Competitive Intelligence

SCIP 2004 Trip Report from Boston

The picture above is taken from booth #218, where my brother Derek and I were staffing Aurora’s exhibits for most of the show, alongside the more than 60 other vendors at SCIP’s 2004 International Conference & Exhibition in Boston this week.

This is a short trip report, because I missed the conference almost entirely; however, the turnout was successful, I’m told by reliable sources, and helps to solidify SCIP’s position both financially and in terms of its leadership in the business. For my colleagues in the CI field, we really need SCIP to succeed more than ever before. The clearinghouse function it performs has become a lot less biased in recent years under Bill Weber’s leadership as Executive Director and that’s good for everybody. Sadly, Boston marked Bill’s moving on to bigger things, but I made him promise he’d stay in touch with the industry - Cheers Bill!

Speaking then purely as a vendor exhibiting at the show, the event was great. A ton of prospective clients came out, as well as a lot of existing ones to see what was new and interesting. Aurora had two big things going on:

ReconG2 – Our next generation current awareness and early warning intelligence service got its first sneak peek from a few select clientele in Boston – more on this to come in later entries; and, the...

2004 CI Portals Report – Lacking an updated, omnibus understanding of CI software portal offerings myself, earlier this year, I decided to write one. You can download yours from the Web for free in a few days. Scarcity breeds excitement by the way - we gave away 25 hardcopies to lucky, registered winners at the show – they were VERY popular.

With that, best wishes to SCIP, all the friends I look forward to seeing every year there and thanks to SCIP's staff and everyone who attended for making it another great event. See you in Chicago next year!

And, best of luck Bill; you’re a tough act to follow... but if anyone's suited to bridge the gap, it's Paul Brecht.

- Arik

Samsung vs. Motorola: South Korean Handset Maker Gains on U.S. Rival

Worldwide cell phone handset market share figures are out for 2003 and Samsung has made some decided progress against competitors in both CDMA and GSM markets, particularly Motorola, although overtaking them for number two will still be a tough hurdle. Here’s an excerpt from a piece comparing the two from the Miami Herald:

Wireless phones were key to Samsung's transformation from a financially ailing maker of memory chips and cheap microwave ovens into a respected brand. The company ignored the low end of the market, focusing instead on pricier handsets for customers who can afford the latest and coolest gadgets.

Samsung shipped 11 percent of all wireless phones sold last year. The company's share of shipments still trails Motorola's 15 percent, but Samsung is neck and neck with Motorola in sales.

Samsung chalked up $10.6 billion in handset revenues last year compared with Motorola's $11 billion. An average Samsung phone, at $190, is 30 percent more expensive than Motorola's $146 average selling price, according to research firm Yankee Group.

And Samsung's profits are fatter. The company's 18 percent gross margins compare favorably with Nokia's 20-plus percent margins, while Motorola's hover in the single digits.

"Samsung has just played its cards right," said Neil Strother, senior analyst for wireless handsets service at In-Stat MDR.

The conglomerate's swift rise in a business that Motorola pioneered is a lesson in the challenges Motorola faces as new chief executive Edward Zander tries to energize the company.

Motorola, with deep roots in radio and communications technology, is going up against Asian consumer electronics giants, including LG Electronics and Sanyo, that leverage their expertise in digital cameras, color displays and music players in the increasingly popular all-in-one phones.

None has been more successful in muscling into Motorola's biggest business than Samsung, which made its mark by betting on an emerging technology seven years ago.

CDMA, or code division multiple access, was new to North America in 1997 when Samsung introduced CDMA phones with Sprint PCS for the carrier's new all-digital national network.

"Samsung is the classic example of how an Asian handset vendor can expand a toehold," said Yankee Group analyst John Jackson. "And they've done it by being a manufacturer."

Bucking the trend toward specialization, Samsung thrives as a vertically integrated manufacturer. Its biggest factory complex is in Gumi, South Korea's largest inland industrial city.

While Motorola is spinning off its semiconductor division, Samsung continues to buy chips, display screens and other parts from its affiliates. That can be an advantage when sales heat up and industry demand outstrips supplies.

One reason Motorola was late last year in delivering phones to stores was a parts shortage. "Being late in this market costs you," Strother said.

Samsung is blessed by another advantage: South Korea's rabid appetite for all things digital, especially mobile technology.

The country's wireless networks are among the world's most advanced, providing a test kitchen for Samsung's concoctions. Korean consumers, on average, replace their phones every nine to 12 months--three times more often than the world average.

Samsung satisfies their appetite by churning out models at a furious pace.

It introduced 150 models worldwide last year compared with Motorola's 40.

Motorola dramatically reduced the complexity of its product line three years ago to make its cell phone business profitable. By contrast, Samsung appears to thrive on complexity, designing different phones for each carrier to help them side-step cutthroat price competition.

The SGH-e715 camera phone it produced recently for T-Mobile looks and behaves differently, for instance, than comparably priced phones for Sprint.

"If the e-715 is a hit for T-Mobile, we would not like for Sprint to come in and rain on their parade" by offering a similar phone at a lower price, said Muzibul Khan, vice president of product management and engineering at Samsung's wireless terminals division in Richardson, Texas..

The seeds for Samsung's success were planted in the United States in 1997, when Sprint was hunting phones for its new CDMA network.

"Only a few companies had the capability," said Sprint's John Garcia, senior vice president of sales and distribution. "Motorola was skeptical, as was Nokia."

Sony Electronics Co. partnered with Qualcomm Inc. to build Sprint's first CDMA phone, but the carrier needed more.

"We needed more advanced handsets, and we needed a lot of them," Garcia said.

Sprint decided to take a flier on Samsung, whose new CEO, Yun Jong Yong, was leading a radical restructuring. The carrier signed a three-year, $600 million contract--a deal that paid off handsomely for both companies.

"What we thought we would sell in three years, we sold in two," Garcia said.

"Samsung invested heavily to coordinate with our engineers to build customized services in their handsets that work uniquely on our network," Garcia added. "That's one of the things that makes them different."

The Sprint deal provided a "market success," said Peter Skarzynski, senior vice president of Samsung Telecommunications America in Richardson. "Then we expanded a step at a time to other CDMA carriers."

Samsung's phones turned heads.

"They were no longer just another garden variety Asian electronics maker," Strother said. "Their overall quality went up."

So did Samsung's reputation for innovation.

"Among carriers, Samsung is perceived to be more a technology leader than Motorola when it comes to delivering coordinated consumer electronics," said Chris Ambrosio of market research firm Strategy Analytics.

In South Korea, where more advanced networks deliver higher speeds than in the U.S., consumers are watching television on Samsung phones, sending video clips and playing 3D games. These features will arrive soon in Samsung phones for U.S. carriers, Skarzynski said.

Motorola, meanwhile, isn't standing still.

Just as Samsung exploited the growth of CDMA technology, Motorola has an early lead in UMTS (Universal Mobile Telecommunications Service). It's a third-generation standard that delivers faster speeds, opening up new ranges of mobile computing and entertainment possibilities.

Motorola also is betting on its software, called MotoJUIX, to give it an edge against players such as Samsung, which licenses other companies' software.

MotoJUIX is based on Java and Linux, an open standard. Motorola said it would give the company flexibility and speed to handle the explosion of applications coming with third generation networks.

"There are a lot of transitions rippling through the industry that allow a technology innovator to win and take share," said Ray Roman, Motorola's vice president and general manager for North America.

Analysts don't think Samsung will knock Motorola from its perch as the world's second-biggest phonemaker anytime soon.

For one thing, Samsung already has maximized its lead in CDMA, said Chris Ambrosio of Strategy Analystics. For another, Samsung has yet to become a mass-market player, serving up quantities of cheaper phones as well as pricey ones.

But, Samsung has to watch our for its own countrymen – LG Electronics topped the Strategy Analytics ranking in CDMA phones, overtaking BOTH Samsung and Motorola, selling 21.3 million CDMA mobile phones last year, a 21.6 percent share, versus Samsung’s shipments of 20.4 million units during the same period, accounting for a 20.7 percent share.

Both LG and Samsung said the greater market share was largely attributed to more aggressive marketing and diversification strategy. Both companies used to focus primarily on the North American export market, but recently diversified its CDMA handset lines to other emerging markets like Brazil and China. LG's emergence as a top competitor is made more interesting as the company has long been the No. 2 player on the Korean CDMA market after Samsung, which essentially controls the high-end mobile phone market with its strong brand and market power.

Meanwhile, Motorola shipped 19 million CDMA handsets last year, securing an 18 percent share, Nokia ranked fourth, carving out a 12.5 percent share, or 12.3 million units, followed by Kyocera with 10.9 million units (11 percent) and Sanyo with 3.4 million units (3.5 percent).

But Korean handset manufacturers have yet to catch up with other competitors for GSM share. Nokia topped the ranking with 146 million units, or 42.2 percent market share for the global GSM handset market, followed by Siemens with 43.3 million units, or 12.5 percent, Motorola was No. 3 with 38.4 million units, Samsung ranked fourth with 33.8 million units, and LG shipped 6.1 million GSM phones last year.

Most ironic is that less than a decade ago, nobody saw Samsung, or LG for that matter, as a serious handset competitor to relative Motorola’s dominance.

- Arik

Martha Stewart, Guilty on All Counts, Meets with Probation Officials; Jury Might Have Acquitted if She’d Testified

Last Friday’s news of felony convictions for Martha Stewart and her former broker left us all talking about how she’ll decorate her cell, but it also sent a strong message to the business world.

Stewart was found guilty of all four counts (obstruction of justice, conspiracy, and making false statements) arising from her sale of a Imclone stock in 2001. (A fifth charge, securities fraud, was thrown out last week.) The broker, Peter Bacanovic, was found guilty of four counts (obstruction, conspiracy, making false statements, and perjury) and was cleared of making false documents. Both will appeal. They each face 20 years in prison at their June 17 sentencing, although most experts think they will get about a year.

Stewart betrayed no emotion, by most accounts, although the Associated Press says she "grimaced and her eyes widened slightly" as the verdict was read, and the Los Angeles Times says she "appeared stunned" as she left the courtroom, while her daughter and one of her lawyers cried. According to one juror, the most damning testimony was that of Stewart's personal assistant, who told the court that Stewart altered a voice mail and a computer log after the feds began investigating. Several jurors criticized Stewart's minimal defense (her lawyers called only one witness) and pointed to her experience as a stockbroker 30 years ago as proof of a sophisticated ability to deceive in 2001 and 2002.

Stewart will "almost certainly" have to step down as a director of her company's board, although she can keep her majority stock ownership. (She resigned as CEO after her indictment.) Stewart still faces civil stock-fraud charges brought by the Securities and Exchange Commission, as well as class-action lawsuits by shareholders. Stewart's statement on her Web site says that she is "obviously distressed by the jury's verdict" but is glad to have personal support and will "continue to fight to clear my name." (However, the LA Times notices that an initial reference to her having "done nothing wrong" was deleted from the site.)

After watching their company's founder attain public ignominy and their company's shares loose a quarter of their value yesterday, the (law-abiding) directors of Martha Stewart Living Omnimedia Inc. released a statement, just to clarify things: "In spite of [today's] disappointment, it is important to recognize the significant contributions that Martha has made to advancing the domestic arts and improving the quality of life in and around our homes." A trademark specialist, quoted in the AP, perhaps put it more succinctly: "This is a terrible tragedy for a great brand."

Widely assailed with a failed defense strategy for their clients, Martha Stewart and Peter Bacanovic’s defense attorneys probably could have improved their chances of acquittal if they’d called a few more witnesses for the defense – especially Stewart herself. An excerpt from today’s New York Daily News:

Martha Stewart might have saved her skin by taking the witness stand to give her side of the stock-sale deal that's rocked her life, jurors said yesterday.

Six jurors said lawyers for the domestic diva made a huge blunder by mounting virtually no defense and muzzling Stewart, leaving them with little choice but to convict her.

"I was ready to hear her side," juror Dana D'Allessandro told NBC's "Dateline." "No matter who they put on. I wanted to hear from her."

"We just ... were hoping they would put up more of a fight or something," said Jonathan Laskin. "Or give us more to chew on. But it wasn't there."

The TV interview marked the largest gathering of jurors to speak out and the most detailed comments yet from members of the panel that convicted Stewart and her stockbroker Peter Bacanovic on Friday.

Legal analysts say it would have been a huge gamble to put Stewart on the stand because prosecutors could have used cross-examination to rip apart her explanation of her sale of 4,000 shares of ImClone stock.

She would also have risked a perjury conviction if she tripped up under oath, exposing her to a much longer prison stint than the possible 18 months she now faces.

There were also worries that the powerful businesswoman's temper would have flared under tough questioning.

Despite the risks, jurors said they were stunned when defense counsel Robert Morvillo abruptly rested the defense case after one witness.

"We were sitting there going, 'But we saw this and heard that,'" said Rosemary McMahon. "So it was, like, 'We need more.' ... We were waiting. We were hoping."

Without any ammunition from the defense, jurors said, they puzzled over possible explanations for the deal.

But in the end they believed the star prosecution witness, broker's assistant Douglas Faneuil.

The final nails in Stewart's coffin came when her assistant Ann Armstrong said she altered a key phone log, and friend Mariana Pasternak testified Stewart mentioned getting what prosecutors allege was an insider stock tip.

The panel members trembled with emotion and avoided making eye contact with the household queen as they prepared to deliver the stunning guilty verdicts.

"That was tough," said juror Chappell Hartridge. "We knew we were about to change two people's lives forever."

Although some jurors wondered whether Stewart was singled out for being a woman, others insisted she had to pay for breaking the rules.

"Laws were broken and lies were told. And money changed hands through means that were not altogether on the up and up," said Laskin. "It's not nothing. I think it's important."

So, why the conviction? Well, Stewart's defense attorney Robert Morvillo did concede during closing that the celebrity homemaker received a secret stock tip, but supported his argument by saying she was simply too smart to botch the cover-up she’s charged with committing. Admission of guilt? Apparently so. Too smart? I think not.

Still, Martha won’t be in jail long – and might even get probation – although if there are no obvious grounds for appeal, she’s might not get bail before her June sentencing and she can spent the springtime behind bars. Meanwhile, her heretofore-erstwhile business partners are jumping ship like drowning rats from MSO.

Regardless, the verdict sent a strong message of public intolerance of corporate shenanigans when it comes to powerful business moguls pocketing ill-gotten gains no matter how tiny or insignificant. Nobody is above the law. The truth shall set you free. We’re just not going to take it any more – and for Kozlowski and Ebbers, it’s time they get fitted for a tastefully tailored set of tangerine jammies.

- Arik

Telcos vs. Cable

I found a good piece in this week’s BusinessWeek magazine “How Telcos Can Fight the Cable Invasion”, all about the expected counterattack from DSL delivering movies and other new services with only minor upgrades.

One of detractors' most common observations is that telcos can't easily add video services. Their much-trumpeted fiber-to-the-home (FTH) initiative, the plan to deliver voice, video, and broadband services by extending fiber-optic cable to every home, could prove to be prohibitively expensive - to the tune of $1 billion for every million potential subscribers. It also could take more than a decade to implement, making that strategy a very slow boat to profitability.

Telecoms don't need to exactly replicate cable's performance and services, however. Instead, with little additional investment in infrastructure, they can grab extra revenue - as much as $20 a month per customer - by providing innovative video services and content not available today, says Jonathan Hurd, a vice-president at tech consultancy Adventis in Boston. Such a move would represent a hefty addition to phone outfits' bottom lines, which typically reflect revenue per customer in the $30-to-$60 range.

Telcos have already taken their first steps in that direction. Many recently began reselling satellite-TV service - programming that's on par with cable. The largest U.S. telecom operator, Verizon, is offering its users a $6-per-month discount on the service to help get the business off the ground, says Marilyn O'Connell, vice-president for broadband. (Verizon and others won't release subscriber numbers.)

But wouldn't that necessitate costly upgrades to their networks?

Upgrading the telcos' existing copper networks to handle that bandwidth isn't a big deal. To provide DSL service today, telcos use DSLAM (digital subscriber line access multiplexer) devices, which accumulate bandwidth, then parcel it out to individual homes or neighborhoods via copper wires. Telcos can add special cards relatively easily to the DSLAM boxes for other flavors of DSL, such as VDSL (very high speed DSL), or to provide neighborhoods with more DSLAMs (at a cost of just $50 to $300 per user).

This could greatly increase the bandwidth available to each subscriber home, says Matt Davis, an analyst at tech consultancy Yankee Group. A DSLAM located within 3,000 feet of a customer's home could pump data at rates of 7 megabits per second, far in excess of standard DSL, and more than enough to broadcast TV channels, Davis says.

If they play their cards right, telcos could not only eat into cable revenues, they might also take on such outfits as DVD rental concerns like Blockbuster and Netflix. The average consumer bought 15 DVDs last year - and telcos could potentially grab part of that money by delivering the same content via their networks, says Ken Twist, an analyst with telecom consultancy RHK in San Francisco.

To do that, telcos need to learn a lot more about branding and marketing - neither a strong point, historically. They also will need to strike deals with content providers, roll out new services, and tweak their networks. The phone companies, however, have a huge and loyal customer base, one that might prove both willing and eager to buy discounted bundles of various offerings.

"I think that, at the end of the day, telcos will be able to respond to the [cable] threat," says Walt Megura, general manager of broadband networks business at gearmaker Nortel Networks, which has recently reentered the broadband-access market. Sure, the doomsayers could be right about some players - but maybe not all.

- Arik

FDA Approval for Boston Scientific’s Taxus Stent Means War with J&J Cordis’s Cypher

Despite its second-to-market delayed start, some analysts are projecting Boston Scientific could realistically end 2004 with a 60 percent share of the $3.8 billion U.S. market, now that it's competing with Cypher. Taxus will roll out “immediately” according to the company and is sure to be the reasoning behind J&J’s Cordis defensive hatchet-burying business alliance with Guidant just a few days ago.

Drug-eluding stents are a big improvement over bare-metal stents, the little tubes designed to keep clogged arteries open, since the drug coating prevents the arteries from clogging again, reducing the need for repeat procedures. For those new to this area, if you’re curious how stents work read the following article from USAToday.com.

John Putnam, an analyst at Belmont Harbor Capital, an independent research firm, says many doctors believe the stent is easier to implant during surgery, compared with J&J's Cypher. "It was expected, but it's good news. I think it's the better stent of the two that are on the market," he said.

Boston Scientific said on February 23rd it hoped to win 70 percent of the U.S. market within 70 days after launching its device, following up its experience in Europe, where it has already grabbed 70 percent or more from J&J's Cypher. One day later, in a largely defensive competitive manuever, Guidant and J&J/Cordis said they formed a co-marketing pact over Cypher, which would provide J&J with Guidant's convenient delivery device and could protect or even increase sales.

CBS MarketWatch had a nice overview of the battle:

The arrival of Boston Scientific's stent, called Taxus, marks the beginning of intense competition with archrival Johnson & Johnson for dominance of the estimated $3 billion U.S. market for drug-coated stents. The new devices are expected to significantly improve the outcomes of artery-clearing angioplasty procedures.

The U.S. Food and Drug Administration late Thursday, as expected, granted approval to Boston Scientific's Taxus. The medical-device maker said it's fully prepared to introduce the stent in the United States and said it has "ample inventory in all sizes." The Taxus was approved early last year for use in Europe, where it's been competing with J&J's Cypher drug-coated stent.

J&J last year became the first company to win U.S. approval for a drug-coated stent, and the health-care-products giant has had the market to itself, until now.

Following the FDA's OK for the Taxus stent, Boston Scientific affirmed financial projections it made early last week at a meeting with analysts.

Boston Scientific said at the analysts' meeting it sees 2004 Taxus sales of between $1.7 billion and $2.2 billion, climbing to $2.4 billion to $3.2 billion next year. The company estimated 2006 sales of the device at between $2.2 billion and $3.4 billion.

Cardiologists have for years used stents, tiny mesh devices, to prop open clogged arteries. But the arteries frequently close up again after the angioplasty procedures. Medical-device makers have found they can greatly reduce the chance that arteries will close up again by coating the stents with anti-scarring drugs.

"This approval is a breakthrough event for the treatment of cardiovascular disease in the United States," Boston Scientific Chief Executive Jim Tobin said in a statement.

Some analysts have predicted that Boston Scientific's Taxus could ultimately emerge as the leader in the market for drug-coated stents. But the company faces fierce competition from J&J.

Just last week, J&J and leading medical-device maker Guidant said they would team up to market J&J's drug-coated stent in the United States, a move aimed at intensifying competitive pressure on Boston Scientific.

Meanwhile, former competitors in the stent selling business Guidant and Johnson & Johnson's Cordis agreed to co-promote Cordis' Cypher Sirolimus-eluting coronary stent. Guidant said the agreement gives it immediate entry into the U.S. drug eluting stent market, but what it does for J&J is much more important in light of the Taxus’ approval for Boston Scientific. In addition, Guidant will assist Cordis in the development of a Cypher stent that uses Guidant's Multi-Link Vision stent delivery system.

Both companies agreed to license certain patents and to settle all outstanding patent disputes between the companies. Guidant reiterated its full-year 2004 earnings guidance as a result of this partnership. Likewise, Johnson & Johnson still expects full-year earnings in line with its prior view. Guidant grants Cordis the option to co-promote a fully bioabsorbable stent currently under development by Guidant. Cordis retains clinical, manufacturing and order fulfillment responsibilities for the Cypher stent in the U.S. The companies will both market and sell the Cypher stent, with each company bearing its own marketing and sales costs.

Guidant Chief Executive and President Ronald W. Dollens said, "We believe this strategic agreement will provide significant benefits to both organizations by building upon the strengths of both companies' sales, marketing and product development resources." Cordis President Rick Anderson echoed Dollens' comments, saying the transaction doubles its presence in the "hospital and cath lab."

Guidant's drug eluting stent program, which uses the drug everolimus, will not be affected by the agreement with Cordis. The company expects to launch its Champion Everolimus eluting stent system in Europe in the first quarter of 2005 and in the U.S. in the first quarter of 2006, pending regulatory approvals.

But, whether Taxus, as many think likely, might eventually break away to dominate here in the U.S. as it has in Europe is ultimately a question of how intensely J&J decides to compete to preserve its current stranglehold on the market.

- Arik

Non-Compete Agreements & the War Between the States

There was an interesting story in Forbes last month called “The Case for Servitude” all about non-compete agreements that I thought you’d enjoy a few excerpts from:

Your new employer shoves a piece of paper under your nose to sign. In it you promise not to work for any competitor for some period of time after leaving this job. Is such a contract, known popularly as a noncompete agreement, a fair deal? Is it enforceable?

Many executives are fans of BreakYourNonCompete.com, a popular site encouraging folks to do just that and pushing the line that noncompetes betoken servitude and inhibit healthy market forces. But economic theory says just the opposite. Noncompete agreements make sense. They are a boon to the economy. Most of the time they are even a boon to the executives constrained by them, and the main problem is not that they sometimes keep such characters from taking jobs they'd love to have, but that the agreements are hard to enforce. Mark Cheskin, a Hogan & Hartson partner who specializes in noncompetes, guesses that only half of the agreements being signed would survive a courtroom showdown.

So, why do we have non-competes if they’re essentially unenforceable – and even illegal in California?

The economic argument: Noncompetes give companies incentives to do more for their workers. "The competitive effects of noncompetes are almost totally benign," says David Henderson, an economist at Stanford's Hoover Institution. "The agreements make it possible for employers to invest heavily in talented workers. You just can't make those investments if the talent is free to take the acquired skills and march off to a competitor."

Except for California, which bans all such agreements, every state accepts that companies have "protectable interests" and can defend them via noncompetes. Unfortunately for companies aiming to protect their interests, the states differ wildly about what's required in the agreements. Texas, Georgia and New Jersey are among the states whose courts tend to be suspicious of the agreements and responsive to arguments that they restrain trade.

Connecticut, Florida, Indiana and New York are among the states somewhat more sympathetic to the view that noncompetes are legitimate business tools. The New York State Court of Appeals has broadened the "protectable interest" standard so that it covers what are called "unique individuals," who can be protected even when they have no managerial responsibilities or special customer contacts.

In a national job market, executives who want to break their noncompetes can play off one state against another, and if all else fails, they can skip to California. It really is a nutty system. If the executive is fast on his feet, he will begin his new career--possibly before telling his employer that he's leaving--by going to a California court and asking for a declaratory judgment that the noncompete is invalid. If he dithers even briefly, he's in trouble. Says Jay Warren, who works for Bryan Cave in New York City, specializing in noncompetes: "As soon as the guy walks out the door, I run to a New York court and ask for a temporary restraining order preventing him from going to work in California."

Think of that next time before you hand in your two weeks’ notice.

- Arik

AARP Appeals to Big Pharma to Relax Controls on Canadian Drug Reimportation

William Novelli, chief executive of AARP, said yesterday that his group will write to the Pharmaceutical Research and Manufacturers of America in the next few days advocating its position, appealing directly to the pharmaceutical industry to keep cheaper Canadian drugs available to Americans. Here’s an excerpt from Associated Press.

"The pharmaceutical industry is not easy to convince. We all know that," Novelli said, speaking at the Kaiser Family Foundation. "I don't know if they'll ever come around on importation. The least we can do is get them to not choke off the supply side, and we're working on that."

Thousands of Americans get their prescriptions filled in Canada, where brand-name medicines can cost half the price because of tighter government controls.

Importing drugs is illegal in the United States, but people seeking cheaper prices can find ways to do so on the Internet. The Food and Drug Administration (news - web sites) and the U.S. pharmaceuticals industry oppose the practice, saying they cannot guarantee the safety of imported drugs.

Supporters argue that the industry is just seeking to keep prices high.

At least five drug companies, citing supply and safety concerns, have limited shipments to Canadian pharmacies to keep drugs from being sold to Americans.

Minnesota and Wisconsin, along with Springfield, Mass., and Montgomery, Ala., have given their residents permission to buy drugs from Canadian Internet pharmacies.

- Arik

Super Tuesday Over, The Race is On: Kerry vs. Bush

Senator John Kerry blazed to victories in Democratic primaries from New York to California yesterday, effectively capturing his party's presidential nomination and prompting his main rival, Senator John Edwards, to end his campaign.

Kerry defeated Edwards in almost every state - including Ohio and Georgia, where Edwards had been looking for a victory to keep his candidacy alive - in what was shaping up as a nationwide romp. Faced with a staggering night of losses, Edwards flew home to Raleigh to withdraw from the race today.

President Bush called Kerry to congratulate him on his victories. "I said, `I hope we have a great debate about the issues before the country,' " Mr. Kerry said, recounting his conversation with the president.

Scott Stanzel, a Bush campaign spokesman, said the President told Kerry that he had won the nomination against a tough field and that he was looking forward to a spirited race.
Kerry's hope for a 10-state sweep was frustrated not by Edwards but by Howard Dean, his onetime nemesis, who finally won his first primary, in his home state of Vermont, two weeks after he withdrew from the race.

The New York Times recaps:

Mr. Edwards and Mr. Kerry offered warm words about each other in their speeches last night, just two days after their decidedly unfriendly debate in New York.

"John Edwards brings a compelling voice to our party, great eloquence to the cause of working men and women all across our nation and great promise for leadership for the years to come," Mr. Kerry said of Mr. Edwards, whom many Democrats have pushed as a potential running mate for Mr. Kerry.

But most of all, Mr. Kerry offered a vigorous attack on the White House, previewing what officials in both parties said would be an extraordinarily rough general election campaign.

"I am a fighter," he proclaimed, and proceeded to use the platform of his nationally televised remarks to attack Mr. Bush for proposing a constitutional amendment to outlaw same-sex marriages.

"George Bush, who promised to become a uniter, has become the great divider," he said in Washington, adding: "He proposed to amend the Constitution of the United States for political purposes, and we say that he has no right to misuse the most precious document in our history in an effort to divide this nation and distract us from our goals. We resoundingly reject the politics of fear and distortion."

Mr. Edwards, smiling but appearing weary, addressed supporters at a rally in Georgia, a state chosen in the hope that he could give a victory speech. Instead, Mr. Edwards delivered an address that sounded a farewell note for his campaign.

"We have been the little engine that could, and I am proud of what we've done together, you and I," he said.

He praised Mr. Kerry as "an extraordinary advocate for causes that all of us believe in: more jobs, better health care, a cleaner environment, a safer world."

"These are the causes of our party," he said. "These are the causes of our country and these are the causes we will prevail on come November, you and I together."

With yesterday's balloting, 29 states and the District of Columbia have now passed judgment on the Democratic field. And the party's leaders appear to have accomplished precisely what they were looking for in setting up this calendar: A near-consensus candidate, chosen early and with minimal bloodshed.

Mr. Kerry has now claimed the nomination earlier than any other nonincumbent Democratic presidential candidate in more than 40 years, with the notable exception of Al Gore in 2000.

Advisers to Mr. Kerry sought to avoid appearing overly optimistic, even as they rejoiced in these latest wins. They said Mr. Kerry would campaign through Texas, Mississippi, Louisiana and Florida, the four states where there will be primary voting on March 9.
"We only have one-third of the delegates we need," said Stephanie Cutter, Mr. Kerry's spokesman. "The primaries give voters across the country a chance to get to know John Kerry."

Still, the Kerry campaign was girding for a sea change in the nature of the campaign, moving from the relatively small field of a Democratic primary — and a relatively mild opponent, in Mr. Edwards — to a general election campaign against Mr. Bush, whose aides have promised a fierce campaign. Mr. Kerry moved quickly to set out the themes of his campaign, incorporating lines used by Dr. Dean and Mr. Edwards as he turned full force to the White House.

"Tonight the message could not be clearer. All across our country, change is coming to America," he said, adding: "We have no illusions about the Republican attack machine and what our opponents have done in the past and what they may try to do in the future. But I know that together, we are equal to this task."

The White House appears to be bracing for a strong Democratic threat. Aides to Mr. Bush said he would broadcast his first television advertisements on Thursday night, as he begins spending about $120 million he has raised precisely for this moment. His campaign surrogates appeared on television news programs last night, portraying Mr. Kerry as, among other things, an advocate of tax increases and big government.
It was the year's biggest night of voting for Democrats, with 1,151 delegates being allocated. Going into last night, Mr. Kerry had 562 of the 2,162 delegates needed to win the nomination, compared with 204 for Mr. Edwards.

Delegates in Democratic primaries are allocated based on the percentage of votes each candidate wins, as opposed to the winner-take-all system used by the Republican Party. As a result, Mr. Edwards was under pressure to not only win a number of big states, but win them by substantial margins in order to make up the delegate differences.

That did not come close to happening.

Mr. Kerry posted lopsided victories in New York and California, the two states with the highest number of delegates at stake.

He scored a double-digit victory over Mr. Edwards in Ohio, where Mr. Edwards had campaigned heavily in the calculation that his attacks on Mr. Kerry for voting for the North American Free Trade Agreement would lift him to victory.

He also swamped Mr. Edwards in Maryland, Rhode Island, Connecticut, Minnesota and, to no one's surprise, Massachusetts.

The other two candidates, the Rev. Al Sharpton of New York and Representative Dennis J. Kucinich of Ohio, posted mostly single-digit showings in the voting. Mr. Sharpton and Mr. Kucinich were both on the ballots in their home states; both suffered single-digit showings there as well.

Mr. Edwards's frustration with the turn of events in this campaign was apparent throughout the day.

He visited a polling place in Atlanta in the early morning for a few minutes, grinning and greeting a smattering of voters and supporters. But he did not respond to questions shouted at him and had not made appearances on morning talk shows, as he has done in the past.

Both Mr. Kerry and Mr. Edwards spent part of yesterday in Washington, voting on gun regulation legislation. Before flying to Washington from Georgia, Mr. Kerry stopped by a trucking company depot in Atlanta where he shook hands, and zipped around in a forklift.
"I think we can do a better job on the economy," Mr. Kerry said. "We can fight for an even playing field, and we can sure fight to create more jobs."

Mr. Kerry's huge victories are attributable to voters' anxieties about their own economic futures and, once again, an intense desire to defeat Mr. Bush, according to the polls of voters that were conducted in each state by Edison Media Research and Mitofsky International for a pool of five television networks and The Associated Press.
In Atlanta, Kyle Cole, 43, said he was voting for Mr. Kerry because "he's got experience."

"We live in some dangerous times," Mr. Cole said. "I really like Edwards, but we need someone who knows how Congress works. And the main thing is to get Bush out."

So, there’s the whistle; and the real race is on! It’s gonna be a long nine months.

- Arik

DeBeers Diamond Monopoly Poised to Re-Enter U.S. Market, Faces New Scrutiny in Europe

De Beers signaled last year it might agree to plead guilty and pay a fine to settle allegations that date back to shortly after World War II when the Justice Department alleged that it fixed the price of industrial diamonds, which was followed with another suit in 1994.

"We have outstanding legal issues with the Department of Justice and the European Union, and we're working to resolve them," said Lynette Hori, the spokeswoman for DeBeers's diamond trading company. "The U.S. is the biggest market for diamond jewelry - accounting for 50 percent of global retail jewelry sales - and we would really, really like to resolve these issues," she said.

I'll bet.

After 10 years of inactivity in the case, the court in January scheduled an arraignment and plea hearing for March 11th. DeBeers and General Electric were indicted in 1994, accused of fixing prices in the $500 million industrial diamond market. Federal officials alleged that GE and DeBeers, which at the time controlled about 80 percent of the market, told each other about price increases in advance.

A federal judge dismissed charges against General Electric in December 1994, saying the government had failed to prove its case. The suits were filed in Columbus because GE's industrial diamond business was headquartered in the Columbus suburb of Worthington. Industrial diamond is sold to diamond tool manufacturers, who use it to make cutting and polishing tools used in a variety of manufacturing and construction applications.

But, prosecution of DeBeers has proven difficult for the past decade because U.S. officials have no jurisdiction over the company, which is based in South Africa.

That hasn't stopped DeBeers from becoming one of the world's best-known brands and one of the biggest advertisers in the U.S., relentlessly linking diamonds to engagements, weddings and anniversaries with its "A Diamond is Forever" campaign. But DeBeers hasn't had a retail presence in America and its executives are subject to detention if they enter the country. DeBeers only has its own retail stores in London and Tokyo.

DeBeers's 1994 charge is still pending in U.S. District Court in Columbus, Ohio, where the Justice Department is looking for a guilty plea, which might be forthcoming, that a unit of DeBeers was part of the global price-fixing conspiracy with GE. Prosecutors said that they hadn't been given access to needed evidence overseas.

DeBeers's efforts to get the charge dropped were rebuffed by the Clinton administration and, initially, by the current Bush administration. But late last year, the company signaled that it might agree to plead guilty and pay a fine to end the suit, and those discussions are now at an advanced stage, according to people close to the talks.

U.S. officials over the years haven't been eager to help DeBeers because of its history of harsh labor conditions and support for South Africa's apartheid regime. But Justice Department officials apparently have concluded that - having lost their case against DeBeers's co-defendant GE in 1994 - they have little leverage to continue to exclude the company from the U.S. if it is willing to plead guilty, unconditionally, to the 10-year-old charge.

Meanwhile, the European Union is investigating sales tactics of the world's largest diamond dealer, even as its relations with U.S. regulators may be improving. Prompted by complaints of retail jewelers, the EU is probing DeBeers, which controls two-thirds of the world's rough diamond market.

The complaints arose after De Beers moved into the retail end of the diamond business. With emerging competition in the wholesale diamond business from companies like BHP Billiton and Rio Tino, which produce diamonds in Canada, De Beers has tried to become an upmarket jewelry brand through a retail joint venture with French luxury goods company LVMH. EU investigators are studying DeBeers's "supplier of choice" system, in which gems are sold only to a select few.

- Arik

Night at the Oscars: One Film to Rule Them All

All prognosticating aside, “The Lord of the Rings: The Return of the King” fulfilled my hoped for Oscar outcome with a Best Picture win, alongside the 10 others it was nominated for, sweeping its categories and tying “Ben Hur” and “Titanic” for a best-ever 11 total wins.

The LA Times had a nice recap of the whole evening.

- Arik