Financial News Daily

There’s only one Web. At least that’s been the standard response in many tech circles to the emergence of the wireless Web. The point? No matter how you get online, be it by PC or smartphone, you’ll still do the same things on the Web, using roughly the same sites and services. Really?

David Witkowski missed that memo. Witkowski, an executive at a Silicon Valley startup, behaves very differently when he uses the Web on a PC compared with when he’s surfing via cell phone. From the office computer, “I pretty much live on Google,” Witkowski says. But from his Research In Motion (RIMM) BlackBerry, the amateur radio enthusiast spends a lot of time searching for gadgets for sale on Craigslist, especially when he travels and on weekends. He also checks local weather forecasts and airline schedules.

Welcome to the weekend Web, where people are spending a bigger slice of time online via wireless devices—and using a different set of sites than during the workweek. “At Google, we see the majority of our desktop traffic [in the U.S.] during weekdays,” says Matt Waddell, chief of staff for Google (GOOG) Mobile. “On mobile, the situation is completely reversed.” Mobile browsing surged 89% in the past year, with mobile page views increasing by 127%, according to researcher M:Metrics. The increase reflects growing availability of all-you-can eat data plans and increasingly sophisticated handheld devices such as the Apple (AAPL) iPhone.
On Saturday, Classifieds Rule

Of course, most Web surfing still happens via PC, but M:Metrics’ research shows that when it occurs by way of mobile, much of it takes place on the weekend. The number of unique visitors to the mobile Web spikes on Saturdays, according to March figures compiled by M:Metrics. The number surged to 4.17 million on Saturdays, an 8% increase from Fridays and 4% more than on the next busiest day, Monday, according to the study, which tracked behavior by 1,861 U.S. smartphone owners.

And like Witkowski, lots of U.S. cell phone users flock to a different set of sites via handheld. Many swarm Craigslist, the local classified ad site. In March, users spent more time on Craigslist than on any other site. “Very few Web sites are inherently local; ours is the exception,” says Craigslist CEO Jim Buckmaster. When it comes to sites visited from a PC, Yahoo! (YHOO) properties hold the No. 1 spot, while Craigslist is way down in ninth place, according to researcher comScore Media Metrix.

Electronic commerce site eBay (EBAY) is No. 2 in time spent on mobile, while it’s only No. 8 on the PC Web, according to M:Metrics and comScore. The Weather Channel gets the fourth-highest number of unique visits on the mobile Web, according to Nielsen Mobile, but it’s way down the rankings at No. 26 on the PC Web, according to Amazon’s (AMZN) Alexa traffic monitoring service. Map provider MapQuest, owned by AOL, is the eighth-most visited mobile site, according to Neilsen, but ranks 35 on the PC Web, according to Alexa.
“Personal Concierge”

During the week, Americans run Google and Yahoo searches at work and compose blogs on MySpace and Facebook. The PC Web’s fastest-growing site categories include pharmacies, food, cosmetics, and job search, according to comScore. During weekends, we fire up our smartphones for fun. The fastest-growing mobile-Web categories relate to weather, entertainment, games, and music, according to comScore.

Dell’s vaunted turnaround plan is showing signs of progress. Again. The PC maker surpassed Wall Street’s expectations on profit and sales when it reported fiscal first-quarter results on May 29. The results fueled hope that efforts to revive growth at Dell (DELL) are finally taking hold, but the company will need to show further evidence of cost savings and sales growth to ensure the comeback sticks and to reverse a share slump.

Earnings for the quarter ended May 2 rose 3.7%, to $784 million, or 38¢ a share, vs. Wall Street’s expectation of 34¢ a share. Sales rose 9%, to $16.08 billion, exceeding analysts’ expectations of $15.68 billion. Leading the way were sales of laptops and servers, the computers that run Web sites and corporate networks. Those areas have been a particular focus since company founder Michael Dell reclaimed the reins as CEO early last year. Server shipments rose 21% and laptop shipments jumped 43%.

Dell’s turnaround has been a long time in the making. The company suffered nearly two years of declining market share and slower growth through early 2007. Signs of improvement (BusinessWeek, 8/30/07) in the middle of last year were short-lived as rising costs and conservative spending by customers crimped earnings through early 2008. The shares were hit hard after Dell’s last report (BusinessWeek, 2/28/08) and have lost 11% of their value this year, compared with a 5.4% decline in the Nasdaq Composite Index.
Giving Dell the Benefit of the Doubt

But for now, investors appear to be giving Dell the benefit of the doubt. Dell shares rallied in extended trading on May 29, adding 2.16, or 9.9%. They had risen 12¢, or 0.55%, to 21.81 in advance of the earnings report. “There’s a significant amount of uncertainty for next 6 to 12 months,” says Jayson Noland, an analyst at Robert W. Baird, who has a neutral rating on the stock and expects it to reach $22 in the next year. “They’re going to get there, but it’s still pretty early days.”

To get back on track, Dell is attacking the PC industry’s fastest-growing segments: consumer sales and emerging markets. Sales in Brazil, Russia, India, and China rose 58% and accounted for nearly 9% of first-quarter revenue; consumer sales rose 20%. At the same time, Dell is slashing costs. “We’re doing one so we can do the other,” CEO Dell said during a conference call with investors.

Shaw Wu, a senior analyst at American Technology Research, says Dell has been tackling a number of costly endeavors—amping up product design, adding compelling product features, broadening retail sales of its machines, and beefing up international operations. “Those all cost money,” says Wu, who has a neutral rating on the stock. “They haven’t detailed how much they need to spend. It’s not all about cost-cutting.”
Duking It Out in the Price-Sensitive Retail Market

Dell expanded beyond its traditional phone and Internet sales and began selling its computers widely through retail outlets last year in a bid to reverse a tailspin that led to the departure of then-CEO Kevin Rollins. Hewlett-Packard (HPQ) surpassed Dell in 2006 as the top PC supplier by gaining share in consumer and small and midsize business markets, which account for about 80% of PC shipments, according to Pacific Crest Securities.

There may be 50 ways to leave your wireless carrier. Just don’t do it before your contract is up—or you’ll be forced to pay a fat early-termination fee. That’s the lot facing most U.S. consumers of communications services, from mobile calling to cable TV to high-speed Internet access.

Consider the subscriber who wants to end a DirecTV (DTV) service contract and has to pay $20 a month for the remainder of the term. Breaking a wireless services contract can cost as much as $175. It’s a big reason why few people switch communications providers. At satellite TV company DirecTV, only 1.42% of customers close their accounts each month. Even Sprint Nextel (S), with one of the highest customer defection rates in the wireless industry, loses a mere 2.45% of its customer base in a month.
A prorated approach?

But in a move that could make it easier for customers to drop phone or satellite providers, early termination penalties are coming under new fire from federal regulators, legislators, and courts. The Federal Communications Commission (FCC) has scheduled a hearing for June 12 to consider potential restrictions on the penalties. And even if the FCC doesn’t act to rein them in, Congress is mulling legislation that would.

Cable and phone companies, which spend hundreds of dollars on advertising and promotions to sign up each new subscriber, fear they’ll have a harder time recouping that investment if the penalties are diminished too far. And exit penalties exist worldwide: European telco Vodafone (VOD) requires subscribers to pay their monthly fees for the duration of wireless contracts, even if they don’t use the phone.

FCC Chairman Kevin Martin has suggested that the commission may require service providers to prorate penalties through the life of a contract, so that the longer a customer stays, the lower the fee. The agency may also require that buyers be allowed to drop a service such as a new cell phone contract without penalty within 30 days of purchase. “Certainly carriers may be able to recover legitimate out-of-pocket expenses and costs,” says FCC spokesman Robert Kenny. “On the other hand, we want to make sure this isn’t being used as an artificial means of locking consumers into a particular service provider.” A ruling to alter the allowed penalty structure could come as early as this fall, says Carol Mattey, a former FCC official who is now a managing director for consultancy Deloitte & Touche.
“Enormous Pressure”

Congress, meanwhile, is considering several bills backed by powerful supporters, including Edward Markey (D-Mass.), chairman of the House Subcommittee on Telecommunications & the Internet, and Senator Jay Rockefeller (D-Va.). The measures, proposing conditions for wireless contracts similar to those being considered by the FCC, are already going through revisions in Congressional committees and could be passed in early 2009.

But while the FCC and Congress may impose restrictions, it’s the legal system that threatens to scratch early termination fees altogether. Courthouses from California to New York are flooded with class actions claiming that early termination fees, especially those on wireless contracts, are unfair to consumers. In a landmark ruling on May 27, the Supreme Court refused T-Mobile USA’s request to dismiss one class action based on the cellular company’s contract stipulations that all customer disputes be settled through arbitration. The decision means that all similar suits can proceed—some state courts are expected to decide cases within days—and may open the floodgates to new class actions. “I just see an explosion of lawsuits,” says Mattey. “Every week, every carrier is getting sued. It’s going to create enormous pressure.”

Score another victory for Advanced Micro Devices (AMD) in its crusade to sick regulators on bigger rival Intel (INTC). The U.S. Federal Trade Commission has opened an investigation into chipmaker Intel and how its conduct affects AMD.

Intel and AMD said on June 6 that they had received subpoenas that give the FTC the leeway to seek information from the chipmakers’ customers, including computer makers Dell (DELL), Hewlett-Packard (HPQ), Toshiba, and Apple (AAPL).

The investigation is focused on Intel’s dominance of the market for microprocessors, which make up the heart of a PC. In particular, the FTC wants more information on Intel’s practice of offering favorable pricing on chips to certain customers.

The move follows a 2005 lawsuit filed by AMD (BusinessWeek.com, 6/28/05) that accuses Intel of engaging in an aggressive and global campaign to shut AMD out of the marketplace. AMD says Intel’s main weapon of choice is the regular use of volume discounts that it claims Intel has sometimes rescinded when PC makers begin adding AMD chips to their product lineup.

That case is expected to come to trial in a Delaware court in early 2010.
Intel Cites Fierce Competition

Intel was already the subject of an informal FTC inquiry in September, 2007, and said it would cooperate with the commission’s more formal investigation. In a statement, Intel described its business practices as “well within U.S. law,” and said the microprocessor business is so “fiercely competitive” that prices on chips have fallen by more than 42% from 2000 to 2007.

Intel says AMD’s problems in the marketplace have more to do with its ability to ship price-competitive products. “There are only two ways to look at this,” says Intel Chief Counsel Bruce Sewell. “There is nothing in the record to suggest that Intel is pricing its products below cost. So if Intel is pricing above cost, then either AMD can meet those prices because it is equally efficient or it can’t because it is less efficient.”

That argument drew a sharp rebuke from Tom McCoy, AMD’s executive vice-president for legal affairs. “This case isn’t about discounts or even about pricing,” McCoy says. “It’s about market foreclosure. If it were only about pricing and discounts then Intel would be winning with the regulators around the world.”
Korea Imposes $25 Million Fine on Intel

Indeed, some regulators haven’t been too sympathetic to Intel. The Korea Fair Trade Commission ruled on June 5 that Intel had violated that country’s antitrust laws by offering rebates to Korean PC makers Samsung and Trigem between 2002 and 2005 in exchange for their agreement not to use AMD chips. The commission imposed a $25 million fine and ordered Intel to stop offering the rebates. Intel has said it will likely appeal the decision. Antitrust regulators in Japan and the European Union also have come out against Intel, saying the company violated laws by paying PC makers not to use AMD chips.

Intel’s defense may not hold much water with the FTC either, says David Balto, a former policy director for the FTC who’s now an attorney in Washington. “These discounts are handcuffs dressed up as benefits, and they have prevented retailers and others from making choices they would have otherwise made in a free market,” Balto says.

Mark Cain felt like a rock star. The chief technology officer of medical imaging software company MIMvista got that sensation as he stepped onto the stage at Apple’s (AAPL) Worldwide Developers Conference on June 9 to demonstrate a new program that delivers medical scans to an iPhone. Suddenly he was in front of an auditorium packed with thousands of Apple faithful, reporters, and bloggers, all eager for news of the latest iteration of Apple’s music-playing cell phone and the software applications designed to run on it. “We went from thousands of people knowing about our company to millions, in just a moment,” he says.

MIMvista’s application is just one of the 4,000 applications being developed specifically to run on the iPhone (BusinessWeek.com, 6/9/08). These are part of a wave of so-called native applications, meaning they’re designed to run directly on the phone, as opposed to being downloaded onto the phone from a Web browser. The first of these programs becomes available by mid-July, around the time the new iPhone 3G hits store shelves.

Native applications take full advantage of the new device’s improved computational power, including its navigational features and ability to run on a more advanced wireless network. “[Both] Web-based and native applications have a place,” says Erica Sadun of the Unofficial Apple Weblog. Yet, “native applications access location, and do a lot of things using the onboard sensors.”

Apple has packed plenty into the new gadget. Like the first version of the iPhone, this one boasts a 2-megapixel camera, a snazzy touchscreen, and an accelerometer that helps it respond to motion. The fancy features make this “a truly sexy device,” says Kevin Burden, director of mobile devices at ABI Research.
Business Class

As appealing as it may be to hipsters, the iPhone 3G was designed with business users in mind (BusinessWeek, 6/11/08) as well. Software developers are all too happy to design applications for business.

Salesforce.com (CRM) was part of Apple’s initial software development kit launch in March. The iPhone and its applications will have “huge ramifications for how people conduct business,” says Chuck Dietrich, vice-president of Salesforce Mobile. “The ability to run sophisticated applications on a handheld will change how people conduct life and business.” Salesforce will have a version of its customer relationship management software available for the new iPhone, though it hasn’t said when or at what price.

Several smaller developers have created a number of native iPhone applications for business. Michael Taylor, CEO of Hey Mac Software, developed an application called Briefcase, which allows iPhone users to grab documents from their home and office computers through the iPhone. As long as remote login is enabled on the computer, an iPhone user can read and transfer documents from one computer to another with Briefcase software on the iPhone.
Smartphone Competition

Apple is also pursuing the health-care industry. Modality created Netter’s Anatomy, an anatomy flash card application. More are on the way, says Modality founder and CEO S. Mark Williams, who also presented on stage at the developers conference. “We are working on several applications,” he says. “We are pretty confident we will have 12 in the next few weeks.” Those applications will include a Frommer’s travel guide application for the iPhone.

Even with the robust development activity around the iPhone, Apple faces plenty of competition in the smartphone business. On June 24, Nokia (NOK) purchased the Symbian mobile operating system, which runs 56.3% of the world’s smartphones. Nokia will give away Symbian, and open the code, hoping developers will make applications for Symbian. Google’s (GOOG) Android operating system will be filled with its own bevy of smartphone applications.

For now, Cain and his software developer peers are content to bask in their rock star status.

Nokia (NOK) wants some of Apple’s rhythm. On July 1 the Finnish mobile-phone maker said that Warner Music Group (WMG) has agreed to participate in Nokia’s fledgling music service, making Warner the third of the major record labels to join in the effort. The move is one more step in Nokia’s effort to compete against Apple for the people who want to carry around music libraries in their pockets.

Nokia’s service, which will officially launch in the second half of this year, is called Comes With Music. It will be built into certain Nokia handsets and will allow customers to download unlimited amounts of music from participating labels. The downloaded music can be kept on a PC or mobile-phone forever. In theory, a consumer could download every single song from the labels’ catalogs; they’d simply need a very big hard drive on which to store the files. Nokia and its partners have not disclosed pricing for the service, but they believe it has plenty of potential. “We believe this will be a significant contributor of revenue over a long-term basis for Nokia,” says Liz Schimel, global head of music for Nokia.
(Almost) All Aboard

The record labels seem to be buying that argument. Universal Music Group in December signed up with Nokia (BusinessWeek.com, 12/4/07), and Sony BMG Music Entertainment partnered with the service in April. A spokesperson for EMI Group, the sole major label yet to join, says the company is talking with Nokia, although no deal has been reached. Nokia says it is in talks with independent labels as well.

For the music industry, the Nokia venture represents a departure from the old ways of doing business. Susan Kevorkian, program director of consumer markets at research firm IDC, says there is “broader experimentation” as CD sales decline and music revenues slide overall. For record companies, it may make sense to look for new ways to sell the work of their artists. Ringtones, for example, have become a multibillion-dollar business in only a few years. “We have a long-term sustainable business for Nokia, the music industry, and the artists,” says Schimel.

It’s hard to evaluate the service before pricing and other specifics are known. Nokia remained tight-lipped about the details of Comes With Music as it unveiled the Warner Music partnership. But Apple (AAPL) has said that it makes little money on music sales through its iTunes store, instead generating profits from sales of iPods and other hardware. Will the music business for Nokia and its partners also be of marginal financial benefit? Schimel says such comparisons are off-base. “We feel it is apples and oranges,” she says. “We are offering a structure that will attract new customers and new revenues.”
Will It Pay?

Some analysts are skeptical that Comes With Music will help Nokia attract new customers for its mobile phones. James McQuivey, a principle analyst at Forrester Research (FORR) says, “There won’t be the same rush to buy Nokia phones” as there is for iPhones. Apple is expected to sell 10 million iPhones by yearend. McQuivey guesses that at most Nokia could sell between 2 million and 4 million handsets in the year following Comes With Music’s launch. The amount of revenue the company earns from downloads will depend on how much Nokia intends to charge consumers. But it is sure to be insignificant at a company that made $10.6 billion last year on sales of $75 billion.

IDC’s Kevorkian sees this as part of a bigger move by Nokia and the music industry. “It is a slim revenue margin, but it makes sense as part of a volume play for Nokia, who is in the midst of transition,” she says. Kevorkian sees Comes With Music as fitting into Nokia’s Ovi service, a broad effort to sell services to mobile-phone users (BusinessWeek.com, 8/29/07).

Still, McQuivey thinks Nokia and its partners may find few takers for the new music service. He argues that music enthusiasts won’t be satisfied with a phone that’s merely adequate for listening to tunes, while other people won’t be willing to pay money for such music services. He says it’s a lot like digital cameras. Some people use their phone as a digital camera, but people taking lots of photos will generally purchase a separate, higher-quality digital camera. “It’s a mismatch in market opportunity,” says McQuivey.

Dear Liz,

I work for a management consulting firm where client satisfaction is by far the biggest priority. I’ve been here for four years and have had four excellent performance reviews. Right now I’m working on a client project that takes up a tremendous amount of time. My project manager gives me special subassignments at the rate of two or three a week, on top of my usual tasks. I have been completing these assignments at night, because I’m away from home anyway during the week and because my client contacts need me focused on their priorities all day long.

Last week I got an e-mail from my project manager (located in another city) chiding me for having logged too many hours on my weekly report. I called him to get clarification and he said, “I’m going to have to eat some of these hours; I can’t bill the client for all of them.” I asked him whether that meant I should back off on the after-hours work, meaning back off on the special assignments, and he said no. Now I feel stuck. If I log my hours, I’m in trouble with the project manager, and if I don’t log them, then I’m violating a major company policy and I could be fired. Anyone checking the project schedules could easily see that I’m putting in extra hours that the client isn’t being billed for. Any advice?

Yours,
Martin

Dear Martin,

This is a bad and unfortunately common practice, and also an unethical one. Your project manager seems to be implying that you should work off the clock, but you need your hours on the clock. It’s his decision—or that of someone higher up—whether to bill the client for all of them, but your company needs to be aware of how many hours a client’s work is taking. I’d send your project manager a very polite and professional e-mail message explaining that you are at the clients’ disposal all day throughout the week, and executing the special assignments at night as a result. Create some documentation that you’re only doing what you’ve been instructed to do and that client satisfaction is a high priority for you, as you’ve been instructed it should be.

If your project manager continues to give you a hard time, seek out the overall practice manager and share your concerns with him or her. It is never the right decision to play fast and loose with the firm’s time-and-projects reporting system to stay on your project manager’s good side. I hope that you can avoid unpleasantness with your project manager, but if not, you’ll still be making the right call for the long term by hewing to the company’s process.

Yours,
Liz

From the outside, the gray Victorian with the stained-glass windows on a gentrified block in Dorchester, Mass., is a typical middle-class dream house. But it also is the headquarters of what you might call a micro-multinational. Randy and Nicola Wilburn run real estate, consulting, design, and baby food companies out of their home. They do it by taking outsourcing to the extreme.

Professionals from around the globe are at their service. For $300, an Indian artist designed the cute logo of an infant peering over the words “Baby Fresh Organic Baby Foods” and Nicola’s letterhead. A London freelancer wrote promotional materials. Randy has hired “virtual assistants” in Jerusalem to transcribe voice mail, update his Web site, and design PowerPoint graphics. Retired brokers in Virginia and Michigan handle real estate paperwork.

Global outsourcing is no longer just for big corporations. Increasingly, Main Street businesses from car dealers to advertising agencies are finding it easier to farm out software development, accounting, support services, and design work to distant lands. Elance, the Mountain View (Calif.) online-services marketplace that is the Wilburns’ main connection to the cyber-workforce, boasts 48,500 small businesses as clients—up 70% in the past year—posting 18,000 new projects a month. Sites such as Guru.com, Brickwork India, DoMyStuff.com, and RentACoder also report fast growth.

Forecasts that the Web would revolutionize work by creating a vast global market for professionals have been around since the early ’90s. Venture capital legend John Doerr thought so much of the idea in ‘99 that his firm, Kleiner Perkins Caufield & Byers, bet nearly as much on Elance as it did on Google (GOOG) and Amazon (AMZN). Kleiner managing partner Raymond J. Lane is chairman.

But while other forms of e-commerce caught fire quickly, Web sites for freelancers have only recently begun to generate much momentum. Market researcher Evalueserve estimates that revenues for online service marketplaces will grow 20% in 2008, to $190 million, far from the initial hype.

Why has it taken buyers and sellers of services longer to get comfortable trading online than companies dealing in physical goods? An eBay (EBAY) for services, says Elance CEO Fabio Rosati, “was a brilliant idea that started too soon.” But improved software, search engines, and new features are boosting the industry. Several sites now allow buyers to view detailed work samples and customer ratings for thousands of service vendors. Guru launched a payment system to mediate disputes and lets buyers put funds in escrow until work is received. Elance developed software to track work in progress and handle billing, pay, and tax records.
MOVING WITH THE MARKET

Those upgrades are starting to make a difference. Elance, which makes money by charging subscription fees and a 4% to 6% cut of each project, expects total billings to rise 50%, to $60 million, this year. Guru predicts similar growth, to $26 million.

Small entrepreneurs are the biggest source of growth. Queens (N.Y.) Lincoln Mercury dealer Ariel Tehrani hired Brazilians to develop a multimedia Web site to sell cars online. San Francisco real estate agent Jonathan Fleming uses graphic designers in Portugal, database managers in India, and writers in Hungary for his blog.

The Wilburns began buying graphic designs through Elance in 2000. They say they shifted to radical outsourcing after reading the 2007 Timothy Ferriss best-seller, The 4-Hour Workweek: Escape 9-5, Live Anywhere and Join the New Rich, which extols the merits of freeing up time by hiring cheap offshore “virtual assistants” to handle scheduling and other routine tasks.

Remote help has allowed 38-year-old Randy Wilburn to shift gears with the economy. His real estate business has slowed, so he spends more time advising nonprofits across the U.S. on how to help homeowners avoid foreclosure. Virtual assistants have handled routine correspondence and put together business materials while he’s on the road, all for less than $10,000 a year. He figures a full-time secretary would run $45,000. Nicola, a 35-year-old designer, decided to work from home after she had their second child. Nicola now farms out design work to freelancers and is starting to sell organic baby food she cooks herself. She is setting up a Web site for that business and offered $500 for the design work. Of the 20 bidders who responded via Elance, 18 are from outside the U.S.

The couple uses two main offshore vendors. One is GlobeTask, a Jerusalem outsourcing firm that employs dozens of graphic artists, Web designers, writers, and virtual assistants in Israel, India, and the U.S. It generally charges $8 an hour. The other is Kolkata’s Webgrity, which has a staff of 45 and charges $1 to $1.20 an hour. Five years ago, says founder Amit Keshan, 32, his company designed Web sites for Indian clients. Now he does all his business through Elance, handling up to 300 jobs each month for U.S., British, and Australian clients. For $125, Webgrity designed a logo for Wilburn’s real estate business that Wilburn says would have cost as much as $1,000 in the U.S.

A worldwide market where even mom-and-pop businesses outsource could still be years from attaining wide appeal. But micro-multinational entrepreneurs like the Wilburns may not be rarities for much longer. “People will do it the old way until it becomes a no-brainer to do it the new way,” predicts Elance’s Rosati.

As Jane Austen wrote in Emma: “Ah! There is nothing like staying at home for real comfort.”

Problem is, many people’s homes—their most valuable asset and the foundation of their retirement plans—are providing scant comfort these days. The Standard & Poor’s (MHP)/Case-Shiller 10-city home price index is down 16.3% on an annual basis, and the 20-city version is off 15.3%. Adding to the financial stress are the bigger debt burdens many families carry in their near-retirement years, including hefty mortgages and home equity loans.

It’s hard enough under normal circumstances to figure out how much is needed to ensure a comfortable retirement. But the mix of slumping housing prices, oil at around $140 a barrel, and volatile financial markets makes it particularly tough today. With energy analysts increasingly convinced that high oil prices are here to stay, and stock and bond markets expected to remain under pressure, living plans may need to be rethought. At the very least, assumptions about how much a home will appreciate need to be reexamined. Largely because of the drop in housing prices, the median household wealth of homeowners aged 45 to 54 will have fallen by 25% between 2004 and 2009, project economist Dean Baker and research associate David Rosnick of the Center for Economic & Policy Research. Even America’s wealthiest 20% will have seen their balance sheets plunge by 27%.

At some point, of course, real estate prices will stabilize and economic growth will pick up again. The question, as always, is when—and by how much. Until the smoke clears, the twin pincers of rising costs and volatile stock prices may persuade an increasing number of older Americans to think about coming up with a Plan B for their housing needs in retirement.

The most practical approach is simply to downsize, suggests Henry K. “Bud” Hebeler, author of Getting Started in a Financially Secure Retirement (Wiley & Sons, $19.95). That’s not a very popular choice, however. “We find that downsizing is the ideal in many cases, but it’s not the norm,” says Ross Levin, a certified financial planner and president of Accredited Investors in Edina, Minn.

One reason may be that families often find that a smaller home doesn’t come with a much smaller purchase price. A two-bedroom condominium in an attractive part of a city with all the amenities typically sells for nearly the price of a comfortable four-bedroom home in a tony suburb. “People don’t save money on the purchase price by going from 2,500 square feet to 1,700 feet because they [still] want the granite countertops and the Jacuzzi tub,” says Joel Larsen, a certified financial planner with Financial Strategies Group in Davis, Calif.

But Hebeler—a former president of Boeing’s (BA) aerospace unit and the founder of analyzenow.com, a financial advice Web site—notes that large homes cost a lot more to maintain and are subject to higher property taxes. The savings from running a small home compound over time. Plus, as we age, few of us want to perform maintenance. Smaller yards and single-level homes become more attractive, as do condominiums and townhomes with maintenance staffs.

Downsizing could become more common as energy costs rise and the population ages. Hebeler advises anyone contemplating a smaller residence to act sooner rather than later. “I believe that over the next decade, small homes are going to be relatively pricier than large ones, at least on a dollars-per-square-foot basis,” he says. “Smaller homes will be in more demand, and many larger homes will be on the market.”

Still, many people are reluctant to move out of their current digs. “Since most people want to stay in their home, they need to look at how feasible that is from the point of view of long-term care,” says Larsen. This often means changing the first-time home buyer’s catchphrase of “location, location, location” to the aging homeowner mantra of “remodel, remodel, remodel.”

There are 90 million beer drinkers in the U.S., and chances are most of them will crack open an ice-cold beer this Fourth of July while they enjoy any number of seasonal pursuits, from grilling hot dogs and watching a ball game to lighting a Roman candle or two.

But to beer industry watchers, the real fireworks are happening right in the backyards of craft brewers. Rapidly rising commodity prices, industry consolidation, and a slowing economy have conspired to make this the most difficult business environment since the beginning of the craft brew revolution in the late 1980s. More than ever, brewers must spend less time brewing and more time running their businesses.

“Profitability is something a lot of companies watch closely,” says Paul Gatza, director of the Brewers Assn.
Main Ingredients

The small brewer’s first concern is commodity prices. Gone are the plentiful hops and cheap malt that made it possible for any basement brewer to develop a distinctive recipe and launch a brand. Just look at the list of ingredients on the label: Barley supplies have been hit by droughts in Australia, too much rain in Germany, and the rush to plant corn for ethanol, pushing the price for the grain up 100% over the past 12 months.

But barley looks plentiful compared with hops, the green, brussels sprout-like herb that gives craft brews their distinctive, bitter taste. Brewers had a surplus of hops just a few years ago, but now the world is short about 10% of its supplies. Prices per pound have jumped from $5 to $30 in some commonly used varieties over the past year. As a result, craft brewers are being forced to sign long-term contracts at these prices, just to guarantee supply.

If prices drop, there will be problems because brewers will be locked in for the next few years. “That’s essentially the risk,” says Hook & Ladder Brewing’s John Timson. “But even worse is not having a product at all.”