Karen Lowry

Stories by Karen Lowry Miller

  • Jukebox Junkie

    If you're already streaming music off the Internet, it is thanks in good measure to Rob Glaser. He pretty much invented the technology. The former Microsoft executive launched RealNetworks in 1995, starting with the first online streaming technology called RealAudio, and moving on to RealPlayer for video. Ten years and untold battles later, his creation has evolved into a subscription-based "jukebox in the sky," allowing unlimited access to the playlists of all the major record labels for a $9.99 a month. "Certainly within 10 years and probably within five years, almost all digital transactions will be regular service models," rather than pay-per-download models like Apple, says Glaser, in his Seattle headquarters overlooking Elliott Bay.Glaser's vision is starting to take off. The number of subscribers to his music site, Rhapsody, has jumped in two years from about 20,000 to 1.15 million. The number of songs available has climbed from under 400,000 to over 1 million. Rivals such as...
  • Inside A Makeover

    The battle for digital control is still raging in the movie business, but it's virtually over in music. The giants are winning. Court rulings have forced free music upstarts like Grokster and Napster out of business, and earlier this month required Kazaa, the producer of file-sharing technology, to introduce filters to prevent piracy. The idea that free music would gut the big record companies seems a distant memory, even though it was still the conventional wisdom just a year ago. "We're finally seeing a raft of new initiatives from really big players," says Eric Nicoli, chairman of one of the big four music companies, the EMI Group. "This stuff is happening all day, every day now."Just consider the last month: Apple and Motorola unveiled a phone that can play music from iTunes, and announced partnerships with big U.S. and British phone companies to develop the mobile music market. In London, two giant retailers, HMV and Virgin, announced digital music ventures, a sign that the...
  • If They Breach The Wall

    Wolfgang Bernhard, the wunderkind who helped turn around Chrysler, is now head of the ailing Volkswagen brand. He's a trained engineer and true car guy, who can take apart and reassemble an engine, and also, colleagues say, keep up with professional drivers on the test track. He also has an M.B.A. and a doctorate on international exchange-rate risks, which may help as he navigates the troubles of the auto industry. In an exclusive interview, his first with the foreign press since taking the job last May, Bernhard spoke to Karen Lowry Miller about his plans for the company, the lessons of Chrysler and Volkswagen's role in corporate Germany:Do you see VW as an icon for Germany? ...
  • Stuck In Low Gear

    Volkswagen has always been an icon of German engineering, both mechanical and social. Hitler planted a factory in the German heartland to build a "people's car" in the 1930s. And so it did, producing the Beetle, the microbus, and a corporate standard for Germany's generous social market economy. After a 1970s law put labor leaders onto the board, VW gave them even greater power than the norm. By 1994, VW was hailed for saving jobs by negotiating the first 28.8-hour week and other creative work arrangements. Its benevolence is so deeply etched in the public mind, says a former executive of a rival carmaker, that "many Germans secretly wish the economy could still be run like Volkswagen."Once again, Volkswagen has the chance to help shape the Zeitgeist. Angela Merkel, head of the center-right Christian Democratic Union, holds a lead heading into the Sept. 18 national elections and advocates radical economic reforms. But a more useful figure to help understand the rumbles of change in...
  • On the Agenda

    These days, it's easy to despair for Europe, and many economists do. Growth forecasts for the euro zone are down, unemployment is climbing and, while 18 percent of young people cannot find work, political leaders in Germany, France and Italy have gone slow on labor market reforms. The European Union is well behind on a five-year-old plan, the Lisbon Agenda, to create the world's most competitive economy by 2010. Expectations are low as leaders of the EU's 25 member states gather at a Brussels summit this week to discuss ways to realize the Agenda goals. Yet, despite the pessimistic majority, there is an underdog case to be made that change is in the air....
  • ON THE AGENDA

    These days, it's easy to despair for Europe, and many economists do. Growth forecasts for the euro zone are down, unemployment is climbing and, while 18 percent of young people cannot find work, political leaders in Germany, France and Italy have gone slow on labor market reforms. The European Union is well behind on a five-year-old plan, the Lisbon Agenda, to create the world's most competitive economy by 2010. Expectations are low as leaders of the EU's 25 member states gather at a Brussels summit this week to discuss ways to realize the Agenda goals. Yet, despite the pessimistic majority, there is an underdog case to be made that change is in the air....
  • HARD NOSE

    Chaos reigned in Portugal through the summer of 1975, when Jose Manuel Duro Barroso was 19 years old. An oppressive dictatorship had been overthrown the previous year, and now Soviet-backed communists were trying to control the country. Barroso belonged to a Maoist group that had resisted the fascist regime, and he continued to fight what he saw as a new dictatorship of the left. A student leader in the University of Lisbon's law school, he knew there was a warrant for his arrest, so for most of 1975 he never slept in the same house two nights in a row. Yet one day communist students recognized Barroso distributing pamphlets on the street, and called the military police. When soldiers arrived they tossed him in a jeep and drove off. Suddenly he turned to his captors. "I don't think you have the courage to shoot a man in the back," he taunted, and jumped out the door. They didn't shoot....
  • Competition: Rising Faster Than Japan

    No one could have predicted in the 1970s that Toyota would become one of the Big Three automakers. Or in the 1980s that a Finnish producer of rubber boots would go on to dominate the market for mobile phones. Or that Nokia would be overtaken by a Korean chip maker, Samsung. Investors have been watching ever since for the next disruptive newcomer, and the Swiss business school IMD, which last week released its annual World Competitiveness survey, thinks it knows where to look. "Everyone is talking about losing jobs to China and India, but this is just a transition period," says IMD researcher Stephane Garelli. Before the West knows it, he says, Chinese and Indian companies that are now making goods or doing service work for Western brands will become major global players: "The moment we feel them, it will be too late."While many analysts are still skeptical of the near-term prospects for Indian and Chinese multinationals, IMD predicts they will rise faster and prove even more...
  • Paper Is Dead--Take 2

    Deep in the labs of Philips Research, two of the world's top nanotechnology experts are thinking about Muggles. Scientists Johan Feenstra and Rob Hayes think they've figured out how a process called electrowetting can make paper that can do anything a videoscreen does. So far, though, all they've got to show for their efforts is a tiny piece of e-paper one centimeter square--only 225 pixels, or picture elements. That won't be nearly enough for headlines and news videos. The only hint of the technology's potential is a laptop presentation the inventors have rigged up. It features Professor Snape, Harry Potter's potions teacher, holding an electronic newspaper with an embedded video clip. "That's what we want," says Hayes.They're likely to get it. Late last month in Tokyo, Sony took an important leap in this direction by introducing Librie, an e-book reader. The device, which costs $370 and is about the size of a paperback, holds the equivalent of dozens of books, which readers can...
  • TOO MUCH MONEY

    Economist Andy Xie recently remarked that the world's biggest problem is "too much money," which is a bit flip, but neatly sums up the strange state of the post-bubble era. The crash that began in early 2000 has destroyed trillions of dollars in wealth, but left many trillions more homeless, desperately searching for a return to good times. With all the major economies in a rare and persistent funk, there is no haven, much less an easy road to riches. So investors are chasing madly from U.S. stocks to bonds and back, from Chinese tech stocks to Czech real estate and South African gold mines, creating what Xie's boss at Morgan Stanley, Stephen Roach, recently called "endless bubbles."Though every big bust tends to produce many minibubbles in its wake, this cycle is different. The world has now endured three false recoveries in as many years, despite what Robert Hormats of Goldman Sachs calls the biggest flood of liquidity since the time of Noah. All the big central banks in America,...
  • THE WI-FI BUBBLE

    In the edgy world of high tech, hot spots sounded so good they just had to work. A customer would pop into a cafe, marina or even a park, flip open a laptop and cheerfully surf the Net, download music or check e-mail. No more wires, no more modems, no more fiddling with a dicey dial-up connection or waiting at an Internet cafe for someone to get off the sports channel in order to fire off a memo to a client.That, at any rate, is the idea behind Wi-Fi, the much talked-about radio-linked LANs (local area networks), known to techies as "wireless fidelity." To get into the Wi-Fi game, all a budding entrepreneur had to do was get a bunch of coffee shops, restaurants or even bus stations to pay for the installation of a network. He'd maintain the operation for a fee, as well as a cut of the revenues, and customers who bought the service would then market themselves as cool Wi-Fi hot spots where local Webheads could come to hang out and surf. Users would be charged a monthly fee for Wi-Fi...
  • Fall Of The Royal Fortune

    "Kings, Queens and Despots," a short list of the world's most wealthy rulers published by Forbes magazine, comes with a number of caveats. Valuing these multibillion-dollar private fortunes is a "tricky business," says Forbes. Most royal families decline to comment on their wealth. But last December, as the 2003 list was being compiled, a prominent member of the Netherland's illustrious House of Orange broke the family's long silence on the issue. Prince Bernhard, feisty 92-year-old father of Queen Beatrix, phoned Christopher Forbes, who is married to his German niece, and demanded that he stop printing "bulls--t" exaggerations of his family fortune. Forbes told him to call editor Luisa Kroll, who wanted evidence. Bernhard faxed a handwritten letter with enough detail about holdings in companies like Royal Dutch Shell and ABN AMRO to persuade her to slash the estimate from $2.5 billion in 2002 to $250 million. The Oranges would have been in the billionaire class occupied by the...
  • The Enron Of Europe?

    Europeans watched smugly as a plague of corporate scandals broke out across America following the fall of Enron. They seemed to feel immune, even above it all, until the news from Royal Ahold last week. The 116-year-old Dutch grocer said it had overstated profits of its U.S. Food Services unit by at least $500 million and uncovered potentially illegal transactions in Argentina. Ahold's share price plunged by two thirds, infuriating millions who had bought the stock on its blue-chip name. CEO Cees Van der Hoeven and his CFO resigned. Albert Heijn, 76-year-old grandson of the founder, appeared on Dutch television to reassure countrymen that the local supermarket chain belonging to Ahold, the third largest food retailer in the world, was safe despite being "shafted." Across the continent, newspapers were calling his company "the Enron of Europe."Is that fair? Compared with Enron, the Ahold scandal pales in size and sheer audacity. The Texas energy giant collapsed in 2001 when it could...
  • Hold The Fries

    As a symbol of American conquest, it's easy to forget how McDonald's was first received overseas. Back in 1974, Britons queued for hours at the opening of a Mickey D's in London. When the Golden Arches sprang up in Moscow not long after the fall of the Berlin wall, they were celebrated as a sign of liberation. In 1994, the drive-through line on opening day in Kuwait City was seven miles long.What to make, then, of McDonald's recent warning to Wall Street, when it announced that it will post its first quarterly loss in 37 years as a public company? Or its plans, disclosed a month earlier, to slow the pace of expansion, closing 175 stores (after shutting 163 in 2001), including 35 in Turkey alone--the first significant closings in its history? For much of the past decade, McDonald's has been the quintessential high-growth multinational, vaulting from success to success and building a uniquely American empire. The number of its restaurants worldwide rose by a third in the past eight...
  • Fasten Your Seat Belts

    CEOs have always used the jargon of combat, but now the battle metaphors feel all too real. Since September 11, the Kroll security-consulting company has been asked by 200 of the Fortune 500 companies to assess the vulnerability of top executives. It has recommended bodyguards in five of the 25 cases completed so far. (The usual rate is one in 100.) "This is a war, and corporate America is a part of it," says Michael Cherkasky, who runs Kroll risk consultants in New York. "We expect executives will be targeted."The major targets know well who they are, and won't discuss security preparations for fear of inviting attack. But it's no secret in the security industry, now busier than ever. Arms makers and symbols of American cultural imperialism, from media moguls to fast-food giants, are at high risk, warns Cherkasky. Chuck Vance, head of Vance Security in Washington, says his office is deluged by U.S. multinationals that fear a second wave of assaults.Personal safety is no longer a...
  • The Pill Machine

    Twenty years ago, a scientist discovered that a drug being tested for heartworm in dogs was also a miracle cure for river blindness in humans. That was big news, and a bigger dilemma for the scientist's bosses at Merck pharmaceuticals. As a veterinary medicine, the drug would be a big moneymaker. As an antidote to river blindness, a deadly scourge to millions of people in West Africa, it would be a sure loser. Merck is a business, not a charity. Yet it would be uncomfortable, at best, to sit on an antidote to this horrific disease, borne by parasites that attack the eyeball and cause an itch that can drive victims to suicide.Merck wasted no time in making its choice. It launched a seven-year clinical trial to prove the drug safe for humans, then began distributing it free under the name Mectizan. Working with aid groups, Merck now treats 25 million people per year in 31 countries. Since 1987, the company has given away more than 600 million tablets of Mectizan, which it figures is...
  • The Teflon Shield

    IKEA is a curious success story. The lines at the Swedish stores are endless, its furniture requires an engineering degree to assemble, yet its $8.5 billion global sales empire is expanding rapidly. Even more interesting is its reputation. It hires factories in impoverished countries like Laos, and its wooden furniture is a threat to forests from Borneo to Russia. Its image as the McDonald's of home furnishing is enough to offend the sensibility of anti-globalization protesters. Yet time and again, IKEA has managed to duck the charges that stick to brands like McDonald's and Nike, and to keep its name off the banners now waved in anger from Seattle to Prague to Bangkok. ...
  • A Run for the Money

    'Old' World? Ha! The Europeans Are Beginning To Teach The Americans A Thing Or Two About The Secrets Of Doing Business In The 21St Century.
  • East Loves West

    Growing up in the 1980s near the Gdansk shipyard, the birthplace of Poland's Solidarity movement, Marek Borzestowski dreamed of escaping communism and becoming a wandering philosopher. His hope was hardly fulfilled by road trips to Bulgaria, where his family would sell face cream and drills, though eventually they built a house with the $5,000 they made as peddlers. Release finally came when the Berlin wall fell in 1989, the year Borzestowski graduated from high school. For two months he hitchhiked through Western Europe, drinking Coke, eating bananas--and plotting ways to hold on to these simple luxuries. Within three years he had landed a spot studying management in Wales, where he sent his first e-mail, and then in Germany, where he learned to surf the Web. That was a big advantage for an ambitious young Pole. In 1995, with $1,000 in savings, he cofounded Wirtualna Polska, a fast-growing Internet portal that now has 260 employees, raised $20 million from big-name investors like...
  • They Call It 'Mobbing'

    The details vary, but the cases have a common theme. In Germany, Klaus, a nurse, had a fight with his boss; she then tried to fire him for giving unauthorized medication (a doctor had approved), for hitting a security guard (who denied it) and for sexually harassing a patient (no victim was produced). Klaus says he won his job back in court but only after thoughts of suicide and months with no pay. In Paris, Dr. G. tells how a new administrator at the ministry where she worked felt threatened by her, and responded by keeping information from her and instructing secretaries not to act on her requests. Depressed, Dr. G. sought therapy and quit. In Scotland, colleagues at Theodor's biochemistry lab were envious that his research was going so well. Offensive comments were whispered and experiments were sabotaged; when he spoke out he was branded a troublemaker and lost his post. And in an organization in Geneva, where Gillian had worked for 18 years, budget-watching bosses tried to...
  • Villalonga's Long Goodbye

    Did Juan Villalonga really run Spain's Telefonica for only four years? His departure alone seemed to take that long, by the time it finally happened last week. And before that came the skein of gutsy deals Villalonga used to turn a former state telephone monopoly into a major New Economy player, boosting its stock market value more than fivefold in the process.Why isn't Villalonga still CEO? The self-confidence that enabled him to snap up Latin American phone companies slipped into arrogance. His refusal last year to abandon a juicy stock-option plan proved an embarrassment for Prime Minister Jose Maria Aznar--who gave him the Telefonica job. Villalonga's move to Miami to live with a former Miss Mexico, Adriana Abascal, made things worse. Last May, Villalonga briefed his board on a major merger--from Miami, on a videoscreen. Board members rejected the deal. Spanish papers stepped up their attacks. And the pressure rose when investigators began looking into charges of insider trading...
  • Hungry For A Triumph

    Back home they're already treating Jean-Marie Messier as an honorary American -- a dubious honor in Paris. The CEO of Vivendi is spoofed on his own company's pay-TV network, Canal Plus. "Les Guignols de l'Info," a satirical puppet show, sends up Messier as a boss with American-size global ambitions. The French press now calls him J6M: Jean-Marie Messier: moi-meme, Maitre du Monde (me-myself, master of the world). All in good fun, says Messier, who last week took the boldest step yet in his campaign to transform Vivendi into one of the world's leading communications companies by agreeing to buy Seagram with its huge stable of American films and pop-music stars. But when asked how he, a member of the elite Club of 100 (experts in la cuisine francaise), could stomach making blockbusters like "Gladiator," Messier can barely stop a scowl from crossing his cherubic face. "I'm neither that kind of exotic, archaic French guy, nor a media mogul fascinated by Hollywood," he says with a groan....
  • Aol's Competitor? Hmm...

    Juan Villalonga was not happy. The 47-year-old chairman of Spain's high-flying Internet service provider, Terra Networks, had guided his company through a wildly successful IPO in 1999 and an acquisition campaign in Latin America. But, he confided to Thomas Middelhoff one day last April, his plan for cracking the all-important U.S. Internet market by buying U.S. portal company Lycos was stalled. Middelhoff, the CEO of German media giant Bertelsmann, was visiting Villalonga in Miami to discuss other business. But he quickly picked up the phone and dialed Lycos CEO Robert Davis--a colleague, since Bertelsmann owns a chunk of Lycos Europe--and a three-way meeting ensued, restarting the merger talks. On May 16 it became official: Terra Networks will buy Lycos for $12.5 billion in stock. Bertelsmann will make its vast trove of books, music and film available to the new company on preferred terms, and has also committed to buy $1 billion worth of advertising and other services over the...
  • A New Breed

    Gerhard Schmid has many interests, including horses and Harley-Davidsons. But the one that made him a success, he confides, is ice hockey. The son of a mason from northern Bavaria, he played on a professional German team in his 20s and then worked as a trainer and coach. The sport taught him all the business skills he needed: teamwork, self-confidence, street smarts and timing. Especially timing. MobilCom, the mobile-phone company he started in 1991, was the first to list on Frankfurt's Neuer Markt for high-growth stocks in March 1997, and its share price has since multiplied 48 times. MobilCom has charged into fixed-line and Internet businesses, too. And two months ago, lining up an ally to bid for a German license to run the next generation of mobile phones, Schmid sold 28.5 percent of MobilCom to France Telecom. His 40 percent stake is now worth €3.4 billion.Schmid, 47, is not only wealthy. He'll also look you in the eye and say so. "I always wanted to be free and independent,"...
  • A Major Market Merger

    Investors love clear signals, and those watching Europe got two of them last week. The only problem was, they contradicted each other. On Thursday, London and Frankfurt announced a groundbreaking stock-exchange merger that promises easier access for investors, more streamlined capital markets, better funding for start-ups--in short, another milestone in Europe's accelerating progress toward transparency, competitiveness and a place in the New Economy. Yet on Friday, the euro--the catalyst and intended symbol of much of what's going right in European economies--closed at a humiliatingly low 90 cents. What gives?The euro, of course, has been tumbling since its inception. No matter how hard the Europeans have worked to bring their growth rate up--it will be around 3 percent this year--they just can't compete with the returns that 6 percent growth in the United States offers to people holding dollar-based investments. Political leaders are increasingly dismayed. Still, EU president...
  • More Than Meets The Eye

    You can be forgiven for stifling a yawn at word of the latest deal coming out of Germany. Last week two huge, inefficient German banks merged into one humongous one. Neither has a name that ends in dot-com. Dullest of all, the deal's a friendly one.But look again. The merger of Deutsche Bank and Dresdner Bank, crosstown Frankfurt rivals for more than a century, will create the world's largest bank by assets (totaling about 1.2 trillion). Its market capitalization, at about 80 billion, will be one of the richest in Europe. Most important, the deal--a three-way asset-swap between the two banks and Munich insurance giant Allianz--is a milestone in the unwinding of Germany's system of cross shareholdings, just the kind of restructuring the country needs to get its economy firing on all cylinders. "It represents the final crumbling of fortress Germany," says Frank Beelitz, who until recently headed Lehman Brothers in Germany. Why does it matter? Ridding Germany of such an incestuous...
  • That Sinking Sensation

    Late last month, in gyrations wild enough to fluster even the most composed central banker, the euro threatened free-fall. On Feb. 28 it plunged four cents against the dollar in less than an hour, touching a low of 93.9 cents before rebounding. The trigger: big Japanese investors sold some loss-making euro holdings to close out their books before their fiscal year ends in March. As the euro moved against the yen, it lost ground to the dollar, too. And once it had slipped through 96.65 cents, the previous low point, a bunch of prearranged sell orders kicked it further down.So what's with the euro, anyway? Here we are, 14 months after its birth, and Europe's long-awaited supercurrency can't even buy a buck. It has steadily slipped, losing nearly 20 percent of its value against the dollar since Jan. 1, 1999. And the recent roller-coaster ride points to a deeper malaise--there's just not much liquidity in the currency nowadays, making it easier for a few players to knock it around. "So...
  • Just Call Him Grosser Vogel

    Charles Rivkin had not expected a real Muppet maniac. As president of The Jim Henson Co., Rivkin presides over the famous line of Muppet characters created by his company's late namesake. When he arrived last summer at the Munich offices of EM.TV & Merchandising, Europe's largest distributor of children's TV programming, he found a hardheaded CEO smitten by Muppets. Never mind that EM.TV's library of 28,000 half-hour shows includes German-language rights to "Peanuts," "Garfield," "The Simpsons" and other cartoon icons, in addition to the Muppets. CEO Thomas Haffa had lined the halls almost entirely with Muppetabilia: posters, dolls and photographs of Miss Piggy, Kermit the Frog, Big Bird and the rest of the characters. "They're huge Muppet fans," marveled Rivkin, who was even more floored by Haffa's response to his suggestion for a small deal on TV rights. "I'd rather own a piece of the company," said Haffa. Rivkin's reply: "That's very kind, but we're not for sale."Then Rivkin...
  • All Of Europe Is In Play

    Klaus Esser hasn't been getting much sleep lately. The feisty, tennis-trim CEO of Mannesmann spent the past three weeks hunkered down with advisers in his Dusseldorf, Germany, office overlooking the Rhine, getting ready for the attack he knew was coming. Chris Gent, CEO of Vodafone AirTouch and his erstwhile ally in the mobile-telephony business, was preparing to buy Esser's company--right out from under him.Sure enough, on Sunday, Nov. 14, Mannesmann received a "friendly" 103 billion euro offer from Vodafone. No sale, countered Esser when they met that day; we're worth twice that. The two men parted, to spend the week feverishly canvassing their shareholders and campaigning in the press and in detailed conference calls with analysts. Esser went to court to block Vodafone from using Goldman, Sachs as an adviser, accusing the investment bank of a conflict of interest because of some earlier work it had done for Mannesmann. But a London High Court judge slapped him down, calling "the...
  • Now Ready To Take Off?

    In a sense, it had been in the works for years. And for the last four months, the negotiations had been intense, covering details right down to the new company's logo. But both sides still had to work overtime to be ready for last Thursday's announcement that DaimlerChrysler Aerospace would merge with Aerospatiale Matra of France. Sources on the German side say DaimlerChrysler CEO Jurgen Schrempp spent most of the day on Oct. 13 on the phone to Berlin and Paris, finalizing the deal. A source close to the French team says negotiations went until 2:30 Thursday morning, with details still being sorted out until 4:30 a.m. What still needed settling at that late hour isn't clear. But the details were sorted out, so German Chancellor Gerhard Schroder and French Prime Minister Lionel Jospin helped the two company CEOs announce their dramatic news at a press conference in Strasbourg that afternoon.Thus was struck another of the grand bargains that are building the New Europe. Combining a...
  • Bertelsmann's Online Onslaught

    Say you're in a Humphrey Bogart kind of mood. Imagine settling into the couch and calling up "Casablanca" via your TV remote. Curious about the real Bogie and Bacall? Tap a few buttons, and a box in the corner of the screen helps you order the leading lady's biography. Might as well toss in the soundtrack too. Both can be downloaded from the Internet. Tempted to scope out the setting for Rick's bar? Pop open another window and check out travel packages to Morocco. Gee, too bad you missed the piano scene.You may think multitasking is a great way to ruin a classic movie. But Bertelsmann believes otherwise. Next month Europe's media giant will test just such a state-of-the-art interactive system with a private cable company in Cologne. In a complete about-face from an early foray into pay TV--when its plan to build a pay-per-view broadcast channel with Germany's Kirch Group was thwarted by European anti-monopoly rules--it has sold all but a 5 percent stake in their joint venture and is...