Hits & Misses
Sun boosts sales of servers by giving them away, UBS learns the hedge-fund game isn't as easy as it seems. J&J gets a tummy ache from a new mouth rinse meant for kids, Amp'D Mobile finds that a hit cell-phone show isn't enough to stave off creditors.
(Business 2.0 Magazine) -- [MISS] Not ready for prime time. Even as the major carriers struggled with low adoption rates for video, it appeared that upstart Amp'd Mobile had found a demographic sweet spot producing original content for its young, hip audience. Its first hit show, an animated series called Lil' Bush, functioned as both effective viral marketing and Trojan horse for the upselling of premium content, drawing subscribers to a platform that yielded 4 million downloads of video, music, and games in the first quarter of 2007 and leading Amp'd to a revenue-per-user tally more than twice the industry average. Yet in June, even as it was making history by becoming the first to take a show from the tiny screen to the small one -- striking a deal with Comedy Central for a half-hour weekly TV version of Lil' Bush -- Amp'd filed for Chapter 11 bankruptcy protection, saying that its "back-end infrastructure was unable to keep up with customer demand."
[HIT] Wii too. It's not just TV that's going mobile -- Wii-style gaming with phones serving as joysticks is also poised to hit the mainstream. In May, Japan's NTT DoCoMo debuted a line of phones equipped with software from GestureTek of Sunnyvale, Calif., that lets users play about 70 downloadable games by tilting or waving the handset. While the Wii uses motion sensors called accelerometers, GestureTek's approach seems to have a built-in advantage for phones: The software avails itself of the now-ubiquitous camera feature, comparing moment-by-moment changes in the viewfinder. Envious Americans should get their turn soon: This fall Verizon customers will be able to download GestureTek software that lets them navigate websites with a flick of the wrist.
[MISS] Over the hedge. Two years ago UBS had a thorny HR issue on its hands -- how to keep its top U.S. talent, including investment banking chief John Costas, from being lured away by the sexier (and potentially more lucrative) hedge-fund industry. The decision came down to a hoary old chestnut: If you can't beat 'em, join 'em. UBS set up its own hedge fund, Dillon Read Capital Management, and tapped Costas to run its $3.5 billion in assets. All seemed well until this spring, when the fund posted a quarterly loss of $124 million, contributing to a 7 percent decline in the bank's earnings. In May, UBS said it would close the fund and take a $300 million charge. Analysts at Morgan Stanley downgraded UBS stock but bumped it up on the irony meter, noting that the fund's closure would lead to a "considerable risk" of staff departure.
[HIT] On the rise? Sun Microsystems has taken an ignominious tumble from the top of the server market to a distant third. But it still believes that its high-end wares pay for themselves via better performance and energy efficiency -- and since early last year, it's been making a big bet to prove it, offering 60-day test-drives of products like $32,000 servers that can handle 14,000 hits per second and 8,000GB storage systems that run $70K. Sun is far from eclipsing rivals IBM and HP, but early returns suggest the approach is working: 5,000 trials have led to 400 new customers, and sales of the most frequently test-driven item, the Sun Fire T2000 server, have tripled. In 2006, Sun's server revenue rose 15.4 percent, according to Gartner, the fastest growth rate in the industry.
[HIT] Cursing a blue streak. When it comes to products ingested by kids, parents rarely give second chances. So odds are Johnson & Johnson's Listerine brand won't be making a dent in the children's oral hygiene market anytime soon. J&J made its play last year when it extended the 112-year-old mouthwash line with a product called Agent Cool Blue, which temporarily turns dental plaque blue to encourage better brushing. The company spent more than $11 million to advertise the rinse, but things went awry when it found that the product's preservatives were "not adequate against certain microorganisms," posing a health risk to people with weakened immune systems. In April, J&J announced a voluntary recall of all 4 million bottles sold.To send a letter to the editor about this story, click here.
From the July 1, 2007 issue