automaker said it will open four U.S. technology "innovation centers," one in Austin, Texas, with 500 employees, another in Warren, Michigan, with 1,500 jobs and two others in cities yet to be determined.

GE also is building a technology center outside Detroit, where it plans to employ 1,100 people, as part of a broader initiative to reseed the company's IT capabilities in the U.S.

Mike De Boer, who led the recent development of a technology center in New Orleans for the company's GE Capital unit, said the business needs a rapid-response approach to technology changes, such as mobile-phone applications, which requires proximity.

"The speed you need to meet customers' requirements is all about being near to the customer," said De Boer, who's hired 27 IT workers so far for a facility that is slated to reach 300 employees.

Opportunities Reappear

U.S. software engineers who have lost jobs, such as Michael Zureich, say they are heartened to see opportunities reappear in their field. Zureich, who worked in auto-manufacturing processes for 24 years, was laid off by Siemens PLM Software in 2009. He became a math teacher in 2010 after a fruitless 18-month job search, he said.

Then he heard of GalaxE.Solutions, a Somerset, New Jersey, company that is shifting some of its 2,000-employee workforce from India to the U.S. It opened an office in Detroit, where it now has 200 on staff, to help develop software for U.S.-based health-care clients. GalaxE.Solutions, like a number of companies that have been repatriating jobs, received state tax breaks as an incentive to influence location.

"The complexity of the business and the agility required was increasing, and I didn't feel we were achieving the collaboration and innovation our customers required," Tim Bryan, chief executive officer of GalaxE.Solutions, said in an interview.

Zureich, 54, who joined the company in March 2011, said while he's earning a little less than he made at Siemens, "I'm getting significant job satisfaction and regained a lot of the confidence I lost."

At the Infosys center outside Atlanta, James said she is way past thinking of an outsourcing job as a step down and is learning a business that is here to stay.

Thursday, October 18, 2012

(BN) Same-Day Shopping Lures FedEx as Premium Business Wanes

United Parcel Service Inc. (UPS) and FedEx Corp. (FDX) are testing strategies for a same-day delivery market fueled by Web retailers trying to match the instant gratification their brick-and-mortar competitors offer shoppers.

Delivery programs under way at Internet retailers such as Amazon.com Inc. (AMZN) and Ebay Inc. (EBAY) signal an opportunity in business- to-consumer shipments for delivery firms where the high-value overnight market between companies has been hurt by a slower economy. It's a space that larger companies have mostly ignored since the collapse of Kozmo.com Inc., which was partially backed by Amazon, in 2001.

Potential industrywide revenue from intra-city delivery of small packages in the U.S. may be as much as $12 billion, triple its size in 2007, FedEx said. While that trails the air-cargo carrier's Express revenue of $26.5 billion last year, it has the potential to grow into a "huge boon" for FedEx and UPS, said Donald Broughton of Avondale Partners.

"Amazon cannot offer me the ability to try it on," said Broughton, who's based in St. Louis. "They can't offer me the ability to hold it in my hands, but we're not that far away from them being able to say, 'Click on it for noon delivery.'"

Traditional retailers are already adapting, offering same- day service through their websites to fend off e-commerce rivals. Wal-Mart Stores Inc. (WMT) enlisted UPS for a holiday pilot program that charges customers a flat fee to deliver popular items such as toys, electronics and sporting goods.

Conducted in four markets, the service costs $10 for buyers in northern Virginia, Philadelphia and Minneapolis and $5 to $10 for customers in the San Jose/San Francisco area, Wal-Mart said.

Customer Payment

The pilot program and UPS's investment in Shutl, a London- based firm that connects brick-and-mortar stores with couriers, are helping the biggest package-delivery company evaluate same- day demand and determine how it can best compete. Competitor FedEx entered the market with its SameDay City service, available in 20 municipalities from Phoenix to Los Angeles and New York.

"What we're trying to do is understand the take-rate of what customers are willing to pay for instant delivery," said Jerry Del Gaudio, Atlanta-based UPS's vice president of strategy.

The arrival of large retailers in a market traditionally populated by business-to-business shippers such as health-care customers and lawyers "completely changes the size of opportunity," said Manish Kapoor, the managing director for SameDay City, a part of FedEx Office.

Winning Share

The service's list price for standard deliveries traveling less than 5 miles (8 kilometers) is as low as $13, down from the $25 fee that initial market research had suggested, Kapoor said. By mid-November all FedEx Office drivers will be trained for the same-day program.

FedEx and UPS stand to take market share from the smaller couriers that retailers such as Amazon often turn to for services such as same-day and overnight delivery, said Colin Gillis, an analyst at BGC Partners LP in New York who has used Amazon's same-day delivery service.

"If I've been given that offer for same-day, I'd still take UPS overnight, because it's more traceable," said Gillis, who has a hold rating on Seattle-based Amazon. "Those companies, because of their scale and scope, have some advantages over the smaller ones."

That's a potential bright spot for both FedEx and UPS, which have each trailed a 16 percent gain in the Standard & Poor's 500 Index this year as they grapple with the shift toward slower, cheaper express services by their business customers. Memphis, Tennessee-based FedEx has climbed 12 percent, while UPS gained less than 1 percent.

'Extreme Lengths'

There are obstacles, including the possibility that same- day delivery demand may be tempered by shoppers' willingness to pay for it.

"Customers will go to extreme lengths to inconvenience themselves to save a few dollars," Sucharita Mulpuru, an analyst at Forrester Research Inc. (FORR), said in an e-mail. "Retailers would be engaging in a race to the bottom if they ever gave something like this away for free."

It's happened before. Kozmo and rival dot-com venture Urbanfetch, which aimed to deliver goods ordered online within hours, both found the business unfeasible.

Urbanfetch closed its consumer arm in 2000 after failed merger talks with Kozmo. And Kozmo, known for its orange-suited delivery staff, shuttered its operations a year later.

Flexibility Edge

Another challenge to FedEx and UPS is the edge that regional couriers have in flexibility. That makes them a better choice for same-day delivery, said Josh Dinneen, vice president of supply chain at LaserShip Inc., based in Vienna, Virginia.

The regional courier has 22 locations on the East Coast and counts Amazon and Barnes & Noble Inc. (BKS) among its same-day service clients.

UPS and FedEx "have a service platform," Dinneen said. "It's very good, but it's very rigid, they're not nimble. We're designing customized solutions that fit into these big-box retailers' supply chains that makes it efficient for them and gives them the flexibility to provide this type of service."

FedEx is banking on its brand recognition and service capabilities to help attract same-day customers who might otherwise use a regional courier, Kapoor said.

Brand Recognition

"It matters who shows up at the door to make a delivery," he said. "Customers do value the convenience, peace of mind and reliability. At the end of the day, they are willing to pay for that."

The U.S. Postal Service is stepping into the market with a pilot program in San Francisco. The agency is in talks with retailers and anticipates working with as many as 10 companies during the trial, which starts in mid-November.

The post office, UPS and FedEx all see indications that the allure of instant gratification will outweigh the costs for shoppers.

"Customers are quickly moving toward buying more online, and most want to see what they bought right away," FedEx's Kapoor said. "The demand for that is building up. The good thing is we're ready for it."

In 2011, Amazon spent almost $4 billion on shipping, more than double what it spent in 2009. The company was able to make up more than a third of that with shipping revenue.

The company has begun acquiescing to states' demands it collect sales tax in exchange for the ability to place warehouses closer to consumers. The shift has fed industry speculation Amazon is planning to roll out same-day delivery already available in 10 cities on a wider basis, heightening competition with brick-and-mortar stores.

Amazon Offering

Amazon, which invested in the failed Kozmo and other dot- com ventures, has dismissed such talk. It offers the service in limited areas including Boston, New York and Chicago.

"We don't really see a way to do same-day delivery on a broad scale economically," Chief Financial Officer Thomas Szkutak said on a July earnings call. "We'll continue to work on behalf of customers to try to figure out a way to serve them even faster."

Retailers facing fiercer rivalry with Amazon might get an edge from Shutl, which will make its U.S. debut in New York and San Francisco early next year, said Tom Allason, the service's chief executive officer.

Currently limited to cities in the U.K., Shutl lets shoppers order delivery online, by telephone or in person 24 hours a day. Delivery is typically less than $10 or often free, depending on the retailer, and Shutl makes a profit on every delivery, Allason said. The company won a $2 million investment in August from backers including UPS.

"The fact that Amazon is doing that is wonderful for us because it sets the expectation among consumers and retailers," Allason said. "And expectations only move in one direction."

Tuesday, October 16, 2012

(BN) Male Shoppers Outdo Women as Web Offers Haven From Mall

Fashion is the fastest-growing segment of online commerce, and it's being propelled by an atypical source: men.

Men who have had to live with department stores designed primarily for women are flocking to websites such as Bonobos and Thrillist that push convenience and a fast shopping experience. And these sites are capturing a growing part of the $41 billion fashion e-commerce market by providing services like recommending items based on personality or shipping trunks of clothes to a guy's home so he can pick.

"Men don't hate fashion, they just hate shopping the way it's designed for women," said Ben Lerer, founder of Thrillist, which gives men tips for activities or products and then sells them. "The young generation of guys love to shop, they love to talk about the brands they like and they really care about how they look."

While women's share of the online clothing market is still more than double men's, the men's market is growing faster, at a 13 percent annual rate compared with 10 percent for women, according to NPD Group, a consumer tracking service. And that growth gap is seen by many as about to get wider.

"It's an area of e-commerce that companies are only just now starting to really figure out," said Joshua Goldman of Norwest Venture Partners, who specializes in retail deals.

Competing for Share

Male-focused online fashion startups are competing with established brands like Gap Inc. (GPS)'s Banana Republic and J Crew Group Inc. for a slice of the fashion e-commerce market. The market for clothing and accessories is expected to grow 78 percent to $73 billion by 2016, according to EMarketer. That's faster than categories like electronics or music.

Frank & Oak, a Montreal-based men's site that gives personalized recommendations each month, said last week it raised $5 million from investors. The site launched in February. Thrillist raised $13 million in August from venture capitalists, valuing the company at $150 million in its first round of funding.

Lerer, founder of Thrillist, acquired clothing site JackThreads to get in on the trend. Now, he said, his users snap pictures modeling new clothes and post them on Twitter, bragging about getting them delivered to their doorstep.

The boom in men's fashion follows by a couple years the success of companies that started out catering to women, like Gilt Groupe and Rent the Runway. Men may be a better target because they are more likely to make big purchases in one swoop to get shopping done quickly, while women often browse recreationally and may not buy, said Jeremy Liew of Lightspeed Venture Partners, which invests in Bonobos.

"Because of that relatively high basket-size, that makes it quite an attractive transaction if you're talking about several hundred dollars," Liew said.

More Income

Men are also staying single longer, according to the U.S. Census Bureau, meaning they have more income to spend on themselves during their early careers. Gilt Groupe, a high-end sales site that started out focused on women, added a men's section in 2008. The typical shopper is 35 years old and single, living in an urban coastal city and making a bit more than $100,000, said Keith George, who heads up the division.

Still, there are risks. And not every idea pans out. Frank & Oak first tried out the market as Modasuite, which made personalized men's clothes. Gilt has stopped investing in its separate men's site, Park & Bond.

Yet there's been enough success for the companies to attract investments from Silicon Valley's venture capitalists. Brian O'Malley of Battery Ventures said he's attracted to a more stable revenue stream than most technology startups, like ad- supported social networking companies.

Shipping Clothes

The menswear sites are testing business models like personality-based recommendation or shipping clothes to a guy's home so he can pick, a service offered by Trunk Club Inc. Although they're not typical technology companies, investors like O'Malley are attracted to the growth potential.

"Day one you're getting real revenue from the product," said O'Malley, who invests in J. Hilburn, which sends representatives to measure men at their homes and make customized clothes. "A lot of the other companies are reliant on venture capital and don't make a lot of money from advertising until they have a ton of users."

'Finance Guy'

Andy Dunn, the founder and CEO of Bonobos, says after one or two questions his retailers can tell whether a customer fits into one of six categories, which include "metrosexual or gay," "finance guy" and, more recently, "hipster." Depending on the label, they'll be pitched a different kind of pants.

"I hear about a new menswear e-commerce thought every day," Dunn said. "But to know that this could work in 2007 was really a leap of faith.'

Because they don't require intensive computer engineering to start, many of the companies are based outside of the San Francisco Bay Area. Thrillist and Bonobos are based in New York, where they can take advantage of its fashion network.

"Think of the computer programmer, and then think of the banker," Lerer said. "Fashion is much more likely to be a top focus here in New York."

(BN) Apple, Zynga, Gruma, Dole, Jovani: Intellectual Property

Apple Inc. (AAPL) appealed a Tokyo ruling that said Samsung Electronics Co. didn't infringe on the iPhone maker's patent as the world's top two smartphone sellers continue their global legal dispute.

Apple appealed an Aug. 31 ruling by Tokyo District Court that said Samsung didn't violate Apple's invention of technology for synchronizing music and video data with servers, Yutaka Sakai, a court spokesman, said by phone yesterday. Cupertino, California-based Apple was ordered by Tokyo District Judge Tamotsu Shoji at the time to pay costs of the lawsuit.

Samsung, based in Suwon, South Korea, and Apple have been suing each other over patent-infringement claims on four continents for more than a year since the U.S. company accused its rival and partner of copying some features of the iPhone and iPad. In August, Apple won more than $1 billion in damages in a jury trial in San Jose, California.

Carolyn Wu, a spokeswoman for Apple in Beijing, couldn't be reached immediately for comment. Nam Ki Yung, a Seoul-based spokesman for Samsung, said the company didn't have immediate comment.

The two companies lead the global market for smartphones estimated by Bloomberg Industries to be worth $219 billion last year. They also maintain commercial ties where Samsung gets about 4 percent in revenue from selling chips and displays used in Apple products, according to data compiled by Bloomberg.

For more patent news, click here.

Trade Secrets/Industrial Espionage

Zynga Sues for Trade Secret Theft After Ex-Employee Joins Kixeye

Zynga Inc. (ZNGA), the San Francisco-based games company, has sued its former studio general manager for trade-secret misappropriation and breach of contract.

Alan Patmore took with him more than 700 files containing confidential Zynga information when he left the company in August to join competitor Kixeye, according to the complaint filed Oct. 12 in state court in San Francisco.

Zynga claims these files contained revenue information, and monetization strategy for its games, plus design documents for more than 10 unreleased games, in addition to 14 months of confidential e-mails reserved exclusively for Zynga's executive staff.

The San Francisco games company alleges that Kixeye, which like Zynga, releases free-to-play online social games, has "failed to achieve success" because it lacks Zynga's know-how. Zynga said that on Patmore's final day of employment, he refused to confirm he had returned company data, and refused to sign a termination certification document.

According to a statement on the Kixeye website, Patmore joined the company, which is also based in San Francisco, as vice president of product on Aug. 23. Will Harbin, Kixeye chief executive officer, said in the statement that Patmore brought "a killer product instinct and an ability to deliver high quality games" to his new job.

Zynga asked the court to bar use of its trade secrets by Patmore and 50 unidentified defendants, and asked that the confidential information be returned immediately. Additionally, it asked for money damages, claiming Kixeye has been "unjustly enriched" through the use of the trade secrets. Zynga also seeks extra damages to punish Patmore and the other defendants for their actions, together with awards of litigation costs and attorney fees.

Kixeye "has nothing to do with the suit," company spokesman Bryan Lam said in an e-mail. He said the suit "appears to be Zynga's new employee retention strategy: suing former employees to scare current employees into staying. They've clearly exhausted other options in their employee retention playbook."

The case is Zynga Inc. v. Alan Patmore, CGC-12-525099, Superior Court of the State of California (County of San Francisco).


Gruma's 'Mission' Trademark Infringed, Appeals Court Rules

Gruma SAB, the maker of Mission brand tortillas, convinced a federal appeals court that a chain of Texas restaurants infringed its trademarks.

The tortilla company, based San Pedro Garza Garcia, Mexico, sued Mexican Restaurants Inc. (CASA) in federal court in Sherman, Texas, in September 2009, claiming the Houston-based company's Mission Burritos chain infringed the "Mission" trademark.

That case was dismissed after a judge found that that the similarities between the marks didn't have a negative effect on the Mexican company, and that there was no infringement. Gruma appealed, and the U.S. Court of Appeals in New Orleans agreed.

In its Oct. 11 ruling, the appellate court said that there is a "great deal of similarity" between Gruma's and the restaurant chain's marks. Gruma's mark "is distinctive, is in substantial exclusive use and has a high degree of recognition." The restaurant's Mission Burrito mark "dilutes the distinctive quality" of the Mexican company's mark, the appeals court said.

The distinction between Gruma's pre-packaged food products sold in retail stores and finished food products sold in the restaurants "is not enough to show that products are dissimilar," the court found.

After reversing the trial court's holding, the appeals court sent the case back for further proceedings.

The appeals court case is Gruma Corp. v. Mexican Restaurants Inc., 11-41105, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The lower court case is Gruma Corp. v. Mexican Restaurants Inc., 4:09-cv-00488-MHS-ALM, U.S. District Court, Eastern District of Texas (Sherman).

Dole Seeks 'Ethical Choice' New Zealand Trademark Registration

Dole Food Co. (DOLE) applied to register "ethical choice" as a trademark in New Zealand, Television New Zealand reported.

The mark is intended to be used with an ad campaign, "Supporting Dole's ethics initiatives," according to Television New Zealand.

Barry Coats of the Oxfam charity told Television New Zealand that if the term is registered, the producer of fresh fruit and vegetables could escape scrutiny about whether its practices were more ethical than its competitors.

In June, Dole removed "Ethical Choice" advertising from New Zealand, following a complaint from that country's Commerce Commission that consumers were likely to believe mistakenly that Dole's business practices were vetted by a third party, according to Television New Zealand.

For more trademark news, click here.


Fiesta Fashion Didn't Infringe Jovani Prom Dresses, Court Rules

Jovani Fashion Ltd., a New York-based maker of pageant and prom dresses, lost its copyright-infringement case against a competitor it claimed was making knockoff prom dresses.

The suit began in September 2010 when Jovani sued a number of dress manufacturers, claiming copies of more than 30 dresses it made and sold in its catalogs were being manufactured and sold. The knockoffs were being made in China, Jovani said in court papers.

In its Oct. 15 ruling, the U.S. Court of Appeals in New York affirmed a lower-court ruling dismissing the case against Fiesta Fashion Inc. of Los Angeles. Jovani argued that its frocks were entitled to copyright protection because they were comprised of a combination of features "that can be identified separately from and are capable of existing independently of, the utilitarian aspects of the article," according to court papers.

Jovani argued that its arrangement of embellishment on the dress bodices, the layers of tulle fabric in the skirts and the treatment of fabric at the dress waistlines were elements that were copyrightable.

The appeals court said this wasn't the case because none of these design elements could be removed from the dresses and sold separately. It agreed with a lower-court finding that removing any of these elements from the dresses would "certainly adversely affect the garment's ability to function as a prom dress, a garment specifically meant to cover the body in an attractive way for a special occasion."

All of the elements Jovani claims were separable and therefore protectable merged with functional elements that decide how to cover the body, the court said. The aesthetic and functional in the prom dresses at issue were inseparable, according to the appeals court's opinion.

The appeals court case is Jovani Fashion Ltd. v. Fiesta Fashions, 12-598-CV, U.S. Circuit Court of Appeals for the Second Circuit (New York). The lower court case is Jovani Fashion Ltd. V. Cinderella Divine Inc., 1:10-cv-07085-JFK-FM, U.S. District Court, Southern District of New York (Manhattan).

(BN) Silicon Beach Draws Startups Moving to L.A. as Office Rents Jump

Josh Paynespent seven years in San Francisco, where a technology boom has pushed office rents to the highest level in a decade. He headed south to Los Angeles's Venice area when starting his Internet firm, StackSocial Inc.

Payne and his 10 employees moved in August into a Frank Gehry-designed loft with three-story-high windows that overlook the Pacific Ocean and the boardwalk's parade of characters, such as the roller-skating electric-guitar player Harry Perry. StackSocial cut its costs by sharing the 3,000-square-foot (280- square-meter) space and its $9,000-a-month rent with another startup, Lettuce LLC, which produces order-management software.

"There's no way that we would have landed this type of location for this money in San Francisco and the Bay area," said Payne, founder and chief executive officer of StackSocial, a one-year-old company that operates an online marketplace for software and gadgets. "It is difficult to get really cool, creative office space companies like ours are looking for at prices that are affordable."

Office space is getting more expensive in Venice, part of a 3-mile (5-kilometer) stretch of oceanfront communities known as Silicon Beach because of its popularity with technology companies. Rents are climbing faster than in the wider Los Angeles region as startups pour into the area and compete for a tightening supply of real estate. The surge in demand is attracting developers, who are renovating old and abandoned buildings in hopes of appealing to more and larger companies.

Tightening Vacancy

In the market that includes Silicon Beach, the vacancy rate for office buildings 5,000 square feet or larger was 12.9 percent in the second quarter, down from a post-recession high of 13.6 percent at the end of 2010, according to brokerage Jones Lang LaSalle Inc. The average monthly asking rent during that period rose 6.4 percent to $3.32 a square foot in the area, which encompasses Venice, Culver City, the Olympic Corridor, Marina del Rey, Santa Monica and parts of West Los Angeles.

For all of Los Angeles County, the second-quarter vacancy rate was 20 percent, the highest in Jones Lang records dating to 1996. Rents climbed 2.1 percent from the end of 2010 to $2.47 a square foot. Office buildings in Silicon Beach often range from one to four stories, while other Los Angeles business centers, such as downtown and Century City, are dominated by high-rises averaging about 25 floors.

'Completely Robust'

"Whether it's Silicon Alley in New York, Silicon Hills in Austin, Silicon Beach in L.A. or Silicon Valley in the Bay area, it's the tech sector that's driving office demand," said John Sikaitis, a Washington-based senior vice president at Jones Lang. "In most of these areas, the office market is completely robust and often far ahead of the rest of the recovery of the larger region."

While Silicon Beach is much smaller than technology communities in Silicon Valley and San Francisco, the area is home to a rising number of Los Angeles's more than 600 tech startups, according to a map by Represent LA, a website that promotes the companies.

StackSocial, which raised $800,000 from March to May from venture capitalists including Tim Draper and Paige Craig, competed with at least a half-dozen other small companies for its space, said Payne, 32.

Zambezi, an advertising agency that developed campaigns for such companies as Coca-Cola Co. (KO) and Comcast Corp., chose Venice because of its concentration of startups, access to entertainment-industry collaborators and the outdoor lifestyle, said Chris Raih, a co-founder of the six-year-old company.

Morning Surfers

"We oftentimes run, literally and figuratively, into other talented people" in the neighborhood's hip stores and coffee shops, said Raih, 35. "That's inspiring and a great chance to consult, formally or informally. And the beach is an inspiration. We have many employees who surf in the morning."

Zambezi's 50 employees moved a year ago from smaller offices a few blocks away to an 11,000-square-foot space near Abbot Kinney Boulevard, one of the district's main commercial streets. The property includes decks and patios, showers and a garage that's used to store bikes, surfboards and other sports equipment.

While Raih declined to disclose what the company pays in rent, he said it was "easily" 20 percent more than what a similar space would cost farther inland.

"We are willing to pay a premium to be in this area," he said.

Google Offices

It's not just small companies that are setting up shop in Silicon Beach. Google Inc. (GOOG), operator of the largest Internet search engine, opened its first office in the area 11 months ago. The company, based in Silicon Valley's Mountain View, took 100,000 square feet near Rose Avenue in Venice in the Gehry- designed property known as the Binoculars Building, after the massive sculpture that functions as its entrance.

The beach area's success while greater Los Angeles languishes is a reflection of the spotty commercial real estate recovery across the U.S., which is regional and often industry- driven, according to Jones Lang's Sikaitis.

Silicon Valley, home to such large technology tenants as Facebook Inc. (FB) and Yahoo! Inc. (YHOO), has seen the office vacancy rate drop to about 19 percent in the second quarter from 24 percent in the last three months of 2010, Jones Lang data show. Monthly rents climbed 3.7 percent to an average of $2.68 a square foot during the period.

In San Francisco, rents have surged to the highest since the first quarter of 2001, near the height of the dot-com boom. Office rents averaged $4.06 a square foot in the second quarter, up 35 percent from the end of 2010, according to Jones Lang.

New York

New York, where financial companies have cut jobs, fell to second behind technology-heavy San Francisco for the tightest U.S. office market in the third quarter, according to an Oct. 2 report by brokerage Cushman & Wakefield Inc. It was the first time since 2000 that Manhattan had a larger share of empty office space than the California city, which had a vacancy rate of 9.1 percent at the end of September.

The tightest area in New York is midtown south, also known as Silicon Alley because of its concentration of technology companies. Its vacancy rate was 6.6 percent in the third quarter, according to Cushman.

In Los Angeles, the influx of "30- and 40-something-year- olds with money" working at the many startups has also buoyed retail properties near the beach, said Suzy Frank, founder of Venice-based Abbot Kinney Real Estate. In the past two years, retail rents on Abbot Kinney Boulevard have more than tripled to $10 a square foot, she said.

"Vacancies for anything, retail or office, in this area are at an all-time low," said Frank, who has lived and worked in the region for 25 years. "There's a waiting list for anything becoming available."

Old Landmarks

At least six developers are planning office projects in Silicon Beach, seeking to capitalize on the surge in demand, according to Jones Lang. Some are working to revamp former factories, post offices and run-down landmarks to appeal to larger technology companies that they hope will continue to migrate to the area, according to Carl Muhlstein, a Los Angeles- based managing director at the brokerage.

Construction of new buildings has been scarce, in part because of the area's lengthy permit-approval process, which requires developers to report the potential environmental impact of their projects, he said.

Worthe Real Estate Group, based in Santa Monica, and San Francisco-based Shorenstein Properties LLC teamed to renovate a 380,000-square-foot former mail-distribution center on almost 20 acres (8 hectares) in the Los Angeles neighborhood of Playa Vista, where Internet and media companies such as Digital Domain Media Group Inc. (DDMGQ), YouTube Inc. and FoxSports.com have offices, according to Jones Lang LaSalle.

TMZ Lease

Time Warner Inc. (TWX)'s TMZ division agreed in August to be the first tenant in the development, called the Reserve. The celebrity-gossip website took 34,000 square feet, according to Hayley English Blockley, a senior vice president at Jones Lang LaSalle, the leasing agent.

Rents, not including utilities and other expenses, start at $2.75 a square foot in the building, which will open Dec. 31, according to English Blockley. An average of two potential tenants a week have toured the property, about twice that at similar projects outside Silicon Beach, she said.

"It's a submarket in transition that is becoming more and more attractive," said Charlie Malet, chief investment officer at Shorenstein. "Demand is not evenly spread across L.A. County -- or for that matter, across the U.S. For that reason, developers today are very targeted as to where they get active."

Spruce Goose

Other developers working in the area include Los Angeles- based Ratkovich Co., which renovated 10 buildings totaling about 453,000 square feet in Playa Vista. Tenants in the project -- called Spruce Goose after Howard Hughes's legendary plane, which was built at the site -- include marketing agencies 72andSunny and Earthbound Media Group, according to Jones Lang.

A sustained recovery in Silicon Beach may be at risk if the small startups that are fueling the area's growth struggle to stay alive, said Steven Heller, an attorney at Santa Monica- based Gilchrist & Rutter Professional Corp. The law firm has brokered several leases in the area for companies including Ascent Media Group, Beats Electronics LLC and TrueCar Inc.

"Silicon Valley grew under the power of a handful of huge companies -- Apple, Google, Facebook, etc.," Heller said. "There is no Goliath here, only embryonic companies with promise and excitement. None are 'huge' yet and may never be."

There's also potential for an "opposite problem: too much success," he said. "If this submarket continues to have success luring tenants, then naturally, rents will continue to go up. Young startup companies are not in the position to pay premium rents, so they will naturally seek cheaper rents elsewhere."

Startup Accelerator

Amplify, a so-called startup accelerator based in Venice, offers young companies a way to reduce the cost of office space near the beach. About 30 members are renting space in Amplify's headquarters for monthly fees starting at $520 for a work station and $1,320 for an office. In addition, six startups are participating in a program in which Amplify contributes about $50,000 in seed money in exchange for an 8 percent equity stake, according to Jeff Solomon, a partner at the company.

Amplify pays $3 a square foot for its building, covered with graffiti art and once home to a "hodgepodge" of tenants including a bong shop and video store, said Solomon, 38.

A few blocks away, StackSocial, which got its start with funding from Amplify, relishes its hip and perpetually sunny spot on the oceanfront. Payne said he's glad his company is in Venice instead of Northern California.

"When my San Francisco friends saw I was moving from the Bay area to L.A., they were questioning what I was doing," Payne said. "I love both areas, but it's great for us being here. And let's face it, Silicon Beach weather is a huge plus."


(BN) Facebook Revising Loan to Borrow as Much as $1.5 Billion

Facebook Inc. (FB), operator of the world's largest social network, is reducing by half a $3 billion credit line arranged to fund taxes for employees who exercise their restricted stock units.

The length of the loan, secured before Facebook's initial public offering in May, was also extended to 3 years from 364 days, and will probably be used to cover about half of the taxes, according to the filing.

Facebook had arranged the original $3 billion bridge loan, along with a $5 billion revolving credit facility, in February. Its tax obligations are now lower than it had expected because the value of its shares have fallen 49 percent since the IPO.

The revised agreement to the loan also named Barclays Plc and Deutsche Bank AG as exiting lenders from the original agreement. The financing was arranged by banks including JPMorgan Chase & Co. (JPM), Morgan Stanley and Goldman Sachs Group Inc.

The company also made amendments to the $5 billion revolving credit facility, mainly due to changes related to the loan.


(BN) Apple Adds Amazon’s Stasior for Siri Voice-Recognition Group

Apple Inc. (AAPL) hired Amazon.com Inc. (AMZN) executive William Stasior to lead its Siri voice-recognition software group.

Stasior, who had run a unit of Seattle-based Amazon handling search and related advertising, will head the group that is building out the voice-activated personal assistant that Apple added to its iPhones, iPads and iPod Touch devices last year, said Trudy Muller, a spokeswoman for Apple.

Apple, based in Cupertino, California, introduced Siri after buying a startup of the same name in 2010. The software understands users' questions and provides answers by voice and Web links on a device's screen. Members of the Siri team that came over in the acquisition have since left Apple, including former CEO Dag Kittlaus and co-founder Adam Cheyer.

The personal assistant was the most heavily marketed feature of the iPhone 4S, with Apple hiring actors including Samuel L. Jackson and John Malkovich for commercials. Some customers have complained that the software doesn't work as well as advertised, with one even filing a lawsuit.

Last month, Apple added to the technology with the introduction of its most recent mobile operating system, called iOS 6, building in the ability to search for sports scores, movie times and make restaurant reservations with voice commands.

Sally Fouts, a spokeswoman for Amazon, declined to comment. Stasior's move was earlier reported by AllThingsD.

At Amazon, Stasior was in charge of developing new search and advertising technology. The unit had about 200 employees, according to a copy of his resume. A graduate of Massachusetts Institute of Technology, he previously worked for search-engine creator AltaVista and Oracle Corp. (ORCL).