Archives: 09 February 2011

Borderless European Cloud Risks Fragmentation

February 9, 2011 at 7:36 amCategory:News

Nationalism is rearing its head in cyberspace. A proposal is gaining ground in France to build a federation of interconnected local computing clouds—funded in part by the government—to protect the country’s sovereignty, data privacy, and jobs. Some observers fear the idea could spread to other countries on the Continent, potentially undermining the promised benefits to Europeans of universal cloud computing, which is being billed as the biggest shift in information technology since personal computers were introduced in the 1970s.

The idea for a cloud à la Française is in part a backlash against American providers of cloud computing services such as Google, Amazon, IBM, and Microsoft. As with Europe’s billion Galileo sat-nav system—an alternative to the U.S.-operated GPS—and various Old World search engine projects such as France’s Quaero, some Europeans worry about becoming overly dependent on American technology in key strategic areas.

On May 17, a group of French technology companies and businesses known as the Association for a Digital Economy in France (l’ADEN), called on local governments in France to partner with private companies to build a network of data centers and shared cloud platforms and services that would cater to the computing needs of French businesses, organizations, governments, and citizens. Such a network would provide an alternative to handing over data and processes to American providers. The group has suggested that the local cloud infrastructure could be built with the help of funds set aside for France’s “grand emprunt national,” a €4.5 billion economic stimulus package that will kick in at the end of next year.

Cloud computing is the term for a new form of distributed computing that allows consumers, enterprises, and governments to store their data and applications on remote networked servers, rather than on local computers and data centers, and to tap into computer applications and other software via the network—freeing themselves from building and managing their own technology infrastructure. In addition to reducing operational costs, analysts say the shift to cloud technologies allows radical business innovation and new business models.

Some industry experts in Europe believe only giants like Google and Amazon can achieve the necessary economies of scale in building the massive data centers that underpin the cloud. They fear that national projects will be white elephants and question whether big enterprise customers like Danone and Carrefour will be willing to pay the price of French sovereignty.

Did Vuitton Engage in a Little Fakery, Too?

February 9, 2011 at 7:27 amCategory:News

LVMH Moet Hennessy Louis Vuitton has zero tolerance for companies that manufacture and sell fake goods. The Paris-based luxury group works with law-enforcement authorities to shut down counterfeiting operations in China, and has won court rulings against eBay for selling fake copies of Vuitton bags, Dior sunglasses, and other items.

But now British regulators have accused LVMH of engaging in a bit of fakery itself. On May 26, the country’s Advertising Standards Authority banned two recent Louis Vuitton advertisements, saying they left a “misleading” impression that the company’s products were handmade.

The ads, the subject of a Europe Insight blog post last December, depict Vuitton handbags and other items being fashioned by workers using hand tools and needle and thread. In fact, most Vuitton products are largely machine-produced—something I have witnessed firsthand in a Vuitton factory. The British truth-in-advertising agency opened an investigation after three consumers complained about the ads.

In its ruling, the agency said that Vuitton didn’t deny using sewing machines in its workshops. “They said that hand sewing machines were used for some aspects of items because they were more secure and necessary for strength, accuracy and durability,” the agency said. However, the company provided no documentation to the agency about the proportion of work done by hand. “Because we had not seen evidence that demonstrated the extent to which Louis Vuitton products were made by hand, we concluded that the ads were misleading,” the agency said.

LVMH, in a statement, said the ruling was not “about the truth of the claim, but whether there was sufficient documentation available to prove to the ASA the ‘extent to which LV products are made by hand.’ ” LVMH says the ad campaign has now ended.

Don’t expect Vuitton customers to rise up in anger over this issue. Reader comments on the earlier Europe Insight blog post were divided between those who thought the ads were dishonest, and those who thought the company was, as one reader put it, simply “celebrating craftsmanship and skill. What’s wrong with that?”

Entrepreneurship Goes Global

February 9, 2011 at 7:27 amCategory:News

Among the global economic upheavals of the past two decades, here’s one worth cheering about: the worldwide spread of entrepreneuriship. Anyone who doubts that should have headed to Monaco last weekend for the World Entrepreneur of the Year awards ceremony.

The 42 countries represented at the event included China and several former Soviet-bloc nations – places where starting a private business was illegal not so long ago. In other countries, the weakening of traditional business structures, such as Korean chaebol, have created opportunities for smaller players. Tax and regulatory reform, the lowering of protectionist barriers, technological advances and the rise of the Internet, all have made it easier — though certainly not easy – to create and build a business.

Ernst & Young started the competition in the U.S. in 1986 and expanded it worldwide 10 years ago. More than two-thirds of this year’s 5,000 contestants were from outside the U.S. The finalists included the heads of emerging-market powerhouses such as Indian industrial conglomerate Mahindra Group, and Geely Automobile Holdings, a Chinese automaker that recently bought Volvo, and dozens of lesser-known success stories.

This year’s winner was Michael Spencer, the founder and chief executive of London-based ICAP. Spencer started the company in 1986 with ,000. It’s now a .7 billion-a-year business that is the world’s No. 1 inter-dealer brokerage, serving as an intermediary for trading between financial institutions. In starting a company, “I knew there was a serious chance of failure,” Spencer says. “But we fought our way out of setbacks.”

Indeed, many of these entrepreneurs have shown a remarkable ability to use adversity as a springboard for growth. Take Indrek Sepp of Estonia, who started AS Pristis, the biggest security company in the Baltics. Sepp started installing car alarms to make extra money while a student in the early 1990s. When revenues flagged after automakers began installing alarms in new cars, he started installing alarm systems. That worked fine – until the housing market in the Baltics collapsed when recession hit two years ago. Undeterred, Sepp moved into the security-guard business last year, buying one of the region’s biggest security-services companies. Says Sepp: “It’s because of the crisis that we were able to purchase this company,” which was being unloaded by its corporate parent at a bargain price.

Another finalist in the competition, Korean entrepreneur Hyeon Joo Park, spotted opportunity in the Asian financial crisis of the 1990s. He started Korea’s first mutual fund in 1998 when that country’s equity market “was the most undervalued in the world,” he recalls. As share prices began rising, investors flocked to his Mirae Asset Global Investments group, which specializes in emerging-market equities. Today it has billion in assets under management and operates in eight countries, including the U.S.

Ernst & Young CEO Jim Turley says his firm last year surveyed entrepreneur-led companies, comparing their responses to the global recession with the responses of longer-established multinationals. “Two-thirds of the entrepreneurs reported they were seeking new opportunities,” he says, while only 20% of the older companies were doing so. “The entrepreneurs are the only ones adding jobs.”

That finding wouldn’t startle anyone in the U.S., where entrepreneurship has long been seen as a key engine of economic growth. But elsewhere in the world, the emergence of a new generation of resourceful and resilient business people is very big news indeed.

Given entrepreneurship’s increasingly global dimension, it’s probably fitting that the U.S. finalist in this year’s competition was Tom Adams, CEO of Rosetta Stone, a company that makes software to help people learn foreign languages.

French Artificial Heart Maker Plans June IPO

February 9, 2011 at 7:27 amCategory:News

In a sign that European tech IPOs are warming up, French startup Carmat, a pioneering designer of an entirely artificial human heart, is planning a €15 million initial public offering on the Alternext market of NYSE-Euronext Paris this month. Co-founded by French heart surgeon Alain Carpentier, the company has tapped the latest technological advances in software, materials science, and aerospace (including stress-testing, miniaturization, and design for severe environments) to devise an artificial heart that avoids problems plaguing earlier such devices.

Carmat has already raised €42.70 million from private backers, including €2.25 million from the Professor Alain Carpentier Foundation and European Aeronautic Defence & Space Co. (EADS), the parent company of passenger jet maker Airbus; €33 million from OSEO, the French state innovation agency; €5 million from Paris-based venture capital firm Truffle Capital; and €950,000 from a share capital increase.

The money raised in the IPO will be used to commercialize a prototype device that has been under development for 15 years. This year Carmat plans to produce 25 prostheses for preclinical trials and implantation in humans. The goal is to conduct full clinical trials with humans in 2011, after obtaining the permission of the AFSSAPS, the French government agency for healthcare product safety. Commercial launch in Europe and the U.S. is expected in mid-2013, says Carmat chief executive Marcello Conviti.

The Carmat artificial heart is intended for patients who have suffered a massive heart attack or those with late-stage heart failure. Cardiac failure is the leading cause of death worldwide and is responsible for around 100,000 deaths per year in Europe and North America alone. Yet fewer than 4,000 people per year are lucky enough to get human heart transplants. “More than 95% of those people currently have no alternative, so this is our potential market,” says Conviti, who has more than 25 years experience in cardiovascular medical devices, most recently as senior vice president strategy and new business development at Edwards Lifesciences (EW).

Digital Rankings: U.S. Gains; Europe Flat

February 9, 2011 at 7:27 amCategory:News

In the race to stay competitive in the emerging digital economy, Nordic nations continue to rule the roost. The U.S. has gained ground, and Asian countries are on the rise. That’s according to the latest findings from the Economist Intelligence Group’s annual “e-readiness” rankings, which have been renamed the Digital Economy Rankings this year as they enter their second decade.

The EIU study measures 70 countries on 100 criteria, ranging from their business, cultural, and legal environments to the price and penetration of broadband and wireless services. The data come from sources including the U.N., World Bank, Pyramid Research, and the EIU’s own proprietary numbers. The purpose of the study—similar to an annual ranking from the World Economic Forum—is to help policymakers assess how ready their countries are to face the changing demands of the 21st-century Internet economy.

Perennial leaders Sweden and Denmark again topped the list, but they swapped places this year, with Sweden narrowly edging out its Scandinavian rival to grab the top spot. Finland ranked No. 4, jumping six places from 2009, and Norway ranked No. 6, down two places. The Netherlands came in at No. 5, down two spots.

One surprise was the performance of the United States, which rose two notches to rank No. 3 in the world. The U.S. used to lag many other countries in mobile and consumer broadband infrastructure, but both have improved markedly in recent years. What’s more, the U.S. has seen a surge in use of the wireless Web thanks to the Apple (AAPL) iPhone and other smartphones.

The balance of the top 10 includes Hong Kong and Singapore, ranked 7 and 8, respectively (swapping positions from last year), Australia (No. 9, down three places), and New Zealand (No. 10, up one). Some European countries were flat or rose slightly—Portugal, Slovenia, the Czech Republic, Greece, Hungary, Latvia, and Poland (among others) were unchanged, while Ireland, Spain, and Estonia nudged up one place each. Others fell drastically, including France (down five places, to No. 20) and Switzerland (down seven places to 19), while Germany, Austria, Belgium, and the U.K. all fell by one place.

The biggest gainers were primarily Asian countries. Taiwan rose four places to No. 12; Japan rose six to No. 16; and South Korea—famous for its speedy and affordable broadband—also rose six spots to No. 13. The EIU notes that Asian countries score especially highly on the quality of their wired and wireless broadband services.

This year’s EIU study finds two other positive trends. First, broadband access is becoming more affordable around the world, especially in emerging economies such as Vietnam and Nigeria. Two years ago, the cost of broadband amounted to less than 2 percent of median monthly household income in just 33 of the countries studied. This year, 49 of the 70 countries had broadband services at that price or below.

In part thanks to this trend, the global “digital divide” is waning. Last year, the gap between the top- and bottom-ranked countries on the EIU’s list came to 5.9 points on a scale of 1 to 10. This year, the gap has narrowed to 5.5 points, a welcome sign that poorer countries are gaining ground in the new digital economy.

Teaching Latin Companies to Use Social Media

February 9, 2011 at 7:27 amCategory:News

Ariel Brailovsky beat thousands of consumers to win a dream vacation package in Spain by doing nothing more than tweeting and completing a few tasks on Facebook. The contest was launched on behalf of the Spanish government by SrBurns, a firm specialized in helping companies and countries in the Spanish-speaking world use social media to increase business. SrBurns was one of dozens of innovative young companies from Spain and Latin America that participated at La Red Innova conference in Madrid on June 14 and 15.

Social networking is dramatically affecting the way people interact, play games, and conduct business around the globe. But companies and governments in Spain and Latin America have been slower to integrate it, dismissing it as a service for teenagers. Many wonder how they can make money using social networking tools, says Gaby Castellanos, chief executive of SrBurns, which specializes in new media advertising.

Castellanos, an award-winning Venezuelan advertising executive who has been living in Spain since 1996, was a leading speaker at La Red Innova, where investors, opinion leaders, entrepreneurs, and bloggers from Latin America and Spain mixed with counterparts from elsewhere in Europe and the U.S. Headed by Jose Maria Figueres, ex-president of Costa Rica and former chief executive of the World Economic Forum, the event was supported by the city of Madrid, which is trying to position itself as a center of development for the Internet and other new technologies.

Castellanos, who is listed in the Spanish language press as of one of the 10 most influential people on the Internet in Spain, says Spain is about six months behind the U.S. in integrating social networking into business, while Latin America is as much as three years behind. She is on a mission to change that, telling Spanish-speaking companies that “social media represents the opportunity to change everything about marketing and advertising.” SrBurns (named after the miserly businessman Mr. Burns in the animated television show The Simpsons), already has a number of case studies to supports its claims. Clients have included Lexus, Turespaña, Vodafone, Telefonica, Diageo, Endemol, and Save the Children.

The Spanish government also is a client. A social media campaign for the Spanish tourism office called “Spain. A Country to Share,” was launched in December 2009 by SrBurns. The campaign included a competition called “The Best Feeling Ever” that attempted to lure more travelers to the country, which was hit particularly hard by the global downturn. Consumers such as Brailovsky, a 38-year-old systems engineer who works for Apple, were encouraged to answer a daily question on Facebook and complete certain tasks, such as posting photos and telling their life stories. The winner also had to get the greatest number of votes from friends on Facebook. Brailovsky, an Argentinean living in Miami, gathered 8,500, beating some 3,000 competitors.

A New Approach to Classroom Computers

February 9, 2011 at 7:27 amCategory:News

Israeli startup Time To Know is out to revolutionize education by offering schools a new digital teaching platform and interactive curriculum. The company’s ambitious goal: to radically change the way teachers and students interact.

Founded in 2004 and located in a cheerfully painted former girls college in Jaffa, Time To Know has raised million in funding spearheaded by Shmuel Meitar, a co-founder of customer care and billing software giant Amdocs (DOX). The company has won contracts with schools in Israel, the state of Texas, and New York City, and counts 350 employees around the world.

The flaws in today’s “chalk and talk” educational system, which has remained pretty much unchanged for the last century, are widely recognized. But attempts to fix it by bolting on computers and connectivity have so far had only limited success—partly due to a lack of relevant educational content and software tools, says Dovi Weiss, Time To Know’s Chief Pedagogical Officer and a co-founder of the company. “What is needed is a holistic approach,” he says.

Enter Time To Know’s Web-based software, which forms the basis for a suite of tools ranging from course planning and classroom management to group collaboration and student assessment. At the core is a collection of interactive curriculum in math and language arts (reading, writing and comprehension), as well as English as a second or foreign language. Thanks to its real-time nature, Time To Know gives teachers immediate feedback on which students in the classroom are succeeding or falling behind. “What we are building is a partnership between teachers and technology,” says Weiss.

Nokia’s Results Sag Amid Faint Hope

February 9, 2011 at 7:26 amCategory:News

By most measures, the world’s largest maker of mobile phones delivered disappointing second-quarter results on July 22. Revenues grew less than 1 percent from the same quarter a year earlier, to €10 billion (.89 billion), and profits plummeted 40 percent, to €227 million (2.5 million), below consensus analyst estimates of €285 million.

Nokia held onto 33 percent of the mobile phone market, but the average selling price for the 111.1 million phones it shipped in the quarter fell to €61 (.60) from €64 (.46) a year earlier. That helped pull down its operating margins on handsets and services to 9.5 percent, from 11.6 percent a year earlier.

Was there any good news? You have to dig down a bit to find it, but Nokia reported a few bright spots. The market for smartphones—higher-priced devices that typically support e-mail, multimedia, wireless browsing, and downloadable apps—is where Nokia’s shortcomings vs. rivals Apple and Research In Motion has been most evident. But in the second quarter, the Finnish company sold 24 million such devices, up 42 percent from a year earlier, according to market researcher Strategy Analytics. The overall smartphone market grew at about the same rate, so Nokia held its share from a year ago, at 40.3 percent, and actually grew share slightly from 38.8 percent in the first quarter of this year.

This seems an astonishing idea, given the rise of the Apple iPhone and continued high visibility for RIM’s BlackBerry devices. What accounts for Nokia’s relatively strong showing (RIM had 18.8 percent of the market in the second quarter and Apple had 14.1 percent, both slightly down from the first quarter, according to Strategy Analytics) is Nokia’s vast powers of global distribution and a preponderance of lower-end models in its lineup that appeal to aspirational buyers in emerging markets.

The result, of course, is that Nokia smartphones sell for a lot less, on average, than those from rivals. Average prices in the second quarter fell to €143 (4) from €181 (3) a year earlier. By comparison, Apple’s smartphones generate 5 each in hardware and services revenues—which helps give Apple far better margins. Still, it’s arguable that selling nearly 4.4 million more devices than your next two rivals combined gives Nokia a certain pride of place.

Ericsson Charts Changing Usage of TV

February 9, 2011 at 7:26 amCategory:News

The way consumers use television is changing rapidly, with 70 percent of viewers now streaming, downloading, or watching recorded broadcasts on a weekly basis and half accessing on-demand TV or videos via the Internet at least once a week.

Those are among the findings in a new study released Aug. 25 by the ConsumerLab research group at Swedish telecom equipment maker Ericsson (ERIC). Conducted in seven countries (China, Germany, Spain, Sweden, Taiwan, the U.K., and the U.S.) with a sample representing 300 million people, the survey is part of Ericsson’s ongoing efforts to understand how consumers behave and what they think of telecommunications and media.

The study findings confirm that patterns of media consumption are undergoing a major transformation, thanks especially to the Internet, mobile networks, and the emergence of digital devices such as the Apple (AAPL) iPad tablet.

To be sure, some 93 percent of respondents still watch conventional scheduled TV broadcasts at least once a week. But a growing number are demanding the ability to consume TV content when and where they want it—at a later date, via time-shifting digital video recorders (DVRs) or on-demand services, and on devices other than traditional TVs, such as mobile phones or laptops. In what’s likely good news for gizmos such as the iPad, 37 percent of respondents said they would be interested in using a tablet in conjunction with their TVs.

“Consumption is fragmented and complex,” said Anders Erlandsson, Senior Advisor at Ericsson ConsumerLab, in a press release about the survey findings. “There are few established consumption patterns, and it’s a trial-and-error market with lots of curiosity around it.”

The study identified some anomalies between consumer spending and usage patterns. For instance, respondents shell out an average of €38 () per month for TV services—broadcast (cable, satellite, DSL), pay-per-view, and on-demand. Broadcast accounts for 60 percent of their total outlay, while on-demand is just 37 percent.

Yet of the 25 hours per week, on average, that consumers spend watching TV, only 43 percent is on broadcast or premium services, while 55 percent is time-shifted or on-demand TV. Ericsson argues that this gap in “wallet share” between what customers pay for and how they use TV augurs a shift in future spending patterns that service providers must anticipate and exploit. “It is clear that consumers are not paying for what they use the most,” the company said in its press release.

What are the opportunities highlighted in the survey? Ericsson found that more than 50 percent of respondents would like to connect their PCs to their TVs to watch online video—from sources such as YouTube (GOOG) and others—or to view photos or browse the Web on a larger screen, more comfortably, and with groups of people. Yet making such connections today can be frustratingly complex.

Another key finding: 40 percent of respondents say that “immediate access” to chosen content is very important to them, suggesting a shift from owning videos to accessing programming on demand.

Most importantly, Ericsson says that service providers must devise ways to align consumer spending and usage. Thanks to the “everything should be free” Internet mindset and a growing shift to TV consumption on PCs, traditional service providers risk seeing the value of their offerings diminished. Yet, “if done right,” Ericsson argues, “consumers will reallocate their TV spending to new alternatives.”

Nokia Profit Tops Estimate as Share Falls

February 9, 2011 at 7:26 amCategory:News

The Finns aren’t gloating types, but they must be taking a certain amount of delight from Nokia’s third-quarter comeback. The world’s largest mobile phone maker on Oct. 21 reported revenues of €10.3 billion (.4 billion), up 5 percent from the same quarter in 2009 and higher than the €9.99 billion average estimate among analysts surveyed by Bloomberg. More importantly, net income of €529 million (0 million) was nearly three times consensus. In last year’s third quarter, Nokia (NOK) lost €559 million.

Driving the turnaround was a huge jump in smartphone sales, which hit 26.5 million units in the quarter, up 61 percent from a year earlier and 10 percent from the second quarter. All told, the category of products that Nokia calls “converged mobile devices” contributed €3.61 billion to the top line, while sales of nearly 84 million conventional handsets in the quarter brought in just €3.56 billion. That makes this the third consecutive quarter in which smartphone revenues outpaced those from simpler, higher-volume phones.

Other metrics also showed positive movement. Operating margins for Nokia’s dominant Devices and Services unit, which accounts for 70 percent of total revenues, climbed one point from a year earlier, to 10.5 percent. And the company’s closely watched average selling price (ASP) crept up to €65, from €61 in the previous quarter and €64 a year earlier. This was due to the higher relative volume of pricier smartphones in the mix, though the ASP of those devices continues to sag—down a worrisome 28 percent during the past year, suggesting Nokia may have been forced to discount in order to move merchandise.

Still, there was enough good news in the quarterly report to drive Nokia’s shares up 6.3 percent in Helsinki trading, though the rise wasn’t matched later in New York, where shares rose 3.3 percent by late afternoon. It also helped that Nokia forecast flat to higher margins in the fourth quarter and raised its forecast for overall industry growth to “more than 10% in 2010,” compared with an earlier estimate calling for a rise of “approximately” 10 percent.

Unfortunately, that’s pretty much where the positive points run out. Nokia conceded in its earnings statement that it expects to “slightly” lose market share this year compared to last in both volume and revenue terms. To help keep costs in line, the company announced plans to lay off 1,800 people from corporate functions, R&D, and at Symbian, a Nokia-owned, London-based software firm that develops the operating system used in Nokia smartphones. It will also streamline operations by merging the development of the Symbian 3 and Symbian 4 operating systems.

Fixing Symbian is key to addressing Nokia’s slipping market share. Simply put, the King of Handsets is having a tough time delivering products that excite buyers the way Apple (AAPL) iPhones and models running the Google (GOOG)-backed Android operating system seem to. Reviewers and bloggers tend to pin the blame on the Symbian software, which though powerful and robust, is faulted for being less intuitive to use.

That point was made starkly clear when researcher Strategy Analytics released its third-quarter smartphone market share estimates later on Oct. 21. In a market that grew overall to 77 million units, up 78 percent from a year earlier, Nokia’s sales grew at less than the rate of the market, up 61.6 percent, while Apple’s grew 90.5 percent and the “other” category, which includes a lot of Android sellers such as Samsung, HTC, and Sony Ericsson, soared 117%.

To be sure, Nokia still has 34.4 percent market share to No. 2 Apple’s 18.3 percent, but that’s a historic low for Nokia—and Apple is closing the gap. At the same time, a crowded market is getting even more competitive: BlackBerry-maker Research in Motion (RIMM) slipped to No. 3 in the third quarter, according to Strategy Analytics, with unit sales up 45.9 percent, but retains its strong footing in corporate accounts, while giant Microsoft (MSFT) is trying one more to time to barge into the handset market with its new Windows Phone 7 software.

All these challenges raise the stakes for Nokia’s new CEO, Stephen Elop, who joined the company five weeks ago from Microsoft. He’s got a lot of work to do, especially addressing Nokia’s tiny market share and near irrelevance in the U.S. Having a decent set of quarterly numbers under his belt and a nice pop in the stock could help smooth the transition.