Filed under: Products and services, General Motors (GM), Marketing and advertising

With sales of new vehicles continuing to wane in the U.S., what can a vehicle dealer do to entice customers onto those bright and shiny vehicle lots? How about install a “scent-pumping” box that spews that new vehicle smell into the service area in hope of recruiting the olfactory senses of browsing customers?

Take that and the fact that some Chevy dealers are installing flat-screen TVs, providing free wireless world wide web service and having a full coffee bar available, and the service department at your local General Motors Corp. (NYSE: GM) sounds care about it is becoming Starbucks Corp. (NASDAQ: SBUX) or something. But, like most goofy marketing moves, the public cares about it. A Chevy dealer in Pittsburgh, Pa. has seen service business increase 10% since adding all the amenities along with using new, bright colors and having repainted and sealed the floors. In other words, don’t let the service department area look like one, but more like a high-end hotel lobby bar.

And this isn’t just a fad; it’s estimated that many auto dealers make increased profits from service (as in, half the profit), with the other half coming from used and new car sales. When sales are lacking (such as truck and SUV sales), you have to make it up somewhere, right? Service just might be the key to getting many dealers out of a hole. Remember, new trucks and SUVs are among the most profitable; smaller, gas efficient automobiles are among the least profitable. That future profit needs to be made elsewhere — and that area is service and routine maintenance.

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Filed under: Google (GOOG), Amazon.com (AMZN), Small business

Over the past couple years, major players like Google (NASDAQ: GOOG) and Amazon.com (NASDAQ: AMZN) have invested in the so-called “cloud.” Basically, they’re leveraging their huge infrastructures to provision services - like web hosting, storage and so on - to other companies. Actually, I know many startups that have such deals (helping to cut costs and get to market faster).

But what if you don’t want to outsource this? Well, there is an alternative: Parascale. The company sells cloud software that you can install on your own servers.

As an indication of its power, Parascale has raised $11.37 million in a Series A round. The investors include Charles River Ventures and Menlo Ventures (both firms have extensive backgrounds in the storage area).

Parascale got its begin four years ago. Interestingly enough, it hasn’t been an simple journey. The original team had to get second mortgages and lines of credit to support operations.

But now, it looks like the timing is right. “With the explosion of digital content,” said Sajai Krishnan, who is the CEO of Parascale CEO, “there is a need for more efficient storage systems.”

The Parascale Cloud Storage (PCS) is built on widely followed standards as well as Linux servers. This makes it easier for customers to adapt the technology to their needs (which isn’t an simple thing to do with Google and Amazon.com).

No doubt, the storage marketplace has gone through several major shifts over the past twenty years. So, with cloud storage, it looks like we may be seeing another shift - and Parascale will now have the resources to become a leader in the space.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the internet Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Management, Industry, Employees, Citigroup Inc. (C)

Citigroup (NYSE:C) will begin a new bonus plan aimed at getting its senior executives to work for common earnings improvement across the entire company instead of only driving profits within their departments. According to the FT, the new system is “an effort to increase co-operation and minimize in-fighting among the disparate parts of the sprawling financial services conglomerate.”

The set-up has all the hallmarks of failure. Senior investment bankers, money managers, and lending executives break their backs to make their operations successful because they can get multi-million dollar bonuses by doing so. Putting them into a pool where their own efforts are watered down by the bank’s overall performance is a good way to get top talent to leave for greener pastures.

The most wrong-headed part of the thinking behind the program is that it does not account for the fact that banking executives do their ideal out of personal greed. The current system of having each operation in the bank strive for its own ideal results already maximizes overall earnings. The profits from a number of successful divisions within the firm adds up to better financial results for Citi as a whole. Bonuses based on the performance of the the bank as a whole simply makes star executives believed they’re being robbed by being lumped in with the company’s losers.

Bonus programs like this would not prevent problems like mortgage-backed investments. Each and every financial firm on Wall St. thought they were a good way to make money. Changing the Citi compensation system would not have changed that.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Industry, Law, Technology

Driving on the LA freeways yesterday, there was a message on the periodic amber signs. That is, drivers will need to use hands-free mobile devices if they want to speak on their cell phones.

And, yes, it’s caused a stir (LA folks love their vehicles and cell phones — hey, it’s a lifestyle here). At the same time, I’ve nearly got into a few accidents because of another driver’s cell phone use (and, in some cases, texting).

But, will the new California law make any difference?

Well, according to a piece in the Daily Breeze, the answer may be: it depends.

For example, Larry Rosen, who is a psychology professor at the California Say University, Dominguez Hills, believes that the law doesn’t address the core problem. Basically, cell phone use — whether hands-free or not — is a distraction (known as “inattention blindness”).

Of course, there are a variety of studies on the topic. Unfortunately, the conclusions are blended. In other words, it’s pretty tough to isolate cause-and-effect on a large scale.

There is one thing that’s certain: the new law should result in a boost in hands-free device sales by such makers as Motorola (NYSE: MOT) and Nokia (NYSE: NOK).

So, to learn more about the new law, you can check out CA Hands-Free.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Deals

Yahoo! Inc. (NASDAQ: YHOO) shares were roughly flat in early trading on Wednesday after gaining 3% on Tuesday on word that the company was again talking deal with Microsoft Corp. (NASDAQ: MSFT). Though shares spiked on reports that talks were in progress, they settled down quickly because of conflicting reports as to the extent of the talks. While technology blog TechCrunch reported the two sides were in discussions on an outright acquisition of Yahoo!, other reports indicated the two had revived discussions of an acquisition of Yahoo!’s search business.

A source close to Yahoo! late Tuesday stated the TechCrunch report was “miles off,” but couldn’t confirm the two companies were again talking about a deal for the search business. The source did note that when Yahoo! announced it would be outsourcing a portion of its search advertising business to rival Google Inc. (NASDAQ: GOOG), the terms did not preclude Yahoo! from selling all or part of its business.

Continue reading at TechConfidential.com.

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Filed under: Marketing and advertising, Burger King Hldgs (BKC)

Burger King (Burger King Holdings, NYSE:BRC) has made good headway recently by constructing sandwiches big enough to bring down a New York crane and marketing tied to video games and hot movies. Therefore, it would have been the last company I would expect to unveil a $190 hamburger.

Actually, the burgers aren’t widely available, yet- only in one location, in West London, and only once a week, by reservation. I suppose the burger, Wagyu beef piled high with white truffles, Pata Negra ham, white wine/shallot mayo, Himalayan rock salt and a soup

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Non-farm payrolls decrease 79,000 in June, ADP says

Filed under: Bad news, Industry, Employees, Economic data, Housing, Recession

Non-farm private employment decreased 79,000 in June on a seasonally adjusted basis, ADP announced Wednesday in the ADP National Employment Report. (pdf)

Meanwhile, the Might estimated change in employment was revised down 15,000 to a gain of 25,000 jobs, ADP said.

In the June jobs report, employment in the service-providing sector fell 3,000, its first declined since November 2002. The goods-producing sector declined 76,000, and manufacturing employment fell 44,000, their 19th and 22nd consecutive monthly declines, respectively.

Employment among small-size businesses, defined as those with fewer than 50 workers, rose just 7,000 during the month, while employment at large businesses with more than 500 workers declined 51,000. Jobs at medium sized business, with 50-499 employees, decreased 35,000.

Construction job losses continue

Further, conditions in two economic sectors hard hit by the slumping mortgage market - - construction and financial services- - showed no improvement in June. Construction employment fell 34,000 - - its 19th consecutive monthly decline. The decline brought the total job loss in construction jobs since the employment peak in August 2006 to 349,000. Meanwhile, financial activities registered a 3,000 job decrease in the month.

Economic Analysis: A poor June ADP jobs report. Almost no positives can be detected, which advocates no net job creation. The construction sector, as expected, continues to register large job losses. Still, investors / traders should not try to draw too many conclusions regarding total U.S. job market conditions from the ADP report: it is not perfectly correlated with the more-comprehensive U.S. Labor Department monthly job creation report, scheduled for release on Thursday at 8:30 a.m. EDT.

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Filed under: Deals

More states have filed charges against Countrywide (NYSE: CFC) for aggressive marketing and giving loans which were highly risky. Washington and California have joined Illinois in the actions.

Up until now, Bank of America (NYSE:BAC), which is buying Countrywide, has been sticking to its story that it will close on its buy of the mortgages company. The media has written a million times that the huge money center bank might pull out of the deal. That actually became a bit more likely with the new states’ actions.

According to The Wall Street Journal, Kurt Eggert, a law professor at the School of Law at Chapman University said, “Countrywide could be required to give back its profit on all those loans and conceivably give back houses on which it has foreclosed.” Since that number could be well into the billions of dollars, the potential damages are rising fast.

Countrywide could spend tens of millions of dollars on legal fees and countless hours in court over the next several years. That has become much clearer in the last few days.

BAC would be better off to let CFC go out of business and just buy its assets. Maybe the bank never intended to close the deal. Maybe that was its plan all along.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Bad news, Economic data, Housing, Recession

Warren Buffett has been pretty vocal about how bad the current downturn will be. The same holds true for billionaire money manager George Soros. He has even testified before Congress to make his concerns known.

Now, Eli Broad, one of the richest men in America, or anywhere else for that matter, says this is the worst economic period of his lifetime. Broad will be 80 soon.

Broad told Bloomberg,“This is worse than any recession we’ve had since World War II.” He does not think the housing market will recover for years and sees a sharp rise in unemployment.

The “billionaire boys clubs” now seems to have formed a consensus, and nearly all of it is based on the problems in the housing market. It home sales keep dropping, most of the equity people in the US have built over the last twenty years goes away. If some of these people lose jobs, defaults rise and the matter becomes worse.

You can bet against the very rich, but it is probably not a good idea. They did not become fabulously wealthy by being stupid.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals

Ever since Circuit City Stores (NYSE: CC) CEO Philip J. Schoonover sliced 3,400 sales people in March 2007 to save money, I have questioned the savvy of its management. That’s because many of those fired sales people took their customers over to Ideal Buy (NYSE: BBY). As its stock lost 86% of its value, I was surprised that anyone would make a bid for it.

Yet Blockbuster (NYSE: BBI), the struggling video store chain, decided to purchase. I don’t know what got into Blockbuster’s head to make it think that combining two struggling companies would make an agile competitor. The Richmond Times reports that it wanted to create a one-stop shop for movies, games, and electronic equipment. But that dream died when Blockbuster pulled its $1.3 billion offer after reviewing Circuit City’s books.

Carl Icahn has said he would purchase Circuit City. But it’s losing money — $164.8 million, or $1 a share, in its fiscal first quarter. This was $100 million more than its Q1 2007 loss. And Blockbuster’s conclusion after a closer look at its financial statements does not bode well for Circuit City’s future. Circuit City stock is down 7.8% in pre-market. Let’s see whether any new bidders emerge.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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