World financial news

The SEC could use more days like this.

The Securities and Exchange Commission, the government’s regulator of the financial markets, made headlines Thursday, a day after it filed a case against an insider trader that looted $8.6 million illicitly from the high-profile, $3.9 billion Dell (DELL, Fortune 500) and Perot Systems (PER) deal. The SEC caught the culprit quickly, too — the crime went down just three days ago.

But days like this haven’t come often enough in the past year for the 75-year old regulator. Most headlines about the SEC have focused on how it missed Bernie Madoff’s $50 billion Ponzi scheme and let Bank of America (BAC, Fortune 500) off too easily.

As a result, lawmakers have become skeptical of the SEC’s ability to do its job. Congress recently left it off a list of proposed recipients for funding to enhance regulatory reform. And earlier this year, some legislators suggested that the SEC be merged with the Commodity Futures Trading Commission.

But don’t expect the SEC to go down without a fight.

"Lately, the public and Congress have raised questions about the effectiveness of the SEC," said Mike Perlis, partner at Stroock, Stroock & Lavan in Los Angeles and former assistant director at the SEC. "It’s important to the SEC to be perceived as a vigorous enforcement agency, so we’ll start to see an increase in activity from them."

In a speech last month in New York, Robert Khuzami, the SEC’s director of enforcement, said it is responding to criticism by enhancing its efforts to catch criminals and protect consumers. He said that in the first eight months of 2009, compared to the same period a year ago, the SEC has opened 10% more investigations, issued 118% more subpoenas and filed 30% more enforcement actions.

"We listened to the criticism and used it as a learning opportunity," said Khuzami. "We are aggressively pursuing long-term improvements in our structure and processes, while at the same time working hard to continue our vigorous enforcement efforts."

Insiders get more headlines: The SEC is talking a good talk, but experts say the regulator may need to go a step further to gain favor with angry lawmakers.

Perlis said the SEC’s efforts will be shifted toward more insider trading enforcement similar to the kind of charges the regulator filed Wednesday. He argued that insider trading cases will help the commission curry favor with lawmakers and with the public, because they are high profile, quick, easy to investigate and don’t require complex actions such as tracing asset flows.

Experts noted that the SEC will have its hands full in the coming months: With a growing number of deals expected to be done as the recovery sets in, that means more crooks will attempt insider trading schemes.

"The SEC is in an odd place, still wounded from all of the past year’s activity on Wall Street," said Michael Williams, dean of Touro College Graduate School of Business in New York. "With M&A coming out of shadow land, the SEC will position itself to be at the table in these deals, actively involved, so it can resurrect itself and avoid a departmental overhaul."

Focus needed: But not everyone thinks that’s such a great thing. Insider trading is harmful to investors, but the more difficult-to-catch problems such as Ponzi schemes and corporate misinformation are usually much more destructive.

"I hope the SEC doesn’t take that route," said Ellen Podgor, a law professor at Stetson University College of Law in Florida. "When it comes down to what’s important, like making sure another Madoff doesn’t happen, then they’ll have to take the time in their investigations instead of the easy way out."

To prevent another Madoff-sized scheme from falling through the cracks, the SEC may be better off focusing on the effectiveness of their efforts rather than on the public attention that they get, some argue.

"The SEC’s problem is that these things are hard to find," said Randall Filer, professor of economics at Hunter College in New York. "To do a better job, they’ll have to become more efficient. Given the political mood, that idea will gain traction … and the government will spend the resources for more regulation."

Funding: The SEC has already begun its push for more funds. Job cuts have coincided with rising rate of securities violations and trades to regulate.

"We are hopeful that Congress will increase our resources," said Khuzami in his speech. "We have had an approximately 11% reduction in force since 2005. With greater resources we can do even more."

Some in Congress think the SEC needs more help. Earlier this month, Sen. Charles Schumer, D-N.Y., said he plans to introduce a bill that would allow the SEC to keep all of the fees it collects from its cases, so it can better afford to recruit and maintain personnel.

"The SEC’s failure to catch Bernie Madoff shows a level of incompetence unseen since FEMA’s handling of Hurricane Katrina," Schumer said. "Under the current system, the agency’s rank-and-file personnel are struggling to keep up with the more sophisticated actors in the market. We cannot keep starving the SEC’s budget."  

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Someone comes to your door and says your water heater is inefficient or unsafe.

Would you like a replacement?

Stop right there. If you say yes, you may be sorry.

Look what happened to a couple living in Ajax. The wife is at home with a newborn baby.

A National Home Services agent came to her door and said he was replacing water heaters in the area from Sept. 14 to 16.

Assuming he was with the company from which they rented the water heater, she said yes.

"Twenty minutes after being asked to sign to acknowledge the change, a technician arrived to remove our water heater," the husband says.

The couple read the contract later that day and decided to cancel the deal with National Home Services.

They were told there would be a $600 fee to remove the water heater after it had been installed.

When I heard about this, I thought there might be a legal issue.

Under Ontario’s Consumer Protection Act, you have the right to cancel within 10 days without a penalty if you sign a contract in your home worth more than $50.

I asked the Consumer Protection Branch whether National Home Services could be seen as trying to get around the rules by installing the new tank during the 10-day period.

If the door-to-door supplier initiates the transaction, "the 10-day cooling-off period is absolute. The supplier installs on a rush basis at its own risk," said director Chris Ferguson.

It’s different if the consumer calls the supplier for an emergency replacement and insists on getting it within 10 days.

In such a case, the consumer may be liable to pay the supplier reasonable compensation for installation or removal.

However, pushing to perform a service within the 10-day period can be seen as trying to deny the consumer the right "to cool off" under the statute, said Vishnu Kangalee, another consumer protection official.

Moreover, suppliers can’t charge a big penalty to a consumer who requests the right to cool off within 10 days – even if the contract has a clause they believe allows them to do this.

"In our view, such a clause is not sufficient if the consumer has neither solicited nor requested the supplier to perform the service within the 10-day cooling-off period," Kangalee said.

Gord Potter, executive vice-president of Just Energy (which owns National Home Services), agreed to let the couple out of the contract without the $600 penalty.

Enbridge Gas (formerly Consumers Gas) once had a monopoly on water heater rentals in Ontario.

Direct Energy bought the business in 2002, but didn’t face any competition until recently.

Direct Energy doesn’t go door to door to replace your water heater, said spokesman Joshua Orzech. Nor does it make you sign a long-term rental contract with penalties to get out early (as competitors do).

Another National Home Services sales agent visited the same couple yesterday and used the same misleading sales pitch.

"I said, `Shouldn’t you start out by saying that you are a competitor to Direct Energy, who we deal with, and that you want our service?’ He just took off," the new mother told me.

So, remember this: If a sales agent induces you to replace your water heater during the 10-day cooling off period, but you change your mind, you can’t be charged a removal fee.

Call the Ontario consumer ministry at 416-326-8800 for help in obtaining a refund.

Write to onyourside@thestar.ca

or check the On Your Side blog at www.ellenroseman.com

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Koenigsegg’s chief executive said on Saturday the Swedish luxury sports car maker still aimed to finalize a deal to buy Saab Automobile from General Motors by the end of October.

Koenigsegg Chief Executive and part owner Christian von Koenigsegg also told Reuters that there was good progress in talks to secure Swedish state guarantees for billions of crowns of loans from the European Investment Bank (EIB).

“Our deadline for the deal still remains the end of October as we have previously said,” he said.

One of Koenigsegg’s main owners was quoted by a newspaper on Saturday as saying the company could pull out of its planned purchase unless steps to secure loans were in place by Wednesday.

Norwegian businessman Bard Eker, who owns part of Koenigsegg through his holding company, told Swedish business daily Dagens Industri that progress was needed on the EIB loans that Koenigsegg needs to finalize the Saab deal.

“If everything is not in place before Wednesday we are out. We give up,” Eker was quoted as saying.

Von Koenigsegg played down the comments, saying he saw no risk the deal would fall through and that there was no crucial deadline for the negotiations in the coming days faxless cash advances.

The Swedish government has not yet said if it will pledge the state guarantees needed in order for the EIB to approve loans to Saab Automobile. The debt office is handling the negotiations on the guarantees on behalf of the government.

“It feels like we are taking positive steps week by week,” von Koenigsegg said. “We are getting closer all the time.”

Koenigsegg, backed by U.S. and Norwegian investors, struck a deal this year to buy GM’s loss-making Saab Automobile business, but its ability to finance the purchase had remained in question.

This month, Koenigsegg said state-run Beijing Automotive Industry Holdings would take a minority stake in the luxury carmaker as part of its planned purchase of Saab, potentially solving some of the financing issues.

The two companies had gone through most of the points in the due diligence process, von Koenigsegg said.

(Reporting by Niklas Pollard; editing by Sue Thomas)

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Stocks tumbled Wednesday, retreating from one-year highs, as investors took a sell-the-news reaction to the Fed’s decision to hold interest rates steady and keep its economic outlook relatively unchanged.

The Dow Jones industrial average (INDU) lost 81 points, or 0.8%. The Dow ended the previous session at the highest point since Oct. 6, 2008. The S&P 500 (SPX) index fell 10 points, or 1%, after ending the previous session at the highest level since Oct. 3.

The Nasdaq composite (COMP) fell 14 points, or 0.7%, after finishing the previous session at the highest mark since last Sept. 26.

The major indexes have repeatedly closed at near 1-year highs over the past two weeks. Stocks are likely to keep batting up against those levels until the start of the third-quarter financial reporting period late next month, said Jeff Kleintop, chief market strategist at LPL Financial.

"I think there will be a lot of upside surprises," Kleintop said. "In the second-quarter, we saw better-than-expected earnings mostly on cost cutting and little revenue growth. This time we’ll still see the impact of cost cutting but I think we’ll also see revenue growth."

He said that this fundamental improvement in Corporate America should give the rally another push.

Stocks initially rallied after the Fed announcement Wednesday, but failed to hold gains as investors used the latest nearly one-year milestone for the market as a reason to sell. A milder-than-expected response to a government auction of $40 billion in five-year notes also contributed to the late declines.

There wasn’t much in the statement that had market-moving potential, said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. "The outlook was consistent with the reports we’ve seen recently and with what the Fed has been saying."

Thursday brings the weekly jobless claims report from the Labor Department and the existing home sales report from the National Association of Realtors (NAR).

Also, the G-20 summit in Pittsburgh begins. The Group of 20 leading developed and emerging countries will discuss the ongoing efforts to stabilize economies after the financial market meltdown.

Fed: The Federal Reserve kept the fed funds rate, a key short-term bank lending rate, at a level near zero, as expected. The announcement was made at the end of its two-day policy meeting.

In the statement, the bankers said that "economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased."

But the bankers also noted that consumer spending has remained under pressure due to the rough jobs market and still-tight credit conditions. Last week, Federal Reserve chief Ben Bernanke said the recession was very likely over, but the labor market still has a long way to go.

In light of the continued challenges, the Fed reiterated Wednesday that it was likely to keep the fed funds rate at the historic lows for the foreseeable future.

Investors were also looking for more on how the Fed plans to eventually wind down programs that have pumped as much as $1 trillion into the economy to cushion the blow of the recession.

To that end, the Fed said it will stretch its purchases of $1.25 trillion of mortgage-backed securities from Freddie Mac and Fannie Mae through the end of the first quarter of 2010. Previously, the program was set to end through Dec. 31. The program has so far succeeded in helping to lower mortgage rates.

Shapiro said that this change was the most interesting detail in the statement. "In terms of buying mortgage-backed securities, the Fed is the only game in town and so maybe they hope that in six months, the world will have had enough time to heal so that someone else can jump in."

One-year highs: The major gauges are back near levels not seen since shortly after the collapse of Lehman Bros. last September.

Despite rampant calls for a fall selloff, investors have used any modest pullback this month as an opportunity to get back into stocks at a slightly lower level. Analysts say fears of having missed the boat on the rally have driven the latest spate of gains.

Since bottoming at a 12-year low March 9, the S&P 500 has gained 56.8% and the Dow has gained 48.9%, as of Wednesday’s close. After hitting a six-year low, the Nasdaq has gained 68%.

Stocks have risen during this period on signs that the economy is slowly starting to recover, and on extraordinary amounts of fiscal and monetary stimulus.

Company news: American Airlines and US Airways Group both slipped after announcing plans to raise cash, dragging down the whole airline sector.

American said it has priced its offering of 48.5 million shares of common stock, as well as $400 million in 5-year notes, with both offerings due to close Monday. The two sales should give American about $770.5 million after fees and expenses. American parent AMR (AMR, Fortune 500) fell 7.8%.

US Airways Group (LCC, Fortune 500) said it will sell 26.3 million shares of its common stock to Citigroup, the offering’s underwriter, with the sale due to close Monday. US Airways fell 13.6%.

The NYSE Arca Airline (XAL) index lost 2%.

General Mills (GIS, Fortune 500) reported higher quarterly earnings that topped forecasts and boosted its full-year outlook, due to strong sales of Cheerios, Trix and its other cereal brands. Shares rose over 4%.

Washington: Treasury Secretary Timothy Geithner told a House committee that U.S. economic growth appears to be picking up, but that reforms must be enacted to fix a broken system. He was testifying at a House Financial Services committee hearing on regulatory reform.

At least one million people could be eligible for an additional 13 weeks of unemployment benefits, following a House of Representatives bill approved Tuesday night. The Senate is expected to take up the issue soon, although it faces some questions about how it should be funded.

World markets: Global markets were mostly higher. In Europe, London’s FTSE 100, France’s CAC 40 and Germany’s DAX all ended lower, giving up gains. In Asia, the Hong Kong Hang Seng fell 0.5%, while Japan’s market was closed for a holiday.

Currency and commodities: The dollar held on to gains versus the yen and euro following the Fed announcement. The greenback had touched a fresh one-year low against a basket of currencies in the morning.

The strength in the dollar dragged on dollar-traded oil and gold prices.

U.S. light crude oil for October delivery fell $2.79 to settle at $68.97 a barrel on the New York Mercantile Exchange, dropping after a government report showed a big jump in weekly crude supplies.

COMEX gold for December delivery fell $1.10 to settle at $1,014.40 an ounce. Gold closed at a record high of $1,020.20 last week.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.41% from 3.44% late Tuesday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners narrowly topped losers three to two on volume of 1.32 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.72 billion shares.  

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AIG has stabilized thanks to a massive government bailout, but more than $120 billion in taxpayer loans to the insurance company remain at risk, according to a report issued Monday by a bailout overseer.

The Government Accountability Office, which oversees Treasury’s $700 billion Troubled Asset Relief Program, said the government’s efforts to support AIG (AIG, Fortune 500) have largely succeeded in propping up the company. But AIG continues to rely heavily on federal assistance to maintain that stability.

The GAO said Federal Reserve loans and Treasury Department investments continue to be AIG’s primary source of credit. Similarly, the company’s steady credit rating, recent profitable quarter and adequate capital levels would not have occurred without taxpayer assistance.

Continued government support will be necessary until AIG can restructure its operations. But that government assistance carries "significant exposure" to credit and investment risks, given taxpayers’ enormous loans and 79.9% interest in AIG, according to the report.

Some AIG operations, including the company’s core insurance business, are showing signs of strength. Still, GAO said it is too soon to determine if the insurer’s stability is a trend or simply an anomaly. Until AIG can demonstrate stability over the long haul, it will be unable to pay its loans back.

AIG plans to pay back the government by selling off pieces of the company. Those asset sales have been slow-going and sold at depressed values thus far, as credit remains tight. AIG has made only $8.6 billion on those deals to date, and has paid back just $1.4 billion on the roughly $38 billion Fed loan. AIG has paid back $6.8 billion of a separate $35 billion New York Fed loan and has not paid any of its TARP loan back.

The insurer still owes taxpayers $120.6 billion, according to the report. Since the company does not make enough profit to repay its loans, AIG has agreed to sell off two huge chunks of its business to the Fed to reduce its debt to taxpayers by $25 billion.

Oversight Committee to review Greenberg proposal

Meanwhile on Monday, House Oversight Committee Chairman Edolphus Towns, D-N.Y., said he is looking into a proposal by former AIG Chief Executive Hank Greenberg to slash the government’s stake in AIG to about 20%, scale back the interest rates AIG is paying on its the loans, and lengthen the term of the insurer’s loan to give AIG sufficient time to get better value from its asset sales.

Greenberg, who was chief executive of AIG from 1968 until 2005, has long argued that the government needs to give AIG a less onerous bailout in order to reduce risk and maximize the potential benefit for the taxpayers. Greenberg was not immediately available for comment.

Shares soared on the news, gaining 21% in late afternoon trading on Monday. Shares have risen 275% since the beginning of August, when the company announced it would appoint former MetLife CEO Robert Benmosche as its new chief executive.

The stock has risen despite repeated statements from the company that it won’t likely be able to repay the government in full for three to five years.

A spokesman for AIG said Monday that the insurer continues to work with government regulators and overseers to ensure taxpayer money is being put to good use.

"We are pleased to have had the chance to work closely with the GAO in its efforts to produce a thoughtful and comprehensive report," said Mark Herr. "AIG remains committed to reducing risk and repaying taxpayers." 

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In a challenge to Yahoo’s display ad dominance, Google unveiled a new technology aimed at making advertising easier for marketers.

Called the DoubleClick Ad Exchange, Google’s new system simplifies and improves how advertisers put display ads onto Web sites. Like Google’s previous ad exchange, the new one allows advertisers and Web site publishers to buy and sell ad space. But the company says the new system gives advertisers much more control over who sees their ads, and where and when they are displayed.

Google (GOOG, Fortune 500) has been the search advertising leader for years, but it makes the vast majority of its revenue on what are called relevant text ads or those ads that appear next to search results on Google and its partner Web sites. Rival Yahoo (YHOO, Fortune 500), on the other hand, has led the display advertising universe, which controls the banners and colorful ads consumers see on the Internet.

Google’s goal is "to simplify the system for buying and selling display ads, to deliver better performance that advertisers can measure, and to open up the ecosystem for all," said Neal Mohan, Google’s vice president for product development.

The new and improved ad exchange comes at a good time for the company. Text ads, Google’s bread and butter, are flatlining as the market has become saturated with the punchy and cheap ads. Google has tried to expand its display ad operation, acquiring DoubleClick in the first quarter of last year, but it has been unable to make much headway.

Overall, Google is the clear search leader, maintaining a 64.7% share of the search market, according to data tracker comScore. Yahoo holds just 19.3% of the overall market.

What is an ad exchange? A typical ad exchange allows advertisers to automatically bid on ad space as soon as an Internet user clicks on a site. The Web publisher accepts the highest bid, and the ad is instantly displayed for the user. Since the process is all automated, the bidding happens in a fraction of a second.

Google’s new exchange improves upon an element that allows advertisers to target audiences by weighing a series of factors. Web site publishers typically send information about who is viewing their site based on a user’s traffic history. The new exchange asks advertisers questions about who they are targeting, giving the advertiser the ability to automatically bid on the ad space depending on whether a user fits a particular set of criteria.

Another new feature will open the DoubleClick exchange to the hundreds of thousands of users of AdWords and AdSense. Those users — Web site publishers and advertisers — will be able to bid to sell their ads and space on the new display exchange.

Unlikely to unseat Yahoo. Analysts say Google’s improvements could help it give Yahoo a run for its money, but a coup is unlikely anytime soon.

"Google has a lot to bring to the table in terms of simplifying the process and adding more transparency around search results," said Matthew Egol, partner in the consumer media and digital team at management consultancy Booz & Co. "Google makes it easier to buy and sell ads than Yahoo, but Yahoo also offers a large scale volume of traffic that can also be branded."

Egol said Google will attract more advertisers who want to drive more click traffic.

But the new technology doesn’t solve the reason Google has been slow to take off in display. The company has been mostly focused on the number of clicks ads get, but not on a brand’s particular strategy. While Yahoo also offers an ad exchange, it is far better at helping premium advertisers develop a marketing strategy, he argued.

In July, Yahoo agreed to sell its search technology to Microsoft (MSFT, Fortune 500) in exchange for a revenue exchange and Yahoo’s exclusive right to solicit premium advertisers for both companies. 

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Dell Inc plans to buy Perot Systems Corp for about $3.9 billion, paying a steep 67.5 percent premium to expand its technology services business and compete with Hewlett-Packard Co and IBM.

Perot Systems, a computer services provider founded in 1988 by former U.S. presidential candidate Ross Perot, would be the largest ever acquisition by Dell and comes after extended speculation about its M&A strategy.

Dell, which lags far behind HP and IBM in the services arena, is looking to buy a company with a strong focus on serving healthcare and federal government customers. It expects the deal to add to earnings in fiscal 2012, but some analysts thought the price tag may have been too high.

Dell said it would pay $30 per share for Perot Systems. Its Friday’s closing price was $17.91 on the New York Stock Exchange.

J.P. Morgan analyst Mark Moskowitz said the price is 1.4 times Perot Systems’ sales, compared to HP’s purchase of EDS for 0.6 times sales last year. That would make the acquisition a little expensive, although it was good for Dell to lessen its dependence on personal computers, he said.

“We do see the building block as being compelling, but the purchase price seems relatively rich,” Moskowitz wrote in a research note.

Perot shares jumped 65 percent to close at $29.56 while Dell shares fell 4.1 percent to $16.01.

The deal comes as large technology companies expand into higher margin IT services to secure stable and recurring revenues as computer hardware becomes cheaper allied insurance.

Dell is the world’s No. 2 maker of PCs, with roughly 60 percent of its revenue coming from that market. The company has been trying to diversify its range of offerings, and services currently comprise only around one-tenth of sales.

HP made a splashy foray into the services segment with last year’s $13.2 billion purchase of EDS, founded by Ross Perot in 1962. HP is the world’s No. 1 PC maker and No. 2 IT services player, behind IBM.

Kaufman Bros analyst Shaw Wu said Dell is finally taking a step to address some of its weaknesses, but it remains to be seen how much impact the deal will have as Dell’s combined services offering would still be much smaller than its rivals.

“This still doesn’t have quite the scale to compete … but it’s also not so outrageous it will be difficult to integrate,” Wu said.

FOCUSED ON HEALTHCARE, GOVERNMENT

Perot specializes in providing business processes and technology consulting services, with a strong client base among healthcare, government and other commercial segments. More than a third of its 23,000 employees are based in India.

Perot Systems estimates it is the largest provider of IT services to hospitals, operating in roughly 1,000 around the world. Around half its sales come in the healthcare sector, with another quarter in government services. 

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Throughout history, people have complained about the companies they do business with. Until the Internet came along, those gripes were directed at small groups of family, friends and co-workers.

But e-mail, discussion forums, blogs and social networks have created a world where a once relatively harmless rant can do serious damage to a company and its reputation. Unhappy customers can, quite literally, broadcast their irritation to the world. It’s a fact that’s forcing some rather significant changes in the way many companies — including Dell, Coca Cola, Starbucks, Southwest Airlines and Charter Communications — are approaching customer service.

No longer is it enough to staff a call center and wait for customers to complain or ask for help. The smart companies, experts say, are the ones using social media to reach out to customers — particularly those who are unhappy and vocal about it.

"Those who wish it away and who think it’s just a fad — those are the ones who are going to be caught flat-footed and run over," said Steve Rosa, chief executive officer of (add)ventures, a Providence, R.I.-based marketing firm.
Of particular interest these days to companies is Twitter, the fast-growing microblogging site that allows users to communicate instantly, on their computers or cell phones, in 140-character messages, referred to as Tweets.

In August of last year, the service had 2.3 million unique visitors. A year later, the number had surged to 24.6 million, according to Nielsen Online.

And although Twitter itself hasn’t yet found a way to turn a profit, companies both large and small are finding uses for it. Some of them even make money. Dell, for example, announced earlier this summer that it has raked in some $3 million in sales directly related to its Twitter efforts. That’s not a lot for one of the world’s top computer makers — with more than $12 billion in annual revenue — but it does demonstrate potential.

Others, such as Progress West HealthCare Center in O’Fallon, Mo. are using it to communicate quickly with customers or, in this case, patients. The facility’s emergency room tweeted every couple of hours with updates on expected wait times. Emergency room staffers also use the Twitter feed to send notes to patients and are starting to answer questions. But the emphasis, at least for now, is on managing patient expectations, said Paula Szwargulski, manager of the emergency department.

"People expect to wait. But if they know how long they’ll have to wait and why they’ll have to wait, it’s not as painful," Szwargulski said.

More companies, however, are employing Twitter to put out fires before they have a chance to spread.

That’s what Michael Tomko of St. Louis learned earlier this summer when he complained on Twitter about a bill from Town and Country-based Charter for his phone service. He was annoyed by a range of fees and regulatory charges.

The brief rant caught the attention of Charter’s social media team, a group of five men charged with monitoring Internet traffic — Twitter, Facebook, blogs, discussion forums and consumer sites — for just that sort of thing. A rapid response quickly blunted Tomko’s anger.

"They could have gotten defensive. Instead, they wanted to know what was going on," Tomko said. "It felt like a real person talking to me."

The encounter offered Tomko a way to vent fast payday loan. He still canceled the phone service. But it turned him into a fan of Charter’s social media initiative, which has eliminated a source of irritation — the phone call-in center. Now he says all of his dealings with the company start with Twitter and the Umatter2Charter group.

"I’m not proclaiming that Charter is fixed," Tomko said. "But I’m saying there is a team of like five guys who are doing it right."

The company is quick to point out that the social media approach won’t subtract anything from other service avenues. And it should be noted that the five teammates — they’ve assisted some 7,000 customers this year — represent a tiny piece of Charter’s customer service operation, which deals with millions of calls annually.

But one thing it does seem to do is provide some customers with a more personalized touch. Each of the five social media guys has his own Twitter page, complete with name and photo.

Customers can essentially decide whom they’d like to talk to. That’s the thing that makes it work for Alexander Chow-Stuart, an author and screenwriter who lives in Woodland Hills, Calif.

"We’re on a first-name basis," Chow-Stuart said. "But when you call, you get a different person every time."

Although Charter has been increasing its involvement in social media — the company hired its first team member in January — it certainly wasn’t the first to go this route. But in recent months, the team has noticed a shift in customer attitude that should probably scare any company not active in this sphere.

In the early days, a customer ranting about Charter on his Twitter feed would express surprise when someone from Charter reached out to help. But those reactions are growing rare, said Eric Ketzer, communication manager for the social media team.

"We don’t have the shock-and-awe responses we used to get," Ketzer said. "So many companies are on Twitter now that they’re just kind of used to it."

That raises a couple of issues for companies who haven’t spent much time thinking about their online reputations.

The first is simply a lost opportunity, said Lorrie Thomas, a Web marketing expert who teaches social media at the University of California, Berkley.

She compares Twitter to a focus group. It’s just a lot bigger and free: "You are getting truly authentic messages. You can watch real, live conversations happening."

More importantly, she said, those companies aren’t doing enough to protect their image in an arena where attendance is expected.

"There are organizations that are completely behind," she said. "If you don’t build your brand, someone else will do it for you."

The challenge facing some companies, however, is convincing profit-oriented chief executives to invest money in an area without being able to promise a monetary return, said Chad Mitchell, a senior analyst at Forrester Research. It doesn’t help that the companies having the most success aren’t eager to share their expertise, out of fear of helping competitors, he said.

"How are you making money with this? That’s hard to measure," Mitchell said.

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Oracle shares fell sharply in after-hours trading Wednesday after the database software maker reported quarterly sales that missed Wall Street forecasts.

The company reported net income of $1.1 billion, or 22 cents per share, for the three months ended Aug. 31. That was up 8% from earnings of $1.07 billion, or 21 cents per share, a year earlier.

Excluding certain items, Oracle said it earned $1.5 billion, or 30 cents per share, which was up 3% from a year ago and in line with estimates from analysts surveyed by Thompson Reuters.

However, sales fell 7% to $5.1 billion in the quarter, missing analysts’ expectations for $5.25 billion in revenue.

Sales of new software licenses, considered a gauge of software sales growth, sank 17% to $1 billion, while software license updates and product support revenues rose 6% to $3.1 billion.

Oracle also declared a cash dividend of 5 cents per share of outstanding common stock, which will be paid Nov. 4.

The drop in sales weighed on Oracle’s stock price. Shares of the Redwood Shores, Calif.-based company fell nearly 6% in extended trading after closing $22.66.

Safra Catz, Oracle’s president, said the company was able to increase profit despite weak sales by "substantially" improving its operating margins.

"Our operating model continues to drive earnings for our stockholders," she said in a statement.

Trip Chowdhry, an analyst who covers Oracle for Global Equities Research, said the company’s results are relatively strong considering the economic backdrop.

"It’s brutal out there," Chowdhry said. "IT budgets have not opened up and in that environment, Oracle is doing pretty well."

"The new licensing revenue decline is giving a false impression that the business is much worse than it truly is," Chowdhry said, adding that he thinks the stock price will recover based on Oracle’s product pipeline and market share.

Looking ahead, Oracle said it expects adjusted earnings per share in the current quarter to be between 35 cents and 36 cents, up from 34 cents the year before.

Based on current foreign exchange rates, Oracle said it expects sales to rise 2% at best in the company’s fiscal second quarter.

In April, Oracle (ORCL, Fortune 500) announced plans to buy Sun Microsystems, which makes the Java programming software language, for $7.4 billion dollars. The acquisition, Oracle’s 52nd since Jan. 2005, could make the company a major player in the hardware market, which is dominated by IBM. (IBM, Fortune 500)

Larry Ellison, Oracle’s chief executive, told analysts in a conference call that his company is "well positioned to compete against IBM."

But the deal with Sun is being held up by European antitrust regulators, who are concerned about Sun’s MySQL open-source database, which could compete with some of Oracle’s products.

Oracle did not provide an update on the status of the Sun purchase.  

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California will lag the United States as the country recovers from a deep recession, with normal growth in the most populous U.S. state not seen resuming until 2011, the UCLA Anderson Forecast group said Wednesday.

Although there are signs now of a recovery beginning to take hold in California, the state’s unemployment rate is expected to stay above 10% until late in 2011, the forecast group said in a report.

The report comes a day after Federal Reserve Chairman Ben Bernanke said that the worst U.S. recession since the Great Depression was probably over, though he warned that recovery and job creation would be slow.

California’s economy, the world’s eighth largest, is suffering record unemployment as it staggers under the combined weight of the recession, a sharp drop in consumer spending, reduced trade flows, financial market turmoil, the mortgage crisis and a prolonged housing slump.

"Overall, the outlook for the balance of the year is for little to no growth," UCLA Anderson Forecast said in its report. "The economy will begin to pick up some tail winds towards the end of 2010 and by the beginning of 2011 we will get off the tarmac and begin to grow at more normal levels.

"The keys to California’s recovery remain a recovery in U.S. consumption, which increases the demand for Asian imports, and for products from California’s factories, increased public works construction, and increased investment in business equipment and software," the report said.

Over the near term, California will be hurt by reduced public spending. The state in July closed a budget gap of more than $24 billion opened by a plunge in personal income tax revenues. Retail sales tax revenues have been hurt by weak consumer spending, denting the coffers of both the state and local governments.

The combined blow of lower income tax and sales tax revenues "implies declining government employment through the end of the 2010 fiscal year," the report said unsecured personal loans.

High unemployment to persist

California’s unemployment rate will peak at 12.2% in the fourth quarter and average 11.6% this year, the report said.

"Though the California economy will be growing in 2011, it will not be generating enough jobs to drive the unemployment rate below double digits until the end of the year," the report added. It forecast an average jobless rate next year of 10%.

The report forecast California’s total employment will shrink by 3.7% this year and grow only at a 0.2% rate next year, then expand by 1.9% in 2011.

The report did offer glimmers of optimism: the housing market is beginning to pick up, existing homes are more affordable, "conditions are becoming ripe for new residential construction," and demand for the state’s export goods is starting to increase.

"Though the consumer goods and services sectors remain very weak, consumer confidence surveys and the response to the ‘cash for clunkers’ program provide indicators that consumer demand may be on the verge of recovery and the implosion of hospitality, retail, wholesale and transportation employment may be coming to an end," the report said.

"Everything that happens at the end of a recession is happening now," said Jerry Nickelsburg, a senior economist with the UCLA Anderson Forecast unit. "But what doesn’t happen at the end of a recession is an end to job loss, so in that sense there will still be some more bleeding." 

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