Tag Archives: Coverage
by Chris Roush
A Media Matters for America study finds that Reuters‘ coverage of climate change declined by nearly 50 percent under the regime of current managing editor Paul Ingrassia, lending credence to former reporter David RFgarty‘s claim that a “climate of fear” has gripped the agency.
Max Greenberg of Media Matters writes, “In line with claims from Fogarty and The Baron, a survey of coverage in the six months immediately prior to Ingrassia’s appointment compared to an analogous period in 2012 found that Reuters filed 48 percent fewer articles on climate change under the new regime, despite the fact that the latter period featured the United Nations Conference on Sustainable Development in Rio de Janeiro, a continuing fight over the European Union’s proposal to impose a carbon tax on international flights, record heat in the U.S. and other noteworthy developments.
“In the six months before Ingrassia joined Reuters, Fogarty wrote 51 of 675 total articles on climate change (about 8 percent). During a comparable period under Ingrassia, Fogarty wrote only 10 articles on climate change (3 percent of 353 total stories).
“The vast majority of coverage in both time periods was focused on policy (59 percent and 63 percent, respectively), as opposed to science (11 percent and 12 percent) and primarily quoted politicians, political officials or government officials (43 percent and 41 percent) on climate change.
“This year, Reuters’ shift has apparently continued apace. An April 2013 article titled ‘Climate scientists struggle to explain warming slowdown,’ later promoted by Drudge Report, claimed that short-term temperature variability ‘has exposed gaps’ in scientists’ understanding of climate change, but neglected to quote any scientists on the issue — or refer to an article filed by the same reporter one week prior, which explained some of the alleged ‘gaps.’”
Read more here. Reuters issued a statement last week about the claims of a decline in climate change coverage that stated: “Reuters is committed to providing fair and independent coverage of climate change that complies fully with our Trust Principles. Reuters has a number of staff dedicated to covering this story, including a team of specialist reporters at Point Carbon and a columnist. There has been no change in our editorial policy.”
by Liz Hester
It looks like the press and regulators are taking a closer look at banks and their relationships with commodities. Nearly every day last week there was a different story about prices, storage or regulation.
Bloomberg had a story about regulators looking into banks’ commodities trades after complaints:
When the Federal Reserve gave JPMorgan (JPM) Chase & Co. approval in 2005 for hands-on involvement in commodity markets, it prohibited the bank from expanding into the storage business because of the risk.
Five years later, JPMorgan bought one of the world’s biggest metal warehouse companies.
While the Fed has never explained why it let that happen, the central bank announced July 19 that it’s reviewing a 2003 precedent that let deposit-taking banks trade physical commodities. Reversing that policy would mark the Fed’s biggest ejection of banks from a market since Congress lifted the Depression-era law against them running securities firms in 1999.
“The Federal Reserve regularly monitors the commodity activities of supervised firms and is reviewing the 2003 determination that certain commodity activities are complementary to financial activities and thus permissible for bank holding companies,” said Barbara Hagenbaugh, a Fed spokeswoman. She declined to elaborate.
That reconsideration comes as a Senate subcommittee prepares for a July 23 hearing to explore whether financial firms such as Goldman Sachs Group Inc. and Morgan Stanley (MS) should continue to be allowed to store metal, operate mines and ship oil. At a time when JPMorgan faces a potential fine for alleged manipulation of U.S. energy prices, the panel will discuss possible conflicts of interest in the business model, said its chairman, U.S. Senator Sherrod Brown, an Ohio Democrat.
The Sunday New York Times had an extensive piece on banks making money from storing and moving commodities, in particular aluminum. The lead of the story talked about a Goldman Sachs warehouse and how they moved products from one storage facility to the next:
The maneuvering in markets for oil, wheat, cotton, coffee and more have brought billions in profits to investment banks like Goldman, JPMorgan Chase and Morgan Stanley, while forcing consumers to pay more every time they fill up a gas tank, flick on a light switch, open a beer or buy a cellphone. In the last year, federal authorities have accused three banks, including JPMorgan, of rigging electricity prices, and last week JPMorgan was trying to reach a settlement that could cost it $500 million.
Using special exemptions granted by the Federal Reserve Bank and relaxed regulations approved by Congress, the banks have bought huge swaths of infrastructure used to store commodities and deliver them to consumers — from pipelines and refineries in Oklahoma, Louisiana and Texas; to fleets of more than 100 double-hulled oil tankers at sea around the globe; to companies that control operations at major ports like Oakland, Calif., and Seattle.
The story also spelled out how banks make money on commodities, an important consideration to remember when writing about the space:
By controlling warehouses, pipelines and ports, banks gain valuable market intelligence, investment analysts say. That, in turn, can give them an edge when trading commodities. In the stock market, such an arrangement might be seen as a conflict of interest — or even insider trading. But in the commodities market, it is perfectly legal.
“Information is worth money in the trading world and in commodities, the only way you get it is by being in the physical market,” said Jason Schenker, president and chief economist at Prestige Economics in Austin, Tex. “So financial institutions that engage in commodities trading have a huge advantage because their ownership of physical assets gives them insight in physical flows of commodities.”
Some investors and analysts say that the banks have helped consumers by spurring investment and making markets more efficient. But even banks have, at times, acknowledged that Wall Street’s activities in the commodities market during the last decade have contributed to some price increases.
The Financial Times wrote this piece about how the Federal Reserve is questioning whether banks should own physical commodities, something that will make trading them less profitable for large firms:
Wall Street banks’ rise as merchants of oil, natural gas, coal and industrial metals is under threat as a US regulator revisits a string of permits for trading physical commodities issued over the past decade.
Senior officials at the Federal Reserve have in recent weeks discussed with bank executives the question of whether to bar banks from owning physical commodity assets, according to people familiar with the talks.
A move to curtail the freedom to ship tankers of oil or fill pipelines with gas could pressure a historically lucrative niche for banks including Barclays, Goldman Sachs, JPMorgan Chase and Morgan Stanley. JPMorgan spent $1.6bn just three years ago to acquire the global oil, metals and coal divisions of RBS Sempra Commodities in an explicit push into physical trading.
US law allows banks to trade commodity derivatives such as futures contracts. In 2003, the Fed expanded this authority by granting Citigroup permission to also own the tangible oil, gas and grains underlying derivatives. Several other banks then received similar approvals through 2008.
These permits are now under question. “The Federal Reserve regularly monitors the commodity activities of supervised firms and is reviewing the 2003 determination that certain commodity activities are complementary to financial activities and thus permissible for bank holding companies,” the Fed said.
In another sign of mounting scrutiny, a US Senate subcommittee is scheduled on Tuesday to hold a hearing on banks’ involvement with power plants, oil refineries and warehouses.
Earlier in the week, JPMorgan Chase was reportedly looking to settle with regulators over commodities-related accusations of price manipulation:
JPMorgan Chase, the Wall Street giant whose reputation in Washington has eroded in a matter of months, is now moving to avert a showdown over accusations that it manipulated energy prices.
The nation’s largest bank, which has previously clashed with its regulators, is seeking to settle with the federal agency that oversees the energy markets, according to people briefed on the matter. The regulator, the Federal Energy Regulatory Commission, found that JPMorgan devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” a commission document said.
The potential deal, the people said, is expected to cost the bank about $500 million, a record for the commission, which has adopted a harder line with Wall Street over the last year. For JPMorgan, which reported a record $6.5 billion quarterly profit last week, the fine will hardly dent the bottom line.
Covering commodities markets remains an important part of business news and one that touches everyone globally. Any new regulations will be important not only for banks and their bottom lines, but also for consumers of – well, everything.
by Chris Roush
A radio station called Business 1310 based near Rochester, N.Y., has begun broadcasting and carrying business news.
A story on YNN.com writes, “Genesee Media Corporation out of Dansville is launching a weekday business and financial news station called Business 1310.
“During the day, people will be able to tune in to hear news updates in the local community, as well as worldwide reports from Marketwatch, Bloomberg and NBC News.
“After a few more months of testing, the radio station will be available on AM channels throughout the Rochester region, western suburbs and eastern region. Business 1310 will also be available online and on your phone.”
Read more here.
by Liz Hester
As Detroit became the largest city to seek bankruptcy protection (in terms of debt), reaction seemed largely to depend on one’s stake in the plan, eliciting varied coverage from the major media outlets.
The New York Times chose to lead with creditors and their anger at being asked to accept pennies for the dollars they invested in the blighted city.
A day after Detroit became the largest American city ever to seek bankruptcy protection in court, the size of the battle this city now faces was growing clear, as creditors vehemently objected to the way Detroit is asking to repay them pennies on the dollar and as representatives of city workers, who face benefits cuts, said the city had failed to truly negotiate before heading to court.
The fiscal realities confronting Detroit have been ignored for too long,” Gov. Rick Snyder said on Thursday as he authorized Detroit’s bankruptcy filing after a recommendation from Kevyn D. Orr, the emergency financial manager Mr. Snyder, a Republican, had appointed to resolve the city’s dire financial situation. “I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future.”
By Friday, many in this city, including some elected leaders, said bankruptcy seemed unfortunate but also inevitable. But those representing tens of thousands of city employees and retirees said they intended to fight the case, particularly for the thousands of retirees who depend on city pensions.
The Wall Street Journal lead was more nuanced, saying many had mixed emotions and choosing to talk first about those feeling slightly optimistic about the pending battle:
Some residents and businesses responded with a dose of optimism in the wake of the city’s bankruptcy filing on Thursday.
Just a few steps away from the city hall room where Detroit emergency manager Kevyn Orr was outlining the Chapter 9 filing, Roy Ferguson, 64 years old, a pastor from a church in nearby Dearborn Heights, said he wasn’t too concerned about the city going bankrupt.
“This is not a good thing, but with the desperate situation of Detroit, hopefully this will be a way out,” he said as he worked on a stand that will offer barbecued ribs this weekend. “Hopefully, it will mean a turnaround. We need it.”
Around the Detroit metropolitan region, the city’s decision to file for Chapter 9 bankruptcy also was greeted with concern and sympathy for those who might get hurt as jobs and pensions are cut. But many, including the big Detroit auto makers, expressed the view that bankruptcy could turn out to be a good thing for a city crippled by debt.
“At this point, whatever helps the city, I am for,” said Detroit resident Kori Loewe, 30. “I don’t know the ins and outs of what it is going to mean for us as residents, but the city needs help.”
Mariam Noland, president of the Community Foundation of Southeast Michigan, a nonprofit that funds neighborhood development projects in Detroit, said the city’s bankruptcy filing is a “serious moment” for the region. “It will impact the lives of many people. We’re going to see what it means in the real lives of real people.”
But it could prove a turning point, she said. “This is a moment where maybe Detroit can start to move forward,” she said.
Mr. Orr, with Mayor Dave Bing at his side, stressed Thursday that despite the filing, the city would keep issuing paychecks and paying its bills.
Bloomberg took a straightforward approach to their story, talking about the bankruptcy and then adding the context of other municipal bankruptcy filings:
Michigan’s largest city joins Jefferson County, Alabama, and the California cities of San Bernardino and Stockton in bankruptcy. The filing shattered the presumption of many bondholders that local governments, eager to continue borrowing at reasonable rates, would do whatever it took, including raise taxes, to come up with the money to meet bond obligations. Kevyn Orr, the city’s emergency manager, said the debt is $18 billion.
While under court protection, Detroit can stop paying some debts, is temporarily immune from most lawsuits and may be able to ask a judge to cancel contracts, including union agreements. Under Chapter 9 of the U.S. Bankruptcy Code, the first step is likely to be a court fight over whether the city was entitled to bankruptcy protection, a challenge that would ask if the city was truly insolvent and it had no alternative to filing.
Detroit’s filing “is going to affect a number of local governments around the country,” said Keith W. Mason, a bankruptcy attorney with McKenna Long & Aldridge LLP. “It calls for greater early intervention.”
Detroit’s problems and its decline have been well chronicled for the last several years. But it’s interesting to see the varied takes the national business press used in covering the bankruptcy filing. Many people are emotionally invested in the city and its history, yet stopping the bleeding from the housing crisis seems nearly impossible as more people flee.
Here’s hoping that getting the city’s books in order will help put it on the path to recovery and it can regain some of its iconic stature. One thing’s for sure, I can’t wait to read the profiles and interviews with Kevyn Orr once his job is over. Maybe he’ll write a book. I’d read it.
by Chris Roush
Casey Quinlan of TheMutualFundWire.com writes about how computers from Narrative Science are writing earnings stories for business news outlets such as Forbes.
Quinlan writes, “Forbes, ProPublica and InvestorPlace use the service, which began at Northwestern University as a research project developed by journalism students and computer science students. Narrative Science was incorporated in 2010. ProPublica uses the service to create short descriptions of 52,000 schools in its database and, as we learned, Forbes uses it for earnings reports.
“The only shortcoming for Forbes, which apparently has been producing earnings previews this way since October 2011, is that the algorithms can’t interview analysts and ask them why earnings previews are up or down, or translate why that should matter to investors — one of the most important of the five W’s of financial journalism.
“Narrative Science has big ambitions. Not only does the company plan to expand through the journalistic job chain, it is also looking to develop software packages that can handle various financial analytical functions.
“Which means in the future, stories like these might be written by robots, only to be read by robots.”
Read more here.
by Liz Hester
Posting a quarterly profit isn’t enough for Yahoo CEO Marissa Mayer. The earnings coverage on Tuesday across the board called the results “faltering” and called into question her ability to turn the ailing Internet giant around.
Here’s the lead from Reuters:
Yahoo Inc trimmed its outlook for 2013 revenue after revealing a sharp 12 percent slide in ad prices in the second quarter, signs that CEO Marissa Mayer’s attempts to revive the struggling Internet giant may not produce quick results.
The company is now forecasting revenue of $4.45 billion to $4.55 billion this year, down from $4.5 billion to $4.6 billion previously. Yahoo also reported that second-quarter net revenue was down slightly at $1.071 billion, though it posted adjusted profit that was ahead of Wall Street targets.
Yahoo, in a novel post-results livestream akin to a TV newscast with Mayer and CFO Ken Goldman playing news anchors, acknowledged the pressure on prices but stressed that Yahoo was developing new ad formats and technology that would reverse the trend.
“We can do better in display, and this is going to be a clear focus for the business,” a relaxed Mayer said onscreen, referring to Yahoo’s display advertising business.
On Tuesday, the company reported a 12 percent slide in price-per-ad in the second quarter from a year earlier, outstripping the first quarter’s 2 percent decline.
The New York Times had this piece on Yahoo’s results, which had a similar tone and lead:
During her first year as chief executive of Yahoo, Marissa Mayer made big strides in changing the company’s culture. But reversing Yahoo’s declining revenue is turning out to be a far stiffer challenge.
The difficulty was underscored Tuesday, when Yahoo reported that revenue from the company’s two primary moneymakers — display and search advertising — fell sharply in the second quarter.
Since arriving from Google last summer, Ms. Mayer has reversed a decline in Internet traffic, and she has tried to improve employee morale by offering new smartphones and free food in the cafeteria. She also helped start a national debate about flexibility and efficiency in the workplace by ending Yahoo’s work-from-home policy. But perhaps more important, Ms. Mayer, 38, has shown that she can move quickly and decisively in executing her plan to improve the company’s fortunes.
“We have made real progress over the last year,” said Ms. Mayer, in a live webcast, emphasizing several products Yahoo released in that period, including new mobile apps, and a redesign for the home page and search. “The people are here. The engine is now up and running.”
Despite the slow ad sales, Yahoo reported that net income in the quarter rose 46 percent from the same period of 2012, to $331 million, or 30 cents a share, primarily on the growth in its investment holdings. Revenue over the same period fell 7 percent, to $1.14 billion, falling slightly short of Wall Street expectations and underscoring the company’s trouble with reviving growth in its core advertising business.
The Wall Street Journal also chose to highlight Mayer’s challenges as she works to right the company:
Yahoo Inc. chief Marissa Mayer delivered another mixed report card on her yearlong turnaround effort, showing a 46% jump in quarterly earnings for the Internet pioneer but continued revenue declines that underscore her challenges.
Ms. Mayer’s willingness to sacrifice immediate gains as she positions the company for future growth has led to the continued deterioration of its core business of selling online ads. Yahoo posted a second-quarter revenue drop of 7%, though the decline was just 1% when excluding Yahoo’s payouts to its business partners.
Yahoo’s display-ad revenue, which represents roughly 40% of the company’s sales, dropped 12% on declines in the number and prices of graphical and video ads. Search-ad revenue fell 9%.
By contrast, the U.S. online-advertising market grew by 15% last year, according to the Interactive Advertising Bureau, a trade group. Rivals such as Web-search giant Google Inc., social network Facebook Inc. and messaging service Twitter Inc. have been garnering an increasing share of marketers’ budgets while Yahoo’s growth has faltered.
Bloomberg chose to focus on the lowered revenue forecast:
Yahoo! Inc. (YHOO) gave a revenue forecast that fell short of analysts’ estimates as Chief Executive Officer Marissa Mayer puts more focus on building products than drumming up immediate sales at the largest U.S. Web portal.
Sales, excluding revenue passed to partner sites, will be $1.06 to $1.1 billion in the current quarter, Yahoo said on its website today. Analysts were projecting revenue of $1.12 billion, the average of estimates compiled by Bloomberg. Second-quarter sales fell 1 percent to $1.07 billion, also missing analysts’ $1.08 billion prediction.
Mayer, one year into her leadership of Yahoo, said on a call with analysts that she’s in the early stages of a turnaround centered on creating new products aimed at luring new users and advertisers from Google Inc. (GOOG) and Facebook Inc. (FB) While her efforts have added users, investors expecting revenue growth will have to be patient, said Paul Sweeney, an analyst at Bloomberg Industries.
So while Mayer is having a hard time attracting advertisers, their acquisitions are helping them make money – especially in Asia, according to the New York Times. She’s also gotten gains from acquisitions.
Employees also seem to be more optimistic. Yahoo, which is based in Sunnyvale, Calif., has had a notable decline in attrition, and 12 percent of new hires this year were returning Yahoo alumni. Of Ms. Mayer’s 17 acquisitions in the last year, most were to bring in more engineering talent for social, mobile, gaming and video products, she said.
The recent $1.1 billion acquisition of the popular microblogging site Tumblr has been the most prominent purchase, delivering a younger and more socially connected audience to Yahoo. But it has also generated skepticism as to whether Tumblr’s popularity can be turned into dollars. Other Yahoo purchases, like Qwiki, a New York based start-up that allows users to produce short videos on their phones, and Xobni, a Silicon Valley company that helps people more easily search mobile in-boxes, have brought Yahoo talent and technology in mobile and video — areas where Facebook and Google, the company’s rivals, have reported stronger advertising growth.
The deals also signal that Ms. Mayer is moving to compete in those areas. Yet in the earnings webcast she emphasized that investors would not see significant change in overall revenue from new and revitalized products until 2014.
Mayer’s high profile and the many profiles written about her turnaround strategy make earnings even more important for business journalists. Her strategy is for the long-term, but many shareholders and analysts are looking for the short-term proof that something is going right at Yahoo. Here’s to holding her accountable for her media tour and her plans to make the company profitable for the next few years.
by Chris Roush
David Fogarty, a former reporter at Reuters for nearly 20 years who left earlier this year, writes for The Baron about what he saw happening at the wire service in terms of climate change coverage.
Fogarty writes, “In April last year, Paul Ingrassia (then deputy editor-in-chief) and I met and had a chat at a company function. He told me he was a climate change sceptic. Not a rabid sceptic, just someone who wanted to see more evidence mankind was changing the global climate.
“Progressively, getting any climate change-themed story published got harder. It was a lottery. Some desk editors happily subbed and pushed the button. Others agonised and asked a million questions. Debate on some story ideas generated endless bureaucracy by editors frightened to take a decision, reflecting a different type of climate within Reuters – the climate of fear.
“By mid-October, I was informed that climate change just wasn’t a big story for the present, but that it would be if there was a significant shift in global policy, such as the US introducing an emissions cap-and-trade system.
“Very soon after that conversation I was told my climate change role was abolished. I was asked to take over the regional shipping role and that I had less than a week to decide.
“I decided it was time to leave.”
Read more here.
A Reuters spokesperson provided the following statement:
“Reuters is committed to providing fair and independent coverage of climate change that complies fully with our Trust Principles. Reuters has a number of staff dedicated to covering this story, including a team of specialist reporters at Point Carbon and a columnist. There has been no change in our editorial policy.”
by Liz Hester
Emerging market stocks and bonds have taken a hit, putting yet another dent in investor’s portfolios already suffering from recent volatility. But according to several recent stories, fund managers are finding some areas that look promising.
Here’s the Wall Street Journal’s take on the recent developments in emerging markets:
The recent rout in emerging markets is enticing some investors to jump back in to search for cheap stocks, bonds and currencies. But the selloff is prompting these bargain hunters to be a lot pickier than in the past.
Markets from Brazil to China have tumbled since mid-May amid growing expectations that the U.S. Federal Reserve is preparing to end its $85 billion in monthly bond purchases. That would shut off a flow of easy money into emerging markets just as prospects for economic growth in some of them have begun to dim. On Tuesday, the International Monetary Fund cut its outlook for the global economy in 2013, citing flagging growth in emerging markets as a major reason for the downgrade.
Investors who are buying have a different take. They say two months of outflows have cleared away much of the “hot money”—from hedge funds and other investors with a short time frame—that had pushed asset prices higher. They see little change to what attracted them to these markets in the first place: faster growth and higher yields than can be found in the developed world.
“In some places, the correction has created opportunities,” said Michael Gomez, co-head of Pacific Investment Management Co.’s emerging-market portfolio management team.
The assets faring well this month, from the Mexican peso to Middle Eastern stocks, have little in common, underscoring how the potential withdrawal of central-bank stimulus is forcing investors to be pickier about what they buy.
In this rethink of emerging markets, investors are embracing countries that have improved their balance sheet and don’t rely on outside funding for growth.
CNBC reported that emerging markets do still have some challenges to work through even as investors consider putting money back into those countries:
Fitch estimates that 2012-2013 will see the second weakest growth for the BRICs (after 2009) since the Russian crisis in 1998. Weaker China growth, declining credit growth and structural bottlenecks are among the culprits, Fitch said.
Emerging market companies also will have to adjust to this new normal. “The end of the commodity boom will be a sea change for emerging-market companies,”AllianceBernstein’s Sammy Suzuki wrote in a blog post. “In the past, they could throw capital at low-return projects and get bailed out by unrelenting economic growth. Those days are gone.”
Already emerging market companies have had trouble increasing their earnings, said Delaney of UBS.
“Despite faster-growing GDP than the developed world, the emerging markets have not managed to translate it into superior earnings growth, and in fact, we have had zero earnings growth in the emerging markets in the last two years,” she pointed out.
The Financial Times story focused on China and how the potential for slower economic growth will likely have ripple effects on the rest of the world:
The important message from the Chinese authorities is that they want the pace of credit expansion to slow and are cracking down on banks and shadow banking activities to achieve that goal. The result is likely to be slower economic growth. Given the state’s grip on the financial system, a crisis would probably take the form of a sharp increase in the number of zombie banks rather than a Lehman-style bank failure. But the net result, again, would be lower growth in credit and gross domestic product.
Chinese growth is already slowing and, according to many economists, by more than the official forecasts. The government’s stated policy is to rebalance the economy away from investment towards consumption, which will also suppress growth in the short term.
A credit crunch would clearly exacerbate the trend, but the direction of travel is already apparent. This is why investors are liquidating positions that benefited from China’s rapid economic expansion. Some of the unwinding has been going on for some time. Copper, for example, peaked two years ago. References to the end of the commodity supercycle are as common as those to China’s credit crunch.
Volatility at the end of June caused many investors to look for ways to find better returns in a low interest rate environment. Stories like these are always timely, especially as emerging markets move to become more established. As more investors consider putting money abroad (and are sometimes encouraged to for diversification), balanced coverage of the countries and their growth prospects helps provide people with a clear perspective of where to go in the search for returns.
by Chris Roush
A new book will be published early next year from Columbia Journalism Review‘s Dean Starkman that will examine why the financial media failed to uncover the economic crisis before it happened.
The book will be called “The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism,” and it will be published by Columbia University Press.
In the book, Starkman travels back to the early 20th century and juxtaposes the work of reporters against other forms of journalism, particuarly muckraking. These two genres merged when mainstream American news organizations institutionalized muckracking in the 1960s and created a powerful watchdog over the public interest.
For many reasons, access journalism came to dominate business reporting in the 1990s, a process Starkman calls “CNBCization,” and rather than examine risky, even frankly corrupt, corporate behavior, mainstream reporters focused instead on profiling executives and informing investors. This is why, Starkman argues, that mostly outside reporters picked up on the brewing mortgage crisis while insiders failed to connect the dots.
Starkman concludes with a critique of digital-news ideology and corporate infuence, which threatens to further undermine investigative reporting, and shows how financial coverage, and journalism as a whole, can reclaim its bite.
“A defining trait of the financial crisis was the degree to which it took the public, and the press itself, by surprise,” said Starkman in an email to Talking Biz News. ” The failure was so big, so catastrophic, and so comprehensive that all aspects of the financial system must be called into question, the journalism that covers it very much included. How could so many, covering something so closely, miss something so big so completely? Why did a few, mostly outside the mainstream, get it?”
by Liz Hester
The ubiquitous software giant Microsoft announced Thursday a huge internal overhaul in hopes of sparking innovation and putting a stop to the infighting that’s damaging the company.
Here are excerpts from the Wall Street Journal story:
Microsoft Corp. unveiled a broad reorganization Thursday aiming to break down internal fiefs that have slowed product development and caused friction among teams of employees.
In its place, Microsoft is imposing a more horizontal plan with managers who will oversee different kinds of functions—like engineering, marketing and finance—and apply them to multiple product and service offerings.
Microsoft’s restructuring follows a strategic plan, which began taking shape about a year ago, to shift its identity away from being a producer of operating systems and application software. Instead, the company wants to be known for devices—designed by Microsoft itself or by partners—and services that are closely tailored to work with that hardware.
The strategy shift, though it still relies heavily on software development, emulates the way rivals like Apple Inc. and Google Inc. have approached development of products such as smartphones and tablets.
Microsoft had already developed successful combinations of hardware and software, like its Xbox videogame console, but in other cases has been hurt by largely independent product units working in isolation.
The New York Times outlined details about how the company will restructure in an attempt to get divisions to work together instead of against each other:
Microsoft said it would dissolve its eight product divisions in favor of four new ones arranged around broader themes, a change meant to encourage greater collaboration as competitors like Apple and Google outflank it in the mobile and Internet markets. Steven A. Ballmer, the longtime chief executive, will shuffle the responsibilities of nearly every senior member of his executive bench as a result.
“To execute, we’ve got to move from multiple Microsofts to one Microsoft,” Mr. Ballmer said in an interview.
It remains to be seen whether more cohesive teamwork, if that is what results from all the movement, will offer the spark that has been missing from so many of Microsoft’s products in recent years.
The company has been widely faulted for being late with compelling products in two lucrative categories, smartphones and tablets. Its Bing search engine is a distant second to Google and loses billions of dollars a year for Microsoft.
Rivalries among the company’s divisions have built up over time, sometimes resulting in needless duplication of efforts. Microsoft managers often grumble privately that one of the most dreaded circumstances at the company is having to “take a dependency” on another group at the company for a piece of software, placing them at the mercy of someone else’s development schedule.
The Reuters story makes an important point for shareholders to remember, that the internal changes will be a large distraction for the staff:
The moves realign the company that helped revolutionize the personal computing industry in the 1980s into what Chief Executive Steve Ballmer calls a “devices and services” corporation – a nod to Apple Inc, which has surpassed it in profit and market value in recent years.
It is also an implicit rejection of “software”, the business which Microsoft helped pioneer and drove the worldwide adoption of personal computing, but in which it faces stiff competition from new rivals that have popularized Internet-based services.
Executives told reporters and analysts on a conference call they did not plan layoffs for now. But a certain amount of employee disruption is to be expected as the company modifies its device marketing and development strategies.
“It can be a major distraction. The details have to be ironed out, there will be a lot of water-cooler talk and that’s happening as the company has some critical products coming out, like a unified phone, Xbox,” Gillis said.
Microsoft’s shares have gained almost 30 percent this year, helped by a rally that began in late April when the company released strong revenue and earnings during what was one of the worst quarters for PC sales on record.
They closed Thursday up 2.8 percent at $35.685.
The Journal reported that the old structure had been in place since 2005, but the new one might not solve all of Microsoft’s problems:
The current corporate structure had largely been in place since 2005. At the time, Mr. Ballmer had argued that greater autonomy would allow product groups to make decisions more quickly. Now, however, he argued that greater collaboration was a more pressing priority, as devices and online, or “cloud” services, must work better together.
“We will pull together disparate engineering efforts today into a coherent set of our high-value activities,” he wrote in the memo. “We will see our product line holistically, not as a set of islands.”
Analysts and former Microsoft executives noted that the change will require more discussion and negotiation among managers, neither of which are necessarily conducive to speedy action. Once action is taken, however, the results for users could be improved.
This is an important story for shareholders. Despite the stock’s gains made this year this reorganization will likely determine returns for the next several years. Anything that helps the behemoth become more nimble is a good thing for investors. Here’s hoping that it’s not too late.