(BN) Google to Facebook Missteps Sour Riviera for Newcomers

Internet entrepreneurs hoping to follow in the footsteps of giants such as Google Inc. (GOOG) and Facebook Inc. (FB) are finding the prospects cloudier this week as they gather along the French Riviera to schmooze and raise cash.

Executives mingling on hotel terraces for the annual Monaco Media Forum are grappling with tight financing after missteps by industry heavyweights and disruption caused by the rise of smartphones. The landscape has changed for startups looking to raise venture capital, list their shares or get acquired by a larger company, investors and executives said.

"Now it's about reality and it's show-me-the-money time," said Ian Maude, a media analyst at Enders Analysis in London. "There are huge changes in the venture-capital market. Investors are now more concerned about returns."

Facebook's stock has plunged since its May share sale, Google has missed analysts' estimates and social gaming company Zynga Inc. (ZNGA) lost at least nine senior managers as its price fell more than 75 percent since its December offering. With consumers increasingly shifting to smartphones from personal computers, ad-supported sites are finding it especially hard to generate new revenue, said Maude.

'Overpriced Market'

For venture-capital investors, "the market was overpriced in the first half of this year" as Facebook's pre-IPO valuations filtered down into the rest of the technology world, Tomasz Czechowicz, managing partner at Warsaw-based tech investment firm MCI Management, said in Monaco. "Right now the market is at a good balance."

The Monaco Media Forum in Monte Carlo attracts executives from Google, Facebook and Microsoft Corp. (MSFT), along with venture investors and startup entrepreneurs looking to pitch ideas. The three days of speeches, seminars and extended cocktail hours cover topics from measuring online audiences to appealing to tech-savvy members of the "millennial" generation.

Startups in Monaco this year include blogging platform Tumblr Inc. and Thrillist, which curates digital lifestyle guides for big U.S. cities.

For new businesses basing their models on advertising, "now you can only do niches," such as targeted services for certain professionals, Czechowicz said.

Increased scepticism about tech companies' prospects has a precedent. Following the 2001 dot-com bust, which followed flops such as Pets.com, investors also became more conservative.

'Tougher Questions'

"I'm sure everyone is asking tougher questions" now, especially about later-stage companies considering an IPO, said Daniel Waterhouse, a partner at venture firm Wellington Partners. "People are more critical of the fundamentals of the business."

Advertisers and Web companies struggling to attract cash and users' attention are also finding more difficulty as people shift to mobile devices. Few are yet able to point to a durable strategy for ads on the smallest screens, on which display advertising is less useful.

Online companies are trying a number of strategies to increase revenue and overcome this problem. For example, Google is betting in part on so-called click-to-call features for advertisers, allowing consumers to connect directly with shops or restaurants from their browser.

LinkedIn Corp. (LNKD), the biggest professional-networking site, is developing services for smartphones and tablets to appeal to paying subscribers.

Social Advertising

Prospects may also be brighter for so-called social advertising, which integrates product pitches into users' other interactions online, Jonah Peretti, chief executive officer of New York-based social news site Buzzfeed, said in Monaco.

The advance of smartphones, tablets and other devices with larger screens will drive mobile advertising, said Martin Sorrell, chief executive officer at the world's largest advertising company, WPP Plc. (WPP)

"On mobile it's only a question of time as clients and agencies engage and adapt," Sorrell said in an e-mail. He said previously that WPP would increase spending on Google ads to $2 billion this year from $1.6 billion in 2011.

Questions about the value of investing in the sector follow a run of eye-popping valuations for tech and media companies with slim revenues and hazy business models.

Microblogging site Twitter Inc. raised venture-capital finance at an $8 billion valuation last year, with efforts to raise sales through advertising in their infancy. Facebook this year bought Instagram -- a photo-sharing application with zero revenue -- for $1 billion.

Stumbles by even the most dominant tech companies mean tougher questions for those now trying to break out, said Buzzfeed's Peretti.

"Companies that have very modest revenues are having more trouble than they used to," he said. "People ask, 'Facebook's not monetizing as fast as they said they would, and they're the best, so how are you going to do it?'"

(BN) China’s Next Step on Yuan Is Convertibility, Zhou Says

China's central bank governor said convertibility will be the next step in the overhaul of the exchange-rate system as calls grow for the nation's new leadership to deepen changes in the economy to sustain growth.

"For the central bank, I think the next movement related to the yuan is going to be reform of convertibility," Zhou Xiaochuan said at a conference in Beijing on Nov. 17. "We are going to realize it, we are moving in this direction, we need to go further, we will have some deregulation."

Zhou's comments underscore pledges by the ruling Communist Party, which last week completed the most important phase of a once-a-decade power transition, to promote freer movement of capital in and out of the country for investment purposes and to make the exchange rate more market-based. The reforms may be part of a broader sweep of changes the nation's new leadership, headed by Xi Jinping, will be pressured to roll out in the world's second-biggest economy.

"Expectations are high" for change as government intervention, ranging from excessive regulation to rigid price controls, has become "unbearable" over the last couple of years, said Li Jiange, head of the country's biggest investment bank and a vice chairman at the government-run company that holds stakes in state-owned lenders.

Li, who spoke at a separate conference in Beijing on Nov. 17, is chairman of China International Capital Corp., and a vice chairman of Central Huijin Investment Co., a unit of the nation's sovereign wealth fund.

Market Forces

He added his voice to calls this month by billionaire entrepreneur Liang Wengen, economist Justin Lin Yifu and liberals including the son of late party chief Hu Yaobang for the government to allow a bigger role for market forces.

Liang, head of Sany Heavy Industry Co., the nation's biggest machinery maker, said private entrepreneurs "hope the new generation of leaders will continue to reform and open the market." He spoke on Nov. 11 as a delegate to the congress that selected the party's new ruling body last week.

CICC's Li said opponents of market-oriented changes gained a louder voice during the global financial crisis when the government's intervention in the economy increased and intensified.

"We need to review what the Chinese Communist Party decided 20 years ago: that is, to let market forces play a fundamental role in allocating resources," he said.

Government Intervention

The new leadership will probably unveil market-oriented changes in late 2013 after a plenary session of the party's central committee, Li said. Reforms will focus on reducing government intervention in the economy and breaking up state monopolies, he said.

The PBOC is often pressured by interest groups to relax monetary policy and to support growth, Zhou said in a separate talk on Nov. 17.

Zhou, who has headed China's central bank for the past decade, wasn't reappointed to the central committee on Nov. 14, suggesting he will probably leave his job. At a press briefing during the congress, Zhou didn't directly answer a question on his retirement.

During his tenure, the country started to overhaul its exchange-rate system and financial markets. Changes included revaluing the yuan and ending its peg to the U.S. dollar in 2005, allowing the currency to become convertible for trade purposes, giving banks more freedom to set interest rates and allowing some foreign institutional investors access to the country's stock and bond markets.

Liberalize Rates

The yuan has appreciated about 33 percent against the dollar since the revaluation. The currency had its biggest weekly gain in a month in the five days through Nov. 16. It was little changed today at 6.2345 per dollar at 11:38 a.m. in Shanghai.

"Interest rates should be liberalized, rates should be decided by market demand and supply," Lin, a former World Bank chief economist, said at a forum in Beijing yesterday.

China's financial system is dominated by large state-owned banks and the stock market and favors big "capital-intensive" players, said Lin, who is a professor at Peking University's China Center for Economic Research. China must develop small, local banks to serve rural areas and small businesses, he said.

Lin was at the World Bank when it published a 448-page report in February titled China 2030, which outlined policies to help the nation sustain growth while avoiding the so-called middle-income trap, where expansion slows because of a failure to implement reforms needed to create a wealthy middle class.

Promote Competition

Co-written with the Development Research Center, a body that advises the State Council, China's cabinet, the document highlighted the need to overhaul state-owned companies, banks, land, labor and financial markets, promote competition and reduce the role of government.

The report was endorsed by Li Keqiang, according to Ding Shuang, senior economist for China at Citigroup Inc. in Hong Kong who previously worked for China's central bank. Li was made No. 2 in the party hierarchy in last week's power transition and is set to become premier in March when Xi is appointed president.

Xi and Li are inheriting an economy burdened by slower growth, an aging population, widening income disparity and environmental degradation that's fueling social unrest.

They may face economic expansion of 7 percent in 2013, the slowest in 23 years, according to Pacific Investment Management Co., which runs the world's largest bond fund. Standard Chartered Plc sees a risk of annual expansion slumping to between 3 percent and 4 percent within 10 to 15 years without market-driven change to introduce more competition for state enterprises.

Growth this year may slide to 7.7 percent, according to the median estimate of economists surveyed by Bloomberg News from Oct. 18-22. That would be the slowest pace since 1999 and down from an annual average pace of 10.6 percent in the decade through 2011.

--Zhou Xin. Editors: Nerys Avery, Scott Lanman

(BN) Samsung Seeks IPhone Ban as Apple Settlement Resisted

Samsung Electronics Co. (005930), told by a federal jury to pay Apple Inc. (AAPL) more than $1 billion for copying the iPhone and iPad, wants another U.S. body to give it leverage to fight back.

The Korean company has asked the U.S. International Trade Commission in Washington to reverse a finding by one of its judges that Apple's devices don't infringe four Samsung patents. The agency, which can block imports of products found to infringe patents, is scheduled to announce today whether it will review that Sept. 14 decision.

Samsung needs a victory to counteract a series of Apple wins in U.S. courts, as the world's two largest smartphone makers fight for increased shares of a $219 billion market.

"For Samsung, it's most important to not lose," said Alex Spektor, an analyst with Strategy Analytics in Boston, Massachusetts. "I don't think they need to cripple their competitors as much as they need to make sure every product they sell into the U.S. continues selling because those products have proven very popular."

The ITC's power to block products from the U.S. market gives the commission's ruling more potential economic impact than even the $1 billion jury award Apple won in San Jose, California, in August. Apple's newest iPhone could contribute as much as one-half a percentage point to U.S. economic growth this quarter, according to an analysis by JPMorgan Chase & Co. released just before the smartphone's debut in September.

Whole Economy

"Getting a judgment at the ITC means a lot," said Victor Siber, who was former chief intellectual property counsel for International Business Machines Corp., and is now at Baker Hostetler in New York. "We're not talking about small numbers. It impacts the whole economy, so they should get it as right as they can."

Samsung is the world's largest smartphone maker while Apple dominates in the U.S. In the third quarter, Samsung had a record 28 percent of the U.S. market to Apple's 34 percent, Spektor said.

Apple has claimed phones running on Google Inc.'s Android operating system, including Samsung's, copy the look and unique features that have contributed to the iPhone's popularity since it was first sold in 2007.

Apple settled with Android-handset maker HTC Corp. (2498) this month, striking a 10-year licensing agreement. Apple said Nov. 15 it is negotiating an agreement with Google's Motorola Mobility unit for binding arbitration of their disputes over how to license patents relating to technical standards all device makers must follow.

No Negotiations

A HTC-like resolution of the Apple-Samsung fight doesn't appear to be coming anytime soon. Shin Jong Kyun, the head of Samsung's mobile unit, was quoted in Korean media last week as saying the company wasn't going to negotiate with Apple.

Suwon, South Korea-based Samsung contends Apple infringes four patents, including two that relate to how phones transmit data. ITC Judge James Gildea said Apple didn't infringe any of the patents, and that one, for a way to detect movement on a touch-screen, was invalid. The fourth patent in the case is for a way to detect phone numbers in e-mails so they can be dialed or stored in the phone's contact list.

The case targeted all models of the iPhone 4S, the iPhone 4, the iPhone 3GS, the iPad 2, the iPad, and the iPod Touch. Gildea recommended that the ITC issue an import ban of the products if it finds Samsung's patent rights were violated.

In addition to winning the preliminary round in Samsung's complaint, Apple, based in Cupertino, California, has been successful so far in its own ITC case against Samsung.

Apple Complaint

Trade Judge Thomas Pender said Oct. 24 that Samsung infringed four Apple patents, including one for the design of the iPhone and one for touch-screen technology co-invented by Steve Jobs, Apple's late co-founder. The commission is scheduled to announce the next steps in that case on Jan. 9.

Apple's legal success against Samsung in the U.S. hasn't been replicated in other nations. In the U.K., Apple was ordered to post a public apology on its website for accusing Samsung of copying a tablet computer design. Samsung also has won non- infringement rulings in The Hague and Tokyo courts.

Samsung has about 140,000 patents worldwide on things like light-emitting diodes, computer-memory chips and televisions. It's been in the mobile-phone market since the 1980s, and is counting on that history to get an upper hand in its global fight with Apple. It filed its ITC complaint in June 2011.

The iPhone generated $80.5 billion in sales for the fiscal year ended Sept. 29, or 51 percent of Apple's revenue, according to data compiled by Bloomberg. Its iPad brought in $32 billion, and the iPod generated $5.6 billion.

Samsung's case against Apple is In the Matter of Electronic Devices, Including Wireless Communication Devices, 337-794, and Apple's case against Samsung is In the Matter of Electronic Digital Media Devices, 337-796, both U.S. International Trade Commission (Washington).

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(BN) Apple, Google Consider Arbitration Over Standard Patents

Apple Inc. (AAPL) and Google Inc. (GOOG)'s Motorola Mobility unit are talking about a way to resolve part of their dispute over patents related to critical smartphone technology, according to a court filing.

The companies have been exchanging proposals on using binding arbitration to reach a licensing agreement over patents that are essential to comply with industry standards on how phones operate. Such an agreement could lead to a global settlement of all of their patent disputes, Apple said in a Nov. 15 filing.

"Apple is also interested in resolving its dispute with Motorola completely and agrees that arbitration may be the best vehicle to resolve the parties' dispute," Apple said in the filing.

Motorola Mobility first raised the issue of arbitration on Nov. 5, before a federal judge in Madison, Wisconsin, threw out a breach-of-contract case that Apple had filed. The Cupertino, California-based maker of the iPhone claimed its mobile-phone competitor was misusing standard-essential patents to demand unreasonable royalties.

"We have long sought a path to resolving patent issues and we welcome the chance to build on the constructive dialogue between our companies," Google General Counsel Kent Walker said in a Nov. 13 letter to Apple that was filed with the court. "While we prefer to seek a framework for a global (rather than piecemeal) resolution that addresses all of our patent disputes, we are committed to reaching agreement on a license for our respective standard-essential patents."

Globe-Spanning Litigation

An agreement that goes beyond the Motorola Mobility dispute to cover other devices that run on Google's Android operating system could help calm litigation that has spanned the globe, said Alex Spektor, an analyst with Strategy Analytics in Boston.

"It's in everyone's best interest in the industry to pull back and reach some sort of equilibrium," Spektor said. "Google could offer a certain level of protection to licensees who comply with whatever standard it puts in place."

The U.S. Federal Trade Commission and the European Commission are both investigating complaints by Microsoft Corp. (MSFT) and Apple that Motorola Mobility is misusing its standard- essential patents. The FTC staff has recommended filing a lawsuit against Google, according to four people familiar with the matter.

Unique Features

Apple, the world's most valuable company, has argued that competing handsets running on Google's Android operating system copy the look and unique features of its iPhones. A continuing battle with Samsung Electronics Co., which has the biggest share of the global market for smartphones, is being waged around the world.

Even so, Apple has recently shown a willingness to settle some of the disputes. It announced a 10-year licensing agreement with Taiwan's HTC Corp. (2498) on Nov. 10. The company earlier settled a patent dispute with Nokia Oyj. (NOK1V)

Companies like Motorola Mobility that help develop specifications to let devices work together pledge to let competitors license inventions incorporated into those standards on fair and reasonable terms.

Not all of the Motorola Mobility patents in its dispute against Apple involve technologies used in industry standards. Motorola Mobility dropped its latest suit involving non- essential patents at the U.S. International Trade Commission. None of the Apple patents lodged against Motorola Mobility is standard-essential.

Fair, Reasonable

"Apple's goal has always been to find a mutual and transparent process to resolve this dispute on terms that are fair, reasonable and non-discriminatory without the threat or taint of exclusionary remedies," Apple General Counsel Bruce Sewell said in a Nov. 8 letter to Google that was included in the filing.

Spokeswomen Kristin Huguet of Apple and Niki Fenwick of Google declined to comment.

Microsoft has its own battles with Motorola Mobility over standard-essential patents, and a non-jury trial is under way in Seattle. U.S. District Judge James Robart could issue a ruling establishing a fair rate for the Motorola Mobility patents. That could lead to an agreement between those two companies, said Victor Siber, former chief intellectual property counsel for International Business Machines Corp., and now with Baker Hostetler in New York.

The cases are: Apple Inc. v. Motorola Mobility Inc., 11cv178, U.S. District Court for the Western District of Wisconsin (Madison); and Microsoft Corp. v. Motorola Mobility Inc., 10cv1823, U.S. District Court for the Western District of Washington.

(BN) Facebook Challenges LinkedIn With Online Job Search Tool

Facebook Inc. (FB), in a challenge to LinkedIn Corp. (LNKD), is rolling out an application that connects candidates with job openings and recruiters on the world's largest social-networking service.

The new service features more than 1.7 million jobs from partners that include Monster Worldwide Inc. (MWW) and BranchOut Inc., the company said on its website today. The online app follows Facebook's introduction of the Social Jobs Partnership last year with the U.S. Department of Labor and other agencies.

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Facebook, which has grown to more than 1 billion users, is expanding into new services and markets as it seeks to attract more users and keep them longer on its site. That's putting pressure on LinkedIn, a professional-networking site with 187 million users that has faced some growth concerns.

"Facebook is all about connecting people and we're thrilled to see developers leveraging our platform to connect job seekers and prospective employers," Marne Levine, Facebook's vice president for global public policy, said in a statement.

"By allowing job seekers to view and share job openings based on personalized criteria, like location and industry, the Social Jobs Application builds on our broader effort to help people use social media to find jobs in the U.S.," Levine said.

Shares of Mountain View, California-based LinkedIn fell as much as 3.7 percent after Facebook's announcement, and traded down less than 1 percent to $98.77 at the close in New York. Facebook, based in Menlo Park, California, rose 13 percent to $22.36.

The new app is a "central location" for recruiters to share job openings with Facebook users, the company said.

(BN) Wal-Mart Starts Food-Testing Subscription Service

Wal-Mart Stores Inc. (WMT), the world's largest retailer, started a monthly service that sends boxfuls of sample-sized specialty food items to subscribers as it tries to lure customers who have not traditionally gone to its stores.

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The Goodies Co. service, developed by the company's @WalmartLabs unit, offers five to eight hand-picked taster samples, ranging from healthy and organic to artisan and ethnic foods, for $7 a month, the Bentonville, Arkansas-based company said in a statement today.

The service is the latest push into e-commerce by Wal-Mart as it seeks to add higher income consumers to its customer base and compete with online retailers. The company has developed its @WalmartLabs unit, based in San Bruno, California, to bring in social media expertise to advance its Web-based business.

The Goodies service is targeting individuals including "yuppies" and "soccer moms" to give customers an opportunity to discover new foods and offer items that may be difficult to find, Shernaz Daver, a spokeswoman for Wal-Mart, said by telephone.

Subscribers can receive loyalty points for reviewing the samples and have the option of buying full-sized versions on the company's website, Daver said.

"They're trying to attract a more affluent customer," David Galper, head of retail and apparel investment banking for KeyBanc Capital Markets Inc., said. "This is not the kind of offering one would typically expect from Wal-Mart."

Wal-Mart can also use customer reviews and the volume of full-size orders to guide decisions on purchasing and inventory, he said.

About 3,000 people in the U.S. have tested Goodies since August, receiving monthly treat boxes with themes such as "Flavors around the World" or "Trick-or-Treat Sweets," the company said. Its Thanksgiving theme is "Easy Entertaining," with gourmet foods such as wine biscuits, pumpkin souffle mix, and dark chocolate infused Quinoa bars.

(BN) Bugs Damaging Monsanto Corn May Do Same to Syngenta Crops

Rootworms, the most costly pest affecting the U.S. Corn Belt, are showing signs of resistance to Syngenta AG (SYNN)'s genetically modified corn just as they do with crops developed by Monsanto Co. (MON), researchers said at a conference.

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Switzerland's Syngenta, the world's largest producer of crop chemicals, and St. Louis-based Monsanto compete to supply farmers with corn containing a genetic trait that enables it to produce its own pesticide. Rootworm resistance, first documented last year in Iowa and suspected in Illinois, Minnesota and Nebraska, is forcing farmers to spray crops with the kind of chemical pesticides the modified corn was supposed to avoid.

Laboratory experiments show Syngenta's Agrisure corn may have "cross-resistance" with Monsanto's YieldGard corn, meaning the crop is vulnerable to the same rootworms that are no longer killed by Monsanto's toxin, said Sarah N. Zukoff, a doctoral candidate at the University of Missouri, and Bruce E. Hibbard, a research entomologist with the U.S. Department of Agriculture. They spoke yesterday in a presentation at the annual meeting of the Entomological Society of America in Knoxville, Tennessee.

Cross-Resistance

Cross-resistance may already be showing up in Nebraska cornfields, said Lance Meinke, an entomology professor at the University of Nebraska in Lincoln. Meinke presented preliminary data showing rootworms collected this year in Wayne County have "low-level" resistance to Monsanto engineered corn, probably because farmers over-used the technology.

Syngenta corn had similarly poor performance even though it had never before been planted in the experimental field, Meinke said.

Rootworm can cause $1 billion of damage annually, making it the most costly corn pest, according to the USDA. There's "mounting evidence" that resistance is developing in multiple states, the U.S. Environmental Protection Agency said in August.

"This has been the most difficult insect to control in the Corn Belt in my lifetime," Dirk Benson, Syngenta's head of trait projects, said by phone yesterday. "We are very concerned about trait performance."

Seeds accounted for $3.19 billion of Basel-based Syngenta's 2011 sales, or 24 percent of total revenue, according to data compiled by Bloomberg.

Monsanto

Monsanto, the world's biggest seed company, sold enough of its rootworm-killing corn last year to cover 37 million acres (15 million hectares), with 75,000 acres showing "unexpected damage" from the pest, William J. Moar, the company's corn insect-resistance management technical lead, said yesterday in a presentation at the conference. That figure dropped to 45,000 acres this year, said Kelly J. Klauss, a company spokeswoman.

Monsanto's YieldGard corn is engineered to produce the Cry3Bb1 protein derived from Bacillus thuringiensis, or Bt, a natural insecticide. Syngenta's Agrisure produces a similar insecticidal protein known as mCry3a.

Rootworms known to be resistant to Cry3Bb1 survived feeding on Syngenta's corn and caused root damage at higher-than- expected rates, said Zukoff, the University of Missouri researcher.

"This does suggest the possibility of cross-resistance between these proteins," she said in the presentation.

Zukoff's study is preliminary and some of it doesn't support the possibility of cross-resistance, Syngenta's Benson said.

"They have an indication of concern," Benson said. "More study is needed."

DuPont Corn

Benson also disagreed with Meinke's suggestion that rootworms in Nebraska may be resistant to Syngenta corn. The more likely explanation for the unexpected damage was high bug concentrations feeding on young plants in an unusually early spring, Benson said.

Monsanto says farms with suspected resistance are rare. Growers can avoid problems by rotating to non-corn crops or switching to a product such as SmartStax, which includes a second trait that kills rootworms, and following planting recommendations, Klauss said in an e-mail.

"In 2012, corn-rootworm protected products containing the Cry3Bb1 protein provided exceptional value to growers on greater than 99.8% of the acres where the technology was planted," she said.

SmartStax

Monsanto's SmartStax combines the company's technology with Herculex, a Bt corn developed by DuPont Co. (DD) and Dow Chemical Co. (DOW) Herculex didn't exhibit cross-resistance in Zukoff's experiment. That trait is coming under increased rootworm pressure as growers switch from Monsanto's YieldGard in the hope of keeping resistant insects at bay, the USDA's Hibbard said.

SmartStax may be vulnerable in areas where rootworms have already overcome the Monsanto trait, Hibbard said. Resistant varieties of rootworm have been developed in laboratories for every type of Bt crop, so field resistance is "almost certainly possible for every Bt product that is out there," he said.

DuPont plans to add the Syngenta trait to its Herculex corn varieties next year because adding the second toxin should deter resistance, Marlin E. Rice, a senior research scientist with the company's Pioneer seed unit, said today in a presentation. He declined to say whether the company's field trials of the new combination have found cross-resistance to the Syngenta technology.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/

Eugene.

(BN) Google’s Apple Envy Yields New Gadgets

By Rich Jaroslovsky

Google (GOOG) isn't the only software company that wants to be a hardware company, but it may be the one that's trying the hardest. Three newly introduced, Google- branded devices reveal, each in its own way, the depth of the company's Apple envy.

Nexus 4

Google uses the "Nexus" designation for flagship phones and tablets built to showcase the purest version of its Android operating system. That means no manufacturer-designed custom user interface and no carrier-imposed apps linked to its own or partners' proprietary services.

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The new Nexus 4 phone, made for Google by Korea's LG Electronics (066570), has a couple of other things going for it as well. It runs "Jelly Bean," the latest version of Android, which is fast and fluid. The big 4.7-inch screen is beautiful, with sharp images and deep, rich colors.

And, as far as these things go, it's cheap: It starts at $299 with no required carrier contract, so you can shop for plans (from AT&T or T-Mobile (DTE) in the U.S.) independent of the cost of the device itself.

By contrast, an unlocked base model iPhone 5 may cost $649 when it becomes available.

Stingy Storage

But there are significant downsides as well. For one thing, the base model has a stingy eight gigabytes of storage, while most high-end phones these days start at 16. (T-Mobile will offer a 16 GB version for $199 -- but it comes with a two-year contract.)

It also lacks support for the new 4G LTE networks being deployed in the U.S. by Verizon (VZ), AT&T and Sprint (S), instead using technology the carriers label "4G" that is significantly slower.

And while I appreciated the curved look of the Nexus 4, I didn't much like its feel, primarily because of a scratchy seam where the front glass is laid into the body. Although it wasn't as sleek, I preferred the LG Optimus G -- an Android phone from AT&T (T) and Sprint with similar specs but without the "Nexus" label.

Nexus 10

Android tablets have had a lot of trouble gaining traction in the marketplace. The big exception is Google's well-received Nexus 7. (Both Amazon.com (AMZN)'s Kindle Fire HD and Barnes & Noble (BKS)'s Nook HD are based on Android, but used heavily modified versions that don't run standard apps.)

The Samsung-made Nexus 10 has little in common with the Nexus 7, which was manufactured by Asus. (2357) It has more in common with the Samsung (005930) Galaxy Note 10.1 tablet, such as the twin front-mounted stereo speakers.

But where I found the Galaxy Note dreadfully cheap-looking and plasticky, the Nexus 10, with its gorgeous 2560-by-1600- pixel 10.1-inch display and smooth, rubberized back, feels more like a premium product. Battery life isn't quite up to the iPad standard, but it's close. The tablet is also a bit thinner and lighter.

Finally, the Nexus 10 is attractively priced, starting at $399 for a 16-gigabyte, Wi-Fi-only version, which is $100 cheaper than its Apple (AAPL) rival.

Absent Apps

So what's not to like? Principally, the same thing that's plagued most Android tablets: the lack of apps designed for them.

While the Android universe has largely caught up with Apple in overall numbers, the iPad has 275,000 apps designed specifically for it. Most of what's available for Android are simply smartphone apps that, in many cases, look and feel ridiculous on a big screen. (The website Ars Technica has collected some particularly egregious examples.)

It's the chicken-and-egg problem Google hasn't yet been able to solve: There won't be more tablet-optimized Android apps until more people are using Android tablets, and people won't want Android tablets until there are more apps that take advantage of them.

Chromebook

For a couple of years, Google has been trying to establish its cloud-based Chrome operating system on laptop and desktop computers as an alternative to Microsoft (MSFT)'s Windows and Apple's OS X.

With little to show for its efforts, the company and its manufacturing partners have embarked on what feels like a last- ditch effort to slash prices and reposition the Chromebook as a secondary device in the home -- the fabled "recipe computer" that can sit in the kitchen until someone wanders by and needs quick Internet access.

And you know what? For that, the new $249 Samsung-made Chromebook isn't bad. At 2.4 pounds and only .7 of an inch thick, it's unobtrusive, yet opens up to an 11.6 inch screen, full keyboard and webcam for video calling.

I'm not a big fan of the Chromebook as a productivity tool; it's just too dependent on having online access at all times. But it may be useful for a fixed locale where you sometimes need to jump online and don't always have a tablet handy. And for those who don't think the convenience is worth $249, Acer (2353) has just announced a somewhat bulkier Chromebook at an even lower price: $199.

None of these products is made by Motorola, the manufacturer Google now owns, so maybe the company wants to reassure its partners that it still values their longstanding relationships.

Or maybe Google is planning cooler things than what we've seen so far.

(Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.)

(BN) Amazon Beats Wal-Mart in Toy Prices as Holidays Approach

Amazon.com Inc. (AMZN) has cheaper online prices for toys than Wal-Mart Stores Inc. (WMT), Target Corp. (TGT) and other major chains as parents begin shopping for the holidays, according to a Bloomberg Industries analysis.

In a comparison of 125 randomly selected toys conducted on Nov. 8, Amazon had lower prices than Wal-Mart on 44 percent of the items, while Wal-Mart had the advantage on 13 percent. The remaining had the same price tag. Wal-Mart beat Target Corp., Sears Holdings Corp. (SHLD)'s Kmart chain and Toys "R" Us Inc. on more than 80 percent of the toys, according to a report led by Poonam Goyal, a Bloomberg Industries analyst.

"Toys are important because they are the top category for the holiday, along with electronics, and are the most competitive," Goyal said in a telephone interview.

Amazon's lead came as a surprise because Wal-Mart led in last year's pricing study for much of the holiday season, Goyal said.

Amazon had the advantage on such items as the limited- edition version of "Resident Evil: Operation Raccoon City," a video game for the PlayStation 3 that it priced at $20.98, compared with $39.96 at Wal-Mart.

Wal-Mart fell 0.7 percent to $71.31 at the close in New York. Amazon declined 1.6 percent to $222.95. Target dropped 1.1 percent to $61.38. Sears lost 2.5 percent to $58.42.

Toy Inventories

Another key is how well stocked retailers will be during the holiday shopping season, Goyal said. The largest toy sellers have better inventory levels than they did a year ago, according to the study.

Amazon, Kmart and Toys "R" Us didn't have any toys out of stock online, while Wal-Mart was missing 3 percent and Target didn't have 8 percent. In the same week a year ago, all of these chains had higher levels.

With the exception of Amazon, out-of-stock levels increased last year as the holiday season neared its end. By Dec. 21, Wal- Mart, Target, Kmart and Toys "R" Us (TOYS) were all out of stock on more than 40 percent of items in the study, while Amazon was missing only 1 percent.

"It appears they've learned their lessons from last year," Goyal said. "If retailers are stocked well, holiday should go well for them."

(BN) Moneysupermarket.Com Is Unafraid of Google Threat, CEO Says

Moneysupermarket.com Group Plc (MONY), the U.K.'s largest price comparison website, is confident that fresh competition from Google Inc. (GOOG) won't reduce profits even if it eats into sales, Chief Executive Officer Peter Plumb said.

Google started a credit-card price comparison website in March, prompting concern among analysts including David McCann at Numis Securities Ltd. that the owner of the world's largest search engine could grab market share from Moneysupermarket by replacing it on popular searches.

Google's new sites are included on the list of paid-for ads that appear at the top of its searches, though they aren't yet competitive on the so-called organic lists that are based on customer popularity, Plumb said. And while transactions generated by clicks on Google's paid-for ads accounted for 24 percent of Moneysupermarket's sales in the first half of 2012, Plumb said the area was not a source of profit for the company.

"It doesn't really matter to us because we have never made money out of that," Plumb, 48, said in an interview in London ahead of a trading statement on Nov. 14. "All it would do is to reduce revenue in a zero-margin part of the business."

Moneysupermarket, which aims to save U.K. households a combined 1 billion pounds ($1.6 billion) in 2012, reported unchanged first-half net income of 8.8 million pounds on July 26, based on a 15 percent rise in sales to 102 million pounds.

The Chester, England-based company boosted sales 19 percent from its money deals website, which covers credit cards, savings accounts and loans. It's seeing a similar trend in motor insurance, Plumb said. Google also started a motor insurance site in September this year, saying it could offer greater privacy and transparency than other price comparison sites.

Corporate Decision

Google opened a property search website in 2010 only to close it in January 2011. Now the Mountain View, California- based company is betting it can attract more sales from its high ranking on the list of paid-for ads than providers like Moneysupermarket had previously been paying for the slots, Plumb said.

Plumb also said he is convinced that Google, which is under investigation by the European Union over allegations that it promotes its own specialist search services over rivals, won't alter its search algorithms to ensure it rises to the top of organic search lists ahead of Moneysupermarket due to the risk to its reputation.

"If they ever decided to take us all out, it would be a big corporate decision which I don't think they will take," Plumb said. "If they ever messed about with the search terms it would destroy trust."

Sell Recommendation

Not everyone is convinced that Google isn't a threat to Moneysupermarket. Numis's David McCann says investors should sell the U.K. firm's stock in part because of that risk.

"The elephant in the room to the investment case remains Google," McCann said in a note to clients after Moneysupermarket's first-half results. On Nov. 9 he lowered his price prediction on the shares to 99 pence from 109 pence. The stock closed at 152 pence that day.

Google has the potential to disrupt Moneysupermarket's growth significantly if it succeeds in diverting visitors from Moneysupermarket's site to its own, McCann said. More than half of the company's earnings before interest, taxes, depreciation and amortization comes via Google, he said.

Moneysupermarket shares have risen 45 percent this year through Nov. 9 to the highest in almost five years, compared with a 12 percent gain in the Bloomberg European Internet Index. The company has a market value of about 815 million pounds.

U.K. Based

Plumb, a civil engineer by training, said expanding in Britain is his main priority even though Moneysupermarket is now in a position to consider similar operations overseas. The company agreed to buy MoneySavingExpert.com, an independent financial advice website founded by the broadcaster Martin Lewis, for as much as 87 million pounds in June.

"I don't need to be outside the U.K.," he said. "I would be very happy still being U.K.-based in three years' time, still focused on our seven main channels and growing market share."

Just 15 percent of savers switch bank accounts or open new ones each year and of those only 27 percent go online, according to data compiled by the company and GfK, a Nuremburg, Germany- based market research company.

Fewer than one in five energy consumers switch supplier or are new customers each year, and of those only 23 percent do so online. Similar data apply to credit cards and loans.

"There is a lot of opportunity for the company as it really starts getting focused on what it does well and be a business no one else can replicate,'' Plumb said.

Unlike rivals such as Gocompare, Comparethemarket and Uswitch, Moneysupermarket covers all the main price comparison areas, giving it a 50 percent market share in terms of visitor hits, according to a company presentation. Its business model is also different in that it only gets sales once a customer's application is accepted rather than being paid per referral.

Plumb previously held executive roles at Walt Disney Co., PepsiCo Inc. and James Dyson Ltd, before becoming chief executive of Moneysupermarket in February 2009.

Editors: John Bowker, David Risser,

(BN) Apple Settles HTC Patent Suits Shifting From Jobs’ War

Apple Inc. (AAPL) settled all global lawsuits with HTC Corp. (2498), signaling a new willingness to resolve patent disputes without resorting to the "thermonuclear war" stance favored by co-founder Steve Jobs.

Apple, which had accused HTC of copying features that made its iPhone unique, "will continue to stay laser-focused on product innovation," Chief Executive Officer Tim Cook said in a statement yesterday with HTC, which surged as the companies announced a 10-year licensing deal. HTC had claimed the maker of iPads and MacBooks infringed wireless patents.

Related links:

• Tech Blog
• More technology news

The settlement with HTC, the first company Apple sued for violating iPhone patents, suggests Cook will take a softer line than Jobs, who vowed before his death last year to wage all-out war against smartphones powered by Google Inc. (GOOG)'s Android software. The agreement may also serve as a blueprint for Apple to negotiate patent accords with Samsung (005930) Electronics Co. and Google's Motorola Mobility business, said Shaw Wu, an analyst at Sterne Agee & Leach Inc.

"For as long as Tim Cook has been CEO, Apple has been less interested in pursuing legal assaults against competitors, choosing increasingly to find ways to settle differences out of court," said Carl Howe, an analyst at Yankee Group in Boston. "This settlement indicates a softening of Apple's legal thrusts."

Licensing Revenue

Apple's shares advanced 1 percent to $552.34 at 9:32 a.m. in New York. HTC, the Taoyuan, Taiwan-based maker of One, Desire, and Sensation handsets, climbed by its daily 6.9 percent limit in Taipei trading, trimming its loss this year to 51 percent.

HTC and Apple declined to provide settlement details. Apple will probably receive $6 to $8 per phone, or $180 million to $280 million a year from HTC, Wu wrote in a research report today. That's more than the roughly $5 per phone HTC pays Microsoft Corp. (MSFT), and reflects the relative strength of Apple's patent defenses, Wu said.

"We think it is fair that Apple will get some licensing revenue for the intellectual property it has developed -- in particular multi-touch gestures -- in making the modern smartphone and tablet with touchscreens," Wu said. "Prior to the iPhone and iPad, there were arguably no products that were close in functionality and appearance."

Bigger Threat

Settling with HTC may allow the world's most-valuable company to focus its legal efforts on Samsung, the Suwon, South Korea-based maker of Galaxy handsets that's now the world's largest smartphone maker.

"Samsung is still going hard and has become an even bigger threat" since being sued by Apple, said Lee Seung Woo, a Seoul- based analyst at IBK Securities Co. Apple may have decided it achieved what it wanted by going after HTC because the Taiwanese company's share of the smartphone market has weakened, Lee said.

James Chung, a Seoul-based spokesman for Samsung, declined to comment.

Jobs, who died of cancer last year at 56, summed up his approach in a March 2010 statement accusing HTC of stealing designs by Cupertino, California-based Apple.

"We can sit by and watch competitors steal our patented inventions, or we can do something about it. We've decided to do something about it," Jobs said at the time. "We think competition is healthy, but competitors should create their own original technology, not steal ours."

Google, Samsung

At the time, HTC was the leading maker of smartphones using Android. Since then, its market share has fallen behind Samsung's. Now, Apple's biggest smartphone patent fight is against the South Korean company, and court-ordered negotiations haven't produced a deal.

Samsung is appealing the $1 billion verdict awarded by a California jury in August, and it has won legal cases against Apple elsewhere in the world.

Cook also held talks earlier this year with Google Chief Executive Officer Larry Page regarding patent disputes involving the two companies, a person familiar with the talks said in August. Google completed the $12.5 billion purchase of Motorola Mobility in May in its biggest takeover.

Jobs told his biographer, Walter Isaacson: "I am going to destroy Android. I'm willing to go to thermonuclear war on this."

Apple Complaint

An Apple complaint to the U.S International Trade Commission in Washington sought to block imports of HTC smartphones because the devices allegedly copied the iPhone's pinch-to-zoom feature. HTC fought back, alleging infringement of patents it bought last year for ways to reliably transmit a larger amount of data.

"This is definitely a positive surprise for HTC," said Daniel Chang, who rates the stock underperform at Macquarie Group Ltd. in Taipei. "The shares will probably get a bump on this news, though it doesn't solve the structural problems at the company."

HTC's stock decline this year follows a 42 percent drop last year amid falling sales and lower profit. The company's share of the global smartphone market fell to 5.8 percent in the second quarter from a peak of 10.7 percent a year earlier, according to Bloomberg Industries data.

"HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation," Chief Executive Officer Peter Chou said in the statement.

U.S. Customs

In May, HTC said availability of its HTC One X and HTC EVO 4G LTE handsets was delayed due to a U.S. customs review required after an exclusion order by the ITC. The company said it redesigned devices to remove disputed technology while maintaining it breached no patents.

The delay pushed back a release of the devices by Sprint Nextel Corp. (S), which had planned to offer the LTE model to help boost subscriber numbers.

Less than a month later, HTC cut its second-quarter sales projection by 13 percent, citing a delay in U.S. shipments and weaker-than-expected sales in Europe.

In July, the ITC ruled that HTC could keep shipping its devices while the agency investigated whether the phones violate the exclusion order, denying an emergency request by Apple to have the handsets halted at the U.S. border.

'Thermonuclear War'

Apple's complaints included claims HTC copied the iPhone maker's technology for detecting phone numbers in e-mails, allowing users to save the information or make a call without dialing. The dispute, which include a case filed in London, also included Apple accusing its competitor of copying other features such as "slide to unlock," multiple screen touches and using various alphabets when sending messages.

HTC's rebuttal included its $300 million purchase of 3G Graphics Co., a company part-owned by HTC Chairwoman Cher Wang, in a bid to leverage that company's patent claims against Apple to bolster its own defense. The ITC ruled in November 2011 that Apple's Macs didn't infringe two S3 Graphics patents.

A separate case before the ITC may have forced Cook to the negotiating table after a judge said Apple probably would face difficulty getting a series of HTC patents invalidated. HTC bought those patents, covering technology in LTE high-speed wireless devices, from ADC Telecommunications Inc. for $75 million.

"The settlement is a big surprise and is likely due to HTC's LTE patents, which it bought from ADC last year, as Apple's LTE patents are relatively weak," said Jeff Pu, an analyst with Fubon Financial Holding Co. in Taipei who raised his price target for HTC today to NT$270 from NT$160. "What HTC still needs, though, is good products."

(BN) EBay Returns to China in Xiu.com Deal to Sell Fashion

EBay Returns to China in Xiu.com Deal to Sell Fashion

EBay Inc. (EBAY), which operates the world's largest online marketplace, is betting that a new fashion-focused partnership in China will help it break into a market where it failed five years ago.

EBay Style debuts in China today in a deal with luxury online seller Xiu.com, featuring 5,000 brands in apparel, handbags and shoes, said Steve Milton, a spokesman for EBay. The arrangement lets consumers in China buy new items from EBay merchants in the U.S. while Xiu.com handles sales, shipping and customer service.

Chief Executive Officer John Donahoe needs to expand into new markets to sustain growth that analysts predict will top 20 percent for a second straight year in 2012 -- up from a single- digit pace in the preceding years. At stake is the Chinese electronic commerce market, which is poised to more than double to $356.1 billion in 2016, according to Forrester Research Inc. (FORR)

"They've been very successful going to developed economies, but to continue to grow at those rates ten years from now, they need to be in these larger emerging markets," Gil Luria, an analyst at Wedbush Securities Inc., said in an interview. "That's a tall task because there are incumbents."

Donahoe is refocusing on China after predecessor Meg Whitman had difficulty gaining traction in Asia a decade ago. Facing competition from Alibaba Group Holding Ltd.'s Taobao.com, EBay closed its unprofitable Web auction unit and formed a venture with billionaire Li Ka-shing's Tom Online Inc. In 2002, EBay withdrew from the Japanese market.

Luria estimates that less than 15 percent of EBay's revenue currently comes from Asia.

Middle Class

The online retailer still sees demand. Merchandise bought by China's consumers via EBay increased 40 percent in 2011 from the preceding year. They spent 17 million hours navigating its Web properties in 2012, Milton said.

"I would describe our approach as focused," Milton said. "We don't want to attack the domestic market. We just know we want to operate in the domestic market. The biggest risk is competition."

EBay is using its sellers' inventory of western brands, such as Michael Kors Holdings Ltd. (KORS) and Coach Inc. (COH), to appeal to an estimated 15 to 20 million young, affluent locals -- part of a growing middle class in China, Milton said. A team of about 800 at Xiu.com, which has expertise in importing into the country, will help translate the site into Chinese and handle shipping after U.S. sellers send purchases to a warehouse in Dallas, he said. He declined to disclose financial terms.

Fashion Appeal

Pairing up with another company means EBay doesn't have to deal with fulfillment centers, inventory and other logistics that were difficult hurdles for retailers in the country in the past, said Colin Sebastian, an analyst at Robert W. Baird & Co. The company will also have to seek out other partnerships to cater to a market with different tastes, he said.

"EBay should be able to leverage a stronger technology platform, a more global buyer and seller base, and perhaps most importantly, they will need partnerships that help them localize the site and user experience," Sebastian, based in San Francisco, said in an e-mail.

The company may have trouble gaining traction with a domain that's secondary to Xiu.com -- ebay.xiu.com -- and shipping that may be slower than the two-day delivery Chinese consumers are used to, because the packages are coming from the U.S., said David Zhao, founder of Shangpin.com, a Chinese e-commerce site.

Still, luxury fashion is a good starting point in a country that has been difficult to enter, even for giants such as Amazon.com Inc. (AMZN), said Victor Anthony, an analyst with Topeka Capital Markets Inc. in New York.

PayPal Advantage

"Starting with luxury goods is an excellent idea, given the Chinese consumer's insatiable appetite for brand name and designer Western products," he said. "The Chinese market is challenging, and competition is rife, forcing companies like Amazon to invest more in its Chinese subsidiary. With careful execution, EBay stands a chance."

Even if EBay is successful in new markets, the company has warned in quarterly filings that it "often" expects operating costs of new ventures in most countries to exceed net revenues for at least 12 months.

EBay Style will be the company's fourth business unit in China. The other divisions are PayPal, an analytics and engineering center and a marketplace that lets Chinese users sell items to consumers in other countries.

EBay's online payments service PayPal may also give it an advantage in China, said Luria. Alipay, Alibaba's online payments competitor, can't be used by U.S. sellers, making it harder for Chinese consumers to buy U.S. goods.

To make sure consumers know about the marketplace, EBay is starting an advertising campaign that will cost no more than $8 million this year, targeting social media and high-end fashion magazines.

(BN) Victoria’s Secret Channels Mad Men Into Hottest Limited

Limited Brands Inc. (LTD)'s Victoria's Secret is thriving using a marketing strategy that seems more Mad Men-era than from the age of Twitter.

While other big brand retailers try to hone their social- media skills, the intimate-apparel chain is creating excitement with a network TV holiday fashion show featuring young women wearing Swarovski crystal-decorated lingerie strutting down a runway in six-inch heels. The show, in its second decade, serves as the cornerstone of an efficient marketing machine. Last year, the special received its highest rating since at least 2002, with 11.5 million viewers. Most viewers are women.

The approach is paying off. Victoria's Secret's sales have risen 7 percent in the past three quarters to $4.33 billion after posting a record $6.1 billion in revenue for the year through Jan. 28. It's the biggest of Columbus, Ohio-based Limited's brands, followed by Bath & Body Works.

The TV show is "essentially an hour-long commercial, and really, that is unheard of," Erika Maschmeyer, an analyst at Robert W. Baird & Co., said in a telephone interview. "There are a lot of places to buy intimate apparel, but there's no other place that has such a strong brand connotation to it and I think the fashion show is definitely a part of that."

Elaborate Costumes

The lingerie chain's marketing approach is in sharp contrast to industry trends. Retailers, which may see online sales grow to 16 percent of $586 billion in revenue this holiday season, have increased digital efforts at the expense of more traditional advertising. Gap Inc. (GPS), the biggest U.S. specialty apparel retailer, has added to social media and moved away from television and print ads, while department-store company J.C. Penney Co. (JCP) exited its catalog business last year.

Viewers can't buy much of what the models wear in the fashion show aside from Victoria's Secret's bras and panties, as elaborate costumes range across themes such as "Circus," "Calendar Girls" and "Silver Screen Angels." Silk jeweled corsets, feather bustiers and wings of all types were styled around the underwear to create the lingerie-clad version of a tiger in one walk to a Native American chief in another.

"As soon as this one finishes they start working on the next," said supermodel Miranda Kerr. "There's so much attention to detail in the underwear, everything is hand- stitched."

'Emotional Content'

The chain does use Facebook, Twitter and e-mail to draw Web traffic and build excitement around new collections and events such as the fashion show. Web and catalog sales rose 4 percent to $1.56 billion in the latest year, a quarter of the business, while revenue at Victoria's Secret's 1,000-plus stores rose 14 percent to $4.56 billion.

Still, the Internet doesn't drive a lot of "emotional content," Chief Financial Officer Stuart Burgdoerfer, said in a presentation to investors on Oct. 17. Victoria's Secret and Bath and Body Works emphasize the product and in-store experience above all and aren't aiming to be leaders in technology, he said.

Victoria's Secret spends about $220 million a year on the catalogs sent to customers' homes each year, including postage, creative, printing, paper and circulation, the biggest expense of its direct business, according to a job posting on its website. The company said it mails 325 million catalogs a year, a figure greater than the U.S. Census Bureau's estimate of the U.S. population.

The company's 15 percent stock gain this year trails the rallies at specialty retailers Urban Outfitters Inc. (URBN) which has added 28 percent and Gap, with an 81 percent rise. It has beaten both in the past five years, as well as the Standard & Poor's 500 Retailing Index (S5RETL), by more than doubling to $46.48 as of Nov. 9. The shares declined 0.2 percent to $46.39 at 10:28 a.m. in New York.

Wexner Tenure

Limited Chief Executive Officer Les Wexner, the longest- tenured CEO in the S&P 500, according to data compiled by Bloomberg, has spun off apparel brands including the Limited stores, Abercrombie & Fitch Co. (ANF), Express Inc., while keeping Victoria's Secret and Bath & Body Works.

"He truly views intimate apparel and personal care as more attractive categories," Maschmeyer said. Victoria's Secret is the biggest specialty retailer for intimate apparel, mainly competing with department stores for business, and created demand for items like push-up bras and colorful underwear in the way Lululemon Athletica Inc. (LULU) has helped create a market for trendy yoga wear, she said.

Angel Models

Victoria's Secret's models, known as "Angels," are a major part of the brand's image, appearing in the fashion show, catalogs, stores and advertisements. The website features a "VS All Access" section for learning more about the group, which includes Adriana Lima and Kerr. Unlike brands that hire celebrities to market their apparel or design new lines, modeling for Victoria's Secret launches careers. Alumni include supermodels Tyra Banks, Gisele Bundchen and Heidi Klum.

Under Wexner's direction, the brand sought to create celebrities, rather than use them as spokespeople, said Marcie Merriman, director of brand strategy and planning for Victoria's Secret from 2001 to 2003. "They would never pick known models or ones that are already out there, because the brand is stronger than that," she said in a telephone interview.

"The models chosen are very specifically ones that women can relate to or feel comfortable around and have personalities," she said, pointing to Klum and Banks, who have both hosted television shows, as examples.

$2.5 Million Bra

One model wears a multi-million dollar bra gift set in the show each year, an illustration of the event's opulence and the brand's aspirational nature. This year's set, valued at $2.5 million, was made with more than 5,200 precious gems, including sapphires, rubies and diamonds, in 18-karat rose and yellow gold. Yet prices, generally, at the brand are "reachable for the average upper-middle class woman," Merriman said. Merchandise online includes $62 lace push-up bras and $70 satin pajama sets.

The fashion show may cost about $12 million, though it "pays for itself" as a marketing tactic, Jennifer Davis, an analyst with Lazard Capital Markets in New York, said in a telephone interview before the report.

Limited spent at least $474 million in advertising in its most recent fiscal year, compared with $548 million at Gap, which makes about $4 billion more in annual sales, and less than $100 million at Urban Outfitters.

(BN) GE Wins Indian Wind Share as Suzlon, Vestas Suffer Market Shift

A shift in India's wind market toward bigger, more efficient projects is benefiting General Electric Co. (GE) as dominant turbine suppliers Suzlon Energy Ltd. (SUEL) and Vestas Wind Systems A/S (VWS) see cash dwindle.

"The market is opening up for new turbine makers," said Sunil Jain, chief operating officer of Green Infra Ltd., a New Delhi-based wind-farm developer. "The growth of GE turbines in the last year is more than what they achieved in 15 years."

Developers in India are building more productive wind farms, ditching a business model set up by Suzlon and Vestas that handed completed farms to investors seeking tax relief rather than energy. The end of the tax benefit in March favored newer developers that separate project development from turbine orders to boost power output, IDFC Private Equity Co. said.

"A major development for the better is the emergence" of the new developers, IDFC Director Nithin Kaimal told a conference in New Delhi last week. "There's a greater emphasis now on the quality of the asset being developed. It's healthier for the industry because it means much better economics."

Suzlon, India's biggest turbine maker, had a 35 percent share of the country's wind market in the last financial year, down from 50 percent two years earlier, according to the Indian Wind Turbine Manufacturers' Association. Vestas was the fifth- biggest supplier, having been third-largest two years earlier.

GE Gains

They've ceded share to competitors such as GE, which agreed to supply at least 450 megawatts of turbines over three years to Hyderabad-based developer Greenko Group Plc (GKO), Greenko President Mahesh Kolli said in July. GE, which conducts turbine-only deals, didn't install a single machine in India in the previous three financial years, IWTMA data show.

"The market is evolving," Kirti Vagadia, chief financial officer of Pune-based Suzlon, said Nov. 9. "It's good that the challenge of executing projects is being shared by a new customer segment. The market size itself is increasing and we are in a good position."

Vestas CFO Dag Andresen said last week that the company was "scaling down" in India as it forecasts 500 million euros ($636 million) of cash losses this year. Suzlon, which said Nov. 9 that a lack of working capital was constraining its ability to complete orders after reporting a fourth quarterly loss, defaulted on $209 million of convertible bonds last month.

"My big concern is the health of the manufacturers," Green Infra's Jain said Nov. 8 in an interview in Noida, near New Delhi. "I'm worried about delays and their ability to execute projects."

The retrenchment of established producers also opens the door for Chinese turbine makers to enter India, Jain said. The increasing competition means "pricing will come down for sure," he said.

The number of turbine suppliers in India last year almost doubled to 24 from two years earlier, IWTMA data show. The country has the world's third-biggest wind market, after China and the U.S.

(BN) GE to Supply 43 Wind Turbines in Turkey to Fina Enerji Projects

// growth vs maturity; contrast with solar 

General Electric Co. (GE), the biggest maker of electrical generation equipment, will supply 43 turbines to Fina Enerji Holding AS for wind projects in Turkey.

The wind parks will total 97 megawatts in capacity and power 27,000 Turkish homes when built, according to a statement today from Fairfield, Connecticut-based GE.

Turkey is seeking to boost wind capacity to 20,000 megawatts by 2023 from about 1,800 megawatts now to meet electricity demand that's increased 6 percent a year, Economy Minister Zafer Caglayan said in June. The market has attracted turbine manufacturers including Sinovel Wind Group Co. and Siemens AG (SIE) with premium payments for low-carbon power.

GE will supply the Kizilcaterzi wind farm, the Karadere park, the Sadilli project and the Salman venture in the nation's west, according to the statement.

Social Networking: a Bubblecovery?

An interesting perspective on social media's economic impact:

...the social media bubble has played a very important role in the U.S.' post-2009 "bubblecovery" or bubble-driven economic recovery. The social media bubble has helped to create nearly 500,000 U.S. jobs in recent years (a very high percentage of newly-created jobs) and has helped to launch a housing and commercial real estate recovery in hard-hit San Francisco and parts of New York City. The social media bubble has contributed to an explosion in post-2009 entrepreneurial activity, with the number of startup incubators tripling from 2009 to 2011. The social media bubble is also important, because it has been one of the few glimmers of economic hope that many Americans have had in recent years, especially for young aspiring-professionals who see few other appealing career options (1, 2, 3).

The recent election cycle may have contributed to the expansion because politicians of all parties embraced social media as a vehicle for delivering their messages. It's a relatively easy task to influence one's vote (i.e. to "buy" a political preference) through online tracking and ad targeting because the vote is free for the person to give. A harder task would be to convince one to buy a product or service online when s/he has to part with real money. Even Zynga with its freemium business model is having trouble.

tags: distribution, cycle, social, networking, business, advertisement

(BN) Wal-Mart Plans Three Waves of Deals Around Black Friday

Wal-Mart Stores Inc. (WMT), the world's largest retailer, will feature three waves of deals around Black Friday this year and will guarantee that customers will be able to get certain items.

In-store specials will start to be offered at 8 p.m. on Thanksgiving, which falls on Nov. 22 this year, followed by an electronics event at 10 p.m. and a 5 a.m. start for its weekend deals, the Bentonville, Arkansas-based company said today in a statement.

Wal-Mart is starting its Black Friday sales two hours earlier than last year as it seeks to lure customers during the most important period of the year for retailers. Black Friday, the day after Thanksgiving, was named so because it was traditionally when retailers would become profitable.

The electronics deals will include an Apple Inc. (AAPL) iPad2 with Wi-Fi for $399 plus a $75 gift card, a 32-inch Emerson LCD television for $148 and an LG Electronics Inc. (066570) Blu-ray player for $38, Wal-Mart said. Customers who are in the store and in the queue line between 10 p.m. and 11 p.m. on Thanksgiving will be guaranteed to get the items. If the products sell out before 11 p.m., the customers will receive a guarantee card for the item that must be paid for by midnight and registered online.

"We ensure customers get the products they want for Christmas," Duncan Mac Naughton, chief merchandising and marketing officer of Wal-Mart U.S., said yesterday on a conference call. At other stores, they might stand outside in line only to find the items have "run out immediately."

Wal-Mart fell 0.9 percent to $73.11 yesterday in New York. The shares have gained 22 percent this year.

(BN) Tesco Turns to Trains to Stack Britain’s Shelves

// packaged payload; distribution

Tesco Plc (TSCO) is leading a trend among U.K. supermarkets to stock stores using container trains, transforming a rail-freight market once dominated by bulk flows of coal, steel and chemicals.

Tesco, Britain's biggest retailer, is being followed by Marks & Spencer Group Plc (MKS) and Wal-Mart Stores Inc. (WMT)'s Asda in the drive to cut transport costs and improve delivery times by switching more of its logistics chain away from crowded roads.

Containers became the biggest part of Britain's 1 billion- pound ($1.6 billion) rail-cargo industry for the first time in 2011 with a 27 percent share, government data shows. Non-food companies including No. 1 home-improvement chain B&Q (KGF) are also being lured by rail's improved reliability and flexibility.

"Logistics markets are being increasingly impacted by road transport costs and disruption in deliveries," said Andrew Griffiths, U.K. chief at Prologis Inc. (PLD), which runs Britain's biggest road-rail interchange at Daventry, central England, serving Tesco and J Sainsbury Plc (SBRY), among others. "Add in the green agenda and rail becomes more and more attractive."

Containers have become the fastest-growing flow on British tracks, with traffic expanding 7.5 percent a year since 2003, said Carsten Hinne, logistics director at Deutsche Bahn AG's DB Schenker Rail U.K. Ltd., Britain's top rail-freight operator.

Shops have doubled their use of rail in five years, said John Holwell, development manager at Malcolm Group Plc, which books trains for Tesco, Asda and the Argos household goods arm of Home Retail Group Plc (HOME) that are run by Direct Rail Services.

Road to Rail

DRS, which moved into cargo after being set up to carry atomic waste, is the fourth-biggest U.K. rail-freight company after Schenker, Freightliner Group Ltd. and the GB Railfreight unit of Channel Tunnel operator Groupe Eurotunnel SA. (GET)

Rail's attractiveness to retailers has been enhanced as it competes head-to-head with road transport in terms of service levels, said Freightliner Chief Executive Officer Peter Maybury.

"The challenge for us is to manage our process well enough that, from our customer's perspective, they don't know if it's going by road or rail," he said. "It's a more complex move as you've got to handle loading, rail movement and final delivery."

Tesco has switched the most freight from road to rail among U.K. retailers, extending the practice beyond primary movements to secondary flows serving regional distribution centers, the Freight Transport Association said in a report in February.

M&S Clothes

Routes include one from Prologis's Daventry site, east of Birmingham, to Mossend in Scotland, and the company's containers are emblazoned with "Less CO2," a reference to the carbon dioxide savings of a rail-based supply chain. Sainsbury, Britain's No. 3 supermarket group, agreed to lease a rail- connected warehouse at Daventry for the first time on Oct. 18.

M&S, Britain's largest clothing retailer, has also been slower to make the shift, with flows limited to movements from ports, plus drinks and garments sent to distribution centers. Volumes may jump as it consolidates clothing deliveries at four main centers, logistics manager Emile Naus said by e-mail.

Daventry, which has 6.25 million square feet of rail- connected distribution space, equivalent to 75 soccer pitches, has only one un-leased site left and Prologis last month sought planning permission to more than double the area covered.

Poor Relation

Among coastal terminals, DP World Ltd.'s London Gateway deep-sea port and an adjoining logistics park that will be Europe's largest is likely to become the busiest U.K. railhead when it opens at the end of 2013, according to Schenker's Hinne.

"From the day the port opens we intend to run four routes, one to the northwest, two to the Midlands and one to the northeast," he said. Trains will span 700 meters (2,300 feet) and eliminate the equivalent of 4,000 lorry movements a week.

Still, rail is a comparatively poor relation in terms of overall freight, accounting for less than 10 percent of traffic, versus two-thirds for roads, 23 percent for waterways and 5 percent for pipelines, Department for Transport figures show.

That's partly because the high fixed costs of locomotive haulage are prohibitive over the short distances often involved in U.K. shipments, with rail generally competitive only over 200 miles or more, said Freightliner's Maybury.

A general lack of terminals and infrastructure and the long planning processes that must be overcome to add new facilities present a further hurdle, according to the London-based Rail Freight Group, which promotes the industry in the U.K.

Tight Fit

Some lines are also closed to the biggest containers, which are unable to clear the tight tunnels, low bridges and wide platforms of a network built in the Victoria era.

Enhancing "gauge clearance" to allow the transportation of high-cube boxes from every U.K. port to every major terminal would provide a vital boost, Hinne said. Following the upgrading of the route north from Southampton on England's south coast last year, Schenker has expanded such traffic by one-quarter.

Those paths that are open to the largest containers, such as the West and East Coast main lines, are also the ones most crowded with passenger services, making the orchestration of port, rail and road schedules a constant headache, Maybury said.

While longer trains may help ease the crunch, the biggest factor in freeing up capacity could prove to be the 33 billion- pound High Speed 2 project to build a 200-mile-per-hour passenger route to northern England via Birmingham. That in turn could allow more freight services to use the West Coast line.

For the moment, retailers and rail operators are eking out new freight flows from innovative use of existing links, most recently with Colas Rail -- a unit of French builder Bouygues SA (EN) -- trialing electric-hauled trains into London Euston station.

The overnight service from Daventry could carry perishables to the heart of the capital, harking back to the days when major stations had goods depots allowing point-to-point deliveries.

"This may not work when you have disparate journeys in different directions, but when you have a collection of receiving points, as you have in most of the big urban retail centers, it starts to have legs," Griffiths at Prologis said.

(BN) Stanford-Rooted Companies Would Form World-Sized Economy

Almost 40,000 active for-profit companies trace their roots to Stanford University, and if they formed an independent country, it would be the world's 10th largest economy, a study found.

The companies' combined annual sales of about $2.7 trillion have generated an estimated 5.4 million jobs since the 1930s, according to the study released last month by Charles Eesley, an assistant professor in management science and engineering, and William Miller, an emeritus professor of public and private management, at the college near Palo Alto, California.

The entrepreneurial community at Stanford played a key role in attracting future business founders to the school, Miller said. In the past decade, 55 percent of alumni who started companies said they chose Stanford specifically because of its entrepreneurial environment, the study found. The university first offered classes in small business and entrepreneurship after World War II. Stanford graduates have also created about 30,000 nonprofit organizations.

In 2011, Eesley sent an e-mail survey to 142,496 Stanford alumni, current faculty and selected research staff. He received responses from 27,780 individuals. About 23 percent of survey recipients with connections to the business school responded.

The study doesn't name the companies that participated and offers only a partial list of those that didn't respond, including Hewlett Packard Co. (HPQ), Cisco Systems Inc., Yahoo! Inc. and Google Inc. (GOOG), the Internet giant founded by alumni Sergey Brin and Larry Page. These companies aren't figured into the methodology.

The Stanford study was modeled after a similar study Eesley helped conduct when he was a doctoral student at the Massachusetts Institute of Technology, based in Cambridge, Massachusetts. By the end of 2006, that study found that living MIT alumni had created 25,800 still active companies, which employed 3.3 million people and produced annual global revenues of almost $2 trillion, the school said.

(BN) Brokers Mine Social-Media for Data, House Lawmakers Say

People who use social-media websites such as Facebook (FB) and LinkedIn may have their information harvested by companies that collect, analyze or sell consumer data, a group of U.S. lawmakers said today.

Acxiom Corp. (ACXM); Epsilon Data Management LLC, a unit of Alliance Data Systems Corp. (ADS); and Intelius Inc. are among those saying they collect publicly available social-media information, in response to questions sent by a group of House members led by Representatives Ed Markey and Joe Barton.

"Posting to Facebook should not also mean putting personal information into the hands of data reapers seeking to profit from details of consumers' personal lives," Markey said in an e-mail. "Users of social media want to share with friends, not enable the sale of their personal information to data miners."

The lawmakers said the companies' responses offer "only a glimpse" of the practices of multibillion-dollar data brokerage industry. Many questions remain unanswered, including "how they analyze personal information to categorize and rate consumers," they said.

Markey, a Massachusetts Democrat, and Barton, a Texas Republican, on July 24 sent letters to companies including Equifax Inc. (EFX), Experian Plc (EXPN) and Fair Isaac Corp. (FICO), the company that developed the FICO consumer credit rating score.

Markey and Barton lead the Congressional Bipartisan Privacy Caucus. Other House members signing the letters were Democrats Henry Waxman of California, G.K. Butterfield of North Carolina, and Bobby Rush and Jan Schakowsky of Illinois, and Republicans Steve Chabot of Ohio and Austin Scott of Georgia.