November 2008 Archives

November 14, 2008

Massive layoffs planned at Sun Microsystems

Sun Microsystems of Santa Clara has announced plans to shed as many as 6,000 workers in the hopes of returning the company to profitability. The software and server maker has struggled to maintain sales of its servers, which has hurt its stock price and undercut plans of a larger comeback. According to a report in the San Francisco Chronicle, the company’s plan to jettison between 5,000 and 6,000 employees represents a reduction of between 15 and 18 percent of Sun’s global workforce, which should reduce costs by $700- to $800 million annually. Sun will take a one-time charge of between $500- and $600 million as part of the layoffs and restructuring.

In light of the shifting economic landscape, Sun said, the company is realigning its operations to put more emphasis on open source computing. Toward that end, Sun is reconfiguring its software business into three groups: applications platform software, systems platforms and cloud computing and developer platforms. “Today, we have taken decisive actions to align Sun’s business with global economic realities and accelerate our delivery of key open source platform innovations – from MySQL to Sun’s latest Open Storage offerings,” said Jonathan Schwartz, Sun Microsystems’ chief executive. Schwartz said in interviews that the credit crunch has delivered a blow to Sun’s business because customers are unable to secure loans for Sun’s premium servers. In addition, a quarter of Sun’s customers come from the financial services sector, which is reeling from the meltdown on Wall Street. Sun’s stock price has plummeted to a dangerous low, reflecting a dour outlook by investors for the company. Sun shares were trading at $4.11 at mid-day, putting the market value of the company at about $3 billion, a little less than what Sun has in cash on hand. The stock is well off its 52-week high of $21.55 a share and its historic high in 2000 of more than $250 at the height of the dot-com boom.

Filed under California Economy, Information Technology by

November 15, 2008

Goldman Sachs conflict alleged in California bond sales

Goldman, Sachs & Co. urged some of its big clients to place investment bets against California bonds this year despite having collected millions of dollars in fees to help the state sell some of those same bonds. According to a report in the Los Angeles Times, the giant investment firm did not inform the office of California Treasurer Bill Lockyer that it was proposing a way for investment clients to profit from California’s deepening financial misery. In Sacramento, officials said they were concerned that Goldman’s strategy could raise the interest rate the state would have to pay to borrow money, thus harming taxpayers. While it is not clear whether this is technically illegal, it is what gamblers call, “playing both ends against the middle” and California has been highly sensitive to the possibility of any major corporation gaming the system ever since Enron ran off with the entire State treasury in 2001. The full article can be read at this link.

Filed under Banking and Financial Services, California Economy, z9-Uncategorized by

November 16, 2008

Amylin to slashe 340 jobs in San Diego

Amylin Pharmaceuticals will lay off 340 employees in San Diego, a decision expected to save the company more than $100 million. fter the job reduction, Amylin will have 1,800 employees, about half of which will be in San Diego.   Amylin says its priorities are to increase sales of Byetta and Symlin — its product for Type 1 diabetes.

Filed under Biotechnology, California Economy by

November 17, 2008

Federal grant of $125,000 awarded for sustainable wine program

The California Sustainable Winegrow-ing Alliance, created by the San Francisco-based Wine Institute and the California Association of Winegrape Growers has received a $125,000 specialty crop block grant from the U.S. Department of Agriculture’s Agricultural Marketing Service to create a certification system for the effort. According to a Business Journal Report, the program started five years ago with the creation of the voluntary Code of Sustainable Winegrowing. Some environmental-protection advocates have called for third-party verification of compliance with the extensive best-management practices in the code. The alliance is currently drafting guidelines for certification.

Filed under Agriculture and Food, Business Associations, U.S. Government, Wine by

November 18, 2008

PayPal starts supporting Mexican peso

Online payment service PayPal, a subsidiary of San Jose-based eBay Inc. has announced that it has expanded into Mexico. Mexican buyers will now be able pay for online purchases using their credit cards or bank accounts with pesos as currency. According to a report in the San Jose Business Journal, the peso is the first Latin American currency to be added to the PayPal system. PayPal also enables payments in the U.S. dollar, Canadian dollar, Australian dollar, euro, British pound, Japanese yen, Chinese yuan, Czech koruna, Danish lrone, Hong Kong dollar, Hungarian forint, New Zealand dollar, Norwegian krone, Polish zloty, Singaporean dollar, Swedish krona, Swiss franc and Israeli new shekel. PayPal is now accepted in 190 countries around the world, and the company said users in Mexico can now shop at retailers that include including, Mixup, Sears, Match.com, Blockbuster, Best Day Travel, PlazaVIP, and PC en Linea “PayPal’s goal is to provide consumers a secure, fast and convenient way to pay and get paid online and to give online shoppers in Mexico more places to shop quickly and securely,” said Fernando Moreno, director of PayPal Latin America. “The launch of PayPal Mexico is a significant step towards our next phase of growth.”

Filed under Banking and Financial Services, Internet, Mexico by

California Ordered To Prepare For Sea-Level Rise

Governor Schwarzenegger has ordered ordered preparations for rising sea levels from global warming, according to a report in Reuters News Service.  Recorded sea levels rose 7 inches (18 cm) during the 20th century in San Francisco, Schwarzenegger said in the executive order for study of how much more the sea could rise, what other consequences of global warming were coming and how the state should react.  California is considered the environmental vanguard of government in the United States, with its own standards for car pollution and a law to cut emissions of carbon dioxide, the main gas contributing to global warming, the report noted.  “The longer that California delays planning and adapting to sea level rise the more expensive and difficult adaptation will be,Schwarzenegger said, ordering a report by the end of 2010.

Filed under Environment and Climate, Governor Schwarzenegger by

November 19, 2008

Bank of America donates $900,000 to Bay Area nonprofits

Bank of America has awarded grants totaling $900,000 to Bay Area nonprofits.  As reported in San Francisco Business Times, four organizations won $200,000 unrestricted grants as part of Bank of America Charitable Foundation’s Neighborhood Excellence Initiative. They are Community Housing Partnership and Renaissance Entrepreneurship Center in San Francisco and Urban Gardens and Oakland Ballet Company in the East Bay.  In addition to these large unrestricted funds winners, the bank honored five community leaders in both San Francisco and the East Bay with a $5,000 donation to the nonprofit of the winner’s choosing. The program also honors local high school students, five from both San Francisco and the east Bay with a paid eight-week internship and other leadership training support.  Starting in 2009, the bank has a 10-year goal to give away $2 billion to community nonprofits.

Filed under Banking and Financial Services, Philanthropy by

November 23, 2008

Silicon Valley Engineers Sentenced For Economic Espionage

Two Engineers from China have been sentenced to a year in prison after pleading guilty to economic espionage against the United States. The two men – Fei Ye, a citizen of the U.S., and Ming Zhong, a permanent U.S. resident – were facing a maximum of 30 years in prison after confessing to stealing microprocessor designs from their Silicon Valley employers in 2006. They had planned to smuggle the designs to China to launch a government-sponsored startup company there. Their guilty pleas were the first convictions for the most serious crime under the 1996 Economic Espionage Act. Prosecutors asked for a lenient sentence because the men cooperated with investigators – both apologized in court.

Unlike traditional industrial espionage economic espionage means that someone acted to benefit a foreign government and is a more serious crime. Only a few economic espionage cases have been resulted in convictions, mostlybecause it’s difficult to prove a person was acting to benefit a foreign nation. The case against Ye and Zhong began seven years ago, when they were arrested at San Francisco International Airport while attempting to board a flight to China. Their luggage was allegedly full of sensitive documents on chip designs taken illegally from four Silicon Valley tech firms who had employed the engineers. The companies include NEC Electronics Corp., Sun Microsystems Inc., Transmeta Corp. and Trident Microsystems Inc. Both had worked at Transmeta and Trident, while Ye had also worked at Sun and NEC. Other documents seized by authorities allegedly demonstrate the engineers were attempting to solicit money from Chinese government agencies to fund a startup firm.

Prosecutors say the documents showed that Ye and Zhong were promoting the startup as something that would elevate China’s chip-making capabilities, however, the documents do not confirm the Chinese government was aware that the chip designs were stolen.

Filed under China, Legal and Criminal Issues by

Wells Fargo now the Nation’s largest bank

San Francisco-based Wells Fargo is now the nation’s largest bank in terms of value, with a market cap of $75.9 billion. In recent New York Stock Exchange trading, Wells moved ahead of J.P. Morgan Chase, which is now worth $75 billion. As reported in Bloomberg News, the San Francisco bank achieved the largest-bank status by being a contrarian in recent years, refusing to purchase mortgage assets at the peak of the market, issue millions of credit cards to those not already banking at Wells, trust that subprime paper blended together wouldn’t blow up or aspire to become a major player in investment banking, among other things. After Wells acquires East Coast rival Wachovia, it will also have the nation’s largest branch network. While there are other measures of bank size, Market cap reflects investor opinion on a bank’s operations and outlook and is considered the most reliable indicator.

Filed under Banking and Financial Services by

CalPERS cuts 80 private equity funds

CalPERS has sold 80 private equity partnerships with a net asset value of $2.1 billion on the secondary markets, according to a report in Pensions and Investments

Leon G. Shahinian, senior investment officer, alternative investment management group, said in an interview that the $189.9 billion California Public Employees’ Retirement System, Sacramento, eliminated 60 partnerships from its alternative investment management program in July and August, he said. UBS assisted in the selection and sale of the private equity fund interests. Mr. Shahinian wouldn’t identify the funds or give selling prices. But according to CalPERS’ June 30 Alternative Investment Management Program Fund Performance review, funds missing from the June 30 list that had appeared on a year-end list run the gamut from buyout to venture capital to a few distressed debt funds and include the following: Technology Partners Fund VII, Thomas Weisel Capital Partners LP, Ticonderoga e-Services Fund II, TL Ventures V, Weston Presidio Capital IV, EuclidSR Biotechnology Partners, JPMorgan Partners Global, Thomas Weisel Global Growth Partners B, Thomas Weisel Strategic Opportunities, Provender Opportunities Fund II, Thomas Weisel Global Growth Partners II, Thomas Weisel Healthcare Ventures, Alta California Partners Fund II, Kohlberg Investors V, OCM Opportunities Fund V, OCM Principal Opportunities Fund III, Paladin Homeland Security Fund, Palomar Ventures III and Belvedere Capital II.

London-based private equity research firm Preqin estimated that funds sold for $2.1 billion in late 2007 in the secondary market — which trades private equity stakes between the pension funds and endowment funds that want to exit or buy. Preqin determined that the net asset value of funds sold equates to 9 percent of CalPERs overall portfolio, and calculates the remaining value of its private equity portfolio at $21.5 billion.

Calpers didn’t confirm Preqin’s calculations. The pension fund said it couldn’t specify how much more it gained from the sale in 2007, when the market was peaking, than if it had tried to sell it today.
But Leon Shahinian, Senior Investment Officer at CalPERS private equity program, said via an email from CalPERS spokesman: “In today’s market, we would have had hundreds of millions in losses.”

The pension fund said that its strategy dated back to late 2005, when its Alternative Investment Management program (AIM) presented a strategic plan to the CalPERS Board to lessen the administrative burden of having so many funds to oversee, and to optimize long-term private equity performance. In 2006, it hired UBS Investment Bank to scrub its private equity portfolio and develop a list to sell. At that time, it had investments in several hundred funds.

The inital sale of the $2.1 billion assets — which were sold in the secondary market and not all in one go — was in the third quarter of 2007, when the Dow was ranging between 13,000 to 14,000.
CalPERS said there were 80 partnerships in this portfolio and 60 different general partnership relationships, diversified over various private equity sectors such as venture capital, distressed, buyouts, etc. Sales were completed in the fourth quarter of 2007.

Filed under Banking and Financial Services, California Government, Venture Capital by

November 24, 2008

California announces electric car network partnership

California and Bay Area Officials have announced plans for a $1 billion network of electric car recharging stations for the San Francisco Bay area highways with a goal of greatly expand the number of electric vehicles on the road. A private company – Palo Alto-based “Better Place” along with San Francisco Mayor Gavin Newsom, Oakland Mayor Ron Dellums and San Jose Mayor Chuck Reed announced the deal, which sets out to install charging stations in homes, businesses, parking lots and government buildings by 2012. The company said it will also build mechanized battery swapping centers where robots will remove and replace the batteries in cars that are compatible with the system. These stations will allow electric car drivers to travel longer distances without recharging.

The initiative would make the Bay Area the first region in the U.S. to create an electric car network.
Gov. Arnold Schwarzenegger on Thursday supported the deal, which the company hopes to someday take statewide. “This type of public-private partnership is exactly what I envisioned when we created the first-ever low carbon fuel standard and when the state enacted the zero emissions vehicle program,” Schwarzenegger said in statement. “This partnership is proof that by working together, we can achieve our goals of creating a healthier planet while boosting our economy at the same time.”

The company also unveiled a prototype electric Nissan Rogue SUV, the second prototype developed
under Better Place’s partnership with automakers. Better Place has already struck similar deals with Israel, Denmark and Australia to create electric vehicle infrastructure in those countries.

“We put in the infrastructure, and the big carmakers make the electric cars for us,” said Joe Paluska, the company’s head of policy and communications. “This is an opportunity for California to apply its strength in technology and innovation to Michigan’s manufacturing might,” he said. “We now
need a strong national policy set by the new administration to help the U.S. revive its auto industry and it’s economy.” Until now, the knock on most electric vehicles is that they were prohibitively
expensive because the batteries cost $10,000 or more. Paluska said the new prototype vehicles solve that problem — the replaceable batteries in the prototype cars would be owned by the company, not the consumer. Better Place would charge drivers a subscription fee to use its recharging facilities.

As their part of the deal, the mayors vowed to help streamline local permitting and regulations to hasten the installation of hookups in the region, and to provide incentives for local businesses to install charging outlets for employees. “Our goal is to make the Bay Area — and eventually California — the electric-vehicle capital of the world,” Newsom said.

Filed under California Government, Energy Industry, Environment and Climate by

November 25, 2008

1.5 million Californians out of work

California now has more that 1.5 million unemployed nearly a third of whom have lost their jobs in the last year. The State’s unemployment rate jumped to 8.2 percent in October, the highest rate in 14 years. This is the third-highest unemployment rate in the nation after Michigan and Rhode Island, which were both have rates of 9.3 percent. The largest hit came in the construction industry, which has lost 65,900 jobs in the last year, followed by manufacturing. Between October 2007 and October 2008, the state lost 101,300 jobs, including 24,600 in the past month alone. The State Employment Development Department said its monthly survey found 527,918 people were receiving unemployment checks in October.

This bad news came just as a state fund that pays these unemployment benefits was about to run out of money and is on the brink of insolvency. The state’s unemployment insurance fund is expected to have a deficit of $2.4 billion at the end of 2009, forcing it to borrow from the federal government for only the second time since the program was established in the 1930s. If no steps are taken to increase the fund’s revenue or reduce its payouts, its deficit is projected to hit $4.9 billion by the end of 2010.

Governor Schwarzenegger has proposed filling this gap by raising the payments from employers into the fund and by reducing benefit levels for unemployed workers and raising income eligibility requirements. He has not been able to reach agreement with the State Legislature on this approach, as they struggle to address California’s now-$11.2 billion budget deficit.

Filed under z9-Uncategorized by

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