Explaining Southern California's economy

J.C. Penney: The new Apple Store?

Mercer 19876

Shereen Meraji/KPCC

The new Apple store at the Americana in Glendale.

Don't rule it out. J.C. Penney Company, which operates numerous* stores in Los Angeles, has hired Ron Johnson away from Apple, where he was credited with being the architect of the Apple Store retail concept. Visitors to, for example, the Glendale Galleria could someday visit Johnson's work for Apple to buy and iPad and then zip over to Penney's to buy...

Well, that's the problem, now isn't it? J.C. Penney now exists in a kind of retail twilight, mixed in with the likes of Macy's, but nowhere near as snazzy as Target (where Johnson used to work) nor as rock-bottom cheap and volume-oriented as Wal-Mart or Costco. It's a department store of old, in recent years forced to rely on a strategy of marking down everything, all the time. This is from Reuters:

Some 72 percent of Penney's $17.8 billion revenue last year came from items discounted at least 50 percent. Johnson said Penney's reliance on discounts may have gotten out of hand. "At some point, you seem desperate," he said.

Discounts will remain at Penney, but in a different form.

Every first and third Friday of the month it will clear out some merchandise by putting blue tags on certain items. The old practice, by contrast, was to throw items into a discount bin with signs proclaiming "70 percent off."

Johnson told a news conference on Wednesday that in the past 10 years, discounts have risen to 60 percent off on average from 38 percent, while the average amount of money that ends up in Penney's cash registers has fallen.

"The customer knows the right price," Johnson said. "To think you can fool a customer is kind of crazy."

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David Siemer talks venture capital with DeBord Report

David Siemer of Siemer Associates and Siemer Ventures.

I had a great conversation recently with David Siemer of Siemer & Associates, a boutique investment bank and early-stage venture capital investor — Siemer Ventures — that's based right here in Southern California. The merchant banking side of their business is "new" old school investment banking, centered on raising capital for clients and providing advisory services. In other words, investment banking the way it used to be, before trading of the sort practiced by the Big Boys — Goldman Sachs, Morgan Stanley — became a profit-driver.

Not surprisingly, David Siemer wanted to get into venture capital, as well. What's interesting about this part of the business, which focuses on digital media, is the firm's bullishness on Asia and India. Siemer Ventures was started in 2007 and currently has its main office in Santa Monica, which is beginning to re-establish the "Silicon Beach" critical mass of tech companies that we first saw back before the dot com crash. For what it's worth, New York is also picking up steam. Silicon Valley isn't the only place to go for venture funding anymore. (Not that it ever was, but it's always been easy to get that impression.)

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Should we be afraid of Mitt Romney?

GOP Presidential Candidate Mitt Romney Campaigns In Florida

Chip Somodevilla/Getty Images

TAMPA, FL - JANUARY 24: Republican presidential candidate and former Massachusetts Gov. Mitt Romney greets supporters and gives autographs after a speech at the National Gypsum Company January 24, 2012 in Tampa, Florida. Romney's speech was billed as a "prebuttal" to tonight's State of the Union speech by President Barack Obama (Photo by Chip Somodevilla/Getty Images)

That's what Michael Keating, formerly of the Boston Consulting Group, thinks. A president who comes from the brutal world of private equity? Terrifying. Keating outlines the fear in the LA Times:

Private equity consultants are not real business people, if real business people can be defined as entrepreneurs who want to build something of lasting value that can employ members of their community and make profits for their shareholders, whether public or private. A private equity consultant is more like an Excel spreadsheet with legs that looks at the "target" company through the lens of return-on-investment and cutting costs to the bone. If those costs are people, well, that's just capitalism in action. If an opportunity exists to expand a product line and it becomes necessary to hire some engineers and sales people, then welcome aboard. It's all a very finely tuned calculation that has nothing to do with what most people recognize as doing business. It is an abstract exercise, at best, that most of these ladies and gentleman have learned at places like the Harvard Business School, the University of Pennsylvania's Wharton School or wherever business is taught as warfare rather than as a contributor to the social good. 

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Google's new privacy policy: Is this war?

Google Stock Photo

Kimihiro Hoshino/AFP/Getty Images

The Google logo is seen at the Google headquarters in Mountain View, California. on September 2, 2011. AFP PHOTO/KIMIHIRO HOSHINO (Photo credit should read KIMIHIRO HOSHINO/AFP/Getty Images)

Google just announced that it's making a big change to its privacy policy, effectively taking 70 different policies tied to different Google products — like search, Gmail, and YouTube — and reducing them to one. Google says that this will enable a much better integrated Google experience for users. Critics say that it's Google breaking its own Golden Rule: "Don't be evil."

It's actually neither. Rather, it's Google being Google. The mighty search colossus missed earnings badly the other day. Meanwhile, Apple just crushed it, earnings-wise. And of course the Facebook IPO looms. Google can't be content to operate like the world's greatest technology lab anymore. It needs to leverage what it's great at or lose out to the competition.

**UPDATE: I went on "AirTalk" with Larry Mantle this morning to talk about the new Google privacy policy. You can listen to the whole segment here.**

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Apple vaporizes estimates for first quarter earnings

Mercer 19876

Shereen Meraji/KPCC

The new Apple store at the Americana in Glendale.

Any questions? The consensus on Wall Street was that Apple would earn $10.14 a share and record $39 billion in sales for its first fiscal quarter, according to Bloomberg. Instead, it did $13.87 a share on $463 billion in sales. Eyes are still being put back in their sockets:

"Those numbers are just unimaginable," said Michael Obuchowski, chief investment officer at First Empire Asset Management, which has $4 billion under management, including Apple shares. "It’s still an extremely well-managed company and they are showing that the product pipeline is sufficient even now to generate growth rates that are unrivaled."

Apple is now pretty darn close to being a $400 billion company, by market capitalization. It currently has two major things going for it: it's vacuuming up more and more market share for smartphones, as these devices become much more popular and begin to define the future of mobile computing; and it's ideally positioned to thrive in the post-PC age, as consumers shift away from old-school laptops and desktops and move to ultrabooks and tablets.

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