Category Archives: Market News

The Future Of TV Is HTML

Posted on by

The title of this post is both a very old idea and a very new one. With the prevalence of fiber connectivity and pervasive broadband speeds, this year has been a hot one for bringing together the home computer and the living room TV. While companies like Apple and Google battle over share of TV viewers, they have left open and promoted the web for content distributors to control their own experience through HTML (and, especially, HTML5).

To that end, it looks like Apple has one-upped Google by opting to privately pre-arrange distribution deals with traditional studio networks beginning with ABC and FOX, while Google has no deals in place at all, hoping the networks will just “allow” consumers to watch Web videos on their TVs. But Google TV is getting a slap in the face from several networks who pulled the plug, right on the big release day. Just as reviews were rolling out in favor of Google’s new living room effort, ABC, CBS and NBC are exiting stage left.

The interesting thing here is that the networks are not sending Google cease and desist letters, they are just simply blocking this particular device from accessing their otherwise free websites, using a free and open protocol. If you normally like to visit http://abc.com on your computer to watch video content, no problem, but if you want to access the website on your Google TV browser by going to abc.com, currently, you will be blocked.

These tactics by the networks are part of a clear strategy that has been at play for some time, Google could have anticipated this would happen. Remember the Hulu vs. Boxee battle? Boxee pumped Hulu through to the TV, but Hulu blocked Boxee because Hulu is restricting their content to computer screens. So Boxee worked around it to get Hulu to the TV screen. Then Hulu blocked the workaround, so on and so forth. Boxee was confident that they were within the boundaries of the law because they were picking up on signals that Hulu was sending out with a free and open protocol, via the world wide web.

Now the same networks behind Hulu are sending the same message to Google in exactly the same way. They are saying you can watch their content with a browser on your computer, or phone, but when it comes to the Google TV set in particular, just like the Boxee, or any other living room TV set, it’s a no go. They are discriminating by device.

Here is what is going on. If you have a TV now, you are almost certainly paying for TV content with a monthly cable bill and if you start to get your TV content through the web, it will be just a matter of time before you will cut your cable bill. The cable companies know this and they appear to be doing everything they can to force the networks to comply with their demands to block their streaming Web video from appearing on TVs. The networks have their hands tied because almost all of their revenue comes from cable right now and if they break up with cable, and go hard-core internet on their own, they will likely implode overnight. For, as you know, Google TV is not offering them anything, and Apple isn’t offering a good enough deal to exist on. So there you have the problems of the traditional TV networks, once rivals now conspiring to sustain their long held control of a medium that is slipping away.

As for the rest of the world, you can’t stop us. Developers of Web video distribution platforms forge ahead. Apple is offering to lure them in with partnerships, Google is giving them the opportunity to figure it out for free. Neither Apple nor Google, nor anyone else is waiting any longer. The time is now. You can feel it. The rest of the video world marches on, bringing the internet and the TV closer together.

Moving Ahead

For most people, Google TV vs. Apple TV is about something different. They are fighting a war for capturing people at the hardware and operating system levels. Apple is succeeding in selling hardware by locking people in with an integrated operating system, while Google is capturing people on the operating system level, with Android, and then integrating Google services from there. Google is giving Android away for free so they can tag along for the ride.

From Google on the Google TV, October, 2010 :

We are working hard to open source the code for the GoogleTV project, and hope to release the source code next year.

From Apple on the Apple TV, October, 2010:

If you can’t add or play a movie in iTunes or QuickTime Player, then you won’t be able to convert it to play on Apple TV.

When Steve Jobs says, “Open doesn’t always win,” he’s talking directly to Google about this war. But for those in the TV business who wish to distribute their content to both Apple TV and Google TV audiences, it doesn’t really matter.

In the past, with this same closed strategy, Apple may have captured the content of the music industry business but I suspect Apple doesn’t really care about the TV content business too much. The studios are traditionally full of wacky businesses and the pool of valuable TV content is a relatively small one with a profit margin that is expected to shrink. How many hit series are there at any one time anyway? Not that many. And of all the series in the past how many are still in high demand?

No Need For Apps

The world is obsessed with apps right now. An app is just software for your computer, and developers are being forced to recreate the same experience dozens of different ways. It’s a constant re-inventing of the wheel. What a waste of time. Now Microsoft is getting into the game too. While it’s easy for a consumer to ignore by just sticking to their platform of choice, developers and content distributors need to figure out WTF they must do next to make their “app” look the same on Windows or some other new platform, like yep, Apple Lion.

Yes, the diversity in platforms is also needed and welcome. It’s in the best interest of the world overall to have many choices. There are many examples of wants-and-needs not being met by just one development platform. Special tasks require alternate solutions. But for TV content, distributed to the living room, none of this really matters because the place to be is not necessarily on the phone, and its not in an app store, its on the web, via HTML.

HTML5

Apple’s Steve Jobs on HTML5, April 2010:

HTML5, the new web standard that has been adopted by Apple, Google and many others, lets web developers create advanced graphics, typography, animations and transitions without relying on third party browser plug-ins (like Flash). HTML5 is completely open.

Google on HTML5, October 2010:

Your GoogleTV site can look great with the right mix of video, audio, and visual effects. HTML5 provides this kind of rich content and more, and it’s supported in GoogleTV’s Chrome browser. For ideas, tutorials, and guidance, check out HTML5 Rocks.

H.264

Meanwhile, while it may be frustrating that Apple TV doesn’t support Flash, and Google TV doesn’t support Quicktime, they do both support H.264 video playback. Apple says “H.264 is the base format” of it’s Apple TV while Google says the “hardware in the GoogleTV supports…H.264 decoders”

You have to ask yourself, if you are looking for scale, what is the lowest common denominator here?

For TV on the web, it pretty much comes down to H.264 video in HTML5. The future of TV is not your mom’s app, it’s the browser. Unless of course the magnets keep us pinned to the vortex due to the effects of a fragmented market. Right now, all of us are unable to discover what we want, forcing Web video developers (and all others too) to tweak their apps for a hundred different versions of Android, on hundreds of different hardware platforms, plus all the iPhone, iPad, and Mac versions, plus Windows, plus this, and plus that, oh my. Jobs was right, what a mess.

Unless you develop for HTML5 with H.264.

Web First

For a publisher, the idea of charging for apps can certainly lead to a nice revenue stream. But giving away 30-50% of your revenue stream to someone for selling the app is not all that nice. In the long run, I’d rather have you come to my website, and I can just sell it to you there. If Apple has a store, and Android has a bunch of stores, and Nokia has one, and Sony and Windows, and everyone else under the sun has one, your business can have one too, no big deal.

The challenge then shifts from app building and revenue-share issues to discovery of your website. Yet the problem isn’t a new one, it’s a problem you face with apps anyway. As a distributor of TV content, if you want to get your content to the living room TVs, especially the ones on the market right now like the new Sony-Google TV or a nice new Apple TV, and you want to bypass the bureaucracy of others’ stores, and setup costs, and revenue shares, even as you want it to work great for the Apple TV experience and for the Google TV experience, and for any other living room TV integration—Boxee, Roku, you name it—format your website to detect the device and present the right display from your website. It’s that simple. Control the entire situation.

And even though you know you are going to develop apps for various TV platforms and other platforms anyway, especially because it’s a great way to get front and center, make them free and use them as a simple browser to get the apps built quickly and inexpensively. Consider developing for the web first so everyone can gain access and you can remain in control. There is a frenzy of “mobile first, web second” development philosophy in fashion right now, and rightfully so, but the living room TV isn’t mobile. It’s stationary. So when creating your apps, you can keep it simple and just point them to your own website where you can manage your own community, special features, distribution, promotion, advertising and sponsorship through a unique, centralized, cross platform environment called the web.

The beauty of HTML TV is that it’s a fancy protocol which everyone loves, it’s open, and it’s free.

Written by Andrew Baron, Guest Blogger at TechCrunch

Cramer Contradicts Himself About Sirius XM (NASDAQ: SIRI)

Posted on by

Once again, Jim Cramer has decided to bash Sirius XM (SIRI) and further seperate himself from reality. In front of the student body of Tulane University, Jim Cramer decided to humiliate himself not only on National Television but to a captive audience of tomorrow’s investors. While recommending that investors do homework on stocks they own, Jim Cramer apparently did not heed his own advice. Once again referring to Sirius XM as an overhyped stock, Jim Cramer pointed out that there are still no firms with a sell rating on Sirius XM. One of those happens to be Jim Cramer’s own TheStreet.com, which most recently upgraded Sirius XM from Sell to Hold, and reaffirmed its rating on October 17, 2010.

Without naming names, Cramer took a shot at me and those of us with a bullish position in Sirius XM. Unfortunately for Cramer, his poke at Sirius XM gets even more embarrassing on a number of levels in that he recommended BUYING Sirius XM right up until the merger was approved. At just over 3.00 a share, Cramer stated that Sirius was a BUY on his Mad Money program while telling viewers they would have a FIVE DOLLAR STOCK when the merger was approved. Cramer failed to own up to his own shortcomings and placed the blame on anyone and everyone else. If that is not bad enough, it gets a lot worse for Jim.

For those Mad Money fans out there, you know that Jim’s style includes the buying and selling of various positions. Cramer is averse to holding any stock and recommends taking profits and cutting losses when appropriate. In his blatant attempt to bash Sirius XM investors and those of us that may seem to promote the stock at times, Cramer actually went back and used an example of how astronomical the losses to investors had been since he recommended BUYING it! He explained how holding the stock, that he himself recommended, turned a $2000.00 investment into $440.00. A whopping 78% loss of principal!

Missing the mark yet again, Cramer decided to mock the investment of John Malone’s Liberty Capital, stating that it was a good deal for Malone but not retail investors. Cramer failed to point out that since the bottom in 2009 when John Malone took a stake in Sirius XM, a $2000.00 investment in SIRI would now be worth nearly $45,000 today! For the bulk of these gains that Sirius XM investors have realized, Cramer has maintained his position on Sirius XM, while his company TheStreet.com rated Sirius XM a SELL.

Honestly…Why does anyone continue to give this man an audience?

Article courtesy of SatwavesPro

Apple (NASDAQ: AAPL) 4Q net income soars 70 pct; iPad falls short

Posted on by

Apple Inc. said Monday that net income for the most recent quarter soared 70 percent on strong sales of iPhones, though iPad sales fell short of expectations.

Shares fell in after-hours trading. Apple’s stock had been breaking through record-high prices for more than a week on high hopes for the iPad.

Apple sold 4.2 million of its new tablet-style computer during the fiscal fourth quarter, fewer than the approximately 5 million that analysts, on average, had expected.

The company sold 14.1 million iPhones from July through September, more than the 12 million or so analysts were looking for. Apple Chief Financial Officer Peter Oppenheimer said in an interview that had the company been able to make more iPhones, that number would have been even higher.

Sales of the iPad might have been constrained by supply issues. Oppenheimer said the company was able to increase production of the iPad toward the end of the quarter.

Apple’s net income rose to $4.3 billion, or $4.64 per share, from $2.5 billion, or $2.77 per share, in the same period last year.

Revenue jumped 67 percent to $20.3 billion from $12.2 billion last year.

Both revenue and net income were record amounts for Apple. The company also did significantly better than Wall Street analysts expected. Analysts polled by Thomson Reuters expect Apple to earn $4.08 per share on $18.9 billion in revenue.

“When you’re shipping the best products ever, these are the results you expect to see,” Oppenheimer said.

Apple CEO Steve Jobs made a rare appearance on a conference call with Wall Street analysts after the results were released. He noted that Apple sold more iPhones than Research in Motion Ltd. sold BlackBerry phones in the most recent quarter.

“I don’t see them catching up with us in the foreseeable future,” Jobs said.

Jobs also spoke disparagingly of the new tablet computers built on Google Inc.’s Android software.

“The seven-inch tablets are tweeners, too big to compete with a smart phone and too small to compete with an iPad,” which has a nearly 10-inch screen, Jobs said.

Apple said it expects to earn $4.80 per share during the holiday quarter on $23 billion in revenue. Apple is known for issuing low guidance and then sailing over. Analysts are currently looking for $5.06 per share in net income on $22.3 billion in revenue.

Shares of Apple, which is based on Cupertino, Calif., plunged $20.69, or 6.5 percent, to $297.31 in extended trading after the release of results. In the regular session earlier, the stock rose $3.25, or 1 percent, to $317.99.

For the full fiscal year, Apple’s net income jumped 70 percent to $14 billion, or $15.15 per share, from $8.2 billion or $9.08 per share.

Revenue jumped 52 percent to $65.2 billion from $42.9 billion.

Warren Buffett: Buying Berkshire Hathaway (NYSE: BRK) Was $200 Billion Blunder

Posted on by

Warren Buffett says Berkshire Hathaway is the “dumbest” stock he ever bought.

He calls his 1964 decision to buy the textile company a $200 billion dollar blunder, sparked by a spiteful urge to retaliate against the CEO who tried to “chisel” Buffett out of an eighth of a point on a tender deal.

Buffett tells the story in response to a question from CNBC’s Becky Quick for a Squawk Box series on the biggest self-admitted mistakes by some of the world’s most successful investors.

Buffett tells Becky that his holding company (presumably with a different name) would be “worth twice as much as it is now” – another $200 billion – if he had bought a good insurance company instead of dumping so much money into the dying textile business.

Here’s his story:

BUFFETT: The- the dumbest stock I ever bought- was- drum roll here- Berkshire Hathaway. And- that may require a bit of explanation. It was early in- 1962, and I was running a small partnership, about seven million. They call it a hedge fund now.

And here was this cheap stock, cheap by working capital standards or so. But it was a stock in a- in a textile company that had been going downhill for years. So it was a huge company originally, and they kept closing one mill after another. And every time they would close a mill, they would- take the proceeds and they would buy in their stock. And I figured they were gonna close, they only had a few mills left, but that they would close another one. I’d buy the stock. I’d tender it to them and make a small profit.

So I started buying the stock. And in 1964, we had quite a bit of stock. And I went back and visited the management, Mr. (Seabury) Stanton. And he looked at me and he said, ‘Mr. Buffett. We’ve just sold some mills. We got some excess money. We’re gonna have a tender offer. And at what price will you tender your stock?’

And I said, ’11.50.’ And he said, ‘Do you promise me that you’ll tender it 11.50?’ And I said, ‘Mr. Stanton, you have my word that if you do it here in the near future, that I will sell my stock to- at 11.50.’ I went back to Omaha. And a few weeks later, I opened the mail-

BECKY: Oh, you have this?

BUFFETT: And here it is: a tender offer from Berkshire Hathaway- that’s from 1964. And if you look carefully, you’ll see the price is-

BECKY: 11 and-

BUFFETT: -11 and three-eighths. He chiseled me for an eighth. And if that letter had come through with 11 and a half, I would have tendered my stock. But this made me mad. So I went out and started buying the stock, and I bought control of the company, and fired Mr. Stanton. (LAUGHTER)

Now, that sounds like a great little morality table- tale at this point. But the truth is I had now committed a major amount of money to a terrible business. And Berkshire Hathaway became the base for everything pretty much that I’ve done since. So in 1967, when a good insurance company came along, I bought it for Berkshire Hathaway. I really should- should have bought it for a new entity.

Because Berkshire Hathaway was carrying this anchor, all these textile assets. So initially, it was all textile assets that weren’t any good. And then, gradually, we built more things on to it. But always, we were carrying this anchor. And for 20 years, I fought the textile business before I gave up. As instead of putting that money into the textile business originally, we just started out with the insurance company, Berkshire would be worth twice as much as it is now. So-

BECKY: Twice as much?

BUFFETT: Yeah. This is $200 billion. You can- you can figure that- comes about. Because the genius here thought he could run a textile business. (LAUGHTER)

BECKY: Why $200 billion?

BUFFETT: Well, because if you look at taking that same money that I put into the textile business and just putting it into the insurance business, and starting from there, we would have had a company that- because all of this money was a drag. I mean, we had to- a net worth of $20 million. And Berkshire Hathaway was earning nothing, year after year after year after year. And- so there you have it, the story of- a $200 billion- incidentally, if you come back in ten years, I may have one that’s even worse. (LAUGHTER)

For Google, Android Means Keeping More Revenue

Posted on by

Friday, Google (GOOG) announced their Q3 earnings. And they were good. Really good. But that doesn’t mean that questions still don’t linger about the company going forward. Namely, how are they going to make money off of something besides text-based search advertising?

Google’s position is that they already are. They shared three key numbers to show how well three other areas of their business are doing: YouTube, display ads, and mobile. And mobile came up again later during the Q&A session on the call. Google CEO Eric Schmidt was on the call and took the question about how Android will make money for the company.

Schmidt called Android “probably the largest single platform play in the market today.” And going forward, he thinks that’s only going to increase as more and more people buy smartphones. At the same time, “in the open source approach, that means we give the software away, which is always paradoxical. People say, well how do you make money from that?,” Schmidt was quick to jump to.

“The evidence we have is that people who use Android search twice as much as everything else,” Schmidt continued. “So, clearly, there is more revenue associated with those searches.”

One of the specific numbers shared by Google SVP of Product Management, Jonathan Rosenberg, was that the annualized run rate on mobile for Google is now one billion dollars. But it’s important to note that this is across all platforms and devices. That just means that a lot of people are searching on their phones and seeing ads.

That’s exactly what Google wants, but Android is a bit different since they’re pouring so many resources into it. “If they are using Android systems, revenue that we share in the search are shared with operators but not with anybody else. So, again it’s more lucrative,” Schmidt noted.

Schmidt also said that on that basis alone, Android is already “hugely profitable.” And he continued on to say that Android is likely to be financially successful even without any of the other mobile ideas that are possible. “We can layer on value-added services,” he said.

That’s interesting. It suggests that Google is definitely thinking about ways they can layer premium services on top of the platform in order to make money. At the very least, they haven’t ruled it out. What kinds of services? Who knows. One obvious one would be turn-by-turn navigation, but they’re already giving that away for free.

But Schmidt was quick to jump back to, “Our primary purpose right now is building this open platform.” He also stated that the goal with their app store is to make money for developers, not themselves.

Written by MG Siegler of TechCrunch

Asian stocks up on solid US corporate results

Posted on by

Asian stock markets advanced Thursday, lifted by better-than-expected earnings results from U.S. corporate bellwethers and growing expectations for action by the U.S. Federal Reserve to spur growth.

The dollar hit another 15-year low against the yen in Tokyo and continued to weaken against the euro. Oil prices rose to near $84 a barrel in Asia as a report showed U.S. crude supplies dropped unexpectedly last week, suggesting demand may be improving.

With the U.S. dollar being pummeled — it twice hit bottom this week against the yen — traders seeking higher returns in equities sent Asian markets higher. That was despite a new sign of weakness in the global economic recovery: Singapore said Thursday its volatile manufacturing sector had faltered, causing a precipitous fall in growth.

Singapore’s economic growth slowed in the third quarter from a record pace, the Trade and Industry Ministry said. Gross domestic product rose 10.3 percent in the July-to-September period from a year ago, compared with a rise of 19.6 percent in the second quarter.

“Singapore is the most exposed to global growth. It’s a bellwether for the global economy,” said Song Seng Wun, an economist at CIMB Research.

Japan’s benchmark Nikkei 225 stock index jumped 163.02 points, or 1.7 percent, to 9,568.73. South Korea’s Kospi added 0.5 percent to 1,886.54. Australia’s S&P/ASX 200 was up 1.6 percent at 4,692.9.

Elsewhere, Hong Kong’s Hang Seng index rose 1 percent to 23,704.70. The Shanghai Composite Index gained 0.4 percent to 2,873.837. Markets in New Zealand, Malaysia, Singapore and Taiwan all rose in early trading.

Sentiment was upbeat across Asia as investors took heart from strong earnings results from Intel Corp. and JPMorgan Chase & Co. The solid results lifted Wall Street on Wednesday as the Dow Jones Industrial Average climbed 75.68 points, or 0.7 percent, to 11,096.08, a five-month closing high.

JPMorgan Chase said Wednesday its third-quarter profit jumped 23 percent and that it earned $4.42 billion, or $1.01 per share, beating analysts’ forecast of 90 cents per share. Intel announced a 59 percent jump in net income after the closing bell on Tuesday.

Global stocks have rallied in recent weeks as investors bet the Federal Reserve will enact a bond-buying program in early November. Buying bonds would drive interest rates and yields even lower, which makes stocks a more attractive investment.

In currencies, the dollar fell to 81.19 yen from 81.79 yen in New York late Wednesday — the lowest level since 1995. The euro rose to $1.4071 from $1.3955.

Benchmark oil for November delivery was up 75 cents to $83.76 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.34 to settle at $83.01 on Wednesday.

Report by Pamela Sampson

AOL, private-equity firms may bid for Yahoo (NASDAQ: YHOO)

Posted on by

AOL Inc. and a handful of private equity firms are discussing a possible buyout offer for Yahoo Inc., The Wall Street Journal reported Wednesday, sending Yahoo shares climbing sharply in after-hours trade.

AOL (NYSE:AOL)  is in talks with firms including Silver Lake Partners and Blackstone Group LP (NYSE:BX)  , about a possibile offer, the report said citing unnamed sources.

According to the report, AOL and its potential private-equity partners are considering a deal in which Yahoo would sell off its roughly 40% stake in Chinese Internet giant Alibaba Group (PINK:ALBCF)   (THE:HK:1688)  , in addition to other, unspecified assets, thus making it a much more manageable potential acquisition. See full WSJ.com report on possible AOL bid for Yahoo.

Much of Yahoo’s market value is tied to its stakes in various Asian assets. The company’s stake in Alibaba grants it access to the world’s largest Internet market, for example. Certain other Alibaba assets are likely to grow much further in value once they’re spun out onto the public markets.

Shares of Yahoo, which closed over 5% higher during Wednesday’s session, shot up a further 13% in after-hours trading, following the Wall Street Journal report. Shares of AOL were down 0.5% in late trade.

In addition, AOL is mulling a reverse merger with Yahoo (NASDAQ:YHOO)  , with the resulting entity possibly becoming a private company, according to the report.

The talks are “very preliminary” and do not include Yahoo, it said.

Both AOL and Yahoo spokespersons declined to comment.

Written by John Letzing

Microsoft’s (NASDAQ: MSFT) Bing Gets a Social Lift From Facebook

Posted on by

Facebook and Microsoft announced a partnership on Wednesday that will give the results on Microsoft’s Bing search engine a social twist — and could help both companies compete against a common adversary, Google.

The new feature allows people who use Facebook to see Bing search results that incorporate information from their friends, like restaurant recommendations.

When a user searches for something like a movie, place or product on Bing, information about how many of their friends “liked” that item on Facebook and related links they have shared will appear alongside the results. The Facebook data will help determine how prominently these will appear, said Yusuf Mehdi, a senior vice president for online business at Microsoft.

“It isn’t just about the common connections between data and the offline world, it’s about the connections between people,” Mr. Mehdi said.

Mark Zuckerberg, a founder and chief executive of Facebook, said the move was a deepening of the company’s current partnership with Microsoft.

In 2007, Microsoft paid $240 million for a 1.6 percent stake in Facebook. Since then, the two companies have worked together to introduce advertisements on Facebook and incorporate Bing Maps into Facebook’s location application, called Places.

Facebook and Microsoft appear to be forming a united front against Google, a rival to both in several ways.

Despite heavy investment by Microsoft, Bing still greatly lags Google in terms of market share. Google has made several attempts to strengthen its social networking offerings and compete with Facebook.

At stake, analysts say, is the ability to know more about users, and to charge more for ads that are more effectively aimed at those users.

“Making search more social is ultimately going to drive more targeted advertising, which you can charge a premium for,” said Mukul Krishna, a digital media analyst at Frost & Sullivan. “Search hinges on that business model.”

Report by Jenna Wortham

Why Florida’s Foreclosure Machine Is Slowing Down

Posted on by

At the George E. Edgecomb Courthouse in Tampa, Judge Sandra Taylor presides over one of the special courts set up to help work through Florida’s backlog of foreclosure cases. Sitting at a desk in a fifth-floor conference room, with a court assistant and a cart stacked with manila envelopes at her side, Taylor uses a speakerphone to talk to attorneys for the banks and mortgage servicers who call in rather than appear in person. Most borrowers don’t show up to contest the loss of their homes.

One day in early October, Taylor had 51 cases on her docket. It took her about 30 seconds to approve some of the actions and set a sale date after lenders’ attorneys summarized the case and the amount owed. “I wish there was more we can do,” Taylor told one homeowner who did appear. She said there was “no legal reason” why she shouldn’t approve the foreclosure on the home.

Another homeowner, Ingrid Young, 44, told Taylor she couldn’t afford the $1,900 monthly payment for her Tampa house because she earns only $1,800 a month. “I am in default, and I do realize that,” she said. Taylor approved the foreclosure after persuading attorneys for CitiMortgage, a unit of Citigroup (C), to set the sale date in January, after the holidays. “It’s a very sad business,” the judge said during a break.

Florida has the third-highest foreclosure rate in the U.S. after Nevada and Arizona, according to RealtyTrac, the Irvine (Calif.)-based data firm. One in every 34 housing units—double the U.S. average—was in the foreclosure process or bank-owned as of Sept. 1. Florida’s legislature appropriated $9.6 million this year to hire semi-retired judges and case managers to preside over foreclosure hearings such as those in Tampa, which have come to be known as “rocket dockets.”

Growing Backlog

The goal is to clear 62 percent of the backlog by next July, according to Craig Waters, a spokesman for the Florida Supreme Court. J. Thomas McGrady, chief judge of Florida’s Sixth Judicial Circuit, once thought that was achievable. Now that JPMorgan Chase (JPM), Ally Financial, and other banks have put the brakes on foreclosures or evictions to look for any paperwork irregularities, McGrady is “very doubtful” his courts can do that. The Sixth Circuit, which covers the area around Clearwater and St. Petersburg, faces a backlog of 33,000 foreclosures, he says.

“All of a sudden all of these issues pop up with the lenders,” McGrady says. “It’s going to slow down the whole process. We’re still getting 1,000 cases a month.” At the Clearwater court, lenders as of Oct. 12 had canceled more than half of 84 hearings to approve foreclosures that were scheduled for the following day, according to Ron Stuart, a court spokesman. Half of 110 hearings set to take place the day after that had been canceled as well.

Among the alleged defects the banks are examining are lender affidavits signed by people, often described as “robo signers,” who repeatedly failed to verify the accuracy of the information in the documents. A lawsuit filed last week by Ohio’s attorney general accuses Ally and its GMAC Mortgage unit of committing fraud by submitting hundreds of false affidavits in foreclosure cases. Ally said in a statement that it “believes there was nothing fraudulent or deceitful about its foreclosure practices.”

A coalition of all 50 state attorneys general, led by Iowa’s Tom Miller, announced a joint investigation into foreclosures on Oct. 13. Florida Attorney General Bill McCollum has asked five lenders and mortgage servicers to meet with him to discuss ways to “redeem the integrity” of the foreclosure process. “Every homeowner that’s in foreclosure now should be questioning” the documents, says Matthew Weidner, an attorney in St. Petersburg who defends homeowners in foreclosure cases. “This entire system is now a great big question mark.” Oliver Chang, a housing strategist at Morgan Stanley (MS), says that as many as 9 million U.S. mortgages in the foreclosure pipeline or already through the process may face legal challenges. 

Law Firms Investigated

The lenders aren’t the only ones coming under increased scrutiny. McCollum is investigating four law firms, including Shapiro & Fishman and the Law Offices of David Stern, that handle foreclosure cases on behalf of lenders. Among the banks represented by the firms the attorney general has targeted are CitiMortgage, Bank of America (BAC), and Deutsche Bank (DB). McCollum accuses the firms of “unfair and deceptive actions” and says thousands of foreclosures that had been approved by judges may have been the result of their allegedly improper actions. Gerald Richman, an attorney for Shapiro & Fishman, says the firm is ready to cooperate with the attorney general’s office if it narrows the scope of a subpoena seeking information, which Richman calls “invasive.” Representatives of the other firms didn’t return phone calls seeking comment. Citigroup says it has stopped steering foreclosure work to the Law Offices of David J. Stern.

Meanwhile, the foreclosure process grinds on. Weidner criticizes judges for continuing to hold rocket docket sessions amid the controversy over flawed documents. “Inside these courtrooms, judges—the bad ones—are just granting summary judgments like nothing’s happening, like it’s business as usual,” he says. “They’re abdicating their responsibilities to be real judges.”

Several Florida judges say their job is not to advocate for homeowners or investigate the accuracy of documents—courts depend on homeowners or their attorneys to raise objections. “We’re processing thousands of cases where no one is really contesting them,” says W. Douglas Baird, a judge in Clearwater. “It’s not a situation where the courts have the ability to go through every document that’s filed and challenge and question those documents.”

McGrady, the chief judge in Florida’s Sixth Circuit, says his courts have seen “numerous situations of some very sloppy practice” by lenders. “I’m disappointed that perhaps they’ve taken advantage of a system that was set up to allow them to obtain their foreclosures in a reasonably fair and expeditious process,” he says, “and they may have abused that.”

The bottom line: As more questions arise about the legitimacy of foreclosure proceedings, Florida is having a hard time clearing its case backlog.

Written by David McLaughlin

An Expensive Face-Lift On Burger King’s (NYSE: BKC) Menu

Posted on by

When Joyce Jacaruso Castillo grabbed a quick coffee at a McDonald’s (MCD) in Manhattan last month, she was wowed by the low lighting, cushioned stools, and piped-in bossa nova music at one of the chain’s newly remodeled units. The 69-year-old New Yorker doesn’t feel the same vibe at rival Burger King (BKC), however. “McDonald’s is more uplifting,” she says. “Burger King is so blah.”

Leveling that playing field could be expensive for the new private equity owners of Burger King Holdings, who agreed in September to buy the chain for $3.3 billion. Burger King Chief Executive Officer John W. Chidsey said last month that 85 percent of the chain’s 7,200-plus locations in the U.S. need to be remodeled. Modernizing stores with the company’s new “20/20″ redesign will cost about $500,000 each, he said in June, with some going as high as $1.1 million. That could push the cost past $3 billion. “The image is 20 years old,” says Charles M. Fallon, president of Burger King’s North American business. “We’re working hard on making the economics work.”

Persuading franchisees to go along may not be easy. Slowing sales at the No. 2 burger chain have made many store owners reluctant to spend on renovations, says Steve Lewis, who owns 36 outlets near Philadelphia. So acquirer 3G Capital Management may need to chip in funds to spur remodeling, says Jordan Krolick, president of consultant Tound & Drowth. “It’s the hidden cost in any restaurant acquisition, and should be planned for as an addition to the initial investment,” says Krolick, who previously ran acquisitions at McDonald’s.

Susan Robison, a Burger King spokeswoman, says outlets without drive-throughs will be cheaper to remodel and franchisees can remodel using the old look, which costs less. Steven Lipin, an outside spokesman for 3G Capital, says “it’s premature to talk about whether 3G’s going to provide funding or what the cost will be” for upgrades.

McDonald’s, which owns much of the real estate underlying its franchises, fuels renovations by matching 40 percent of funds put up by its franchisees, on average. At Burger King, franchisees, who own about 90 percent of outlets, are responsible for renovation costs and must remodel their stores every 10 years to Burger King’s specifications.

Burger King unveiled its 20/20 redesign two years ago. So far, more than 30 U.S. restaurants have been outfitted with chrome-trimmed booths, brick walls, LCD menu screens, red and black paint, and “flame” chandeliers. Some franchisees say they won’t pay for the extensive remodels. Lewis says four of his restaurants have come up for contract renewals in the past two years and he has opted for less expensive updates such as adding carpeting and terminals with Internet access. “I’m doing whatever the minimum is,” he says.

Remodeling stores lifts sales 12 percent, according to Burger King. Shoukat Dhanani, who operates 61 Burger Kings in the Houston area, built the first 20/20 restaurant in the U.S. in May 2009. Sales are 40 percent higher than at his other locations, he says. Some customers couldn’t believe the sleek store was a Burger King, he says. “Customers were like, ‘Wow, this is nice!’” he says. “‘Are we in the right place?’”

The bottom line: Burger King’s new owners could face a hefty bill to help update its restaurants, which trail competitors in performance and appearance.

Written by Burt Helm