Fixing Sprint May Take More Than Layoffs

It's January, and at Sprint Nextel (S), that means layoff time. In each of the past two years, the No. 3 U.S. wireless service provider kicked off the new year with an announcement that thousands of jobs would be eliminated.

This year is no exception. On Jan. 26, Sprint said it will eliminate as many as 8,000 employees. Investors welcomed the announcement, boosting the shares 2% to 2.51 on the news.

But some analysts say there may be little reason in the long run to revel in this latest attempt to reduce expenses. In spite of about 9,000 jobs eliminated in the previous two years, the company has suffered losses in four of the past five quarters and margins have been narrowing. "Cost-cutting measures like this are akin to a tourniquet," says Craig Moffett, an analyst at Sanford C. Bernstein & Co. "They can help stave the bleeding, but they can't save the patient."

Handing out pink slips may help reduce costs—Sprint will cut expenses by $1.2 billion a year in this recent round of cuts—but the moves aren't doing too much to address the company's biggest challenge: keeping subscribers from disconnecting service and switching to rivals including AT&T (T) and Verizon Wireless, which is owned by Verizon Communications (VZ) and Vodafone (VOD) of Britain.

Narrow Margins

Investors and analysts will get a clearer view of Sprint Nextel's challenges on Feb. 19, when the company is due to release fourth-quarter results. In that period, Sprint likely lost 1.1 million to 1.3 million traditional wireless customers, according to analysts' estimates. Subscriber losses may continue through late 2010, says Michael Gary Nelson, an analyst at Stanford Group Co..

Fourth-quarter revenue may have dropped 13% to $8.55 billion, the sixth straight decline, and margins may keep narrowing, in part because of costs related to the elimination of jobs, according to analysts surveyed by Thomson One. In Sprint's main wireless business, gross margins may slip to 21% in 2009, from 24% in 2008, according to UBS (UBS). Net losses may also continue through 2010.

For CEO Dan Hesse, the task of retaining customers is made more difficult by stiff competition, an already saturated market, and an economic environment that's causing consumers to tighten their belts. "The deck is stacked against them," Moffett says. What's more, as one of the biggest providers of wireless service to bankers, managers, and engineers, Sprint may lose out as Corporate America slashes jobs and other spending.

Rivals, meanwhile, are picking off the few new subscribers by offering devices and services Sprint Nextel lacks. AT&T, for instance, is the exclusive U.S. provider of the Apple (AAPL) iPhone. To its credit, Sprint has snagged an exclusive on the much anticipated Palm (PALM) Pre. But the 3.1-inch touchscreen phone isn't expected to hit stores until May.

Revamping Incentives

Sprint Nextel is taking several steps to stem losses and reverse course. It has stepped up spending on marketing. And on Jan. 26, the company tied its executive and employee incentives directly to subscriber retention and operating income metrics.

The company could also offer deeper discounts, such as bigger phone subsidies and cheaper calling plans, but that's a risky move for a company whose margins are already under pressure. In January, Sprint subsidiary Boost began offering unlimited calling, texting, and other services for $50 a month, paid in advance. The danger is that some current post-paid subscribers paying Sprint an average of $56 a month could switch to this lower-cost plan.

Further cost reductions may be in order. Sprint could hire an outside firm like Nokia Siemens Networks to manage its network, says Walter Piecyk, an analyst with Pali Research. And additional customer-care operations could be relegated to offshore call centers.

Fortunately for Sprint Nextel, the company has plenty of cash—about $4.1 billion at the end of the third quarter—and isn't expected to face a cash crunch imminently. But big debt eventually will come due, and investors' patience may wear thin even sooner. "Sprint still has a relatively long runway to turn this around," Nelson says. "But every quarter it's getting shorter."

Software Bugs Are Mobile Phones' 'New Reality'

Has your smartphone ever locked up? Have you ever found it difficult to navigate? Or is it just downright crash-prone?

If so, you'd better get used to it.

That's the take of Jim Balsillie, co-CEO of BlackBerry maker Research in Motion (RIM). Balsillie told the Wall Street Journal that software snafus are part of the "new reality" facing phone makers and their consumers as new, increasingly advanced products are rushed to market.

Balsillie said RIM (NASDAQ: RIMM) and its carrier partner, Verizon Wireless, managed to ship the BlackBerry Storm only "by the skin of their teeth," even after delaying the product launch by a month. Bit he admitted that the close timing later played a role in user complaints, ranging from sluggish performance to keyboard snafus after its launch.

The news illustrates some of the challenges facing smartphone players and wireless carriers, who are facing unprecedented pressure to deliver the next big device: Competition is at an all-time high, while manufacturers and networks struggle to cope with rock-bottom margins and users who demand devices of ever-increasing complexity.

As a result, the effort to ship the latest crop of devices on time and ahead of the competition often means that quality suffers.

A survey by J.D. Power and Associates late last year found that business users feel beset by software problems with their mobile devices, like frozen applications, system reboots and touchscreen glitches. Kirk Parsons, senior director for wireless services at J.D. Power, told InternetNews.com at the time that such problems could be expected, since that today's smartphones are really mini-computers -- and are prone to the same sorts of errors and crashes.

Software problems aren't alone in proving a headache for users. Apple's popular iPhone 3G experienced network glitches and received upgrades after last June's launch.

Navigating a Storm

But in the BlackBerry Storm's case, reviewers complained about problems navigating its user interface.

RIM did not respond for comment by press time.

The Storm arrived on Black Friday in 2008, a month later than had been initially planned, and was quickly christened by industry watchers as a top rival for the iPhone due to its touchscreen and unique keyboard approach.

The 3G-enabled device was RIM's first-ever model to sport a touchscreen, dubbed SurePress, which replaced the traditional QWERTY keyboard. Users have a on-screen, tactile keyboard that simulates the "clicking" experience of pushing BlackBerry keys. Just like iPhone users, Storm owners also can use a fingertip to sweep screens and to tap between applications.

But problems implementing those features brought a boatload of complaints from users and reviewers. RIM and Verizon Wireless ultimately issued a software update soon after launch that improved touchscreen accuracy and navigation.

A new reality?

Industry observers said that handset makers and carriers need to avoid repeats of such problems if they want to maintain market share.

"I think by [Balsillie] saying this was a new reality is undermining what this actually does to the consumer," Ryan Reith, IDC senior research analyst, told InternetNews.com. "A negative device experience (especially on an expensive device) can turn off a customer forever."

Reith said Storm user complaints tied to software bugs were the results of rushing the device's testing during development.

"Devices are so highly publicized these days that every day matters, and manufactures are cutting corners that they shouldn't be cutting in order to cut down time to market," he said. "I think this will change as operators find this to be way too big a headache, and ultimately a bad reflection to their client base."

Other handset manufacturers are sure to be tested in coming months, especially as vendors angle to quickly roll out new designs and features that can curb the Apple (NASDAQ: AAPL) iPhone's growing share of the market.

One of the most closely watched launches of the near future is likely to be from Palm, which is slated to debut its new Pre smartphone -- and its radical new software, dubbed WebOS -- by June.

But to show off the Pre and WebOS at the annual CES event earlier this month, the pioneering mobile device manufacturer had to scramble to get the offering demo-worthy, and continues to make tweaks to the offering despite a looming deadline.

Roger McNamee, a managing director and co-founder of Elevation Partners -- one of Palm's major investors -- acknowledged in a recent interview with Yahoo Finance Tech Ticker that Palm raced to introduce the Pre at CES since Apple was not making a big splash at the tech show.

Since its moment in the limelight at CES, Palm has not provided review units nor further details about the operating system or the device. Palm has told InternetNews.com both are still in development and that it would not comment further until it has a formal announcement date.

It's not surprising that Palm wants to take as much time as it can to get the Pre right. Analysts have stated that the phone's debut must be perfect, given Palm's shaky stance in the market.

Long Droughts, Rising Seas Predicted Despite Future CO2 Curbs

Greenhouse gas levels currently expected by mid-century will produce devastating long-term droughts and a sea-level rise that will persist for 1,000 years regardless of how well the world curbs future emissions of carbon dioxide, an international team of scientists reported yesterday.

Top climate researchers from the U.S. National Oceanic and Atmospheric Administration, Switzerland and France said their analysis shows that carbon dioxide will remain near peak levels in the atmosphere far longer than other greenhouse gases, which dissipate relatively quickly.

"I think you have to think about this stuff as more like nuclear waste than acid rain: The more we add, the worse off we'll be," NOAA senior scientist Susan Solomon told reporters in a conference call. "The more time that we take to make decisions about carbon dioxide, the more irreversible climate change we'll be locked into."

At the moment, carbon concentrations in the atmosphere stand at 385 parts per million. Many climate scientists and the United Nations' Intergovernmental Panel on Climate Change have set a goal of stabilizing atmospheric carbon at 450 ppm, but current projections put the world on track to hit 550 ppm by 2035, rising after that point by 4.5 percent a year.

The new study, published in the Proceedings of the National Academy of Sciences, projects that if carbon dioxide concentrations peak at 600 ppm, several regions of the world -- including southwestern North America, the Mediterranean and southern Africa -- will face major droughts as bad or worse than the Dust Bowl of the 1930s. Global sea levels will rise by about three feet by the year 3000, a projection that does not factor in melting glaciers and polar ice sheets that would probably result in significant additional sea level rises.

Even if the world managed to halt the carbon dioxide buildup at 450 ppm, the researchers concluded, the subtropics would experience a 10 percent decrease in precipitation, compared with the 15 percent decrease they would see at 600 ppm. That level is still akin to mega-droughts such as the Dust Bowl. The already parched U.S. Southwest would probably see a 5 percent drop in precipitation during its dry season.

Mary-Elena Carr, associate director of the Columbia Climate Center, called the new projections "very sobering." She noted that while societies can try to adapt to reduced precipitation with better farming techniques and other measures, there is a limit to the ability to cope with severe drought.

"When it's drought, that is hard, because we have a finite amount of water and a growing population we need to feed," Carr said, adding that the severe storm surges associated with higher sea levels also pose a dangerous challenge to large populations.

The rising sea levels anticipated under a conservative projection, the authors wrote, would cause "irreversible commitments to future changes in the geography of the Earth, since many coastal and island features would ultimately become submerged."

The scientists noted that the world's oceans are already absorbing an enormous amount of carbon, but over time this will reach a limit and they will no longer absorb as much. As this happens, the atmospheric temperature will remain nearly constant.

Most previous scientific analyses, including the U.N. panel's summary report for policymakers, have assessed climate change impacts on a 100-year time scale. A few researchers, such as Ken Caldeira of the Carnegie Institution's Department of Global Ecology, have argued that it makes more sense to look at a time scale of at least 500 years.

In an e-mail yesterday, Caldeira wrote that he had debated this point with other contributors to the U.N. reports in 2001, adding, "If you took our long term climate commitment seriously, you would not use 100-year [global warming projections] to compare effects of different gases."

Carbon dioxide emissions account only for about half of human-induced global warming, but the several other gases that play a role, including methane, dissipate more quickly. Solomon said policymakers could take this into account when deciding how best to reduce greenhouse gases overall.

"We ought to be extra careful about how much carbon dioxide we put out in the future," she said, adding that politicians often focus on the less certain but potentially disastrous impacts of climate change but would do well to focus on the more predictable consequences. "The parts that we don't know, that are possible but very uncertain, shouldn't get in the way of what we do know."

A separate study in the same journal yesterday suggests that the iconic emperor penguins of the Antarctic could be headed to extinction by 2100 if the sea ice shrinks by the predicted amounts. That paper -- written by scientists from the Woods Hole Oceanographic Institution, National Center for Atmospheric Research, the National Snow and Ice Data Center in Boulder, Colo., and France's Centre National de la Recherche Scientifique -- projects that the number of breeding pairs in a colony in Terre Adelie, Antarctica, will decline from about 6,000 to 400 by the end of the century because the animals depend on sea ice for breeding, foraging and molting habitat.

Emperor penguins would have to migrate or change the timing of their growth stages to avoid extinction, the authors write, but "evolution or migration seem unlikely for such long-lived species at the remote southern end of the Earth."

HP's ProCurve Now an Open Network Blade

The thin line between networking hardware and application servers is getting even more blurry, thanks to HP's latest move.

HP's (NYSE: HPQ) network equipment division is launching a new initiative called the HP ProCurve Open Network Ecosystem (HP ProCurve ONE), which enables applications to run inside of a network blade.

HP ProCurve has signed up Microsoft (NASDAQ: MSFT), Avaya, McAfee, F5 and Riverbed as partners for the program, which could help HP to compete more effectively against networking giant Cisco (NASDAQ: CSCO).

"HP is the largest IT provider on the planet," Marius Haas, senior vice president and general manager of HP ProCurve, said during a Webcast press conference today.

"So the kind of depth and breadth of coverage that we have at HP is something that outweighs anything that has presented itself in the networking space as a true alternative to what Cisco provides."

Cisco has its own application server on a network blade effort called the AXP, which was announced in April of 2008. Cisco is also reportedly expanding its application delivery capabilities with a new server lineup.

Like Cisco's AXP, HP will use Linux as the core underlying operating system on which application vendors will deliver their solutions. A Linux 2.6 kernel will sit on top of HP's new ProCurve ONE Services zl Module, which is a blade that plugs into the ProCurve Switch 5400zl and 8200zl series switches.

An HP spokesperson explained to InternetNews.com that the Linux OS is being used as a service OS to provide application installations, diagnostics and the checking of application licensing credentials. The applications themselves bring their own OS, just as if they were an appliance.

Microsoft, which is one of HP's launch partners for the ProCurve ONE service, shrugged off the Linux aspect of ProCurve ONE.

"From the Microsoft perspective the boxes running in my office are running Windows Server 2008 and they're doing just fine," Tim Sinclair, a general manager with Microsoft, said in response to a question from InternetNews.com. "In the spirit of choice, if customers have solutions that they need to run on Linux and they are set for that, it enables customers' choice. But for the solutions we have it is running Server 2008."

Resident Evil 5 Demo Out for Xbox 360 Gold Members Only

Zombie buffs rejoice, Capcom's Resident Evil 5 demo is available now for Xbox 360 "Gold" members in the U.S. Presumably similar to the surprisingly mediocre Japanese demo – reviewed here – it looks like the U.S. version may in fact sport an extra level and a few new weapons.

Here's the salient bit from Capcom's press note:

As part of the demo launched today, fans will be able to get hands-on with new "Resident Evil 5" features including three new levels of single- and two player co-op play (limited to Gold members), characters, weapons and environments. In this latest installment of the renowned survivor-horror franchise, returning "Resident Evil" hero Chris Redfield is joined by new partner Sheva Alomar to take on the frightening effects of the latest bioterrorist attack in the depths of Africa.

There's a catch: If you want the Resident Evil 5 demo today, you'll have to pay for it. Really. How much? What Microsoft charges for an Xbox Live "Gold" membership -- $50 a year – if you don't already have one. Freebie "Silver" members have to stand at the window looking in until Thursday, January 29th. And PlayStation 3 owners are out of luck until sometime next week.

Which raises the question: Should demos be timed exclusives? It's one way to distance yourself from the competition, sure, all other things being equal in a multiplatform scenario. And it's certainly Capcom's prerogative.

But I'd personally rather see Microsoft and Sony hammer out post-release exclusivity deals, like downloadable content (DLC) only available on one or the other. There's nothing special about the Resident Evil 5 demo, save for its early availability. While time is a commodity, I'm disappointed when it's the only one a company can come up with to tilt the playing field.

I've also made no secret of my disdain for Microsoft's annual Xbox Live membership fee for online multiplayer and matchmaking. It's too bad Microsoft's attempting to distinguish its pay-for "Gold" service from the Xbox 360's default "Silver" by turning a demo (not really "premium" content by itself) and co-op play into a membership drive.

To clarify: I have no beef with annual membership fees, when they're justified. But early demo access and online multiplayer capabilities don't make the grade.

AMD launches new low-power Opterons, announces design wins

AMD released a group of new, low-power Opteron HE processors today, with parts immediately available from HP and, um, Rackable Systems (we discussed that company's concept of server "physicalization" recently). Dell, Sun, and "other solution providers" are expected to launch SKUs based on the new processors within the first quarter.

AMD is launching three new HE (aka, low-power) flavors of the 2376, 2374, and 2372, at 2.1GHz- 2.3GHz, and one "SE." The "SE" parts are cutting-edge Opteron parts with a correspondingly higher power consumption. In this case, the new part in town is the 2386 SE, at 2.8GHz and a 105W ACP. Typically, CPUs that are classified as SE at the beginning of a launch cycle are later relaunched as standard parts with a lower ACP/TDP.

"In the current economic environment, data center managers are under more pressure than ever to reduce costs without compromising the latest features or performance," said Patrick Patla, general manager, Server and Workstation Business, AMD. "The new Quad-Core AMD Opteron HE series processor offers unrivaled performance-per-watt and cost-efficiencies for a wide range of configurations without a potential front-side bus bottleneck. In the second quarter AMD plans to take energy-efficiency to the next level in introducing even lower ACP processors for the unique demands of cloud computing environments."

ACP, TDP, and SPEC_power

ACP, or average chip power, is a standard AMD introduced when it launched Barcelona in the fall of 2007. A processor's ACP value is meant to be a much more accurate reference point when comparing processor power consumption; AMD now promotes ACP over TDP when it refers to its processors' power draw.

ACP was meant to close (or at least reduce) the known chasm between how Intel and AMD measure TDP. Intel defines TDP as a measurement that "should be used for processor thermal solution design targets. The TDP is not the maximum power that the processor can dissipate." Intel also offers its own average power metric, defined as: "measured CPU power while running BAPCo MobileMark'05 Office Productivity suite on Microsoft Windows XP for a period of 90min at 50°C."

AMD's TDP, on the other hand, has always been a theoretical amount of power that the processor in question could draw. The company compares and contrasts the two in its original ACP white paper (PDF). "With AMD Opteron processors, the TDP... was used to represent the maximum power for the processor." Because this was an engineering design specification, it was significantly easier for AMD to report to customers. But that didn't help customers accurately assess the power required for the processor, because a processor with a 115W TDP may not break the 70W mark under extremely high workloads."

AMD's ACP values are calculated based on power consumption in a series of benchmarks, described as including "floating point, integer, java, Web, memory bandwidth, and transactional workloads... These workloads were Transaction Processing Performance Council (TPC-C), SPECcpu2006, SPECjbb2005, and STREAM. The geometric mean of measurements, taken during these workloads, is the ACP...The ACP value for each processor power band is representative of the geometric mean for the entire suite of benchmark applications plus a margin based on AMD historical manufacturing experience."

AMD also notes that it measures ACP conservatively, and deliberately chooses parts that run slightly hotter-than-average when measuring ACP for any given processor series.

Whether or not you believe AMD's ACP and Intel's TDP are equivalent (Intel denies it), ACP is a much better indication of Opteron's power consumption under load in real-world conditions. If you're curious to see how much power various CPUs individually consume (as opposed to system power as measured at the wall), Lost Circuits Deneb review has a comprehensive chart.

SPECpower (full name: SPECpower_ssj2008) is a reasonably new power consumption benchmark developed by the Standard Performance Evaluation Corporation, or SPEC. SPECpower_ssj2008 is designed to "provide a view of a server system's power consumption running Java server applications." The goal of the test is to provide a standardized framework for comparing measured performance to measured power consumption; details on the benchmark are available here (PDF). Pre-Shanghai, Intel was a far more enthusiastic proponent of SPECpower_ssj2008 than AMD. There were practical reasons for this--SPECpower's focus on Java server applications was practically a worst-case scenario for AMD both in terms of Barcelona's performance differential vís-a-vís Yorkfield/Kentsfield and the processor's performance-per-watt. Shanghai improves on both points, particularly power consumption, and we may see AMD making more use of SPECpower as a result.

SPEC has developed and released a methodological guide (PDF) to benchmarking power consumption It states, "It is not possible for a single benchmark to represent the energy efficiency for all of the possible combinations of an IT environment." The takeaway here is that it's impossible to declare one methodological standard (AMD ACP, Intel TDP, Intel AP, or SPECpower_ssj2008) categorically better than another. The only standard that ranks definitely "below" these four is AMD's TDP, which makes absolutely no attempt to provide any information that's useful in the real world.

AMD will probably release more SPECpower_ssj2008 results now that Shanghai has debuted and it wouldn't be surprising if Intel's own average power values became a bit more prominent as well. Truly comparative power consumption values/rations between the two companies remain a pipe dream, but the water should be a bit less muddy now than in previous years.

Camera Click Sound to be Legal Requirement

The US is reportedly readying the "Camera Phone Predator Alert Act" to protect citizens from being photographed illegally, without their knowledge.

While the topic has been mulled over for years, it is only now that the country is planning to put forth a legislation to make the camera click sound audible when a picture is clicked. While some cell phone manufacturers already have compliant devices in place, there are others where simply putting the phone into silent mode would let voyeuristic photography go undetected. Even for those phones on which the camera click sound cannot be turned off, users have been able to hack into the phone's firmware and remove the sound.

The proposed bill would fall under the domain of the Consumer Product Safety Commission and is expected to be provided the status of a "safety requirement". Additionally, the draft of the legislation also mentions that the click sound should be audible within a "reasonable" distance.

Similar laws are already in place on countries like Japan and Korea and most device manufacturers have been able to comply with the same.