-Ian.

—– http://story.news.yahoo.com/news?tmpl=story&cid04&ncids8&e=6&u=/ washpost/20030724/tc_washpost/a32817_2003jul23 AOL Subscribers Down by 846,000 Thu Jul 24,12:23 AM ET

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By David A. Vise, Washington Post Staff Writer

America Online’s subscriber base plunged by 846,000 in the second quarter, as hundreds of thousands left for cheaper or faster Internet connections and a similar number were dropped because they had been mistakenly counted in the past, AOL Time Warner Inc. disclosed yesterday.

In addition, new disclosures about a federal investigation into improper accounting at Northern Virginia-based America Online Inc. showed that the division’s legal problems are hurting other parts of the AOL Time Warner media empire.

AOL Time Warner said yesterday that the Securities and Exchange Commission ( news -web sites ) would not allow it to spin off a portion of its cable television unit until it resolves a dispute over how to account for hundreds of millions of dollars in questionable revenue from a complex deal with German media firm Bertelsmann AG ( news -web sites ).

AOL Time Warner also said it may restate previously reported profits and sales linked to the Bertelsmann transaction. And the company indicated that it could not determine how long the SEC and Justice Department ( news -web sites ) investigations into its bookkeeping practices will last.

The company said its profit increased to $1.1 billion (23 cents per share) in the second quarter, from $396 million (9 cents) in the second quarter of 2002. Revenue increased about 6 percent, to $10.8 billion. The profit figure included a number of substantial one-time gains from the settlement of a lawsuit with Microsoft Corp. and the sale of various businesses.

Despite solid results in divisions other than America Online, AOL Time Warner shares fell yesterday by $1.14, or 6.8 percent, to $15.71, as analysts and major investors reacted to the continuing uncertainty caused by the SEC investigation, the threat of increasingly costly shareholder lawsuits, the deterioration in America Online’s performance, and disappointment that the strength of AOL Time Warner’s film, publishing and cable television operations did not prompt the company to substantially increase its financial projections.

“Our goal for the remainder of this year is to keep laying the foundation that will enable us to exit 2003 with more momentum than we had when we entered it, with an eye toward achieving, strong sustainable growth next year and beyond,” said Richard D. Parsons, chairman and chief executive of AOL Time Warner.

AOL, the nation’s biggest Internet service provider, has shed a total of 1.2 million subscribers over the past year and now has 25.3 million subscribers in the United States.

The company said the total includes 2.2 million high-speed subscribers, an increase of 300,000 over the past three months. During that period, AOL launched an enhanced high-speed offering and promoted it with an advertising campaign titled, “AOL for Broadband: Welcome to the World Wide Wow.”

In addition to losing dial-up subscribers faster than expected, AOL is predicting that its online advertising revenue will drop about 40 percent in 2003. The decline is occurring even though the total dollars spent on advertising online is growing nationally, a trend that can be seen in the financial results of some of America Online’s competitors, including search engines Yahoo and Google and many specialized Web sites.

AOL Time Warner had sought to persuade SEC investigators that they were mistakenly challenging the accounting for the two-part Bertelsmann deal. But the company said yesterday that the commission has refused to back down.

“The company and its auditors continue to believe the accounting for those transactions is appropriate, but it is possible that the company may learn additional information as a result of its own review, discussions with the SEC and/or the SEC’s ongoing investigation that would lead [AOL Time Warner] to reconsider its views,” the firm disclosed.

The Bertelsmann deal involved AOL’s sale of roughly $400 million in advertising to Bertelsmann in connection with the purchase of Bertelsmann’s stake in AOL Europe.

AOL Time Warner released its second-quarter results prior to the opening of stock trading yesterday morning. Although it cut its projections for America Online, the company beat Wall Street estimates as its cable television, motion picture and publishing businesses thrived.

“Our solid results in this quarter and the first half of the year give us confidence that we can deliver on all of our 2003 financial objectives,” Parsons said. He added that the company is continuing to reduce its hefty debt through the sale of businesses and the spending of billions of dollars of excess cash generated by operations.

The Warner Brothers and New Line Cinema movie units generated $572 million and $239 million, respectively, at the box office in the United States. “The Matrix Reloaded” led the way among new releases, while “Harry Potter ( news -web sites ) and the Chamber of Secrets” boosted DVD and CD sales.

“On balance,” said Deutsche Bank, “we think this report is good news.”

In a conference call with analysts, Parsons said he was no longer counting on the sale of stock in Time Warner Cable to generate cash for debt reduction this year. Instead, he said, the handling of any cable spinoff will be determined by broader issues, including the best way to help that subsidiary grow.

“The specific timetable for executing an IPO will depend on strategic considerations, not balance sheet imperatives, as well as the status of our SEC investigations,” Parsons said.

Wi-Fi’s true believers see powerful ‘grass-roots’ force

John Markoff NYT Monday, July 14, 2003

  SUN VALLEY, Idaho Is the Wi-Fi boom about to bust? Even though that has lately become the fashionable view, the answer is probably no.

Critics argue that there are too many competitors trying to deliver high-speed wireless connections to the Internet. Prices for most commercial Wi-Fi services are too high, they say, and free or subsidized operations abound, including those like the one McDonald’s started rolling out last week at its fast food restaurants in San Francisco.

All this will make it practically impossible, the skeptics insist, for anyone to build a profitable business in Wi-Fi, a short-range wireless radio technology that frees personal computers from their physical tethers to the Internet.

A surprising number of true believers in Wi-Fi were present at this famed mountain resort during an annual conference, organized by the investment banker Herbert Allen, that brings together technology, media and entertainment industry leaders.

Intel, in particular, is betting a lot of its own money on Wi-Fi. And that may be exactly what the new technology needs to succeed.

Intel’s two top executives, Craig Barrett and Andrew Grove, were here this year to preach the virtues of Wi-Fi, in the belief that it will be a powerfully disruptive force in the telecommunications industry.

It has certainly been a disruptive force at Intel. The industry and analysts have focused their attention on the current frenzy to build out wireless Internet locations known as hot spots at airports, coffee houses and hotels. But Intel has a much bolder wireless plan in the works: it wants to close the so-called “last-mile” gap between homes and the Internet backbone with cheap, super-fast connections so that businesses can deliver interactive entertainment and a host of other digital products and services right into America’s living rooms and dens.

The new Intel bet is remarkable given that the company initially backed the wrong wireless standard, putting its resources behind a competing standard known as Home RF. But Intel, the world’s biggest computer chip maker, changed its strategy after company executives realized the power and potential pervasiveness of the unregulated Wi-Fi wireless networking standard.

The Wi-Fi standard was developed and commercialized at Apple Computer as early as 1999. Ultimately, though, it gained widespread popularity on its own, Mr. Barrett acknowledged in an interview here, as a grass-roots, from-the-bottom-up movement. That success stands in striking contrast to top-down wireless data strategies, like the 3G cellular approach pushed by the telecom industry, which has so far been an expensive bust.

Barrett now says that people who predict a Wi-Fi shakeout are missing the point, as well as failing to see the deeper implications of the technology. “What is missing is the realization of how many legs this technology has,” he said.

In the three months since Intel introduced its new wireless PC chips, the company has become the dominant force in the Wi-Fi market. It is now putting Wi-Fi circuitry in all of its chip sets for portable computers, investing widely in Wi-Fi industry start-ups and spending almost its entire annual marketing budget in a $300 million advertising campaign trumpeting the virtues of its unwired Centrino brand.

“Intel has raised the level of the water and is floating all the boats,” said Glenn Fleishman, editor of Wi-Fi Networking News, a Web-based daily newsletter.

Of even greater potential import, Intel plans to start a test in Texas in a few months that will use a combination of wireless technologies, including Wi-Fi, to bring broadband Internet connections directly to homes. Last week the company quietly announced that it was teaming with a small equipment maker, Alvarion, of Tel Aviv, Israel, to back a complementary wireless standard that is intended to send data over distances of as much as 30 miles and at speeds of up to 70 megabits per second. The data rate is high enough to comfortably stream high-definition television video broadcasts, and the range makes it possible to quickly deploy a system in a large urban or suburban area.

By comparison, current Wi-Fi technology is limited to several hundred feet and speeds of 11 megabits per second. The Intel test, however, will explore using the 802.16 standard, known as WiMax, to distribute the data to Wi-Fi antennas in local neighborhoods. If Intel is able to jumpstart the market to reach millions of homes with a relatively inexpensive interactive data and video service, the technology could quickly alter the communications landscape. That is already starting to happen. There is now an explosion of Wi-Fi hot spots in hotels, coffee shops, restaurants and airports, and a new wave of handheld gadgets will soon supplement portable personal computers for a class of mobile workers that analysts are calling windshield warriors.

In a speech here, Barrett sketched a portrait of a rapidly growing market. There are now about 40 million Wi-Fi users, he said, and new access points are selling at the rate of about 15,000 a day, which makes Wi-Fi a much faster-growing technology than cellular telephony.

While prices for connection times are certain to keep falling, industry executives say they are already seeing usage patterns that suggest that Wi-Fi commercial services are working and are here to stay. Moreover, they say they believe the services will complement and not compete with free services that are emerging in urban areas around the country. “We have a good business model in hotels, said Dave Vucina, chief executive officer of Wayport, a provider of Wi-Fi hot spots in hotels, airports, restaurants and other locations that is based in Austin, Texas.

In the hotels that Wayport serves, he said, the company is seeing between 8 and 12 percent nightly usage rates for each occupied room. He said he believed that the rate could go as high as 15 to 24 percent. Those numbers are credible, industry analysts said, because out of the 40 million business travelers in the United States, 30 million now carry personal computers when they hit the road.

The central issue in the debate is whether those workers will be able to meet their data needs with next-generation cellular telephone networks, or whether the far higher data rates available on Wi-Fi networks will prove preferable.

Copyright © 2003 The International Herald Tribune

The struggling fast-food icon is hoping to regain its luster with a splashy new ad campaign. Don’t count on it. The problems run deep at America’s leading burger empire. McDonald’s (MCD) just announced its seventh earnings decline in eight quarters. The stock price is hovering near a seven-year low, and the CEO is warning of layoffs. It’s not just the weak economy. Toss in rising anti-American sentiment around the world and a recent report highlighting America’s child-obesity problems, and it does indeed seem like the worst of times for the Golden Arches.

The company’s response: Bring in the great persuaders. Under pressure from Wall Street, McDonald’s has retooled its top marketing team, hired some celebrity pitchers, and launched an aggressive new U.S. advertising campaign.

The McMarketers are certainly experienced. Larry Light, named chief global marketing officer last month, has logged nearly four decades in the business, including key posts at Bates Advertising and BBDO Worldwide. Longtime McDonald’s insider Bill Lamar took over U.S. marketing duties in August. And just last week, the company brought in Kay Napier, a 20-year marketing veteran from Procter & Gamble (PG). For additional consulting help, the company has even coaxed Happy Meal inventor and marketing legend Hal “You Deserve a Break Today” Schrage out of retirement.

So what’s coming out of this bunch? A reported $40 million advertising campaign touting McDonald’s new value menu. Produced by DDB Worldwide in Chicago, the “Got a Buck, You’re in Luck” theme is reportedly fronted by, among others, a real estate tycoon (Donald Trump), two tennis stars (Venus and Serena Williams), and a loudmouth lawyer (Johnnie Cochran). It also features the return of two McDonaldland characters (Grimace and the Hamburglar).

According to McDonald’s spokesman Bill Whitman, the campaign is about good food and great value. “We’re conveying that message with celebrities people know and with characters they feel good about,” he says. Little more than two weeks into the campaign, McDonald’s claims that sales have risen 2 percent. The new marketing push is the public face of a turnaround plan, announced in September, that includes a $1 billion budget to remodel stores during the next two years.

Yet while McDonald’s is certainly focused on its new message (Whitman repeated the phrase “great value” nine times during a brief chat with Business 2.0), the strategy seems misguided. With its sudden conversion to lower prices, McDonald’s is playing a desperate game of catch-up. Wendy’s, for one, has had a national value menu in place for more than a dozen years, and Burger King announced its own “99 cent” menu last month. So no points here for innovation.

But even more confounding is the choice of spokespeople. Does anyone associate Donald Trump with value? Or Johnnie Cochran? Are we to believe that either of the über-athletic Williams sisters regularly eats a Big N’ Tasty burger, at any price? And how does pairing any of these folks with mysterious fuzzy characters help get the word out?

It all feels like another desperate experiment in a long line of desperate experiments (McCafes, a McKids clothing line, a McDonald’s ketchup brand, the Golden Arch Hotel in Switzerland, the Chipotle Mexican Grill and Donatos Pizzeria, and on and on).

McDonald’s difficulties — market oversaturation, increasing competition, menu problems, disgruntled franchise owners, and more — are too big for a quick marketing fix, no matter who, or what, is doing the persuading.

———–

Microsoft tool “Clippy” gets pink slip By Erich Luening CNET News.com

Software giant Microsoft is laying off one of its most controversial employees: Clippy.

The software help system, a long-despised feature of Microsoft’s popular Office suite of business software, is the star of a new Web marketing campaign launched Wednesday. The campaign, and a companion Web site, trumpet Microsoft’s forthcoming Office XP software as so easy to use that Clippy is out of a job.

The Web site, designed and hosted by Microsoft, serves as a mock layoff notice and resume for Clippy. “I’ve taken over this space to share my pathetic story and show off my skills as a Web designer. Not bad, huh? Know anyone who’s hiring? Office XP works so easily that it’s made Office Assistants like me useless. Obsolete. And, I’m told, hideously unattractive,” Microsoft has Clippy saying on the Web site.

The company is bringing Clippy to a light-hearted end. Microsoft is asking customers to take part in an online poll so they can chime in on what Clippy’s next job should be.

The site is part of a $30 million marketing and advertising campaign launched to promote Office XP, which Microsoft is expected to launch this summer. For Microsoft, Office is an extremely important product: Its sales make up more than one-third of the company’s overall revenue.

Microsoft is hoping to appeal to customers with a less-obtrusive, easier to use version of the suite. In Office XP, Microsoft plans to hide the Clippy character tool from view and help people in a less obtrusive manner.

Office customers are wondering why the Redmond, Wash.-based company took so long to give Clippy the boot.

“Not one person in my office, from the receptionist to the sales people to the engineers to the CEO use the blasted paper clip. Not even my wife, who is an elementary school teacher, uses it,” wrote Ketan Deshpande, senior software engineer at Manage.com, in an e-mail to News.com. “In less time than it took MS to put this Web site together, they could have pulled the dumb clip out of their software.”

Other Office customers agreed and wondered if Clippy was related to another, much-reviled Microsoft helper. “These guys seem to be a legacy from Microsoft Bob. When they were introduced I thought Microsoft was trying to save face from Bob’s dismal acceptance by moving a key piece of technology into the professional products,” wrote Steve Mizera, a systems engineer in Silverado, Calif.

“Every time I have to install or reinstall Office the first thing I do on each application is turn off Clippy. I have tried several of the variations of the “animated helper,” but I have found them all too annoying to leave on,” Mizera wrote.

Lisa Gurry, a Microsoft Office product manager, said Clippy has lived a useful life but is no longer needed. “We think Office has so many new features for making it easier to use that Clippy is no longer useful. This is definitely in response to user feedback. We asked ourselves what we could do to help users find features,” with the least amount of confusion.

Gurry said if people miss Clippy, they can turn him back on by clicking on the “help” tag on the Office XP task bar.

Office XP not only plays a critical part in the company’s product lineup this year, but it is seen as a catalyst for Microsoft’s .Net software plan.

However, the company will have a battle convincing many customers to upgrade, analysts say. Many consumers and a growing number of business customers don’t see the need to upgrade to yet another version of Office, since they use few of the productivity suite’s existing features.

The Clippy Web campaign will continue until the Office XP product launch at the end of May, Gurry said.