"We're on our way into a new bubble, and bubbles eventually get pricked." -- Barry Diller, InterActive CEO, warning of high Internet stock valuations So far, the goal of rivaling IBM (IBM) in tech services has eluded Hewlett-Packard (HPQ) CEO Carly Fiorina. IBM's $43 billion Global Services unit towers over HP's $12 billion business. Now, HP is hoping to close the gap by expanding into the lucrative business-process outsourcing (BPO) market, BusinessWeek has learned. BPO deals typically involve taking over entire functions for a company, such as human resources.
HP is close to hiring Marc Schwarz, director of outsourcing at Deloitte Consulting, to lead the division, say insiders. Schwarz declined to comment. In January, HP started quietly pursuing 15 to 20 BPO deals, including a $200 million contract to take over some accounting jobs for Procter & Gamble (PG). IBM and Affiliated Computer Services (ACS) also are bidding. The winner will be announced later this month, says P&G.
HP plans to focus on one of the largest BPO segments, finance and administrative tasks such as billing and invoices. "We will evaluate other areas," says Ann Livermore, executive vice-president for services, who declined to discuss any specific deals or potential hires. Then maybe HP will stop living in IBM's shadow. Could Secretary of State Colin Powell have been thinking of his future boss when he complained in his 1995 autobiography about the privileged few who avoided the Vietnam-era draft by taking refuge in the National Guard and the Reserves?
When President Bush appeared on Meet the Press on Feb. 8, he said he served "proudly" in the Vietnam-era Air National Guard, adding that "there are a lot of really fine people who have served in the National Guard and who are serving in the National Guard today in Iraq."
True enough. But during Vietnam, few Guardsmen were called to active duty. "The Reserves and the Guard acquired reputations as draft havens for relatively affluent young white men," reads an official history of the Air National Guard.
No wonder then, that Powell wrote in My American Journey: "I am angry that so many of the sons of the powerful and well-placed... managed to wangle slots in Reserve and National Guard units." Powell says his criticism was aimed at the political leaders and the system at the time, not at any individuals who served in the Guard or Reserves. After months of internal debate, the AFL-CIO is finally getting ready to endorse Senator John Kerry (D-Mass.) for President, BusinessWeek has learned. A group of 18 mostly industrial unions had first backed Representative Dick Gephardt (D-Mo.), while two service-worker unions had lined up behind Vermont ex-Governor Howard Dean. But with Gephardt out and Dean almost so, the 18 switched to Kerry on Feb. 11. One of the service unions, the American Federation of State, County & Municipal Employees, already yanked its Dean pledge. The AFL-CIO will probably wait to endorse Kerry until after the Feb. 17 Wisconsin primary, when the Service Employees International Union has said it will ditch Dean if he hasn't scored big wins.
Labor's belated aid won't make much difference unless the primary race narrows, which seems unlikely. "But it means the Democratic Party is unified early for a battle against Bush, so we're glad to get the endorsement," says a Kerry campaign official. Come November, they'll be glad for the manpower. Ex-Merrill Lynch (MER) aide Douglas Faneuil drew laughs when he testified that Martha Stewart threatened to dump Merrill because she hated its hold music. But after many an hour on the wrong side of an Air Supply marathon, one can sympathize -- and wonder: Just how are Up Front: companies entertaining the people they put on hold these days? Merrill Lynch, like IBM (IBM), General Motors (GM), and Dell (DELL), plays classical music, as does BusinessWeek parent The McGraw-Hill Companies. But Wal-Mart (WMT) plays light country. The Salvation Army plays hymns. At Microsoft (MSFT) and EMC (EMC) -- silence. Beats Barry Manilow. Skeptics may scoff, but you can do well by doing good -- good corporate governance. A new study by Georgia State University and proxy advisers Institutional Shareholder Services found companies with the best governance did better on many measures, including price-earnings ratios and return on equity.
The best-run companies had five-year average annual returns of nearly 8% above their industry averages, while those with the worst gover-nance scores returned 4% less. It seems governance pays -- and shareholders can bank on that. There's a rule of thumb for startups: Don't go head-to-head with Microsoft (MSFT). But on Feb. 16 at the techie confab DEMO 2004, Gus Tsao, president of Wuxi, China's Evermore Software, will show off a rival to Microsoft Office. Tsao's program, Evermore Integrated Office, runs on Windows and Linux. It combines word processing, spreadsheet, and presentation software so that changes to one document are reflected in related files.
Born in China, Tsao, 59, has worked at U.S. tech companies since the 1980s. He wanted to do a Java version of Office in the mid-'90s but -- no surprise -- couldn't get backing. His big break came four years ago, when the city of Wuxi invested $2.7 million. The program first appeared in China, and a U.S. version is now going for $99 a year -- a quarter the price of Office.
As for Microsoft, Tsao says: "There are many well-known battles where the weak and outnumbered won the war." Tsao better hope he has a good slingshot. The billboard's less-than-glamorous station in life has been to sit at the side of dirty highways or atop windswept buildings. That's not going to change, but the industry is hoping to shed its image as the neglected cousin of the advertising world.
Billboard company executives are preparing to lure new clients by offering more detailed demographic data about who sees their billboards -- which is a big improvement over mere traffic counts. Both ACNielsen and Arbitron (ARB), known for measuring television and radio audiences, are rolling out competing ratings using global positioning system technology. The companies pay people to carry cell-phone-size gadgets that are tracked by satellites, allowing companies to tell who goes by which billboards and when.
Since ratings companies will collect lots of information from their respondents, they'll be able to tell, for example, how many 18-year-old guys who buy music four times a month will pass by a particular Best Buy (BBY) billboard in Georgia. The system will rate kiosks and bus shelters, too. "We are hoping these ratings will put outdoor on par with how other media is bought," says Stephen Freitas of the Outdoor Advertising Assn.
Giants of the billboard industry such as Clear Channel, Viacom, and JCDecaux are betting the new ratings will fuel growth. As it stands, the market for outdoor ads is expected grow from $19 billion in 2003 to $22 billion in 2008, according to PricewaterhouseCoopers.
Nielsen is rolling out its system in Chicago, and Arbitron is testing in Atlanta. They hope to be in other major markets in a few months. Finally, billboards may get a little respect.
Corrections and Clarifications
``Coming: Way more info on billboards'' (Up Front, Feb. 23, 2004) should have referred to Nielsen Outdoor, not ACNielsen.
Forget Hemingway and Shakespeare. One of the most gifted writers of modern English may be Ted Kaczynski -- a.k.a. the Unabomber.
Or that's what one influential college admissions test, the SAT II, would conclude. The SAT II was born after parents and educators protested the Scholastic Assessment Test's multiple-choice format. The SAT II includes an essay section that becomes mandatory next year. Essays are graded on "development of ideas, supporting examples, organization, word choice, and sentence structure."
Test-prep giant Princeton Review graded well-known writers on these criteria and rated them from 6 (tops) to 1 (worst). Hemingway scored just a 3. Shakespeare got a 2; Gertrude Stein a 1. And Kaczynksi? He got the gold star -- a 6.