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S PEC IAL ADVER TIS ING S EC TION
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CEATEC Japan 2008
THE FINANCIAL CRISIS
Breaking usability barriers is key to seamless services
Internet-savvy consumers are forcing electronic technology companies to put people back into the equation
By Peggy Anne Salz
Central banks add funds to money markets
Goal is to improve liquidity of dollar around the globe
By Nina Koeppen And Terence Roth
FRANKFURT—Central banks on Monday added $330 billion to the funds they can pump into money markets as more financial institutions ran into trouble in Europe and the U.S. The U.S. Federal Reserve said it boosted its currency-swap facility, which lets foreign central banks pump dollars into their cashstrapped banking systems, to a total of $620 billion from the previous $290 billion. Shares of the swap arrangements are apportioned to the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada, the National Bank of Denmark, Norges Bank of Norway, the Reserve Bank of Australia, the Riksbank of Sweden and the Swiss National Bank. The move will allow international central banks to increase volumes of dollar-denominated lending to their banking systems for oneweek periods. It is aimed at keeping banks liquid amid a shortage of dollars in interbank money markets. “The increase in the amount of foreign exchange swap authorization limits will enable many central banks to increase the amount of dollar funding that they can provide in their home markets,” the Fed said in its statement. “This should help to improve the distribution of dollar liquidity around the globe.” Markets awoke Monday to news that the financial crisis was broadening in Europe, after Germany’s Hypo Real Estate Holding AG, Dutch-Belgian bank and insurer Fortis NV and the U.K.’s Bradford & Bingley PLC all needed government-orchestrated emergency funding. In the U.S., Citigroup Inc. agreed to acquire Wachovia Corp.’s banking operations in another deal backed by the U.S. government. As the outlook darkened, interbank rates—rates at which banks borrow funding from each other— nudged higher in longer-dated euro funds, indicating that banks were still hoarding cash amid perceptions that other banks also are at risk of default. One or more banks borrowed a total of Œ6.788 billion ($9.92 billion) overnight from the ECB at a penalty rate of 5.25%, data from the ECB showed Monday. They also parked a total of Œ28.059 billion with the central bank as of Sunday, despite a belowmarket rate of 3.25%. The significance is that, because European banks no longer trust each other, they would rather park funds at the central bank at a lower rate than lend to other banks at a higher rate. “With financial markets experiencing a serious risk of seizure and the real economy continuing to lose momentum, we think that the outlook is getting gloomier by the day,” said Aurelio Maccario, chief eurozone economist at UniCredit. “Financial conditions keep tightening and the massive liquidity injections guaranteed by the ECB have done little to alleviate the problem,” he said. But the ECB at least provided some short-term relief: A special provision of Œ120 billion in 38-day euro funds helped damp overnight euro interbank rates Monday, but didn’t halt the steady increase in longer-term euro interbank offered rates. Overnight euro money-market rates fell as low as 3.5%, well below the ECB’s main policy rate of 4.25%. But the three-month Euribor rate—a benchmark for interbank trading—rose to 5.237% from 5.142% Friday, because the funds will cover the critical year-end period. Other longer-dated Euribor rates increased in tandem at Monday’s fixing. Earlier Monday, the Reserve Bank of Australia pumped cash into its banking system to stave off end-of-quarter and end-of-financialyear liquidity pressures as the global financial crisis continued. The central bank injected a net 3.14 billion Australian dollars (US$2.61 billion) after estimating a surplus of A$424 million for the day and then adding an extra A$2.72 billion in its dealings. The Bank of Japan said Monday it is supplying one trillion yen ($9.42 billion) against pooled collateral at its headquarters, starting Sept. 30 and ending Oct. 1.
IGITAL convergence used to be about tools, technology and new ways to deliver communications capabilities across a multitude of platforms and devices. Today, the emergence of empowered consumers, the advance of so-called digital natives — individuals who have grown up with the Internet — and the abundance of applications designed to give consumers more of a say in how they create, access and enjoy content is forcing companies to factor people back into the equation. Against this backdrop, clever companies are moving their focus from pushing the boundaries of what their technology can accomplish to breaking the usability barriers that hold people back from interacting with content — when, how and where they wish. Content and experiences now must be much more seamless and fluid. With this in mind, Nero AG, a digital media technology company based in Karlsbad, Germany, has created liquid media technology, a flagship offer that enables content creation and distribution anytime, anywhere and on any device. “We’ve helped consumers transfer and enjoy media, but the next step is to put people in control of it,” says Richard Carriere, president of Nero’s U.S. subsidiary, Nero Inc. in Glendale, California.
Congress, Treasury seal deal on U.S. bailout package
Continued from first page filled weekend negotiations, where the specter of a faltering economy collided with the politics of a presidential election to create one of the biggest congressional dramas of recent years. Saturday included a highdecibel exchange between Treasury Secretary Henry Paulson and congressional Democrats, a ban on handheld email devices to forestall news leaks, and a battery of lobbying calls from the president and the presidential candidates. “The key was to work through this and incorporate everybody's concerns but in a way that gave us the tools we needed,” Mr. Paulson said in an interview. “We had to just insist that we can work on things. We can compromise, but at the end of the day it had to be something that was workable in the marketplace.” At the bill’s core is Mr. Paulson’s concept of buying impaired mortgage-related assets from financial firms—giving them cash to replace the toxic debts that have put them in danger or dissuaded them from lending. The plan is to help the firms restore their capital bases as well as the trust that enables them to borrow and lend at reasonable terms. Without this, officials worry that the credit markets, the lifeblood of the economy, would grind to a halt. Sellers of assets could include a broad range of financial entities— not just banks but also credit unions and pension funds. The assets offered to the government must have been originated or issued on or before March 14, 2008. The Treasury wouldn’t get the entire $700 billion for purchasing such assets upfront. Just $350 billion would be immediately available. But the other $350 billion would be available unless Congress specifically holds it back. Mr. Paulson doesn’t expect the funds to unclog the financial situation immediately. “I’m hoping that, in a very fragile system, this restores some confidence when it’s announced. But it will take several weeks” before the asset purchases begin to work, he said. The plan would impose some curbs on executive compensation at firms that sell assets to the government. These include a ban, for those that sell a large amount of securities to the U.S., on creating new “golden parachute” payments to departing top executives. Companies also would have to have provisions to “claw back” past bonuses found to have been based on misleading financial statements. The Treasury would receive warrants giving it the right to acquire nonvoting common stock or preferred stock in firms benefiting from the bailout. The program would be subject to oversight that includes a bipartisan committee and the Government Accountability Office. The GAO would have an office located within the Treasury Department. The Treasury plans to hire asset managers to determine the criteria for the purchase of securities and oversee the portfolio once the buying begins. While those details remain murky, the Treasury expects to buy up large chunks of assets at a single time. The asset managers would likely start buying the simplest assets first, such as mortgagebacked securities, and then move on to more complex ones, such as collateralized debt obligations. One likely method of purchasing and pricing assets is a reverse auction. In this, firms would offer to sell securities at given prices, and the Treasury could buy the least expensive on offer. Institutions would presumably offer to sell at prices high enough to alleviate their woes but not so high they’d be passed over in favor of lower-priced offers. The historic legislation is an attempt to stem a crisis that threatens to stall the U.S. economy. Treasury and Federal Reserve officials dubbed it their “break the glass” plan. The agreement came together only after concessions on all sides. Democrats backed down from a proposal to let bankruptcy judges alter the terms of mortgages, and from another that would have steered a portion of any government profits from the package to affordable-housing programs. The Bush administration, for its part, agreed to much broader executive-compensation limits than it originally envisioned, among other things. At a pivotal point Saturday afternoon, Mr. Paulson met with lawmakers and argued over whether the funds would come in one tranche or in installments. “Damn it, if you think you need $700 billion right away you better tell us,” Democratic Sen. Charles Schumer of New York told the Treasury secretary, according to two people familiar with the matter. “I’m doing this for you as much as for me,” Mr. Paulson shot back. “If we don’t do this, it’s coming down on all our heads.” The House plans to vote on the measure Monday, with the Senate likely to follow later in the week. Both parties have already started the process of pressuring and cajoling members to vote for the bill. Passage is seen as likely, despite the measure’s unpopularity. Support from House Republicans, who staged an 11th-hour revolt on Thursday, is still uncertain. Asked about the outcome of the House vote, Rep. Christopher Shays, a Connecticut Republican, said, “I think it’s up in the air. This is what we call a legacy vote.” An exhausted Sen. Chris Dodd, a central player in the negotiations, expressed Congress’s split emotions Sunday morning. “I’m pleased that we’ve come to a result,” the Connecticut Democrat said. “I think it’s dreadful that we had to come to this result.” Several days ago, it wasn’t clear any kind of deal would be reachable, amid divisions between Democrats and Republicans in Congress and between Democratic negotiators and the Bush administration. The tensions of election-year politics ratcheted the pressure further. On Thursday, talks broke down after a showdown at the White House featuring congressional leaders and the presidential candidates. House Republicans, emboldened by the emergence of Sen. John McCain on the scene, demanded wholesale revisions, including an insurance plan through which banks would pay into a fund to protect against further declines in asset values. Mr. Paulson didn’t believe this would be as effective as buying assets outright. Fearing the defection of House Republicans, he agreed to consider it. Inside the Treasury, there was deep concern that divisions between the White House and House Republicans could blow up the deal. Mr. Paulson’s negotiators arrived on the Hill Friday with a basic message: We can compromise on certain things, but we can’t agree to anything that will limit participation in the program. Treasury staff members and congressional staffers separated the legislation into piles, one for bipartisan agreement and another pile for contentious items. At least 10 issues remained unresolved. At 3:15 p.m. Saturday, a group of lawmakers met in a conference room outside the office of Rep. Pelosi. Republican aides complained as they saw eight Democratic lawmakers arrive for the meeting, but only two Republicans. Mr. Paulson, who looked exhausted, reiterated his warnings about the consequences of a failure to act. “The crisis is ongoing,” he said. “You saw what happened earlier this week with Washington Mutual”—which on Thursday became the largest lending institution to fail in U.S. history. “There are other companies,” Mr. Paulson said, “including large companies, which are under stress as well. I can’t emphasize enough the importance of this.” The meeting grew contentious. Senate Democrats, many of whom had felt let down by the Bush administration when the plan nearly derailed at the White House, were more assertive. For over two hours the group argued, with several members yelling at Mr. Paulson. The Treasury secretary, growing agitated at times, continually told members they needed to design a program that would work and that it made no sense to create a program if financial firms didn’t want to participate in it. “The situation is fragile,” he said repeatedly. Democratic Sen. Max Baucus of Montana, chairman of the Senate Finance Committee, became frustrated that Mr. Paulson appeared to be arguing for softer language on the executive-pay rules, arguing loudly that executives at these companies shouldn’t be handsomely paid. “Let’s not get emotional,” Mr. Paulson responded, according to someone who was in the room. Mr. Paulson objected to language that would give a new oversight board power to control how the new program would be run. “All we’re talking about is having [comedians] Groucho, Harpo and Chico watching over Zeppo,” said Rep. Frank, before Democrats backed off. The meeting ended around 5:30 p.m., and lawmakers broke into smaller working groups. Sandwiches and pizza were delivered later. Many lawmakers grazed on a big bowl of pistachios in Rep. Pelosi’s office. The House speaker’s office was furious about leaks coming out of Saturday's afternoon meeting. In order for Capitol Hill aides to stay in the meeting, they had to hand over their BlackBerrys, said one participant. A Pelosi staffer walked through the meeting with a trashcan. The devices were later put on a table with Post-it notes identifying each owner. On the tough issue of limiting severance pay for executives, Sen. Schumer wanted a one-size-fits-all approach. Mr. Paulson said this would make the program impossible to implement quickly, by requiring every company to redo its employment contracts. They agreed to a compromise under which any firm that sells more than $300 million of assets to Treasury wouldn’t be able to create new golden-parachute provisions for executives for the duration of the program. The final hangup was a move to see that taxpayers were reimbursed if the plan lost money. Democrats earlier wanted a fee or tax levied on financial firms to cover losses. By 11:30 p.m., there was a breakthrough. The administration would be required to submit a plan to Congress “to recoup those losses from the entities that benefited from this program,” according to a summary circulated among House Republicans. Lawmakers and the administration also struggled with details of the Republicans’ insurance plan, which ultimately survived in limited form as an option for the Treasury. An official familiar with the conversations said Sen. McCain also tried to encourage reluctant House Republicans. “He would say, ‘You are absolutely right—the first round was a bad deal,’” and then go on to explain the urgency of acting on something else, this person said. —Sarah Lueck, Michael R. Crittenden, Susan Pulliam, Christopher Cooper, Laura Meckler and Patrick Yoest contributed to this article.
Rather than require consumers to grapple with too many devices and too many types of digital content in a range of file formats, earlier this month Nero introduced “Move It,” an offering that makes it possible for “even the most nontechnical consumer” to convert music, videos and photos from one file format to another for use and enjoyment across a broad range of devices. “All users need to do is plug their portable device into their personal computer and select the output,”says Mr. Carriere. “In the background we do all the heavy lifting around, reformatting,transcoding and optimizing the file for the device so consumers don’t have to ask themselves any of the tough technology questions.” Put simply, Nero Move It converts the content into the desired format for transfer between PCs,digital cameras, mobile phones, game consoles and popular online social networks and communities such as YouTube and MySpace.“In my mind,this is what convergence has to be: Technology that lets all people — not just the tech savvy — enjoy content,” Mr. Carriere adds. Making content distribution more of a no-brainer also sits at the core
of the Digital Living Network Alliance (DLNA), an international, crossindustry collaboration of major consumer electronics,computing industry and mobile device companies. The vision of wired and wireless interoperable networks where digital content can be shared through a range of devices within and beyond the home is well advanced in the Asia-Pacific region, especially Japan and South Korea, where both wired and wireless broadband services are more widely used and faster than anywhere else. However, Tokyo-based ACCESS Co., a DLNA member company which provides technology, software products and platforms for mobile phones, wireless handhelds and other networked devices beyond PCs, reports increasing interest outside the region, too. “DLNA is gaining traction in markets outside Japan as more devices make it to the marketplace and more consumers look for ways to manage their content experiences in the home,” says Kiyo Oishi, ACCESS’s senior vice president of marketing. More than 3,000 DLNA-certified products from 36 manufacturers are now registered. To deliver on the promise of convergence and pave the way to a connected home, ACCESS recently extended its product portfolio and acquired
key technologies that move the company, and the industry, a big step forward.“We don’t have the answers, but we’re making the building blocks that will help [the industry] find the answers,” Mr. Oishi says. A central focus at ACCESS is to enable consumers to access and enjoy the content they want,how they want it — for example, move it midstream between devices without having to stop or pause the content any time during the experience. Mr. Oishi offers this example: A consumer starts off by listening to music on a portable wireless player. He then enters a car and the player automatically routes the music through the vehicle’s entertainment system. “Nothing to wire and nothing to connect,” Mr. Oishi says. When the consumer arrives home the player automatically routes the music through the TV or home-entertainment system in the living room and throughout the home.“There are no limits because the technology is there and the timing is right,” he adds. At the other end of the spectrum, there are also no limits to what empowered consumers and digital natives expect — even demand — from digital convergence. They are coming of age in a culture where the phenomenal popularity of social networks, mobile communities and user-generated
content have whet the appetites for tools and technologies that allow consumers to capture their own experiences and create content, says Tomi Ahonen, Hong Kong-based author of the new book, “Mobile as 7th of the Mass Media.”“What’s more,users want to carry this [their content and experiences] with them in their pockets,” says Mr. Ahonen.
Seventh mass media
The mobile phone is more than a device. “It is emerging as a mass media,” Mr. Ahonen adds. In fact, he refers to mobile as the seventh of the mass media, following print from the 1500s, recording from the 1900s, cinema from the 1910s, radio from the 1920s, TV from the 1950s and Internet from the 1990s. “Social networking, digital communities, usergenerated content and Web 2.0 will ultimately converge around the cellphone,” he predicts. David Cushman, a Peterborough, U.K.-based strategist in social media, takes this a step further and suggests that Internet and mobile — the sixth and seventh mass media — themselves converge in what he calls the eighth mass media: Us. As Mr.Cushman sees it,the Internet and mobile are simply tools that enable people to determine their content experiences. “We are the
eighth mass media. We are the distribution, the content, the medium and the message carried with it.” Many companies offer tools and technology that will allow people to capture and share their experiences. But Evernote Corp., a technology start-up in Sunnyvale, California, has something much more ambitious in mind. It has developed a mix of technology and services to help users create and maintain an external brain. Put simply, Evernote’s technology allows consumers to capture information in any environment using whatever device or platform they find most convenient. More importantly, Evernote makes this information accessible and searchable at any time, from anywhere. It even mines every image for text, making it possible for users to browse and retrieve information of all kinds, even if it’s a phrase scrawled on a scrap of paper. Whether it’s images on a camera phone, clips on a video camera, notes on paper, links on the Internet or shows on TV, Evernote lets users digitize the content that defines their lives and lets others have a look. “It’s about enabling people to back up their brains, to capture and store all their memories,” says CEO Phil Libin. “What they gather here they can keep and share forever.”