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Personal and Business
Turnarounds:
A Platter of Links from March
to May 2008
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"Capital Fellow" (it's Boris Johnson, right before he beat "the
Red Ken")
by Gideon Rachman -- Financial Times 4/11/2008
<< Victory would be a fantastic political comeback for a man often dismissed as a lightweight and a joker. Johnson was sacked from his first job, as a reporter at The Times, for making up a quote. His early steps in politics ended in humiliating circumstances after he was sacked again, this time from the Conservative Party front-bench team, for lying about an extra-marital affair... The Mayor of London has three big responsibilities -- over transport, planning and policing. Collectively, they give him the ability to change both the quality and feel of life in the capital. The mayor will also be the person who prepares London to host the 2012 Olympics. >>
www.ft.com/cms/s/0/d858af82-050e-11dd-a2f0-000077b07658.html
"Why Ford Can Double" by Michael Santoli -- Barron's 4/7/2008
<< Alan Mulally [is] executing a high-stakes task of strategically shrinking the company in plain sight of the investment world. Hardly anyone is bothering to take notice, but investors should pay closer attention, because the turnaround he and his largely new team is engineering could result in a double or better in Ford's shares, now near a 25-year low at $6.49... [E]ven with last week's reported double-digit declines in monthly sales, the likely annual industry volume for 2008 is merely trending toward the levels that Ford executives have been assuming for months now. Sure, Ford Motor Credit auto-loan delinquencies are trending higher, but they remain well within the normal historical band, and the unit [unlike its General Motors counterpart] makes no home loans. >>
http://online.barrons.com/article/SB120735072304191217.html
"Ailing Sheraton Shoots for a Room Upgrade"
by Tamara Audi -- Wall Street Journal 3/25/2008 page A1
<< Many travelers see Sheraton as a convenient rooming house with stale decor and unremarkable service. And despite past attempts to improve that image, including one in 2000 that cost $750 million, the chain still lags in some important measures. For example, average revenue per available room...is lower than both Starwood's other full-service hotels, including Westin and W, and its main competitors Marriott and Hilton. In North America, Sheraton's average nightly revenue per available room in the fourth quarter of 2007 was $100.72, compared with $112.62 at Marriott. Guest surveys also show that quality varies dramatically between Sheratons in different locations. In an industry where consistency is critical, one bad experience at a $300-a-night hotel can cause a guest to write off the brand entirely. >>
http://online.wsj.com/article/SB120639871515760733.html
"Henry Blodget, Redeemed?" by Roben Farzad
Business Week "Fair Value" department, 4/7/2008, page 114
<< Wall Street outcasts, not exactly paupers, usually crawl under a rock for good, ideally on a golf course in the Caribbean. Instead, Blodget has braved ridicule and scorn (and invited more) to have a say in the Web 2.0 market debate... Blodget's work is his penance. No teary appeal on 60 Minutes. No revisionist press packet. >>
www.businessweek.com/print/magazine/content/08_14/b4078114110373.htm
Wartime and the Cyclical American Psyche: "Nothing Succeeds
Like Success"
by Victor Davis Hanson -- Commentary April 2008, pages 19-23
<< Three-quarters of Americans favored the initial decision in October 2002 to remove Saddam Hussein... By late 2006, however — after the Abu Ghraib scandal, the pullback from Fallujah, the withdrawal of some members of the original coalition, and increased internecine violence between Shiites and Sunnis, and in the face of some 3,000 American combat fatalities — only about a third of Americans still thought the war was worth the price or favored its continuation. By late summer 2007, of the 27 Democratic Senators who had voted to authorize hostilities in October 2002, only one, Joseph Lieberman of Connecticut, was still on record as supporting the effort. Former President Bill Clinton, who in 2002 had boasted, "I don't think it will be a big military problem if we do it," and who reiterated his support in May 2003, announced last year that he had been against the war "from the beginning." But we appear to have entered lately into still another cycle of re-interpretation... >>
www.victorhanson.com/articles/hanson040408PF.html
"Value to Unlock" -- Starting to Find Buyers for Mortgage Securities
by Saskia Scholtes, Gillian Tett and Henny Sender
A heavy-duty Financial Times
analysis -- May 10 and 11, 2008
<< BlackRock...struck a $15bn (£7.7bn, €9.7bn) deal to buy a portfolio of distressed subprime mortgage debt from UBS of Switzerland for 75 cents on the dollar. A sophisticated investor with deep pockets appeared to be calling the bottom... In previous financial crises, the emergence of such buyers for assets that have collapsed in price has helped to signal a turning point. When America's banking system was hit by the savings and loans crisis in the early 1990s, for example, the tipping point occurred -- at least in the eyes of many investors -- when bidders arrived for the assets of the failed S&L institutions... So is something similar about to happen now? Policymakers, bankers and investors all want more buyers like BlackRock to emerge for mortgage securities and other risky assets... >>
www.ft.com/cms/s/0/636228e6-1f6e-11dd-9216-000077b07658.html
A Delightfully Gritty Look at Being a Property "Vulture" from
the FT's dour-most columnist:
"Don't catch this falling piano, at least for another couple of years," counsels
John Dizard
<< [T]he vulture business is...more attractive to newbies than to veterans... You spend a lot of time in conference rooms in Courtyard Marriotts, mostly near regional airports, going over badly drawn legal documents looking for flaws. There are usually a lot of those. Invariably, people who are approaching insolvency have cut corners on their financial reporting, so a lot of those boxes in the warehouse that the accountants saw may be empty. Maintenance for the pumps in the basement of the building you now own was not really paid for, as they said it was. So the basement flooded. Ever seen a flooded basement? Ever wonder how tenants feel about that? You'll find out. One of the more interesting points of debate around the coffee urn at those hotels is whether the former owners went insane because the business was in trouble, or did the business get in trouble because the owners were insane? >>
www.ft.com/cms/s/0/39517af6-1b05-11dd-aa67-0000779fd2ac.html
"'Dowdy' Talbots Hopes Makeover Can Revive Sales"
by Amy Merrick -- Wall Street Journal 4/2/2008 page B1
<< [R]etailers of women's clothing, from Talbots to
AnnTaylor Stores Corp. to Chico's FAS Inc., are struggling with a weak economy,
poor fashion choices and aggressive discounting throughout the industry. They
are closing stores, delaying expansion plans and paring costs in every possible
area... For fall, [Talbots] designers will fill the stores with traditional
menswear patterns such as houndstooth, tweed and herringbone. They also plan to
play up the color red, which features prominently in Talbots's logo and the
front doors of its locations... Talbots had already announced it will close about
100 of its more than 1,100 stores this year, including shuttering its kids' and
men's businesses. The chain was so strapped for cash recently that...it had to
ask suppliers to delay sending bills, in order to avoid violating its bank
covenants. >>
http://online.wsj.com/article/SB120705979399580343.html (subscribers only)
<< Before 6,000 investors, employees and analysts [CEO] Howard D. Schultz unveiled an improved automated espresso machine that grinds coffee for each drink and has a lower height — so customers can see baristas making their beverages... Mr. Schultz also announced the company's acquisition of Coffee Equipment Company, the four-year-old Seattle-based maker of the Clover coffee brewing machine, which brews one cup of coffee at a time... Beginning in mid-April, users of the customer card can customize their drinks — adding vanilla or using soy milk, for example — for free. He described this as a start to an evolving rewards program... "We somehow evolved from a culture of entrepreneurship, creativity and innovation to a culture of, in a way, mediocrity and bureaucracy," Mr. Schultz said. >>
www.nytimes.com/2008/03/19/business/19cnd-sbux.html?pagewanted=print
"Consumer Slowdown Scalds Starbucks"
brief item from Fortune 4/23/2008,
but with plenty of drinker feedback
<< "The current economic environment is the weakest in our company's history, marked by lower home values, and rising costs for energy, food and other products that are directly impacting our customers," said CEO Howard Schultz, who returned earlier this year to lead the company's turnaround efforts after a spell of weak results under the departed Jim Donald. >>
http://dailybriefing.blogs.fortune.cnn.com/2008/04/23/consumer-slowdown-scalds-starbucks
"Energy Beverages, Smoothies, Food among Changes Planned" by Starbucks
by Andrea Jones -- Seattle Post-Intelligencer 5/1/2008
<< Starbucks Corp., which has said it would "fight to the death" to promote its coffee, is getting in on the energy drink business. And the smoothie business. And the as-yet-unnamed-Italian-beverage business. The Seattle-based coffee chain, which recently decided to stop offering breakfast sandwiches, will also begin offering healthy foods in the fall... Starbucks will partner with Pepsi-Cola for its "DoubleShot platform" to sell energy drinks through retail channels similar to those used to sell bottled Frappuccino drinks. The company will also sell custom energy drinks in stores... Starbucks' newest initiatives -- including offering fruit drinks -- seem puzzling, and "all over the board" to outsiders, said Bradford Hudson, a marketing professor at Boston University who teaches the Starbucks case study.
John Chidsey, the Man Behind the Burger King Turnaround
by Janet Adamy -- Wall Street Journal 4/12/2008, page B1
EXTRACT from CEO Chidsey: << I'd say it was finding who our target customer was -- figuring out who was the superfan -- and not wasting our time trying to be all things to all people... We're in [almost] 70 countries around the world. It's not like we need to go into 30 new countries. Really what we need to do is drill down in the countries we're in. We need to be a lot bigger in Germany. We need to be a lot bigger in the U.K. We need to be a lot bigger in Japan. The second thing that really resonates for us is the fire-grilled food... As Peter Tan, who now runs our Asia operations, said, having run McDonald's in Asia, "You guys should have killed us because Asians so prefer fire-grilled food." >>
http://online.wsj.com/public/article_print/SB120709864540082145.html
"A Turnaround with Teeth for Implant Maker Nobel Biocare"
by Neil A. Martin -- Barron's
4/7/2008
<< Dental implantation is likely to gain in popularity, especially in the U.S., as the population ages. "The outlook for continued strong growth is good, and improving due to the number of new dentists" receiving some training in implants, says Dennis P. Tarnow, head of the department of implant dentistry at New York University. In addition, insurers are starting to cover some procedures. North America contributes 34% of Nobel's sales; Europe, 45%; Asia-Pacific, 15%; other regions, 6%. >>
http://online.barrons.com/article/SB120736046672591789.html
Even cynical reporters get jazzed by resurrection dramas (as
long as they know the ending)
"They Kept McCain Afloat" by Maeve Reston -- Los Angeles
Times 3/7/2008
<< In the second week of July 2007, a pall settled over the half-empty headquarters of John McCain... The top two officials had resigned. Two-thirds of the staff had been fired or left, and those who remained worried the campaign might never recover... The Arizona senator tried out a now-familiar laugh line: "In the words of Chairman Mao, it's always darkest before it's totally black"... McCain's comeback was largely engineered by a team that grew out of the summer collapse, who are jokingly called the ‘Sedona five' because of their strategy sessions at McCain's Arizona cabin... Schmidt, McCain and Graham decided on a string of events highlighting the troop buildup [in Iraq], in which McCain would travel with veterans and fellow prisoners of war beginning Sept. 11 in Iowa, and moving on to New Hampshire and South Carolina. ‘We had our share of experts telling us we were out of our minds' to keep the focus on Iraq, [campaign manager Rick] Davis said. >>
http://articles.latimes.com/2008/mar/07/nation/na-mccainteam7
"Better Days, and Even the Candidates, Are Coming to W.W.E."
by R.M. Schneiderman -- New York Times 4/28/2008
<< W.W.E.'s quick recovery is the result of many steps the company has taken, including expanding overseas and online, where its digital revenues grew 47% last year in part because of a mobile content deal with AT&T Mobile. W.W.E. was also able to react quickly, turning the issue of steroids to its advantage, even as the public grew increasingly weary of steroid scandals and corporate foot-dragging in other sports, like baseball and bicycling... The turnaround was completed by a company that -- while public -- is still very much a family-run enterprise. In 1982, Vince McMahon, a promoter and announcer, took over his father's wrestling business, and with his wife, Linda, began to build the World Wrestling Federation into a national brand (the company changed its name -- and initials -- after losing a legal battle with the World Wildlife Fund). >>
www.nytimes.com/2008/04/28/business/media/28wwe.html?pagewanted=print
Monster's Sal Ianuzzi Begins Restructuring, Invests to Boost
Demand
by Joseph De Avila -- Wall Street Journal 5/12/2008
EXTRACT from Ianuzzi: << Everything from investment in technology to sales force [had grown too comfortable]. Customer service is another example. People would come to us to put up a resume, and we made it too hard. And they'd walk away because it was too hard... This company had no less than 19 technology platforms. It would take an average of 44 weeks to implement a new product. >>
http://online.wsj.com/article/SB121054906861083759.html (subscribers only)
"Peru's Born-Again Free Markeeter" -- President Alan Garcia with Mary Anastasia O'Grady
<< Mr. García led Peru once before, from 1985-1990. That presidency ended in disaster... Price controls had spawned long lines for food. The government had a fiscal deficit totaling a whopping 7.5% of GDP. The economy contracted 8.8% in 1988 and 12.2% in 1989. Meanwhile, Shining Path terrorists dominated the countryside... In 2006, he ran again and won [as voters] braced themselves for life again under the man known as "crazy horse." So far not only have their fears not materialized but something truly unexpected has happened instead: Mr. García now speaks the language of a born-again economic liberal and defends markets as a way to reduce poverty. >>
http://online.wsj.com/article/SB120977171596164055.html
A Rebuttal to Time: "How Putin's Crackdown Holds Russia Back"
by
Michael McFaul and Kathryn
Stoner-Weiss -- Foreign Affairs, January/February 2008
<< Authoritarians elsewhere have held up [Vladimir] Putin's popularity and accomplishments in Russia as proof that autocracy has a future -- that, contrary to the end-of-history claims about liberal democracy's inevitable triumph, Putin, like China's Deng Xiaoping did, has forged a model of successful market authoritarianism that can be imitated around the world. This conventional narrative [is] based almost entirely on a spurious correlation between autocracy and growth... Russia's path is more likely to be something like that of Angola -- an oil-dependent state that is growing now because of high oil prices but has floundered in the past when oil prices were low and whose leaders seem more intent on maintaining themselves in office to control oil revenues and other rents than on providing public goods and services to a beleaguered population. Unfortunately, as Angola's president, José Eduardo dos Santos, has demonstrated by his three decades in power, even poorly performing autocracies can last a long, long time. >>
AND
ONE BLAST FROM THE PAST...
From Business Week 4/10/2008: "Peter Drucker's Winning Team"
by Drucker Institute director Rick Wartzman
<< Peter Bavasi pored over a Harvard Business Review article by Peter Drucker [and the part that said] "Any job that ordinarily competent people cannot perform is a job that cannot be staffed" was especially ominous for Bavasi. He had, you see, just become president of the Cleveland Indians, a sports franchise to which the word ‘hapless' seemed inextricably tied... The Austrian-born [Drucker] enjoyed watching America's national pastime... Bavasi, though, wasn't looking for a baseball guy. He needed an organizational expert, someone who could help teach his entire operation, from the equipment manager in the clubhouse to the skipper in the dugout, how to be more effective at a broad range of tasks. In fact, Bavasi had long been a big believer in Drucker's concept of MBO, or management by objectives... >>
www.businessweek.com/print/managing/content/apr2008/ca20080410_436523.htm
Compiled by Frank Gregorsky (703) 281-1674 Return to ExactingEditor.com home page