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Archive for the ‘P.S.’ Category

Companies intent on creating new, nationwide wireless broadband systems have their work cut out for them. Upstart LightSquared recently won FCC approval for its network, despite interference problems with high-precision GPS receivers. Part of the solution was the development of filters which can be applied to affected GPS devices. The fix won’t come cheap, though. The filters range from $6 to $300 per device, and patching every affected receiver could cost up to $400 million. Even if LightSquared doesn’t have to chip in, the company still faces an uphill battle. It hopes to sell wholesale access to its network rather that deal with consumers directly, and the company faces “terrible economics,” according to professor of management and strategy Shane Greenstein.

Meanwhile, Clearwire had been attacking the nationwide wireless broadband problem from the retail side. They backed away from their retail strategy back in February, and stores have been closing in its wake (including the one in downtown Evanston).  Now, the Wall Street Journal is reporting the company is considering skipping its December 1 debt payment, which at $237 million could drain the company of around one-third its liquidity. Shares of the stock dropped steeply following the announcement, which could allow Sprint to buy out the remainder of the company on the cheap (Sprint is both Clearwire’s majority owner and largest customer).

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Vitaly Borker’s unique approach to customer relations appears to have met its foil—law enforcement. Borker bragged to the New York Times that his blend of low prices and abusive treatment of his customers was a winning combination, and one that was perfectly legal. Well for Borker, it appears the gig is up. Thanks to the Times exposé, Google has tweaked its search algorithm and previously indifferent branches of law enforcement are now tripping over each other to prosecute the online merchant.

Borker’s vague and not-so-vague threats caught the attention of the United States Postal Inspection Service, which is charging him with mail fraud, wire fraud, cyberstalking, and interstate threats. All told, the charges tally to a maximum of 50 years in prison. The New York attorney general is also investigating charges, which would be on top of Borker’s existing aggravated harassment charges brought by local authorities. In his quest for greater publicity (and better sales), it appears Borker has gambled and lost it all.

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Lexus GX 460

Bad news comes in threes for Toyota. First it dealt with bouts of unintended acceleration, then the brakes on its Prius developed an ailment, and now the Lexus GX 460 has been come down with a bad case of lift-throttle oversteer.

This latest blow also comes hot on the heels of leaked documents suggesting Toyota delayed action on a recall to address unintended acceleration (maybe bad news comes in fours?). Unlike the last time, the company has responded more promptly and appropriately, halting sales of the behemoth SUV, offering loaners to affected customers, and vowing to come up with a fix pronto.

Consumer Reports discovered the problem while testing a number of vehicles for sinister responses during emergency maneuvers. The GX 460’s behavior caught many testers by surprise—while navigating a tightening curve, they let off the gas pedal to simulate a less-experienced driver’s reaction. The tail of the SUV swung wide, pointing the nose of the two-and-a-half ton truck toward the curve’s apex. Like many other vehicles, the GX 460 has a stability control system to deal with situations like these. But unlike other cars and trucks, the Lexus’ system didn’t kick in until it was almost too late.

Disturbed by these antics, Consumer Reports editors slapped a “Do Not Buy” warning on the SUV. The last vehicle to earn this dishonor was the Mitsubishi Montero Limited in 2001. Isuzu also ran into a similar problem with their Trooper SUV in 1996, which the magazine rated as “Not Acceptable” due to high rollover risk. Isuzu didn’t take the rating lightly and sued Consumer Reports for defamation. Though most of the rulings went in Isuzu’s favor, the strategy wasn’t an out and out success—Consumer Reports is still publishing while Isuzu’s American sales declined until it finally withdrew from the U.S. consumer market in January 2009.

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iPhone with compass

Apple announced their first quarter earnings for fiscal year 2010 Monday, and the real news wasn’t their record revenue but their adoption of the new Financial Accounting Standards Board’s rules regarding so-called “subscription” products. Previously, a portion of the revenue from the iPhone and Apple TV had to be recognized over a period of two years. With the new standards in place, Apple may now recognize revenue from these products at the time of sale.

The shift in accounting standards simplifies Apple’s quarterly statements, which until now reported revenue from subscription products in two ways—either all up front or spread out over two years. Furthermore, the company has revised its earning statements all the way back to 2007 when the iPhone first hit the market.

Many analysts failed to adjust for the new FASB rules, and their predictions fell well below Apple’s actual performance as a result. The Street predicted $14.69 billion in revenue with earnings per share at $3.49, well short of the $15.68 billion in revenue and $3.67 EPS Apple reported.

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The decline of Swiss banking secrecy seems to be in an endless tailspin. Earlier this year, the U.S. Internal Revenue Service announced they would pursue the disclosure of secret Swiss bank accounts they suspected belonged to less-than-honest United States citizens. Switzerland begrudgingly complied, and now the Swiss government has released more details on the agreement. While Switzerland’s earlier statements appeared to uphold bank secrecy, last week’s admission that all UBS accounts held by U.S. citizens containing over 1 million Swiss francs (around $1 million) will be disclosed seems to have more seriously undermined the practice. Furthermore, suspicious accounts—once the only ones thought to be in jeopardy of disclosure—will be outed if they contain more than 250,000 francs.

When the U.S. internal revenue service first announced that they would investigate secret bank accounts for tax evasion, authorities estimated around 7,500 U.S. citizens would give themselves up. But in the final days of the disclosure period, that number nearly doubled with 14,700 offshore account holders turning themselves in via handy form letters and the like. The IRS says the voluntary disclosures will raise “billions of dollars” in revenue, according to a Wall Street Journal article.

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The Federal Communications Commission released a draft version (pdf) of its network neutrality rules today, one month after chairman Julius Genachowski proposed them in a speech to the Brookings Institution. Genachowski’s proposals survived more or less intact, but with some exemptions that could significantly affect their implementation. And according to our previous chat with professor of Management and Strategy Shane Greenstein, the effectiveness of the six rules hinges on their implementation.

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We all know the financial crisis has not been kind to Wall Street. But while stock portfolios have taken a beating, the recession has saved its worst for Everyman.

I didn’t know stress was so powerful… It’s a lot harder to deal with than shooting at people and having people shoot back at you.

Richard Campbell, Iraq veteran, on dealing with mortgage companies for 18 months to avoid foreclosure.

In an entry earlier this month, we linked to another heart-wrenching look at the fallout of the financial crisis, “Giant Pool of Money,” a report from NPR’s This American Life. Last Thursday, journalists Alex Blumberg and Adam Davidson re-interviewed some of same people from the original May 2008 broadcast.

Listen to the “Return To The Giant Pool of Money.”

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