|
|
Way to Go, Tiger Woods!!! Arnold Palmer, We will miss you on the circuit.
Kit Menkin’s Leasing News www.leasingnews.org Monday, April 15, 2002 Accurate, fair and unbiased news for the equipment Leasing Industry Headlines---- Commercial Money Center---It Gets Worse. Wildwood Financial Gets Accolades Vendor Profile Request—Jim Flemming Recruiters Being “over looked?” The Week Ahead April 15-19 Thalman and Boyee earn MBA from Pepperdine University Milestone Cap. to Acquire Privately Held VELOS Capital. Silicon Valley's biggest companies report loss of $89.8 billion SJ Mercury Survey reveals staggering tech plunge Sign of the times: Cities stuck with too much office space Gerry Egan, TecSource, New Prez. NAELB-New Officers ### Denotes Press Release. Commercial
Money Center---It Gets Worse.
$19.2 Million Fraudulent Leases? out of $250 Million Portfolio
or is it higher, as others are now coming forth? Here
are reader’s comments to Leasing News: Please
do not use my name. Other employees may guess who I might be as
I was involved in ( upper management). I do know that the fraudulent
leases were bonded by ACE (under Illinois Union Insurance Co.), RLI
and American Motorists as these were the last 3 companies who wrote
bonds for CMC. I
am concerned in looking for employment that the onus of working for
CMC will be working against me. How do I tell a prospective employer that
I was not guilty of any wrong doing? I
fully expect that all of the sureties will file suits if they have
not yet done so. Knowing what I do about D&B's public records
database, I'm not surprised that they are not all showing up as yet
(D&B Public Records can be slow). If
you have access to Lexis/Nexis, you might get a better list of complaints.
Accusearch through Data Filing Service/UCC Direct might give you more
information but can be costly. I'm sure you know all of that, but
I thought I'd throw it in. Because special purpose companies were
often formed for bulk sales, a UCC search might not return accurate
data. Any San Clemente addresses showing would most likely be the
offices of Anthony and Morgan Surety and Insurance Services, the broker
who sold the bonds to CMC. The
actual bonding process was a simple one, the bonds themselves are
something of a web. In certain cases, bonds were 'wrapped' when one
company purchased the bond from the original seller. Any changes
to the bonds were at the request of either the issuer of the bond
or the bank to whom the leases were sold. The cause for any changes
were due to various reasons including simple mergers and, in certain
cases, declining ratings on existing bonds. To my knowledge the list
of bonding companies includes: Royal
Indemnity Amwest
Surety Frontier
Insurance Co. RLI
Insurance Co. Safeco ACE
America Insurance (ACE wrapped the Frontier, Royal and other bonds) American
Motorists Insurance Illinois
Union Insurance Co. (A wholly owned subsidiary of ACE) Kemper
(these bonds were purchased in the mid summer of last year but were
returned as Kemper's bond rating dropped after 9/11/01 due to the
fact that they had insured parts of the World Trade Center. This
is noteworthy as this event is THE ONLY impact that 9/11 had on CMC
although they continued to publicize that event as having caused severe
damage to CMC. That has always made me a little sick, quite frankly,
but I had no control over
this. It did bother me ******** tried to use such a tragedy to their
advantage. Kemper is not responsible for any CMC leases) Chubb
Group of Insurance Companies, in the final days, was negotiating
with CMC to wrap the entire portfolio with new bonds and relieve the
obligation of the original sureties. Once this was done, the entire
portfolio was to be refinanced by Citibank and Chase Manhattan as
a joint venture apart from any routine purchases. Once the lawsuits
started coming down, however, all parties pulled out. There
may have been a few other smaller bonding companies, but the names
escape me. Most of those bonds were later wrapped though. The list
above is an accurate list of the big players though. I
am sure Safeco and their subsidiaries are especially aggravated as
they were promised but never received relief on the bonds written
on leases for Shandoro Ventures, a gigantic CMC disaster along with
Kapco and Med-Quik. ACE,
of course, will be the biggest suit as they hold the most bonds.
ACE is not without blame, however, they did not investigate what they
were bonding and were unfortunately duped as a result. I
would like to help out, but it is not the legality that I am fearful
of, but
the fact that I worked for such a company. Please withhold my name. ------------- I
noticed that you mentioned "no major banks seem to be involved" in
the CMC story. This is not correct: Citibank is in for $50 Million and
Netbank is in for more than that amount. By
the way, the Citibank deals were sold under a special purpose company
formed solely to sell leases to Citibank. This was agreed upon by
both entities as a matter of risk management. The name of that company
was CMC Lease Funding 2000-220 L.P. You
may quote me. I have been sitting on some information since the middle
of last summer involving what I believed to be wrongdoing by the executive
management of CMC. I was not, however, 100% certain that wrong had
been committed until you reported today (Friday) that one of the signers
on the bogus deals had come forward. I was the Processing Manager
for CMC. This
story is going to get much bigger, I can assure you. Much, if not
all, of the information you have been given regarding the collapse
has been either inaccurate or misrepresented with the exception of
information you reported today ( Friday’s Leasing News. ) Dean
Ambrosini (It
takes a lot of courage to write what you have. You are being considerate of
your industry, plus trying to up-hold business ethics. I think once
the lawsuit
is noticed, other may follow, and defaults in payment will reveal
what was “real” and what was not. Leasing News will also
print information
without attribution when we can confirm it, or know or learn
about the source. It has more credence when signed, like Dean Ambrosini. editor) --------- The
actual figures on the fraudulent leases I am concerned with total
$19.22 million (confirmed figure) and were sold to various banks using
bogus companies for lessees. CMC's entire portfolio was in excess
of $250 million in receivable accounts, most of which were misrepresented
through falsified records
to the respective investors (banks) and sureties. To
my knowledge, that entire portfolio is now considered in default by
the investors and sureties. Your
Ponzi reference is, in fact, correct. CMC was using their own funds
to cover up the default in the portfolio. I was aware of this, as
were others at my level, and we were told that it was necessary to
do this in order to continue to be considered credit-worthy for future
bond purchases. The
actual leader in the lawsuits, however, was not Safeco but ACE American
Insurance Company, which wrote bonds for CMC. ACE, having 'wrapped'
or purchased bonds from other sureties in addition to having written
their own, was the insurer of the bulk of CMC's portfolio (I recall
this figure to be approximately $140 million). It
is my understanding that ACE filed a motion seeking relief from their
obligation to CMC in Federal Court this past summer (late June 2001)
and filed a subsequent lawsuit shortly thereafter having lost that
round. I believe that all of the sureties have filed similar suits. I
think that Ron Fisher, to return to that subject, was the founder
and original president of the company but was pushed out of that role
due to difficulties caused by his past dealings as the company grew.
I always found odd that he was replaced with Wayne Pirtle in that
role, however, as Wayne's background
is a much bigger mystery. (
Top Executive Insider, known to Leasing News—name withheld ) (The
first reader mentioned many insurance companies. The
UCC filings show the security party as Amwest Insurance company, San
Clemente, Inc. The debtor is Commercial Money Center. Perhaps this
were assigned
to American Insurance Company. It is evident there are several lawsuits
and insurance companies seeking payment. This
particular lawsuit appears different. The plaintiff is the American
Motorist Insurance Company of Illinois, signed by the attorneys for
Royal Indemnity Company and Safeco Insurance Company. It follows a
“third Amended Estipulation and temporary restraining order dated
February 27,2002 against CMC and CSC “ and all of its agents,
officers and employees are enjoined and restrained...from withdrawing
by any means, any bonded lease payments” and names banks accounts
and other matters. CMC closed doors on March 10. This lawsuit was
completed on March 19, signed by all parties, and filed with the court
on March 26,2002. The lawsuit does not appear-yet- in either the
CMC or Capital Markets D&B report, at this time. In the string
of leases assigned, appear
to be the alleged non-existing kiosks from a partnership reportedly involving
Ronald Fisher. The
suit is addressed to Commercial Money Center, Inc., a Nevada corporation;
Commercial Servicing Corporation, a Nevada Corporation, Wayne Pirtle,
an individual, Anita Pirtle, an individual. Capital Markets Corporation
was not named. Leasing News will seek further information on Commercial
Servicing Corporation. Perhaps there is a reader who can give us the
background on Wayne Pirtle. editor ) The
People Behind Commercial Money Center Dr.
Fisher's Chiropractic career was always a mystery to those of us at
CMC. I
had heard rumors of malpractice, including Medicare fraud, and various
other issues, but none have been confirmed. I can tell you, however,
that the ONLY "President of CMC" ever known to any employee
of CMC was Dr. Fisher regardless of what might be indicated on paper.
Not Wayne Pirtle. I
know great measures were taken to keep Dr. Fisher out of sight, however.
I had always assumed that his BK was related to his Chiropractic practice.
Given the number of "out of work Chiropractors" selling
at CMC, I have also suspected that Dr. Fisher's dealings caused some
colleagues to lose their licenses as well. We all thought
the BK involved his entire practice. (
Name Withheld) I
read the claim by CMC Director of Marketing Bill Hanson that he did
not make
any money since last June. Perhaps
he was a victim along with the rest of us in that he was also given
false information to distribute to our brokers and vendors. Bill
is a most likable person and a very kind man, but I can assure you
that he did make money and plenty of it. Perhaps not directly, but
Conrad and Associates did. (Name
With held) ----------------------------------------------------------------------------------------------- About
Leasing News--- ----- Your
piece on CMC demonstrates a great deal of journalistic maturity and integrity.
Congratulations on a very well done piece! Please
withhold my name. --- I like your classified ads, and use them. A very good source for leasing sales people. Perhaps you could shed some light on where your publication is distributed so that we know who will potentially see our classified ads. Thanks again, Tom Gerner TGerner@IFCCREDIT.COM VP Human Resources IFC Credit ( to inform, to educate, to entertain, to help ) Do it better, don’t run away just because they do it ) We estimated we have 5,000 readers. Many read us “at home”, some are doubled listed and may also read us at work. I would say there is an “age” factor. We know this from the ISP address. The older the person and the higher up in the scale of a leasing company, the less they are interested in the internet, e-mail, or “inside news.” This does not apply to entrepreneurs or smaller companies who compete with the larger companies. Many of them are quite computer and internet “ready.” We have a real cross section from brokers, collectors, managers of departments, salesmen, sales managers, sales representatives, and even attorneys. Our first classified ad was for an attorney by the way, who got a leasing company job through Leasing News. We have had operations people, collectors, and other people involved in the industry find job , therefore they must be readers. I think they all care about their professional, want to succeed in life, are concerned about others, want to know more about what is going on, and have a very curious mind. We don’t just automatically print any press release sent to us and particularly . We print a lot of controversy and things you will not read anywhere else about the leasing industry. We are not driven by advertisers or charge for our services. You won’t see a full press release that Boeing leased five new aircraft. ( sorry ). Most of the press releases are so phony, they could be comedy. They are quite one sided, at best. One of the things I learned in starting this, most readers want it delivered to their e-mail address. I originally thought they would like the html, cleaner layout, that they could print or adjust to a newspaper format or click to the url mentioned. They like it delivered. Thus the reason I plug the classified in the e-mail news edition. By the way, we never intended to have a classified section, it was requested by the readers. It took several months of the requests for us to act as it is a lot of work to maintain. April 17 will mark out two year saving these news stories, and in The Day In American History, we will mark the anniversary. _______________________________________________________ Wildwood
Financial Gets Accolades I
did go through the program with Bob (Baker ) and Wildwood back in
January. http://www.wildwoodfinancial.com I
definitely believe that the experience and program are worth every
penny. I am closing my first two deals on Monday, one for $98,000
and one
for $13,000. They have walked me through every phase of the transactions well.
Your
newsletters have been helpful, but also a little frightening. After
going through the program at Wildwood and getting rolling on trying
to sell,
I would get your newsletter and read about the demise of yet another funding
company or leasing company. I would think to myself, "My god,
what have
I gotten myself into". But after three months of doing this,
I really feel
that I will be able to make a nice living at this. Getting
companies to give me one shot at their leasing business has been the
hardest thing. But the ones that have, really like the fact that I
can give them a little bit better customer support than the big guys.
That has been my biggest selling point. I
really appreciated your feedback when I asked for it, and I am even more
appreciative of the fact that you checked back to see how things turned back.
Your reputation as a great guy has been solidified as far as I am concerned. Thanks
again and I hope to meet you at one of the funding retreat or
conferences. Sincerely Scott
P. Chrismer Executive
Leasing Professional Pivotal
Financial Group, LLC Tel:
412.471.9150 Fax
412.471.9151 Email:
scottc@pivotalfg.com (Leasing
News recommended Wildwood Financial, and the timing was right
to get in on the bottom floor, as major change is happening again in
the industry. Those educated will survive, and the lucky ones like Scott
Chrismer will do better. What is that old say,” The harder I work,
the luckier I get.” (P.S.
After thirty years in this business, I still ask,” My God, what
have I
gotten myself into.” editor) ________________________________________________________________ Vendor
Profile Request—Jim Fleming I
would like to respond to "name withheld" who expressed concerns
over GE's insistence on vendor profiles. I believe this is a trend
that is not limited to GE alone, for many funding sources are becoming
increasingly reliant on vendor profiles and vendor investigations.
If one receives these vendor profile requests on face value alone,
then the obvious reason behind the funding source's request is that
they are entitled to know who they are doing business with. After
all, it is their money. The fraud monster is always waiting in the
shadows, and funding sources are taking pre-emptive measures to minimize
that risk. The
question I would pose to "name withheld" is, that (1) if
speculation has been circulating about GE's motivations ever since
their acquisition of CPLC, and (2) they then finally whittle their
broker lists down to a select few, (3) move their operations to a
retail center , (4) well-publicized stories of their predatory nature
continue, and (5) you are feeling uneasy about recent directives,
then why are you still doing business with them? Jim
Fleming National
Business Credit nationalbusinesscredit@yahoo.com -------------------------------------------------------------------- Recruiters
Being “over looked?” As
President of Executive Solutions for Leasing and Finance, Inc., which
is an Executive Search firm that has specialized in Leasing placements
since 1990, I have seen recessions and bountiful times come and go
in a fairly cyclical way over the years. Banks get into leasing and
then exit. Companies centralize and then decentralize. They outsource
and then bring services in house. Consolidations occur in a frenzied
manner, or slow to a comprehensible level. None of this is news.
What I cannot understand is how the Hiring community in the Leasing
industry seems to have completely lost all understanding of the services
professional and diligent recruiters provide. Just because there
are many folks looking for positions now, that doesn't mean that companies
are acting intelligently or saving money by not paying fees to recruiters.
Getting
a resume of a candidate is the most basic and simple part of the process.
It's what is done with that resume that earns a good recruiter a fee.
Someone has to spend a lot of time reading all of the resumes received.
Then, based on a one-dimensional piece of paper, decisions have to
be made as to who warrants a closer look. Recruiters
(good ones) have extensive info on candidates to augment resumes.
Or, they get it BEFORE deciding a candidate's appropriateness. Secondly,
recruiters have historical perspective. Unfortunately,
people are not always totally "accurate" in their resumes
or claims they make. Recruiters spend 10 hours a day every day speaking
with people in the Leasing industry, and have lots of info about lots
of people and companies that is crucial.
Finally, recruiters who do their jobs properly facilitate the process
providing valuable feedback, helping to negotiate packages, doing
reference checks, and a myriad of other things.
The reason we spend 10 hours a day every day doing this is because
that's what it takes. It's a full time job. If management is mandated
by their company to assume the role of sourcing, screening, and investigating
candidates on their own, then they are NOT doing what they were hired
to do. The
perceived savings the company realizes in not paying a fee is really
an expense.
If companies do the math and figure out what their management earn
per hour and what they could accomplish in the many hours a successful
search requires if they were applying their efforts to responsibilities
they were hired to perform, they would realize they have lost more
money than they saved. The
more candidates there are on the street, the GREATER the need for
assistance. It's even more critical to have the time and resources
to select the best from a large pool. The more people available,
the harder the selection becomes.
If the recruiters companies have been using have not performed beyond
emailing a resume, then clients shouldn't become recruiters themselves.
They should engage a firm that earns their fee, and then allow them
to do what they know how to do better than anyone else. Teri
Gerson, President Executive
Solutions for Leasing and Finance, Inc. 908.654.1550
F 908.654.1553 terigerson@exsolutions.com --------------------------
The Week Ahead April 15-19 Washington Post April 15 Monday Deadline for filing 2001 income-tax returns. American Enterprise Institute holds forum on tax policy featuring White House adviser Larry Lindsay and Rep. Bill Thomas, chairman of House Ways and Means Committee. Treasury Secretary Paul O'Neill speaks on taxes at Economic Club of Grand Rapids, Mich. Bank of America, Corning, Eli Lilly, Fannie Mae, Sprint and Texas Instruments issue quarterly reports. April 16 Tuesday House Financial Services Committee meets to mark up legislation on accounting industry reforms. Caterpillar, Coke, Delta Airlines, General Motors, Gannett, Johnson & Johnson, Motorola issue quarterly reports. Economic indicators: March housing starts, consumer prices, industrial production April 17 Wednesday Fed Chairman Alan Greenspan testifies before Joint Economic Committee on the economy. Two House committees, Ways and Means and Energy and Commerce, hold hearings on adding prescription drug benefits to Medicare. HHS Secretary Tommy Thompson is scheduled to present administration's views. IMF Managing Director Horst Koehler addresses National Press Club. General Dynamics, IBM, J.P. Morgan Chase, Nextel, Northrop Grumman and Pfizer issue quarterly reports. Economic indicators: February trade balance April 18 Thursday Senate likely to hold key procedural vote on oil drilling in Alaska's Arctic National Wildlife Refuge as part of consideration of energy bill. House votes on extending Bush tax cuts after 2009. Senate Labor Committee holds hearing on Bush administration proposal for voluntary ergonomic standards. American Express, Marriott, McDonald's, Merck, Microsoft, Nortel, Nucor, SBC and Sears issue quarterly reports. Economic indicators: Leading indicators. ________________________________________________________________ Thalman
and Boyee earn MBA from Pepperdine University
Thalman
Financial, Inc. announces that Andrew Thorn, President, member of
the Leasing News Advisory Board, Steve Herring, Vice president of
Marketing and David Bovee Vice President of Business Development have
each earned their MBA from the Graziadio School of Business and Management
at Pepperdine University. Pepperdine
University offers both fully employed and executive MBA programs. They
attended a division of the executive MBA program known as P/KE which
is designed
from Presidents and Key Executives. Classes
were held throughout the World in China, Singapore, Viet Nam, Mexico,
Washington DC, San Francisco and Seattle. A highlight of the class was
attending class in the White House with key presidential staff members and
the Federal Reserve building where the class actually was held where
the Federal
Board holds its meetings. The class also visited Microsoft and met then
President and COO Rick Belluzzo. Perhaps
the most famous graduate of the Graziadio Pepperdine P/KE program
is Businessman
Thomas E. Burnett, Jr., who was one of the heroes killed aboard United
Flight 93 that crashed in Pennsylvania on September 11th. The
editors of US News & World Report have ranked Pepperdine University's Graziadio
School of Business and Management among the best business schools in
the nation. ####
######################################### ################# Milestone Capital Sign Letter of Intent to Acquire Privately Held VELOS Capital Corp. FAIRFIELD, N.J--Milestone Capital
-- Acquisition expected to jump start leasing program and
dramatically increase revenue
Milestone Capital (OTCBB:MLSP) announced Friday that it has signed a letter of intent to acquire VELOS Capital Corp. for a combination of stock and cash.
VELOS is a company which primarily engages in commercial leasing, employing several industry veterans with substantial leasing experience. VELOS also has established credit arrangements with several major financing organizations. The transaction is expected to close within 60 days.
Commenting on the transaction Chuck DeMory, Milestone's CEO said, "We are excited with the potential to acquire an experienced team of leasing professionals, the high profile clients they represent and the banking relationships they have established.
This should accelerate the growth in our newly formed leasing subsidiary."
Milestone Capital, Inc. in early January completed a reverse acquisition in which it acquired the assets of EliteAgents, Inc. EliteAgents (http://www.eliteagents.com) was established in 1999 as a mortgage banker and has spent the last three years and over $6 million developing several sophisticated computer systems to implement its strategic objective. One of these systems, for which a patent has been applied, allows a non-experienced individual to easily qualify a borrower for a mortgage and to evaluate offerings from numerous financial institutions to find the one which best fits the borrower. Once determined, the system allows the originator to obtain the necessary information to initiate the mortgage as well as perform the necessary steps to be eligible to receive a portion of the commission.
Experienced loan officers utilize this system to develop a network of realtors, financial planners, accountants, attorney's, home builders and other professionals to originate mortgages and receive a portion of the commission which this network generates in addition to their own commissions.
Howard Conyack, Jr., Executive Vice President of Milestone and head of the Mortgage subsidiary said, "Our loan officers have found that the approach is well received by the professionals who join our network in that it is easy to utilize and very effective in handling their client requirements. These loan officers see how our approach will greatly enhance their future earnings."
Mr. Conyack added, "Our objective is to be able to offer additional financial products such as leasing to this network of professionals and eventually be a full service financial marketing organization. Our sophisticated technology, which we believe to be unique in the industry, coupled with the experience of the loan officers and the network of professionals they develop will result in a very powerful organization which we expect to take nationwide."
Statements in this press release other than statements of historical face are "forward-looking statements." These statements relate to future events or the Company's future performance. Such statements are subject to certain risks and uncertainties, including fluctuations in interest rates, demand for mortgages, and other risk factors identified from time to time in the Company's filings with the Securities and Exchange Commission that could cause actual results to differ materially from any forward-looking statements. These forward-looking statements represent the Company's judgment as of the date of the release. The Company disclaims, however, any interest or obligations to update these forward-looking statements.
CONTACT:
Howard Conyack, Jr.
Executive VP
800/848-5442
or
Donald Radcliffe
Radcliffe & Associates, Inc.
212/605-0100
SOURCE: Radcliffe & Associates, Inc. ####
########################################## ############### Silicon Valley's biggest companies report loss of $89.8 billion
SAN JOSE, Calif. (AP) -- The Silicon Valley's biggest companies lost more money last year than they earned in the previous eight years combined, according to a newspaper report. "There's not a sector, at least in recent memory, that has collapsed like this," said Donald Strazsheim, former chief economist at Merrill Lynch. The San Jose Mercury News' annual survey of the 150 largest publicly held companies in the Silicon Valley shed new light on the worst year in the area's recent history. The companies lost a combined $89.8 billion in 2001. Sales plummeted by $55 billion, the first time revenues failed to grow since the survey began in 1985, and 96 of the companies lost money. As orders for computers, software and Internet equipment vanished, companies canceled long-term projects, laid off employees and left millions of square feet of office space idle. The year's winners were non-tech companies -- especially real-estate companies, who reported the highest operating profit margins. Economists and accountants are now trying to figure out how much of the reported losses stem from weak business conditions and how much they reflect temporary but costly mistakes of the 1999- 2000 technology bubble. Last year's losses are stuffed with write-offs, restructurings and charges connected with errors such as paying too much for an acquisition. To sort out bad economic conditions from bad business decisions, the Mercury News examined the past 10-year history of the area's top 150 companies from two points of view: net profits and profits from ongoing business operations alone. The comparison shows that tech companies were financially stronger last year than the reported losses suggest: Despite the huge collective loss, the top companies earned $8.3 billion in operating profits in 2001. The survey also shows that pressure on tech profits and a slowing growth rate had been squeezing companies throughout the late 1990s, well before the sharp drop. "Last year was extraordinary," says Risto Puhakka, vice president at chip equipment research firm, VLSI Research in San Jose. "But for start-ups in our industry, every year it's been harder and harder to compete against the larger players." It has been hard to predict when conditions will improve. Last week, Siebel Systems CEO Tom Siebel called the first quarter of this year the worst in the computer industry's history. For the first time in a decade, IBM last week warned that it would miss its sales forecasts. __________________________________________________________________ Survey reveals staggering tech plunge YEAR'S LOSSES EXCEEDED EIGHT YEARS OF PROFITS By David A. Sylvester San Jose Mercury News The technology recession of 2001 will go down as the worst in Silicon Valley's recent history, a year when the biggest companies lost staggering amounts of money and tech sales shrank for the first time in at least two decades. The Mercury News annual survey of the 150 largest public companies -- to be published Monday in full - - reveals that Silicon Valley's biggest companies reported a combined loss of $89.8 billion last year -- exceeding their profits for the previous eight years combined. Sales plummeted by $55 billion, the first time revenues failed to grow since the survey began in 1985. ``There's not a sector, at least in recent memory, that has collapsed like this,'' said Donald Strazsheim, former chief economist at Merrill Lynch and now president of Global Advisors. As orders for computers, software and Internet equipment vanished last year, companies canceled long-term projects, laid off employees and left millions of square feet of office space idle. Economists and accountants are trying to sort through the debris to figure out how much of the reported losses reflect temporary, although costly, mistakes of the technology bubble of 1999-2000 and how much they reveal weak business conditions. To separate the two, the Mercury News examined the past 10-year history of the current SV150 companies from two points of view: net profits and profits from ongoing business operations alone. The comparison shows that tech companies were financially stronger last year than the reported losses suggest. At the same time, it shows a growing squeeze on companies throughout the late 1990s that started well before the sharp drop in 2001. In fact, the bubble in 2000 only masked the increasing pressure on tech profits and a slowing growth rate for the valley's larger companies. One sign of this: Since 1994, each year's crop of SV150 companies have included more and more money-losing enterprises. ``Last year was extraordinary,'' says Risto Puhakka, vice president at chip equipment research firm, VLSI Research in San Jose. ``But for start-ups in our industry, every year it's been harder and harder to compete against the larger players. Size does matter, because all of the operations are pretty much global.'' In short, Silicon Valley's tech companies have been experiencing the most wrenching, most difficult economic period of their recent history -- even worse than the 1990-1991 recession. The latest SV150 survey challenges the popular perception that Silicon Valley is a kind of Midas Valley where new ideas are easily transformed into gold through entrepreneurial magic. The Midas touch here is often sporadic, difficult to sustain and, in times like these, can favor the largest and most powerful companies. With some notable exceptions, the healthiest companies last year were large, older tech companies or non-tech companies, while even the best and brightest of the 2000 ``bubble babies'' have struggled to survive. ``The New Economy companies are learning from the Old Economy companies,'' says Geoffrey Moore, chairman of strategy consulting firm, the Chasm Group in San Mateo who developed the theory that the largest, ``gorilla'' companies are the best bets. ``We have to become more respectful of the traditional competitive advantages,'' he said. Throughout this period, it's been hard to predict when conditions will improve. Last week, Siebel Systems CEO Tom Siebel called the first quarter of this year the worst in the computer industry's history. For the first time in a decade, IBM last week warned that it would miss its sales forecasts. Part of the problem is that 2001's losses are stuffed with write-offs, restructurings, and charges resulting from the collapse of the Internet bubble. These figures often reflect past mistakes -- such as paying too much for an acquisition. The Mercury News' review, based on data supplied by investment research firm Multex.com, shows: • Despite the huge collective loss, the SV150 companies earned $8.3 billion in operating profits in 2001. These results excluded one-time costs in 2001, such as the historic $51.4 billion write-off for JDS Uniphase's inflated purchase of companies, the $13.6 billion write-off at VeriSign, Cisco System's $2.2 billion write-off for unsold Internet equipment. In other words, the SV150 earned a slim pre-tax profit of 3.3 percent from existing operations. • Non-technology companies got their revenge: Real-estate companies, such as Essex Property, Glenborough Realty, and Mission West had the highest operating profit margins in the SV150. As a group, non-tech companies such as SJW, parent of San Jose Water, along with California Water, Franklin Resources, and Knight Ridder, publisher of the Mercury News, had some of the highest profit margins. • The networking and telecom shakeout is far from over. Even when the large write-offs are removed, essentially excusing costly mistakes from the past, many of the bubble's high fliers -- JDS Uniphase, Inktomi, E.piphany, Redback Networks -- are still losing money from operations. • Over the past decade, more and more SV150 companies have been losing money. In 1994, only 22 companies among the SV150 lost money; last year, 96 companies reported losses. At the height of the bubble in both 1999 and 2000, 50 companies a year -- one-third of the total SV150 -- were losing money. And that was before the big spate of post-bubble write-offs. • Profit margins hit a plateau in the late 1990s and started declining in a see-saw fashion. As a group, the SV150 posted its highest profit margin in 1995, at 9 percent. During the peak of the tech bubble, the margin was just 6.9 percent. Operating profit margins held steady during the 1990s, then declined. • Sales growth has been slowing for seven years for the larger companies as a group. During the last five years -- except for the bubble year of 2000 -- sales growth for the companies on the SV150 list has fallen below 20 percent a year. For the early '90s, these companies were usually growing more than this. Some of these trends reflect the maturing of Silicon Valley's industries, and the impact of a sharp, but temporary, economic downturn. As Marc Gerstein, director of investment research at Multex.com, says: ``It's the nature of the technology recession.' Two of the largest industries show a widening gap between the most profitable companies and the also-rans. In semiconductors, only three companies -- Intel, Linear Technology and Maxim Integrated products -- have had an average profit margin higher than 20 percent for the past seven years. The next most profitable is Advanced Micro Devices, with a long-term average profit margin of 2.9 percent. In computers, four companies -- HP, Sun Microsystems, Apple Computer and Adaptec -- have survived and thrived over the past ten years. But those that didn't keep up, like Tandem Computers and Amdahl, have already been acquired. Computer graphics maker SGI has struggled for two straight years with losses. Before the downturn ends, companies will need to show stronger profits on the bottom line. ``All the managers that we work with now are focused on margins,'' says Moore. ``It's all about profits now.'' Mercury News business researcher Jack Davis contributed to this article ______________________________________________________________________ Sign of the times: Cities stuck with too much office space BRIAN BERGSTEIN, AP Business Writer
SAN FRANCISCO (AP) -- Economists see signs the recession is abating, but that's little consolation to those who own office space in America's cities, where rents are plummeting because of the biggest glut of commercial real estate in years. Even as U.S. companies are adding jobs and home sales remain brisk, the nation's office vacancy rate hit 14.7 percent in the first quarter -- the highest since the mid-1990s, according to Reis Inc., a New York real estate investment firm. It might be hard to summon sympathy for landlords, but thinned-out business districts create plenty of pain for other people -- and provide a snapshot of the state of the economic recovery. "More empty buildings mean less business for everything to coffee stands to small restaurants, cafes, business services, personal services," said business consultant Tapan Munroe, former chief economist for Pacific Gas & Electric Co. Perhaps no place illustrates the issue as vividly as San Francisco, which is still marveling at how fast the dot-com boom went bust. A record 21 percent of the city's office space is vacant, nearly three times the rate at this time last year, according to the Grubb & Ellis real estate company. In the South of Market area, the former warehouse district that became known as Multimedia Gulch during the dot-com heyday, the vacancy rate is a staggering 49 percent. It was close to zero two years ago, said Colin Yasukochi, a Grubb & Ellis research director. Back then, Enzo's Ristorante in the heart of the area used to serve lunch to 90 people a day. The answering machine often would be full with reservation requests when owner Renzo Romero arrived at the Italian joint at 9 a.m. Romero has since reduced his midday staff from eight people to four and sometimes gets as few as 10 lunchtime customers a day. "It used to be like a flea market around here, with so many people walking around," Romero said. "Now, Monday through Thursday is like a Sunday. All the restaurants are taking a big hit." The cities with the highest drops in office rents this year all are high-tech centers: Boston, Oakland, San Francisco, San Jose and Austin, Texas, according to Reis. Phoenix, Dallas, Denver and Columbus, Ohio also have vacancy rates over 18 percent. Although the Internet economy started to tank in 2000, constructing an office building can take nearly two years, so some new complexes are just now coming open after the demand has dried up. Grubb & Ellis found that 331,000 square feet of office space is under construction in South of Market. Other real estate firms put San Francisco's overall vacancy rate lower, around 16 percent, and say occupancy rates in smaller-sized offices and in the city's financial district are even healthier. "We're back to the same market we were at between 1986 and 1998," said Hans Hansson, president of Starboard Commercial Real Estate, which leases and sells office space. But there's no disagreement over the results. Top- tier office space that rented for more than $80 a square foot two years ago now now goes for about $33. That isn't bad only for real estate companies. Many businesses that have scaled back since the bust find it nearly impossible to sublet their excess space. "Almost every office you go into, there are at least a few empty offices and cubicles," Yasukochi said. Even after being burned by the dot-com meltdown, office brokers still ooze optimism -- at least partly because sharing bad news about the market just encourages tenants to try to wrangle ever-better deals. Some are already hoping the next boom comes from clusters of new biotechnology companies. "It's difficult now, but there's activity and people making deals," said Leland Whitney, managing principal of Whitney Cressman, a commercial real estate firm. "It's just a question of when the Bay Area is going to have its next disruptive technology, and we'll be back." -------------------------------------------------------------------------------------------- National
Association of Equipment Leasing Brokers Election
John Chase, Chase Lease, Jim Borland, US Energy Capital, and John
Winchester,ComCo Equipment Leasing Group, were elected as Directors
of 475 member National Association of Equipment Leasing Broker at
the Orlando, Florida conference this last past weekend. Michael
Meacher, TecSource, was saluted for the work he did as president. Bob
Bell, Independent Leasing Associations, was elected as President-Elect
and Gerry Egan, TecSource was chosen president. New
President's Address NAELB
Annual Conference Luncheon,
Saturday, April 13, 2002 First,
let me tell you how pleased I am, and how immensely flattered I am,
to be given this position. From my very first NAELB meeting, I've
felt like a part of this group and felt a special kinship with so
many of the members. I guess that's because I consider myself to
be the quintessential NAELB'er. My business, like that of so many
of our members is a very small business. Also, like so many other
NAELB members, mine is a 'family' business run by my wife, Jamie,
and myself. ...Well,
truthfully, it's run by Jamie and I just try hard to stay out of the way!
It is, in fact, largely because of her capable hands on the tiller
that I am able to accept this job. I'm grateful that I can because
I have, without a doubt, benefited greatly, both professionally and
personally, from my membership in the NAELB. Now,
I hate to start off my term by disappointing anyone, but, in fairness,
I do want to make clear to anyone that voted for me for this job because
they thought it would finally shut me up,...that you were way, way
wrong! I've
been accused more than a few times -and perhaps not without some justification-
of being long winded. But I've never been accused of having no opinion,
or of being bashful in expressing it! So
I'd like to take a few minutes today to share with you a few of my
thoughts about us -as an association- and about some of the things
I hope we can do. I'd like to talk about this meeting, and about
what your being here means; to you, to this group and to our industry
at large. And, finally, I'd like to talk for a few minutes about
change, and about how the changes in our business are presenting us
with great opportunities. Our
association today remains strong, secure, and committed to our mission.
We continue to attract new broker members, new funder members and
new service-provider, associate members. Have some people from each
of those categories left our business and our association? Certainly.
But the mark of our relevance and effectiveness is that those joining
our industry today, and some of those who've previously been unaffiliated
or become disaffected with any other group, and are struggling today
in our industry, see our group -see an association with each of you-
as an important part of their plan for success. Financially,
we're on solid ground and we will weather whatever cycles our business
goes through. We are, and we will, because of the foresight and discipline
of previous boards of directors who have husbanded your dues dollars
carefully and prudently, while still delivering the lowest cost meetings
and the lowest dues in our industry. That's because they understood
that ours is predominately a group of members who don't get reimbursed
by someone else for their participation in this association. I can
promise you that this current board of directors
will continue to be equally as cognizant of that. So,
in spite of what a few critics or nay-sayers may have to say, we remain
both relevant and reliable; and we're looking forward and not backward.
To paraphrase the words of Mark Twain, "any reports of 'our'
death have been greatly exaggerated". The
first focus and cornerstone of our mission has always been education
and it will continue to be so as we do look forward. This year, we'll
be looking at every possible opportunity to expand our educational
offerings and every possible avenue that will allow us to offer them
more frequently, more conveniently and more practically. Towards
that end, as many of you may already know, on Thursday we hosted the
first of what we hope will be a number of productive inter-association
meetings with our friends and counterparts from some of the other
equipment-leasing associations. Some of the participants from some
of those other associations are here with us today. While each of
our groups has specific focuses, strengths, and weaknesses, there
are many, many areas of common opportunity and of common challenge.
At NAELB, on behalf of our members, we are 100% committed to
exploring any and all opportunities for cooperation with our friends
in the other associations that will help us deliver on our mission
to our members. I'm very excited about the kinds of opportunities
that it may open up and the kinds of meetings that it may make possible
for all of us. We've
also recently -and finally- launched the next generation of our immensely
popular list server. List server Version 2.0 you might call it!
Our NAELB member's list server has been a fabulously successful tool
in keeping our members in touch with one another and creating a channel
for sharing essential business information and tips ...along with
a few jokes and a little nonsense, now and again. Our
new On-Line Community Discussion Center takes the best of the list
server and combines it with a wide array of new features, and the
ability to create and manage more focused and more conveniently available
discussions. It allows members to express themselves more thoroughly
and creatively and allows them to exchange documents and files safely.
Each user will choose whether or not to receive discussion postings
by e-mail and which postings to receive. Member profiles are available
to help members get to know each other better. Using the power
of technology and the internet, our members now are in contact with
each other daily -almost instantly- strengthening the relationships
that have made this association more than merely a trade group and
into a true community. As the discussion center grows, it will undoubtedly
become a more comprehensive, a more involving and a more timely and
searchable knowledgebase for our members to draw on. Going
even beyond that, we are now actively reviewing various methods, technologies
and programs for delivering additional educational content to you
via the internet. This may include live 'web-events' and/or 'on-demand'
programs which can be streamed to you at your convenience. Imagine
being able to 'attend' one of the work shops you attended here, but
being able to do so without leaving your office -or even while still
at home in your jammies! Those
that say technology breaks down the bonds between people, just aren't
using it right and they certainly don't know the NAELB. Already,
thanks to our small, initial steps into the online, connected world;
more of our members, are in contact with more of our members, more
often, than ever before; including, members who are unable to attend
our in-person meetings such as this one. But
technology is just a way to leverage the delivery of information.
It can't and shouldn't ever fully replace the need for and importance
of personal meetings; meetings like this one. Meetings
like this one allow us to know each other beyond our online profiles,
we get to know each other personally. This is where bonds are built
and where friendships are forged. The kinds of bonds and friendships
that are rooted in common interests, common opportunities and common
challenges. The kinds of bonds and friendships that remain strong
across months and
across miles; strong enough to then be maintained remotely through
an online community. But they take root here. You might 'click'
online, but you don't get close. You can educate and entertain online
but you can't shake hands. That's
why your presence and participation here at this meeting has been
so important for you. You may have learned a new technique or two,
or picked up a new idea, or met a new funding partner -any and all
of which are undoubtedly valuable- but I'll wager that years from
now you'll still be benefiting more from the personal relationships
you began or furthered here, than you will from any single business
idea or program you take home. But
it goes way beyond even that. In spite of all that's happened in
the year since our meeting in New Orleans; the plane hijackings, the
war on the terrorists, the topsy-turvy economy, the uncertainties
in our funding sources, the people leaving our business; in spite
of all of that, you are the group who were able and willing to come
here and support this association. You are, then, the core; the very
heart of the NAELB. You are the group that will shape the NAELB in
the years to come. You are the group that new members, and those
members unable to come
here this year, will look to for leadership as they try to move forward
themselves. Your continued and active involvement will be crucial
to the continued growth of the NAELB. But
it goes way beyond even that. Look around. Really, take a look around
for a moment. You're looking, right now, at the strongest, most successful,
most positive, and most committed group of leasing brokers anywhere
in our industry today; perhaps at any time ever! You're also looking
at the funders that want to, are able to, and are here to, work with
you... ...and at the other service providers that have the tools you
need to continue moving forward. You
are the group that will shape our whole industry going forward. That's
what's so significant about your being here at this meeting. It isn't
how many of us are here. Those that focus solely on the number of
attendees here will miss the whole point. And,
by the way, to those that said I'm not coming because the meeting
may be smaller than previous meetings, here's what I say about that
kind of logic. That's like saying, I don't see a ten dollar bill
on the ground, so I'm not going to pick up the five dollar bill that
is laying there right in front of me! That's the kind of short-sightedness
and volume mentality that's gotten this whole industry in such trouble
in recent years! Why would anyone decide to pass up an opportunity
for themselves, just because someone else wasn't going to take advantage
of it? The
significance of your being here comes from the statement you're making
to the whole industry by your being here. No one is sitting here
today because they're planning on closing their business tomorrow.
Everyone sitting here today is doing so because they plan on doing
business tomorrow -and they hope to being doing more of it than they
did yesterday. By being here, you're telling the funding community,
both those here and those that will arise from the wreckage of the
ones that are gone, that you're still here, and are still ready to
do business. The message is simple. If you've got problems, get
them fixed, because we're still here and ready to bring you business.
We came here together to show you that. And
so the significance isn't in the number of us here, at all. It's
in who we are and what we represent. We are the strongest, the survivors,
the ones ready to keep moving forward. Because of that, we are the
ones that will shape things to come. So I say to all funders: if
you want to look forward, take a look at us. If you wonder what it
will take to do so, come and ask us. And if you need someone to help
you make it happen, work with us. But
we must also tell them that we're willing to make changes, to adapt
to new realities in our business. And that's a message we must carry
out from here today. That we're not afraid of change, that we're
capable of change, and that we're willing to change. Certainly
there's been much change in our business; in the players, in the methods,
in the standards. But that's good news! I hear so much worry and
so much complaining about it. I don't understand all the negativity.
Without change there is no progress; and without progress there is
no growth; and without growth there is no opportunity. Change -fortunately-
is the natural order of business. More
than fifty years ago, Austrian born economist and Harvard professor,
Joseph Schumpeter, wrote that "Capitalism is, by nature, a method
of economic change that not only never is, but never can be, stationary."
He described an inevitable process he labeled "Creative Destruction."
It's only in recent years that the business world has come to understand
it, to recognize it and to embrace it. Schumpeter referred to those
inevitable and continual changes in all businesses and industries
as mutations which continually revolutionize from within, "incessantly
destroying the old one, incessantly creating a new one". He
said that process is the "essential fact" of capitalism. And
about entrepreneurs -and what better way is there to describe NAELB
members- he wrote: "To act with confidence beyond the range of
familiar beacons and to overcome that resistance requires aptitudes
that are present in only a small fraction of the population and that
define the entrepreneurial type as well as the entrepreneurial function." What
does that mean to us, here in this room, today? It means that the
turmoil going on in our industry is, first, completely natural and
not the hand of some malevolent forces acting against us, and it is,
therefore, to be welcomed and not feared. Second, for those entrepreneurs
who recognize it as such, it's offering an invitation and opportunity
to experiment, to change, to pioneer and, ultimately, to create and
dominate the markets that will evolve and result from it. So
what is it we can do to maximize the opportunity this changing environment
is creating for us? Well, there's no one right answer for everyone,
but there's one thing everyone will have to do to find the answer
that's right for them. Be willing to leave the old ways behind. Many
of the problems that many of our broker members are struggling with
today, can be traced directly to worn-out sales strategies that no
longer reflect the realities of the marketplace. They may think they're
customer focused, but they're focused on a customer who retired ten
years ago! If
whatever you're doing isn't getting you the results you want, for
heaven's sake, quit doing it! Complaining about the customer isn't
going to improve things. The next time you complain about 'the customers'
or 'the vendors' or 'the funders' because you're not getting the results
you want, I want you to remember this: When a dart misses the dart
board, it is seldom the dartboard's fault. And that advice applies
equally well to the funders here in the room when you're tempted to
complain about us brokers. Does
it take courage to change? Yes, of course. And boldness. You don't
cross a chasm in two small steps. But doing the same things over
and over again and expecting different results is said to be the definition
of insanity; and waiting for yesterday to dawn again is a fool's pastime. Peter
Drucker, author of Innovation and Entrepreneurship, Managing for Results,
and a host of other great books, tells how to manage this process
in Management Challenges for the 21st Century. He writes
that change is the norm and "the only ones who will survive are
the change leaders." He writes: "to be a change leader
requires the willingness and ability to change what is already being
done just as much as to do new and different things." Change
leaders must "abandon yesterday...it is not possible to create
tomorrow unless we first slough off yesterday." When
you get home, take a look at every part of your business. Look at
how you're set up, how you're organized, how you market, how you sell,
how you process. Look at every policy, every sales program and every
procedure. Drucker says to put each one on trial for its life. Ask
yourself this about each one, and answer it honestly; if you weren't
already doing it the way you're doing it; and knowing what you know
now and given the market realities of today, would you start doing
it that way now? If the answer is no, then you must abandon it and begin
doing it differently or begin doing something else in its place. And
I'll give you one more test to apply. Those that know me, know what
I'm going to say. Look at every new idea you can find, especially
ones that don't make sense to other people in our same business.
Try to see it, not from their point of view, and not from yours, but
from the customer's. Does it make sense from the customer's point
of view? Then ask yourself this about it: would you rather do it
or would you rather compete with the person who is doing it? If you
hope you won't have to compete with it, then you better start doing
it yourself. I'm
going to close now by making a commitment to you as members of this
great association, and I'm going to ask you to make a commitment too.
My commitment as your new president is this. While I am your president
you won't hear me complain about this business or about who's gone
from it. You won't hear me complain about the customers or about
the vendors. You won't hear me complain about rates, or credit standards.
And you won't hear me complain about or blame things on the economy.
What you will hear me talk about is what we can do to respond
positively to these things. You won't hear me re-hash the same tired
old sales ideas we've relied on for far too long now, either. You
won't hear me talk about the marketplace of yesterday. You will hear
me focus on and support any ideas that will help our members take
control of their sales and compete effectively in the marketplace
of tomorrow -and that will help our association continue to grow. To
our broker members I ask for the same commitment. Let's quit focusing
on the negatives and things we can't control. Let's focus on what
we can control -ourselves. Let's focus on what we can do and how
we can sell differently and let's not wait for our funders or our
vendors to change. If we'll change ourselves, and what we're doing
or how we're doing it, and if we'll focus our efforts on the new realities
of our marketplace, if we'll become more effective sales peoples,
taking more control of our sales and writing more consistent quality
business, the funding
will take care of itself. Take a look around here. There's a lot
of funding power represented here today. We don't have funding problems.
We have sales problems. Let's work on creating new sales channels,
let's work on improving our selling skills and let's work on selling
the business that the funders sitting in this room today want to write. From
our funder members I ask a similar commitment. We're here because
we're still here, and we do want to work with you. Are you willing
to recognize that and help us produce business for you? I ask that
you go home and take a hard look at what you could change in your
shops that would help us get you the business you're looking for.
What kinds of tools and resources can you make available to us, as
NAELB members, that will help us identify, find, sell to and close
the kind of business you're looking for? We spend our time and our
money to belong to this organization because it stands for high standards
and it creates a meeting place for your businesses and ours. We ask
that you appreciate that. Our association tells our members over
and over and over again to do business with our member funders. How
can you make doing so worthwhile? How can you make it a benefit of
NAELB membership? What can you do to make it easier for NAELB members
to work with you than to work with outside sources? What can you
do to make working with you unique and advantageous? From special
NAELB member contracts, to special NAELB member programs, to special
NAELB member sales tools, there are plenty of opportunities for true
partnership commitments to this group.
Your part of the business has gone through some terrific turmoil.
But you're still here. And so are we. Now's the time to capitalize
on that. We're
all in this together. We must all re-commit to working together with
a new sense of partnership. There has never been a better or more
important time for doing so. My
friends, I'm excited about the future for our association and for
our industry. If it's true that it's a time for change, and that
the future belongs to the change leaders, then we're ideally positioned
to be those leaders. We've proven our ability to survive. We're
small businesses for the most part, unencumbered with layers and layers
of management. We should be uniquely able to move quickly if we'll
only recognize the time to do so. My friends, that time is now. Thank
you for coming. Thank you for being a part of this wonderful group.
And thank you for giving me this opportunity to be a part of it. Gerry
Egan President NAELB April
2002 www.leasingnews.org |