Thursday, February 27, 2014

ARM: Ruling the World (BusinessWeek)


The Unlikely Tale of How ARM Came to Rule the World

An ARM-designed microprocessor chip

An ARM-designed microprocessor chip
This is a story about ARM Holdings (ARMH), the mobile technology company. But before it gets going, here are a few things you need to know:
1. ARM is a company made up mostly of chip engineers. They design parts of chips—such as graphics and communication bits—and they design entire chips.
2. ARM sells these designs and licenses its chip architecture to dozens of companies, including Apple (AAPL), Samsung Electronics (005930:KS), Qualcomm(QCOM), and Nvidia (NVDA).
3. As a result, just about every smartphone, mobile phone, and tablet runs on an ARM chip.
4. In fact, you can argue that ARM-based products are now the most-used consumer products in the world, outflanking even Coca-Cola (KO) and McDonald’s(MCD) by some measures. (I recently made just such an argument.)
5. A great many people have not heard of ARM. This is because the company has largely kept to itself from a headquarters in Cambridge, England.
6. Its anonymity is sort of incredible when you think about it, considering that ARM has arguably had a more profound effect on modern living than just about any other company.

Picture an idyllic scene in the English countryside—like Downton Abbey, but bigger. That’s Cambridge. It has these ancient college buildings that are cathedrals to learning. On a warm day, students stream out and head to the river to go punting or get a pint and lounge around in grassy fields. It’s a place that begs you to get lost in thought.
Near the center of town, right between a Gap (GPS) and a Marks & Spencer(MKS:LN), is a dark alleyway that’s encrusted with bird poop. It’s in this alley that Acorn Computers got its start in 1978.
The young and/or non-British may not remember Acorn. The important thing is that it made computers when PCs were just starting to appear. In those days, a company with an idea for a computer couldn’t just order up a batch from Foxconn(2317:TT). No, it had to have real engineers to design the parts. Acorn had those: It had a team of young, clever electrical engineers plucked from the local schools and electronics companies. As Acorn endured financial ups and downs over the years, it came to the conclusion that its chip team was a luxury it could no longer afford. The company’s management twice tried sell its chip design department only to have the deals fall through. “We felt quite unloved, really,” says John Biggs, one of Acorn’s chip engineers.
Then, in 1990, a new and determined customer arrived: Apple. The Mac maker had developed plans for a handheld computer and wanted a breakthrough microprocessor for the device. Apple, Acorn, and VLSI Technology, a chip design tools maker, formed a joint venture to build the silicon. Twelve Acorn engineers were picked to staff the company, which they named ARM. It’s an acronym within an acronym: Advanced RISC Machines—RISC stands for “reduced instruction set computing.”
The barn where ARM Holdings began
Photograph by Ashlee Vance/BloombergThe barn where ARM Holdings began
ARM established its headquarters in Swaffham Bulbeck, a village 8 miles from the center of Cambridge. The office was a converted 18th century barn. The first CEO, Robin Saxby—now Sir Robin Keith Saxby—managed to outfit the place with almost no budget. He won ARM’s first boardroom table in a coin toss with a local furniture salesman, then tried to win a set of desk drawers through a game of billiards at the pub. (He lost, and the engineers went without drawers for some time.)

The design specifications for Apple’s handheld computer called for an affordable product that could fit in someone’s hand, yet still have the computing muscle to cope with handwriting recognition and other advanced functions. “There was a need to be cheap, and being cheap meant making a small chip, and that meant a low amount of power would be sent through it,” Biggs says. At a time when the chip industry was focused on making bigger, faster products, ARM went the opposite direction and became the low-cost, low-power specialist. “It was really a happy accident,” he says.
Apple named the handheld Newton, and it flopped. But ARM’s chip caught the attention of companies looking to make small and sophisticated devices. In 1993,Nokia (NOK) hatched plans for a groundbreaking mobile phone. Unlike the rudimentary brick phones of the time, Nokia’s would have an actual menu with icons and basic games and would be aimed at businesspeople. Nokia picked ARM for this device, which would emerge a couple of years later as the Nokia 6110, one of the first blockbuster handsets. “Once the royalties started kicking in for that product, things took off,” Biggs says.

Wednesday, February 26, 2014

Sedan Market: Powerful Impala...(Bloomberg BusinessWeek)

A Super-Quiet Chevy Impala Wakes Up the Sleepy Sedan Market

Thursday, February 20, 2014

Nuevos WalMarts más ...chiquitos? (BusinessWeek)

A Walmart Neighborhood Market store in Chicago on Aug. 15, 2013

A Walmart Neighborhood Market store in Chicago on Aug. 15, 2013
“Walmart has a long history of embracing change. And this year, we’ll certainly make some changes to improve our business. These changes will be made with a filter on increasing customer relevance.”
That was how Doug McMillon, Wal-Mart Stores’ (WMT) new chief executive officer, introduced his plans for 2014 in a prerecorded call (PDF) on Thursday. What followed were the details of just how tough 2013 was for the world’s biggest retailer. The company’s net sales grew 1.6 percent to $473.1 billion, and its operating income decreased 3.1 percent to $26.9 billion. In the U.S., Wal-Mart’s comparable store sales, an important measure of a retailer’s health, declined 0.6 percent. Company executives have given all sorts of reasons for the slow sales in the U.S.: Some customers are still having a hard time financially; the government reduced food-stamp benefits; the weather was terrible, and the flu season wasn’t.
There was one bright spot: Wal-Mart’s smaller stores. Bill Simon, the head of the retailer’s U.S. operations, noted that the smaller locations (which range in size from 15,000 square feet to 39,000 square feet) had positive comparable sales growth and increases in traffic each quarter of 2013. The grocery stores, called Neighborhood Markets, had sales growth of about 4 percent for the year. Trouble is, there aren’t many of them: 346 to be exact, and only 20 of the even smaller Walmart Express stores. To put that in perspective, the competition—Family Dollar Stores (FDO),Dollar General (DG), and Dollar Tree (DLTR)—have more than 23,000 stores combined.
For Wal-Mart, becoming more relevant to consumers means becoming more convenient. You could run in and out of a dollar store in about the time it takes to find your car in a Walmart Supercenter parking lot. And smaller stores might—just might—be more palatable to cities that have fought against the big-box stores. Simon said Wal-Mart is planning to open between 270 and 300 smaller stores this fiscal year, a big increase from plans revealed back in October to build just 120 to 150 new small stores.
That still seems slow to some. Credit Suisse (CS) analyst Michael Exstein thinks Wal-Mart should just go ahead and buy one of the big dollar-store chains. He suggested Family Dollar, which has more than 7,000 locations across the country. A big merger would be one way for Wal-Mart to get smaller.
Berfield writes about retailers, restaurants, and other consumer companies for Bloomberg Businessweek. Follow her on Twitter @susanberfield.

Wednesday, February 19, 2014

Respaldando el caso de un salario superior al minimo...(BloombergBusinessWeek)

In his January 2014 State of the Union address, President Obama called for a new federal minimum wage of $10.10 an hour. The year before, in the same speech, he proposed a $9 minimum wage. Obama didn’t provide an economic rationale for the increase so much as a marketing one, ad-libbing: “It’s easy to remember: 10-10!” If instant recall is the primary goal, why not $10.04, in a salute to Smokey and the Bandit? Or $10.66, the year of the Norman conquest of England? Or better still, $10.99 after the IRS form?
Obama isn’t the only party guilty of loose thinking about the minimum wage. His bid to raise the floor from the current $7.25, set in 2009, has reheated a simplistic, dumb-as-rocks debate that’s dragged on for decades. Fiscal conservatives and the libertarian wing of the Republican Party reflexively view any increase in the minimum wage as a job killer. Labor unions and liberal Democrats cavalierly suggest that, oh … doubling it! sounds about right to them.
Raising the minimum wage is certain to be a wedge issue for Democrats in the midterm elections because it’s the rare redistributive measure that enjoys broad popular support. A Washington Post-ABC News poll in December found that two-thirds of Americans support a minimum wage increase. But to opponents, it smacks of Big Government heavy-handedness. That explains why politicians on both sides are loudly reminding their constituents of their ideologies. The back and forth, however, fails to address the real issues: What’s the right minimum wage? And what’s the fairest way for the world’s largest economy—historically a beacon of social mobility—to arrive at it?
The first question is a bit easier to answer. The original minimum wage, 25¢ an hour, was born in 1938 under similar conditions of economic hardship and class resentment. Labor Secretary Frances Perkins and President Franklin Roosevelt had fought for it for five years. The night before signing the Fair Labor Standards Act, in a radio fireside chat, Roosevelt said, “Do not let any calamity-howling executive with an income of $1,000 a day … tell you … that a wage of $11 a week is going to have a disastrous effect on all American industry.”
Free-market conservatives argued during the Depression, and do now, that it’s wrong in principle for government to interfere in work contracts between consenting adults. Even if you don’t embrace laissez-faire libertarianism, they make a more pragmatic case: The minimum wage is counterproductive. It steals jobs from the most vulnerable people—those who could get hired at $5 an hour, say, but not at $7.25 or $10.10.
Graphic: Minimum Wages by the NumbersGraphic: Minimum Wages by the Numbers
Generations of students, steeped in neoclassical economics, were taught that setting the price of labor above its equilibrium level causes supply to exceed demand and leads to more unemployment. It makes sense. But as physicist Doyne Farmer once wrote, “If one were to go through any standard introductory economics textbook, and color every statement pink with weak empirical confirmation, most of the book would be pink.”
The argument that a wage floor kills jobs has been weakened by careful research over the past 20 years, beginning with a seminal 1994 study by David Card of the University of California at Berkeley and Alan Krueger of Princeton. The duo compared employment in fast-food restaurants in New Jersey, which had just enacted a minimum wage hike, with fast-food restaurants across the border in Pennsylvania, which had kept its rate the same. The result: no reduction in New Jersey’s employment rolls.
The Card-Krueger study touched off an econometric arms race as labor economists on opposite sides of the argument topped one another with increasingly sophisticated analyses. The net result has been to soften the economics profession’s traditional skepticism about minimum wages. If there are negative effects on total employment, the most recent studies show, they appear to be small. Higher wages reduce turnover by increasing job satisfaction, so at any given moment there are fewer unfilled openings. Within reasonable ranges of a minimum wage, the churn-reducing effect seems to offset whatever staff reductions occur because of higher labor costs. Also, some businesses manage to pass along the costs to customers without harming sales.

Tuesday, February 18, 2014

Fusiones y Compras: Varios grandes

Applegate is a graphics editor for Bloomberg Businessweek in New York. Follow him on Twitter @evanapplegate.