New Routers Catch the Eyes of IT Departments

Multifunctional Boxes Keep Business Networks Humming, Curbs Sprawl

Information-technology professionals like Jeff Young want to cut down on the sprawl of networking equipment in their company's computer rooms. In the process, they are being drawn to a new type of product coming out of the technology-networking industry.

Mr. Young, chief technology officer at financial data company FactSet Inc., used to buy a different piece of networking equipment to handle each different technology task. That meant he purchased one piece of gear to deal with email spam, another piece for Internet-traffic filtering, and yet other equipment for firewalls. Overall, his Norwalk, Conn., company had more than 300 "routers," the back-office networking gear that helps to direct and shape Internet traffic.

Having so many routers was expensive and took up space. So late last year, Mr. Young began testing a new type of router from networking company Cisco Systems Inc. Called the ASR 1000, the router crams multiple functions -- including speeding data through computer networks and filtering out unwanted Internet traffic -- into one box. Cisco officially launched the product this month.

"The consolidation component of this gear is compelling," says Mr. Young. He adds that for every five of FactSet's old routers, he plans to replace them with one of Cisco's new routers. Mr. Young expects the rollout to be finished in a year, but declines to comment on how much the deployment will cost.

As IT pros like Mr. Young clamor to deal with "box sprawl," networking companies from Cisco to Juniper Networks Inc. to Telefon AB L.M. Ericsson's Redback Networks are introducing new routers that can stuff more services into their boxes. Apart from its new ASR router, Cisco unveiled a multifunction router known as the ISR in 2004. In 2005, Redback Networks introduced a multifunction router called the SmartEdge, which can facilitate Internet telephone calls and filter Internet traffic. That same year, Juniper launched new routers dubbed the M-series, which boast Internet-telephone features and can block unwanted Internet traffic.

These new multifunction routers are intended to appeal to IT departments that want to minimize the space devoted to networking equipment, replacing older gear with more efficient products that consume less energy. Unlike typical routers, which may perform just one function, the new gear can be customized to carry out a variety of tasks, such as securing a network and ensuring important files have the proper bandwidth to reach their destinations. Prices of the new routers vary according to the different mix of services that companies add to them.

For companies that adopt these multifunction routers, there are cost savings to be had. Most of the savings will come in a company's data center, the huge back-office computer warehouses where Internet and communications companies and businesses link to each other's computer networks. Companies typically lease space in data-center facilities based on the amount of square feet that their equipment occupies. A spokesman for Cisco, San Jose, Calif., says its ASR router uses between two to four feet less in a datacenter than a bundle of networking gear delivering the same features, saving customers $4,000 to $20,000 in data-center-setup fees.

Some data centers also lease space based on the amount of power that computer equipment consumes. A Redback spokesman says its SmartEdge router consumes 61% less energy than a competitor's single-function box that is used to deliver Internet-telephone and data services. That translates into savings of about $3,000 a year in energy bills, says the spokesman.

Companies need to weigh such potential cost savings against the front-end expense of these new routers, however. Because the multifunction gear packs in more services than typical routers, they can be four times as expensive at the outset as typical routers that cost about $20,000 apiece. Cisco has said its new ASR router costs between $35,000 and $400,000, depending on what functions a customer decides to add to the box.

Still, "while clearly the equipment is more expensive, in some cases the cost savings and reduction in energy can offset the pricing," says Ray Mota, an analyst with Synergy Research Group Inc., a Reno, Nev., market research firm.

Some corporate customers may not like the multifunction routers for other reasons. Mr. Mota says some IT managers feel safer having a dedicated router performing a single task, thereby ensuring service for that one task is optimal.

Manoj Leelanivas, a senior vice president at Juniper who oversees the unit that mainly produces routers for cable and telephone companies, adds that some corporate customers may avoid the new routers because of the way their companies' IT is structured. He notes, for instance, that some corporate IT departments have separate groups managing communications, networking and security and don't want to introduce equipment that would overlap.

This isn't the first time networking companies have offered multifunction routers. Early this decade, networking concerns such as Crescent Networks Inc. and CoSine Communications Inc. introduced routers that could perform several tasks, but those boxes were often faulty. Equipment manufacturers have since developed specialized processors and software to improve the performance of such routers. Redback Networks, for instance, has spent about $250 million since 2005 on developing special processors. Cisco says it spent $100 million and obtained 42 patents for the semiconductor it is now using in its new ASR router.

Mark D. Krupinski, who oversees networking for WesBanco Bank Inc., turned to multifunction routers to control the box sprawl at his Wheeling, W.Va., bank. In 2006, after several acquisitions, WesBanco had 80 different phone systems spread across 82 bank locations. The extensive network included dozens of specialized call-routing boxes and other equipment.

So Mr. Krupinski decided to consolidate all the confusing systems into a single network. By early last year, the massive array of routers serving the different phone systems had been replaced with a single server and an ISR multi-function router from Cisco. Mr. Krupinski declines to say what the bank spent on the conversion, but says the move saves it $1 million a year in maintenance and telecommunication costs.

"It's a headache to have to worry about maintenance and power consumption for loads of equipment if you don't have to," he says. "The costs savings we saw more than justified our consolidating."

By Bobby White
Wall Street Journal; March 25, 2008

Pleasing Google's Tech-Savvy Staff

Information Officer Finds Security in Gadget Freedom of Choice


How do you run the information-technology department at a company whose employees are considered among the world's most tech-savvy?

Douglas Merrill, Google Inc.'s chief information officer, is charged with answering that question. His job is to give Google workers the technology they need, and to keep them safe -- without imposing too many restrictions on how they do their job. So the 37-year-old has taken an unorthodox approach.

Unlike many IT departments that try to control the technology their workers use, Mr. Merrill's group lets Google employees download software on their own, choose between several types of computers and operating systems, and use internal software built by the company's engineers. Lately, he has also spent time evangelizing to outside clients about Google's own enterprise-software products -- such as Google Apps, an enterprise version of Google's Web-based services including email, word processing and a calendar.

Mr. Merrill, who has surfer-length hair and follows a T-shirt dress code, studied social and political organization at the University of Tulsa in Tulsa, Okla., and then went on to earn master's and doctorate degrees in psychology from Princeton University. His education in IT came largely from jobs as an information scientist at RAND Corp., senior manager at Price Waterhouse and senior vice president at Charles Schwab & Co. He joined Google in late 2003.

We sat down with Mr. Merrill to talk about Google's approach to IT. Excerpts:

The Wall Street Journal: What's the structure of the IT organization at Google?

Mr. Merrill: We're a decentralized technology organization, in that almost everyone at Google is some type of technologist. At most organizations, technology is done by one organization, and is very locked-down and very standardized. You don't have the freedom to do anything. Google's model is choice. We let employees choose from a bunch of different machines and different operating systems, and [my support group] supports all of them. It's a little bit less cost-efficient -- but on the other hand, I get slightly more productivity from my [Google's] employees.

WSJ: How do you support all of those different options effectively?

Mr. Merrill: We offer a lot more self-service. For example, let's say you want a new application to do something. You could take your laptop to a tech stop [areas in Google offices where workers can get technical support], but you can also go to an internal Web site where you download it and install the software. We allow all users to download software for themselves.

WSJ: Isn't that a security risk?

Mr. Merrill: The traditional security model is to try to tightly lock down endpoints [like computers and smartphones themselves], and it makes people sleep better at night, but it doesn't actually give them security. We put security into the infrastructure. We have antivirus and antispyware running on people's machines, but we also have those things on our mail server. We have programs in our infrastructure to watch for strange behavior. This means I don't have to worry about the endpoint as much. The traditional security model didn't really work. We had to find a new one.

WSJ: You depend in large part on open-source software or software that's built internally. What are some examples? What are the benefits?

Mr. Merrill: We do buy software where it makes sense to -- for example, we have a general ledger [accounting software] from Oracle; Oracle did a good job. Where it makes more sense to buy, we'll buy; where it makes more sense to build our own, we'll build. An example: Our [customer-relationship management] software is tightly integrated with our ad system, so we had to build our own.

We also believe there should be competition -- for instance, in operating systems, because different operating systems do different things well. We run search off of Linux. We run the Summer of Code where we pay college students to work on open-source projects that they think are useful.

WSJ: What's driving the "consumerization" of tech in the enterprise, where companies are borrowing tech ideas from the consumer Internet?

Mr. Merrill: Fifteen years ago, enterprise technology was higher-quality than consumer technology. That's not true anymore. It used to be that you used enterprise technology because you wanted uptime, security and speed. None of those things are as good in enterprise software anymore [as they are in some consumer software]. The biggest thing to ask is, "When consumer software is useful, how can I use it to get costs out of my environment?"

Google Apps is hosted on my infrastructure, and [the Premier Edition] costs roughly $50 a seat. You can go from an average of 50 megabytes of [email] storage to 10 gigabytes and more. There's better response time, you can reach email from anywhere in the world, and it's more financially effective.

WSJ: When you make that pitch to other CIOs, what are they most skeptical about?

Mr. Merrill: When I talk to Fortune 100 CIOs, they want to understand, "What is your security model? Is it really as reliable? What's the catch?"

The answer is, I had to build this massive infrastructure to run Google, so adding all the enterprise data isn't a big deal. I already had to build security standards because search logs are really private. Very few [Google employees] have access to consumer data, [and those who do] have to go through background checks. We have a rich relationship with the security community -- so when people find problems, they tell us. We have more than 150 security engineers who do nothing but security. We don't have a security priesthood: Every engineer is trained. We use automated tools that check every engineer's code.

We're able to invest in information security in a way that most people aren't. We did it because of search. In some sense, Google Apps is just a byproduct.

By Vauhini Vara
Wall Street Journal; March 18, 2008

Forbes Is Planning Web Ad Network

Traditional media companies trying to stem the flow of advertising dollars to Google and other large Internet companies increasingly are building ad networks of their own, anchored by their brands. The latest, Forbes Inc. was set to announce Monday that it will start selling ads this spring for about 400 financial blogs. In recent months, Conde Nast, Viacom Inc., CBS Corp., and other major media companies have unveiled topic-specifi ad networks. But these media networks - some linking fewer than a dozen handpicked Web sites - may have a tough time competing with the networks of thousands assembled by Google, Yahoo Inc., Microsoft Corp., and Time Warners Inc.'s AOL.

-Associated Press

Microsoft Denied Bid To Stop Suit

The U.S. Supreme Court rejected Microsoft Corp.’s bit to stop an antitrust lawsuit brought by Novell Inc. Novell sued Microsoft in 2004 over 1990s practices by the software giant in the word-processing and spreadsheet software markets. The Supreme Court rejected Microsoft’s appeal, allowing the case to proceed in a federal court. Microsoft has already paid almost $5 billion relating to the government’s antitrust case.

CBS TV Stations Start Up An Online Ad Network

Television stations owned by CBS Corp. are launching an online advertising initiative with local bloggers and social media sites, the company announced. The ad network will involve CBS-owned TV stations generating online modules called “widgets” which individuals can easily add to their Web sites. The widgets will contain local news as well as advertising, which the CBS stations will sell. The online partners will receive a share of the revenue, but specific financial details weren’t disclosed.

- Associated Press

Meet Bob the Blogger

Two or three times a month, Elise Martin checks in on a colorful character online who is always meeting up with real celebrities in faraway places and offers tips on hot industry trends.
His name is Bob Archer, and he blogs at www.meetbobarcher. com. But he's not real.
He's the creation of Archer Group, a small Web-marketing agency in Wilmington, Del. The blog helps Archer stay in touch with clients and get them tolhink about ways to use the Weband the firm's services.
Each post puts the mythical Bob in an interesting place, with an interesting person, talking about an online-marketing concept. A recent entry had him schmoozing with Danny DeVito at the actor's restaurant DeVito South Beach in Miami.
Here are edited excerpts from an interview with Archer cofounder Lee Mikles:

WSJ.COM: How did Bob's blog get started?
Mr. Mikles: Bob's story goes back to when we founded the coJv.pany. We wanted a name that sounded like it had been around for a while but wasn't pretentious, so we called it the Archer Group. It was kind of an inside joke that there was this person Bob Archer.
When [Archer decided to do a blog, it wanted] to stand out and offer something [people] were actually going to read. So we decided to bring Bob Archer to life.

WSJ.COM: Why use celebrities?
Mr. Mikles: They're people we can ,connect with, and it also adds to the perceived stature of Bob Archer.

WSJ.COM: What are the biggest challenges?
Mr. Mikles: Coming up with something interesting. I try to dedicate an hour or two a week. Everybody in the office feeds me ideas.

WSJ.COM: What's readership like?
Mr. Mikles: We're getting between 40 and 60 visitors a day. We have an active client list of about 50 firms.

Read more of the interview with Archer's Mr. Mikles online, at WSJ.com/SmallBusinessLink.

Quattrone's Return

Frank Quattrone's new advisory firm, Qatalyst Partners, marked one of the investment-banking world's great comebacks, not the least because ofthe tech-world heavyhitters that have thrown their support behind Mr. Quattrone. The statement about Qatalyst's founding includes supportive quotes from Google CEO Eric Schmidt, who gushed about Mr. Quattrone's experience and "unparalleled industry knowledge."

Other tech mavens who showed up were Bill Campbell, chairmain of Intuit, Jim Breyer of Accel Partners, and Gideon Yu, the chief financial officer of Facebook, former CFO of YouTube and former treasurer of Yahoo. The long list of tech companies that its bankers have advised include: Adobe, Agilent, AOL, Apple, Amazon.com, Applied Materials, and Ascend. And that's just the "A"s.

Such big names go a long way toward confirming Mr. Quattrone's star status in the technology industry. Mr. Quattrone's founding group doesn't (yet) include some of his longtime associates, like star bankers Bill Brady and George Boutros, who are still where he left them at Credit Suisse Group.

The first people to join him are former Credit Suisse vice president of Internet banking Frank Quattrone Jonathan Turner and the former general counsel of the Credit Suisse technology group, Adrien Dollard.

The more junior bankers include former Evercore Partners vice president Neil Chalasani, former Goldman Sachs vice president Brian Slingerland and Vista Partners associate Brian Cayne.

by Heidi Moore
Wall Street Journal

A New Meaning For 'Unbanked'

Microsoft, Yahoo Shun Their Bank Dream Teams As Talks Over Bid Resume

Why hire a team of high-priced investment bankers if you aren't going to use them?

You might pose that question to Microsoft and Yahoo. The two companies met on Monday to discuss Microsoft's vision for its proposed bid. But there were no bankers in attendance.

On the face of it, the exclusion of the bankers seems odd. Since Microsoft announced its unsolicited bid for Yahoo in January, the two companies assembled teams of top investment bankers, including Jill Greenthal of Blackstone Group and Paul Taubman of Morgan Stanley on the Microsoft side and Janine Shelffo of Lehman Brothers working with Goldman Sachs Group and Moelis & Co. on behalf of Yahoo.

So why did Microsoft and Yahoo keep out all the high-priced, presumably well-prepared bankers when the companies had their first talks since Jan. 31?

It could be seen as a sign of a kinder, gentler, less-impetuous Microsoft that is thinking ahead and trying to win over Yahoo management. The absence of bankers from the meeting seems to indicate that Microsoft wants to start a charm offensive and get to know Yahoo without the anvil of the bid hanging over the two parties.

There are good reasons for Microsoft to soften its approach, the biggest one among them being price. Yahoo will resist a deal until there is a higher price. Microsoft won't sweeten its bid until Yahoo opens its books. And Yahoo won't open its books to people it doesn't like. If Microsoft can humanize its approach and look less like the big bad wolf, the software company presumably will get better cooperation from Yahoo and ease the way for a deal. Not incidentally, it also might stop the massacre in the value of Microsoft's shares, which have fallen 20% since December.

Any of those reasons would bode well for a deal to actually materialize. But there is one thing to keep in mind: The bankers get paid even if they aren't in the room.

By: Heidi Moore
Wall Street Journal; March 15, 2008

March 15, 2008; Page B4

Yahoo paid price for coddling Google

McCLATCHY-TRIBUNE
SAN JOSE, Calif. - Almost eight years ago, Yahoo decided to lend a little start-up a helping hand, featuring its search technology on the Yahoo home page and giving it money at a critical juncture.

In cut-throat Silicon Valley, no good deed goes unpunished.

The start-up was Google, and Yahoo's generosity helped launch the most formidable competitor it had ever encountered. Now facing a takeover attempt by Microsoft, Yahoo is coming to terms with the punish¬ing consequences of its complex relationship with Google, including a futile attempt to copy Google's extraordinarily profitable advertising model at sig¬nificant cost to Yahoo's own business.

Long before the world learned that Google had turned the Internet into an amazing money-minting machine, Yahoo knew.

When Google was still a private company, it sent its financial statements to Yahoo's headquarters in Sunnyvale, California, like clockwork. Google had to because Yahoo was one of its earliest investors.

The statements showed the incredible growth of Google's search advertising business, with sales more than doubling from quarter to quarter.

But Yahoo executives didn't focus on the money; they were interested in how much traffic was being driven by search, recalled Ellen Siminoff, an executive who joined Yahoo in 1996.

In 2000, Yahoo agreed to use and promote Google, which it touted as "the best search engine on the Internet." Google co-founder Larry Page described the pact as a "major milestone."

The following year, Yahoo was even more generous, paying Google $7.2 million for its services. (Google in turn paid Yahoo $1.1 million for promotional help.) Google desperately needed the money, which helped push it into the black for the entire year.

Yet Yahoo was hardly flush with cash. After two years of profit, Yahoo reported an annual loss of million in 2001. The value its stock had collapsed fro $118.75 a share in January 2000 to $4.05 in September 2001.

Meanwhile, Yahoo's promotional push was having an effect on Google "When we were turning th business around in 2001, Google was already becoming the ascendant player in Europe, especially in the U.K., which is one of the most important advertising markets," recalled L. Jasmine Kim, a former vice president for global marketing and sales development for Yahoo.

Microsoft Online Executive Resigns

A well-regarded vice president in Microsoft Corp's online group quit to join a small online-ad agency, a sign of continuing turmoil within the software giant's Internet operations.

Joanne Bradford, vice president and chief media officer of Microsoft's MSN online service, will leave the software maker after seven years to join Spot Runner Inc., a privately held Los Angeles firm that uses the Internet to help companies create advertisements for television.

The departure follows Microsoft's bid for rival Yahoo Inc. and comes at a time of widespread management tumult as companies try to figure out their place in the fast-changing online-advertising business. Last week, Google Inc.'s head of online sales and operations left the Internet-search giant to become chief operating officer of Facebook Inc., the fast-growing, four-year-old Internet firm.

At Microsoft, Ms. Bradford spent her career trying to inject advertising-industry expertise into the company's software culture. The company has tried but largely failed to expand its share of the online-ad market against stronger rivals such as Google, prompting the bid for Yahoo, which has so far rejected the offer.

Meanwhile, behind the scenes, Microsoft's online group is grappling with a host of challenges, including a reorganization last month and departure of several key executives, of which Ms. Bradford is the latest.

Microsoft is also in the throes of integrating aQuantive Inc., an online-ad company it bought last year for $6 billion. That merger has elevated executives at aQuantive, a shift that threatens to displace some existing Microsoft employees, say some insiders.

Ms. Bradford, who before Microsoft worked in ad sales at BusinessWeek, was one of the few high-ranking Microsoft executives who joined the company with experience in the advertising industry. That skill set has become increasingly important as Microsoft attempts to turn around its money-losing online business.

Ms. Bradford's departure was announced in an email to employees from her boss, Microsoft Vice President Satya Nadella. For now, Ms. Bradford's position will be filled by Greg Nelson, a Microsoft general manager in charge of MSN's international operations.

Ms. Bradford at times struggled to prove herself to Microsoft's higher-ups but is credited with building tighter ties between Microsoft and large advertisers and ad agencies. She also inspired strong loyalty among Microsoft's online-ad sales team, which she headed before taking her current Microsoft position.

"It's a devastating thing for people on the sales side," said a person familiar with Microsoft's online group.

At Spot Runner, Ms. Bradford will become the company's executive vice president of national marketing services, which will focus on attracting more large, national advertisers to the company's services.

By Robert A. Guth
Wall Street Journal; March 14, 2008

AOL Buys Into Social Networking

Deal for Bebo Aims to Turn Laggard at Time Warner Into Ad-Focused Hot Spot

Time Warner Inc.'s AOL, battling to reinvent itself, is plunging into the hot and pricey world of social networking.

AOL announced plans to fork out $850 million for Bebo, a social-networking site with a strong presence in the United Kingdom, but a distant rival in the U.S. to heavyweights such as MySpace and Facebook.

The acquisition is the single biggest AOL has made in several years, as it attempts to transform itself from an Internet-access subscription business into an advertising-focused one. The deal represents a major bet that online advertising will retain its sparkle and social-networking sites will benefit.

The transaction is rooted in the belief that social networking is becoming a major gateway for how people use media and services on the Web, including email, search and video. "People are using social networks as their prism to the online world," said Bebo President Joanna Shields, a former Google Inc. executive who joined Bebo last year and is expected to remain at the helm.

The two biggest social networking sites are already largely spoken for: News Corp. bought MySpace in 2005 for $580 million, and Microsoft Corp. made a $240 million investment in Facebook Inc. last year. News Corp. also owns The Wall Street Journal.

Still, AOL's move is a risky one. Some hot Web properties, including social networks and video-sharing sites, are finding it harder than they expected to turn their heavy traffic into ad dollars, with some of the biggest sites generating less advertising revenue than hoped.

Like many of its counterparts, Bebo is more about potential than profit -- a factor that had warded off several contenders for the company, including Yahoo Inc. and CBS Corp., according to people familiar with the situation. Indeed, some analysts questioned whether AOL was overpaying.

"The price seems a bit high, and it's hard to know what AOL is getting," said Ryan Jacob of the Jacob Internet Fund, which owns shares in Google and Yahoo, but not Time Warner. Bebo, based in San Francisco, had 22 million visitors world-wide in January, compared with MySpace's 109 million and Facebook's 101 million, according to comScore Inc.

The deal comes as Time Warner Chief Executive Jeff Bewkes is under pressure to kick-start the company's stagnant stock price. AOL has been one of the company's trouble spots in recent years and the focus of a major turnaround. Mr. Bewkes flagged plans last month to separate the Internet-access business from the rest of AOL. At the time, he said he was "open to any strategic moves that make sense."

AOL has recently been in talks with Yahoo over a possible alternative to Microsoft's bid to acquire Yahoo, although it is seen as having little chance of success, according to people familiar with the situation.

The Bebo acquisition raises questions about whether Time Warner is still open to selling AOL, which had been seen as a serious option. Mr. Jacob said: "AOL is clearly bulking up to make itself more attractive, either for a spin-off or a transaction."

AOL plans to twin Bebo with its chat services AOL Instant Messenger and ICQ, creating a platform that it says will reach 80 million unique visitors around the world. "Social networking was really invented here at AOL. We let it get away from us," said AOL Chief Executive Randy Falco.

Bebo, founded in 2005 by a married couple, rapidly expanded to include a range of entertainment including TV shows and music. While it is little known in the U.S., it has a higher profile overseas, and AOL hopes to use the site to boost AOL's international presence.

But the biggest issue may be luring advertisers to Bebo. Ad spending on social-networking sites is still tiny and largely experimental for marketers. Expected to reach $1.6 billion in the U.S. this year, up from $920 million in 2007, the market is dominated primarily by MySpace and Facebook.

During its fourth-quarter earnings call on Jan. 31, Google said it was having a harder time than it expected generating ad revenue from partner social-networking sites. Its partners include MySpace.

Some of advertisers' concerns with social-networking sites stem from a lack of comfort displaying ads next to less-predictable content.

Mr. Falco says AOL can do better than Google by combining an interactive advertising approach that Bebo has developed, with AOL's existing online advertising technologies. AOL plans to use the data that Bebo users enter into the profiles they create about themselves to help better target ads both on that site and on the network of Web sites where it brokers ads.

AOL may face other challenges integrating Bebo. AOL already has stumbled in its efforts to integrate a series of smaller online ad firms acquired in the past few years. Earlier this week, Curt Viebranz was fired as president of AOL's Web ad selling unit, dubbed Platform A. He was succeeded by Lynda Clarizio, formerly president of Advertising.com.

By Merissa Marr & Emily Steel; Aaron Patrick, Vishesh Kumar & Kevin Delaney contributed to this article.
Wall Street Journal; March 14, 2008

Google, Cleveland Clinic Form Venture

Google Inc. and nonprofit academic medical center Cleveland Clinic formed a partnership and pilot program aimed at giving patients more control over their online medical records.

The venture marks the Mountain View, Calif., Internet search company's first foray into the online health-care space. Since 2006, Google has discussed on its company blog and in executives' speeches the issues around giving consumers more control over their medical data and more relevant health-related information.

While Google hasn't disclosed plans, analysts and technology industry observers have speculated that the company has big ambitions in health care. They say Google could boost its already large user base and search-related advertising business by becoming a destination for health-related information and services.

The effort by Cleveland Clinic and Google is part of a larger push by technology companies, hospitals, insurers and the government to use technology to give patients more control and access to their medical information. That could help lower health-care costs if access to more data helps consumers make better choices. Similar efforts are under way at companies such as Revolution Health Group LLC and Microsoft Corp. Microsoft started its online health-care service, dubbed HealthVault, in October.

Health-care experts say companies such as Google and Microsoft face an uphill battle in trying to improve the nation's health-care system. The industry is highly regulated. People have also been slow to embrace online personal health records amid privacy and security concerns.

Cleveland Clinic's new program will be open to up to 10,000 of its patients by invitation only. Under the pilot, patients who already use Cleveland Clinic's personal health record system can securely share medical information such as prescriptions, conditions and allergies between the Cleveland Clinic system and a Google health-profile online. Users can access their Google profile from any Internet-connected personal computer and would control what information goes into the profile.

Cleveland Clinic and Google officials say the pilot program is intended to free medical data from electronic-medical records so that patients can take their data wherever they go and share it with other doctors or pharmacies. Typically, control over medical data stored in electronic-medical records is in the hands of the health-care profession instead of the patient.

"From a patient perspective, they no longer have to remember all that information, write it down on a piece of paper and keep it with them," says C. Martin Harris, chief information officer for Cleveland Clinic.

Marissa Mayer, vice president of search products and user experience for Google, declined to say how the Cleveland Clinic initiative fits into Google's overall ambitions in the online health market.

By Christopher Lawton
Wall Street Journal February 21, 2008

Yahoo Sees Blue Skies, but Clouds Brew in China
Yahoo Inc. is pressing its case to shareholders this week on why it's worth more than Microsoft Corp.'s bid for it, even as moves by its Chinese partner underscore investor doubts that Yahoo can stay independent. Alibaba Group, the Chinese Internet company that is 39% owned by Yahoo, is in advanced talks with investors to finance Alibaba's purchase of Yahoo's stake in an effort to expand its management independence should Microsoft's bid prevail, according to people close to the situation. While it's not pushing for a Yahoo sale, Alibaba believes that a change in control at Yahoo would trigger an opportunity for it to buy the stake under the companies' agreements, though that could be subject to interpretation. The talks signal Alibaba's belief that Microsoft could still succeed in its quest to buy Yahoo, which owns stakes in Internet companies in Japan, South Korea and China, where Alibaba is the third largest Internet search company. Alibaba's interest in purchasing the Yahoo stake could also represent a new wrinkle in any negotiations. For Microsoft, gaining Yahoo's Asia stakes was a key attraction when it made the bid Jan. 31, an offer now valued at about $42 billion. Alibaba's move coincided with the kickoff of Yahoo's roughly week-long road show at which company executives will meet with major shareholders to make the case that Yahoo's value exceeds Microsoft's offer, which company directors last month rejected as insufficient. Chief Executive Jerry Yang, Chief Financial Officer Blake Jorgensen and President Susan Decker are among those at the meetings, which began yesterday. As part of road-show documents filed with regulators, Yahoo reaffirmed its financial guidance for 2008 and projected strong revenue and cash-flow growth in 2009 and 2010, releasing financial projections first presented to its board in December. Based on the projections, it is easy to calculate a standalone value for Yahoo close to $40 a share, and any additional strategic value to Microsoft could make a deal worth more than that, says a person close to the situation. Microsoft's cash-and-stock offer, valued at $31 a share when first announced, has a value of about $29.49 a share based on Microsoft's price in 4 p.m. trading on the Nasdaq market yesterday. Some major Yahoo shareholders had previously said they expected Microsoft to raise its price and a deal to happen at about $ 35 a share. But it isn't clear whether Microsoft will increase its bid. The Redmond, Wash., technology company declined to comment. Analysts said Yahoo's reaffirmation of its modest guidance for the first quarter and the year means it's less likely to be vulnerable to a Microsoft takeover because it misses its projections. But they said it would be a stretch for Yahoo to hit its estimates for 2009 and 2010, which are well above current analyst expectations. "Those are not easy numbers," says Mark Mahaney, an analyst with Citi Investment Research, whose parent company has done business with Yahoo and makes a market in its shares. "We think it's the most likely outcome that Microsoft buys Yahoo, and at a higher price than $31," he adds. Imran Khan, an analyst at J.P. Morgan, estimates Yahoo's 2009 revenue at $6.4 billion after commissions paid to marketing partners are factored out. That is below Yahoo's guidance of $7.1 billion, in part because he isn't as optimistic as the company about search-related improvements. People familiar with the matter say that Yahoo's strong prospects in display advertising, such as banner ads, are central to the case the company is making to investors. Yahoo's road-show presentation doesn't include any specific mention of scenarios it has discussed with News Corp. and Time Warner Inc. about folding some of their Internet assets into Yahoo in return for significant Yahoo stakes. Such discussions about possible alternative deals -- considered long shots by people close to the situation -- haven't progressed, although as of earlier this week Yahoo and the possible partners were still talking, according to people familiar with the matter. News Corp. Chairman Rupert Murdoch said at a media conference last week that the company wouldn't get in a fight with Microsoft. ( News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.) If Microsoft's bid goes through, Alibaba aims to exercise a clause in its 2005 deal with Yahoo that exchanged Yahoo's China operation and $1 billion in cash for a stake in Alibaba. Alibaba believes the "right of first offer" clause in the agreement would be triggered by any Microsoft deal for Yahoo, say the people familiar with the matter. Under Alibaba's interpretation of the agreement, if Yahoo decides to transfer its stake in Alibaba to Microsoft as part of a broader deal, Yahoo would first have to offer that stake to other Alibaba shareholders. The Chinese company's other main shareholders include Alibaba management and Japan's Softbank Corp. Alibaba would finance the purchase of the stake with help from two lead investors and a group of others, including large Chinese institutions, the people say. Alibaba has hired Deutsche Bank and Wachtell, Lipton, Rosen & Katz as advisers, people familiar with the matter say. A Wachtell Lipton spokeswoman confirmed that the law firm has been hired as legal counsel. At the core of Alibaba's move is an effort to keep Chinese management control of Alibaba, say people familiar with the plan. Alibaba's management -- led by founder Jack Ma -- controls the company's operations despite Yahoo's stake and one board seat. Alibaba executives are concerned that Microsoft's size and history of hands-on management could jeopardize Alibaba's autonomy and its image as a Chinese company. China's government restricts Internet content and is suspicious of foreign Internet companies -- which, partly as a result, have fared worse than their domestic rivals in China. After Microsoft's bid for Yahoo surfaced, Chinese regulators contacted Alibaba about how it could be affected by a deal. Such concerns are partly driving Alibaba's search for alternative shareholders, the knowledgeable people say. Spokesmen for Alibaba and Microsoft declined to comment. Alibaba's efforts are bad news for Microsoft. While selling off Yahoo's stake would fetch a chunk of cash, the software maker would lose a foothold in an increasingly important market. Alibaba is one of China's biggest Internet companies, with a broad portfolio of businesses. Its flagship unit is Alibaba.com Ltd., a business-to-business trading platform that listed in Hong Kong in November 2007 after raising $1.7 billion in the biggest initial public offering ever by a Chinese Internet company. That unit reported on Tuesday that its profit more than quadrupled in 2007, while revenue jumped nearly 60%. Alibaba also runs Yahoo China, as well as a consumer-auction site, a payment- processing service, a software company and an advertising-trading platform. In Yahoo's road-show presentations to investors this week the company is valuing a portion of its Asian holdings at $12.6 billion, or $8.97 for each Yahoo share, based on Friday's prices. That includes Yahoo's 28% stake in Alibaba.com, which the company values at $3.2 billion, but not its stake in Alibaba Group's other, unlisted operations. Alibaba.com's share price has fallen sharply this week. But putting a value on Yahoo's entire stake could be difficult. Alibaba's nearly 80% stake in Alibaba.com, its Hong Kong-listed unit, is valued close to $ 8 billion based on its current share price. But the valuation of Alibaba's other businesses is tricky: Its Taobao unit is by far the dominant consumer auction site in China, but it is believed to have relatively little revenue because it offers most of its services free. If Microsoft acquires Yahoo, and Alibaba and Microsoft cannot agree on a price for Yahoo's stake in Alibaba, the shareholder agreement stipulates that the matter would then go to arbitration. By Kevin J. Delaney, Rebecca Blumenstein, and Robert A. Guth; Jason Dean, Jessica E. Vascellaro and Sky Canaves also contributed to this article. The Wall Street JournalMarch 19, 2008

On the Web, Signs of a Click Recession

Google Feels Pinch
As Ad Growth Slows;
Sweeter Deal for Yahoo?


Internet advertising may be showing itself more vulnerable to a consumer slowdown than many in the industry had hoped, according to new search-ad data released this week.

The report from research firm comScore Inc. showing a decline in the number of consumer clicks on Google Inc. search ads in January amplified existing concerns about the effect of a broader economic slowdown on the Internet. Many online-ad experts have played down such worries, predicting any economic weakening will be offset by a continued shift in ad spending from traditional media to the Internet. Google Chief Executive Eric Schmidt said the company hadn't seen any impact from macroeconomic softening when the Internet company reported earnings Jan. 31. But some investors and analysts have grown anxious in recent months that any pullbacks in consumer spending would hurt online ads.

ComScore released data to clients Monday showing a 7% decline in the number of times U.S. consumers clicked on ads appearing alongside Google's search results in January compared with December; clicks were 0.3% lower compared with January 2007. That follows a 7% decline from November to December. Google charges an advertiser only when a user clicks on one of the small text ads for, say, digital cameras, that appear when a user searches for "digital camera."

ComScore also reported a 1% decrease in U.S. search-ad clicks for Yahoo Inc. for January from December, with clicks increasing 4% for Microsoft Corp. over the same period.

Google shares were down 4.6%, or $22.25 on the news, falling to $464.19 in 4 p.m. Nasdaq trading yesterday, having dipped more than 8% lower earlier in the day. Google is trading 38% lower than its 52-week intraday high. (Please see Options Report.)

Some analysts say comScore's latest numbers may exaggerate any slowdown in clicks. J.P. Morgan Internet analyst Imran Khan in a research note pointed to divergences in the comScore click data and Google's reported results in the past.

RBC Capital Markets Internet analyst Jordan Rohan called investor reaction to the data "overblown," saying that it fails to take into account any increases from revenue per search because of factors such as higher pricing. Mr. Rohan said RBC checks with search advertisers indicated a pickup in spending in February after weakness in January. "It may not be a great first quarter, but it's not going to be as bad as the numbers from comScore suggest," Mr. Rohan said in an interview.

The concerns about the online-ad outlook come amid indications that Internet advertising hit record levels in 2007. The Interactive Advertising Bureau trade group and PricewaterhouseCoopers Monday estimated that U.S. online-ad revenue hit $21.1 billion last year, a 25% increase from 2006.

Google declined to comment. When it reported fourth-quarter revenue and profit that fell short of Wall Street expectations last month, Google said clicks on ads increased 30% in the fourth quarter from a year earlier, compared with a roughly 50% average increase during the previous four quarters. At the time, executives cited Google changes that lowered the click growth rate, such as a modification to site design that makes it harder for users to click on ads accidentally.

But some analysts say new data suggest the trends in ad clicks indicate Google is feeling an impact from a consumer slowdown in the first quarter, so far at least. The risk is that if consumers are spending less overall, they are less prone to click on search ads. Google has said it could benefit from comparison shopping by price-sensitive consumers who conduct more searches and click on more ads to find the best deal. But, over time, such behavior could lead advertisers to rein in online-ad spending if they're notching fewer sales for each ad click.

John Aiken, managing director of Majestic Research in New York, says his analysis suggests that's exactly what's happening, with small- to medium-size advertisers pulling back on search advertising as the return on their ad-spend investment drops. When that occurs, Google has fewer ads to display, generally reducing the likelihood a consumer sees one to click on. "It's been a trend that's been getting worse over the last four to five months," Mr. Aiken says.

Tepid electronic-commerce data have added to concerns, given a link between online sales and advertising. U.S. e-commerce spending in January fell 17% from December, and was up a modest 11% compared to January 2007, according to comScore. It had fallen 14% in January 2007 from December 2006, and risen 19% in January 2007 compared with a year earlier.

Some others say they aren't seeing a consumer pullback in online data. Consumer visits to retail sites from Google.com have increased 11% so far this year compared with the same period a year earlier, according to research firm Hitwise, a unit of Experian. "I'm not seeing necessarily any signs of recession in terms of consumers' curtailing their visits to retail from search," said Bill Tancer, general manager of global research at Hitwise.

The anxiety about online advertising comes as Microsoft is pursuing Yahoo with an unsolicited cash-and-stock offer valued at $41.7 billion based on Microsoft's share price in Nasdaq trading yesterday. It's unclear whether the concerns could affect the outcome of that takeover standoff, though a bleaker Internet-ad outlook could potentially increase pressure from shareholders on Yahoo to accept the offer, and decrease Microsoft's willingness to raise its bid. Yahoo has rejected the bid