The Best and Worst of Business 2009

The Best of Business 2009

Best Hire: Phyllis Campbell

Washington Mutual’s collapse last year-which came to a head with a run on the bank and seizure by the FDIC-resulted in the loss of 3,400 jobs in downtown Seattle, a virtually empty shell of a new headquarters building, and a lot of anger and hurt in the community. The challenge for JPMorgan Chase, which acquired WaMu, was to reassure customers, win back local confidence and develop a strong brand as the foundation for a range of new services.

Chase hit a grand slam when it hired Phyllis Campbell to chair its Pacific Northwest operations. During her career as CEO of the Seattle Foundation, CEO of US Bank, Washington and, before that, in management at Old National Bank in Spokane, Campbell developed a reputation as a competent manager and a hard worker with a strong commitment to the region. (see also p. 53.)

With JPMorgan Chase promising to continue WaMu’s charitable giving ($2.65 million to Washington nonprofits in 2009), it is good to have such a strong homegrown leader at the helm. Now if she could only persuade Chase to move its headquarters to Washington state. Leslie D. Helm

Photo by Hayley Young

Best Connected: Dan Rosen, Chair, Alliance of Angels, and CEO, Dan Rosen & Associates

As chair of the nonprofit Alliance of Angels, an organization of more than 100 individuals who invest in early-stage companies, Rosen has helped provide make-or-break funding for more than 140 Northwest entrepreneurs over the last dozen years. Often using personal funds, angel investors are the critical link between the “friends and family” stage of borrowing and the more formal venture capital stage-hence, the beatific moniker. Unlike venture capitalists, who look for quick returns on their investments, angel investors are often committed to firms for as long as eight years. In recent months, as venture capital has dried up, Rosen’s Alliance has played an even larger role in the fate of Seattle’s startups. Last year, the Alliance made 34 investment transactions worth about $6.4 million, a 64 percent increase over 2007 and the second-highest investment total since the organization was founded 12 years ago. Rosen boasts: “One hundred percent of the companies that have received money [from the Alliance] in the last four years are either still in business or have been acquired.” Randy Woods

The Alliance of Angels and Dan Rosen’s Investment Success Stories

• SnapIn Software
• OnRequest Images
• Neah Power Systems
• Pacific Bioscience Laboratories
• Insitu
• CleverSet
• Shelfari
• The Coffee Equipment Co.

Photo by Kyle Johnson

Best Business to Be in in a Post-Cash Economy: Bartering for Luxury Cars

If your company can’t give you a raise, would you settle for a $100,000 Audi instead? Seattle-based BizXchange can help you out. That’s what the business bartering service did this year for a cash-strapped media company that wanted to reward its employees.

“We help companies pay for products and services they need without having to use cash,” says BizX president and CEO Bob Bagga. “Smart business owners want to save money, whether the economy is booming or shrinking.”

Under Bagga’s supervision, Al Nabooda Automobiles, a Porsche dealership in Dubai, United Arab Emirates, exchanged 25 Audis (each with a sticker price of about $100,000) for unspecified media services from Dubai-based Arab Media Group. The transaction, worth about $2.2 million, was the most highly valued deal of the year on BizX.

With more than 2,000 existing members in its system, BizX allows companies to register online and indirectly exchange services with other businesses. Barter transactions between BizX members grew at an average of 32 percent per quarter during the first three quarters of 2009, and revenue is up 54 percent from the same period last year, Bagga notes.

Bagga says the most common exchanges in BizX come from real estate companies, media groups and the entertainment industry. He has watched some people pay for all or part of their homes and even witnessed an exchange for plastic surgery. Talia Schmidt

Best Startup and Startup Executive: Seattle Sounders FC and Tod Leiweke, CEO, Vulcan Sports and Entertainment

Flying in the face of the gnarliest recession in decades came the Major League Soccer expansion team Seattle Sounders FC, scarves held high and expectations guardedly low. Selling out every home game at Qwest Field, the Sounders have confounded futbol skeptics and local economic analysts. While credit goes to many, none is more central to the caper than Tod Leiweke, CEO of Vulcan Sports and Entertainment, Paul Allen’s amusement park that also includes the NFL Seahawks and NBA Portland Trail Blazers. Leiweke helped Allen fulfill a promise from 12 years earlier when Allen told statewide voters that if they helped fund a stadium, it would host soccer matches along with football.

“People asked us for a long time, ‘When is it going to happen?'” Leiweke, a 26-year veteran of pro sports administration, notes. “I would often say, ‘When we do it, we will do it right, so that it has a chance to succeed for the long haul.’ Now, when you look at this partnership between [majority owner] Joe Roth, [part-owner and general manager] Adrian Hanauer and Paul Allen, you can check the box that we put the right partnership together.” Art Thiel

Photo by Hayley Young

Best Leader in Education: James Jiambalvo, Dean, Michael G. Foster School of Business at the University of Washington, and the Kirby L. Cramer Chair in Business Administration

School rankings may not be a perfect measure of success, but there’s no doubt they raise an institution’s profile. As head of the UW’s Foster School of Business, Jim Jiambalvo, 60, has been instrumental in improving that school’s ranking on the U.S. News & World Report list of full-time public school MBA programs, up from 13th in 2008 to eighth in 2009. It’s just one measure of success for this public-accountant-turned-professor (he taught at the UW for three decades before becoming dean), who nabbed the school’s top spot after a nationwide search.

Jiambalvo has also re-energized the business school’s capital campaign, pulling in some $65 million in major gifts during the campaign’s final year in 2008. And he’s credited with re-envisioning the school’s new home: Paccar Hall, a $95 million, state-of-the-art facility set to open for classes in fall 2010. “It may be the single most important aspect of us becoming a successful school,” he says.

“Our ultimate goal is to be the best public business school in America,” he adds. “I don’t think that means being ranked number one. It’s about creating futures and changing the lives of our students; that’s the ultimate goal.” Elizabeth M. Economou

Best Business Expansion: Express Credit Union moves into low-income housing

About four years ago, long before the current economic crisis, Tricia McKay was looking for a way to address the fact that a shocking 20 percent of Puget Sound-area residents, mostly in the low-income bracket, had no access to banking institutions. “Far too many low-income people in the county had nowhere else to turn except to predatory lenders like payday-loan and check-cashing services,” she says. The result of her efforts is the newly expanded Express Credit Union, a 75-year-old financial institution with 1,400 members. Under the guidance of the Medina Foundation, McKay helped broaden Express’ business model to include lending services for moderate- to low-income customers, making it the only credit union to provide such assistance in King County. Working closely with BECU (the former Boeing Employees Credit Union) and eight nonprofit service providers, McKay helped set up 16 satellite offices, staffed with BECU customer service reps, in communities traditionally underserved by banks.

The new Express, says McKay-who at one time directed the Craig and Susan McCaw Foundation and managed Seattle’s Team Read tutoring program-is another step in her lifelong goal of eradicating the root causes of poverty. “We saw a huge gap in affordability of financial services,” she says. It looks like Express is helping to close that gap. In its first three months after relaunching, Express signed up 500 new members and now has more than $9 million in assets. During the next five years, McKay expects Express to serve between 6,500 and 7,000 low-income members. Randy Woods

Best Turnaround: Dendreon

Seattle biotech firm Dendreon has been through good times and bad. But the company got the news it needed and possibly secured its future in April, when it announced that its first drug out of the pipeline, Provenge, was shown to help men with prostate cancer live longer.

The reaction was immediate. Dendreon’s stock shot up to $20 from $8 per share the first day after the news was released (it’s now around $30, as Seattle Business goes to press). The company launched a clinical trial for a cancer drug in pill form, raised close to $200 million in a follow-up stock offering, announced it would build a manufacturing plant in Atlanta and submitted its final application to the Food and Drug Administration to sell its drug commercially.

This from a firm that had unfavorable results from its Phase I trial, a stock trading under $2 a share in 2002 and no future. But the results came in and, eventually, Dendreon showed long-term survivability rates were higher with Provenge and was able to expand its trial to 500 men, the critical stage that ultimately vindicated the business. Throw in some politicking on the FDA’s 2007 advisory panel and there were enough ups and downs to make Dendreon stockholders reach for the Dramamine. The future, at least, looks a lot smoother. Chris Winters

Most Eagerly Anticipated and Desperately Needed Upgrade: Windows 7

Let’s face it. Microsoft blew it with Windows Vista. When it was released, it was obviously not ready for prime time, was too bloated, and worst of all, all those “Vista Ready” PCs turned out to be … well, not. Not by a long shot.

It was a PR nightmare that even bringing Jerry Seinfeld out of retirement couldn’t save. But here we were in 2008, Windows XP was seven years old, and while it was a perfectly decent product, it was getting long in the tooth. Besides, all the Apple fanboys wouldn’t stop their cackling over all the cool stuff they were doing with Leopard. Those “I’m a Mac” commercials were especially grating.

The answer was Windows 7, which you’d have to think was what Microsoft should have/might actually have been working on all along, kind of like the Coca-Cola Classic to the New Coke that was Vista. Early reviews were good. Great even. “What took you so long?” they asked. Good question. Chris Winters

Kind of a Big Deal Dept.: Amazon Buys Zappos

You may not be able to judge a book by its cover, but to online retailer Amazon.com, shoes are another story.

In a deal apparently blessed by St. Hubbins, the internet bookseller’s $880 million purchase of the internet shoe company Zappos not only enabled Amazon to get a better toehold in the online footwear market, it also allowed Jeff Bezos to brag that he finally owns more shoes than Imelda Marcos could ever dream of.

In a close second place, Microsoft sold off Razorfish, pocketing $530 million for the digital ad agency, which lost $50 million on $360 million in revenue for fiscal 2008-2009, and was forced to lay off 70 people earlier this year. The new owner of Razorfish, which Microsoft bought as part of its $6 billion acquisition of aQuantive in 2007, is PR firm Publicis in the West. Maybe Publicis will be a more natural fit for the agency, which has somewhere in the neighborhood of 2,000 employees worldwide. David Volk, Chris Winters

Best Loss Leader: Microsoft Windows Live

Last year’s financial results for Microsoft’s Windows Live division read like the punch line of a good-news-bad-news joke. The good news: The division that includes Hotmail and Live Messenger raked in $520 million in revenues in fiscal 2009. The bad news: It lost $560 million.

And then we wonder why there are layoffs in Redmond. But it may be a small price to pay for hot internet properties. At least Hotmail remains more popular than Google’s Gmail service … just not as popular as Yahoo Mail. David Volk

Best Sign That Venture Capital Isn’t Dead: Biotech Firms Rake In Most of the Cash

The year 2009 will go down as the time of the Great Recession, but there remained a few signs of life. In particular, venture capital still provided a bit of money for startups. As was reflected in the public markets (see p. 35), biotechnology and medical sciences proved a popular draw for investor capital, with networking technology and video games following.

The top venture deals of the year:

1. Calypso Medical: The company, which is developing ways to reduce the side effects of radiation therapy for cancer, raised $50 million in September from Skyline Ventures and original investor and founder Frazier Healthcare Ventures.
2. Pathway Medical Technologies landed $42.5 million in March to build devices used to treat diseases of the arteries. Investors include WRF Capital, Forbion Capital Partners, HLM Venture Partners and others.
3. NanoString Technologies, a spinoff of Leroy Hood’s Institute for Systems Biology, scored a cool $30 million in June to boost sales of its product, a device used to measure gene activity in tissue samples. Investors included Clarus Ventures, OVP Venture Partners and Draper Fisher Jurvetson.
4. Calistoga Pharmaceuticals, a Seattle company that got its start licensing drug technology from now-defunct Icos to make cancer therapies, raised $30 million in May from Frazier Healthcare Ventures, Alta Partners, Three Arch Partners and Amgen Ventures.
5. NewPath Networks, a Seattle maker of wireless infrastructure technology, raised $30 million in April from the private equity firm Charterhouse Group and venture company Meritage Funds.

Other significant deals this year: Smith & Tinker (games): $29 million, Popcap Games (games): $22.5 million, Telecom Transport Management (networking): $20 million, Audience Science (advertising): $20 million. Chris Winters

Best Silver Lining to a (Really) Dark Cloud: Entellium Postscript

It isn’t often that the people left holding the bag after a business bankruptcy get anything more than heartburn, but some of the workers at ill-fated software maker Entellium walked away with something a little more lucrative.

Fourteen of the people who kept the company going during its final days received an unexpected New Year’s gift when a bankruptcy judge ordered that they be awarded more than $380,000 total in incentive bonuses and severance pay.

Yes, many were upper-level managers, but it’s better than nothing. The bulk of the company’s 200 staffers were unceremoniously laid off without warning and walked away empty-handed … unless you count the satisfaction from seeing the former chief executive officer and chief financial officer get prison sentences for falsifying the company’s revenues. David Volk

Better Late Than Never Dept.: Link Light Rail

It may have been millions of dollars over budget, several years later and many miles shorter than expected, but Link Light Rail service began in mid-July to cheers, generally positive reviews and a rider load of about 96,000 over its first two days.

Of course, it helped that the rides were free on opening weekend. Once fares kicked in on Monday, the crowds on the 14-mile line were much thinner. The Seattle Times reported some trains left Tukwila with as few as eight riders while passenger counts around downtown were closer to 100.

Maybe that’s why they call it “light rail.” David Volk

Best Extreme Makeover: Unbranding Starbucks

We’d never understood the phrase “authentic replica” until we heard about Starbucks’ newest bit of sales strategy: running as far away from itself as it possibly can.

At least that’s the way it seemed in July when the coffee company redesigned a store on Seattle’s Capitol Hill, which already has plenty of independent coffeehouses. This location was originally slated to close and deliberately omitted any evidence of its corporate identity. Instead, 15th Avenue Coffee & Tea (inspired by Starbucks) opted to recreate the feel of an authentic community coffeehouse complete with china cups, live entertainment, wine and beer sales, and the ever-present rustic furniture.

The stealth store was the first of three that the company planned to test in Seattle. One local wag wondered what would be next. Home Depot opening a “neighborhood” store next to the local True Value Hardware? David Volk

Photo by Hayley Young

Most Innovative Charity Program: Food Lifeline

Who knew that attending a Macy’s fashion show, going to a gourmet dinner party or even opening a free checking account could make such a difference in feeding the hungry? A member of hunger relief organization Feeding America, Food Lifeline set up corporate-sponsored programs doing just this to help distribute nearly 22 million pounds of food to more than 660,000 hungry people in western Washington this year.

Along with a variety of local business partnerships (including the Seattle Sounders, Boeing, QFC, Macy’s and Seattle Metropolitan Credit Union, to name a few) and national promotions with brands such as Arm & Hammer, Stouffer’s, Kraft Macaroni & Cheese and Snickers, Food Lifeline President and CEO Linda Nageotte launched Seattle’s Table, Produce for the People and Grocery Rescue, which arranges same-day donations of excess food from restaurants, markets and food service providers.

Food Lifeline uniquely operates under the philosophy that building partnerships and fostering long-term mutually beneficial relationships with participating businesses will have more effective results than simple handouts. As a result of these practices, Food Lifeline received a $900,000 grant from the Gates Foundation, among many other corporate and personal donations. The 58-employee organization manages to supply almost half of all food distributed by King County food banks. Kate Vesper

Most Unlikely Survivor: Cell Therapeutics

You could be forgiven for thinking at the end of 2008 that Cell Therapeutics’ days were numbered. It ended the year with $124 million in debt, no revenue (like most biotech firms in drug development phase) and an August 1-for-10 reverse stock split that failed to prevent the company’s share price from closing out the year at 14 cents, down 99.3 percent from the year before.

We at Seattle Business even said it was time to unplug the machine.

And yet, the end hasn’t come. Or it might just have been postponed.

The year 2009 may well be the year Cell Therapeutics hung on, fighting a rearguard action against bankruptcy. It sold off its share of the lymphoma drug Zevalin for $18 million (later reduced to about $14 million in arbitration), then cut the 34 jobs (of 122 total in Seattle) related to that program. It closed an animal testing facility in Italy (another 62 jobs gone) and then raised $15 million from one of its investors. Then it sold $20 million in a stock offering.

Come June, the company released promising data on its lead drug candidate, Pixantrone, for non-Hodgkins lymphoma, causing its share price to crest above $2 for the first time in years (although just for a day). The firm gave several executives, including CEO James Bianco, $250,000 in what may seem ill-timed largesse but was actually deferred bonuses from 2008-kind of a “thanks for not bailing on us” note.

Also in June: the business unloaded $52.9 million in debt (paying cash and stock to get rid of it) and turned in a new application for Pixantrone to the FDA. Then in August, the company sold $30 million in preferred stock; the proceeds would be used to buy back a lot of common stock that it had been selling off to keep the lights on.

In September came the kicker: The FDA agreed to review Pixantrone. Cell Therapeutics asked for an expedited review, which would still take six months. The company has another drug in the pipeline, but it’s still at an early stage, and the company appears to have bet the farm on Pixantrone garnering a favorable review from the FDA.

Cell Therapeutics isn’t safe yet, but can see the light at the end of the tunnel. Just hope it isn’t an oncoming train. Chris Winters

Best Way to Co-Opt the Competition / Bypass a Porn Filter: Microsoft Bing

It used to be if you wanted to look at dirty pictures, you had to summon your courage, walk into a convenience store, buy a bunch of things you didn’t need, then nonchalantly ask for a Penthouse or Playboy as though it wasn’t the real reason you stopped in.

Not only has internet porn removed that walk of shame, but Microsoft’s new search engine, Bing, made it easy to bypass porn filters at home or work. All users have to do is pick their poison, select video, put the cursor on one of the thumbnails and watch the tiny video play itself out. That’s one way to increase market share, at least until Microsoft puts out a “security patch” that fixes that particular “bug.”

If you’re trying to beat Google at the search game, however, another way is to team up with its biggest rival. Which is why Microsoft’s alliance with Yahoo helped Bing make a big boom, allowing the company to attain the No. 2 position in the increasingly important world of search.

Whether Bing’s entry into the marketplace will be a good thing over the long haul depends on whether you’re a boss, a parent, a Microsoft supporter or a porn-seeking teen. David Volk

The Top 10 Stocks of 2009

The Worst of Business 2009

Worst News Story: Underemployment, Unemployment High, Higher

In this dark economic climate, we wait on tenterhooks to see if the unemployment rate in Washington will join that of Oregon and California, edging into double-digit territory.

Wait no longer. While the state’s jobless rate hit 9.3 percent in September, that number is simply the official figure from Washington’s Employment Security Department, which only counts those of the jobless who are actively looking for work. New data from the U.S. Bureau of Labor Statistics say that roughly 6.3 percent of the state are out of work and not looking, or are working part time involuntarily.

Why would someone who is unemployed not be looking for work? In short: It’s discouraging.

Consider the tally of layoffs this year, including three major employers cutting significant chunks of their work forces:

• Boeing: 10,000 jobs this year worldwide;
• Starbucks: 6,700 jobs;
• Microsoft: 5,800 jobs.

And then there’s a long list of other companies cutting staff, adding up to at least 5,000 more, not to mention the uncounted small companies that cut handfuls of jobs or quietly went out of business. Chris Winters

50-100 layoffs: Amgen [100], Cardiac Science [66], Cell Therapeutics (96 worldwide), Expedia [85], F5 Networks (85), Fred Hutchinson Cancer Research Center (83), Nautilus (50), Philips Electronics (96), Premera (95), Razorfish (70 nationwide), RealNetworks (70), SumTotal Systems (58), Vulcan (50), Watchguard (55 worldwide).

101-200: Adaptis (138; shut down), Agilent (120), Alcoa (106), Attachmate (120), Coast Engine and Equipment (111), Eddie Bauer (193 nationwide), Hampton Affiliates (175), Intermec (150), Key Bank (200), Liberty Mutual/Safeco (100), Magnolia Audio Video/Best Buy (182), Results Bellingham (150), Seattle Post-Intelligencer (181), ZymoGenetics (161).

More than 200: Allied Waste/Rabanco (203), Genie Industries (260), Itronix (300), Qwest (235), Russell Investments (400), Swedish Medical Center (200), TTM Technologies (429), Weyerhaeuser (221).

Compiled from regional news sources

Worst Reflexive News Story: Bye Bye, Miss American P-I

After years of battling the Seattle Times, the city’s oldest and scrappiest newspaper, the Seattle Post-Intelligencer, ceased publication in March with an edition that was, ironically enough, one of its biggest sellers ever. Unless you were one of the subjects of its many hard-hitting investigative series, that’s the bad news. The good news is that the website Newspaperdeathwatch.com, reported that in the first five months after the print edition ceased, Seattlepi.com managed to retain most of the readers it had before the paper folded. And it just might prove to be the example the news business needs to see how online news can be made to work (i.e., even scrappier than before). David Volk

The Hall of Shame: Businesspeople Behaving Badly

Michael Mastro

Call him Mastro the Magician: This 84-year-old made billions of dollars disappear into thin air. For more than 40 years, Seattle-based developer Michael Mastro held a successful career in the real estate market, primarily working on low-profile projects.

But when the market collapsed, it took down Mastro’s empire with it. Now, the former developer has been forced into Chapter 7 federal bankruptcy.

James Rigby, the court-appointed trustee hired to oversee the liquidation of Mastro’s assets, said this could be the biggest bankruptcy the western Washington district has ever seen.

Mastro’s statement of his finances reveals almost $587 million in liabilities-$100 million of which is still owed to individual investors and local organizations like the Italian Club of Seattle. Yet he reported just $249 million in assets. The documents also indicate Mastro borrowed heavily from dozens of banks to help secure finances for his projects, while simultaneously loaning millions to other developers.

A handful of banks have sued Mastro for unpaid loans and millions of dollars they will likely never see again, including Charter Bank, Washington First International Bank and Wells Fargo Bank. Meanwhile, the “friends and family” investors who supported him early on are likely to get nothing.

Stuart Fuhlendorf

Two years after he stepped down as chief financial officer at digital storage technology company Isilon Systems Inc., Stuart Fuhlendorf made headlines again this year after the Securities and Exchange Commission (SEC) charged him with fraud. The SEC reported that the former CFO was cutting secret side deals with Isilon customers, allowing the firm to report inflated sales numbers following its initial public offering in 2006. The SEC began its investigation in 2007.

Fuhlendorf hid the true terms of the deals from Isilon’s controller, audit committee and outside auditor, according to the SEC, leading to the company reporting $4.8 million in improper revenue.

In a court filing in U.S. District Court in Seattle, the SEC sought an injunction against Fuhlendorf, and wants to make him pay back his gains, plus a financial penalty, bonuses and other compensation he received, as well as to bar him from serving as an officer or director of another public company. Fuhlendorf’s attorney, Peter Ehrlichman, has denied the allegations.

Pradyumna Samal

Mustn’t cry over spilled milkor wine, in this case.

When online wine company Vinado hired Bellevue-based web development company Minecode to help design some features for its website, Seth Micarelli, Vinado’s CEO, never imagined it would ultimately lead to the demise of his empire.

In 2006, the two companies began having problems over a contract dispute. Minecode President and CEO Pradyumna Samal ordered his project manager, Sandeep Verma, to disable the “virtual gift shop” function on the Vinado website by removing two programs, significantly impacting the company’s revenue. Vinado restored the programs a few days later. But in early January 2007, Samal hacked into the website once again, this time deleting all of Vinado.com, its e-mail server and entire database. Total damages to Vinado add up to at least $115,000. The site is now defunct.

Samal and Minecode ultimately pleaded guilty to two counts of computer intrusion. Earlier this year, a federal court judge sentenced Samal to 90 days of home detention with electronic monitoring, as well as three years’ probation. The judge also sentenced Minecode to three years’ probation and ordered it to pay $144,000 in fines and $120,000 in restitution.

Susan Kinney

Susan Kinney, who managed funds at the Rotary Club of Seattle to eradicate land mines in war-torn nations and to provide polio vaccinations to Third World kids, apparently was scraping a little off the top$350,000 over more than four years, according to the court papers charging her with theft in September.

Kinney’s former colleagues described her as a trusted friend, making them disastrously wrong on both counts. Kinney faces five years in a federal penitentiary, while her colleagues had to dip into the Rotary’s cash reserves to cover the shortfall. Talia Schmidt, Chris Winters

Worst Employee: Thinking Globally, Stealing Locally

Brett M. Smith didn’t work for Washington Mutual, Countrywide Mortgage or Lehman Brothers, but that didn’t keep him from thinking globally and acting locally when he tried to cash in on a trend and steal big, even if it was only from a Northwest lumber business. The 25-year-old Puyallup man embezzled $2.5 million from Tacoma-based Manke Lumber Co. by using his position as a lumber weigher and grader to falsify records so that deliverers would be paid for lumber they had not delivered. But unlike the Wall Streeters who bailed out with platinum parachutes, the small-time Smith was sentenced to 10 years in prison and had to forfeit bank accounts and a BMW. So much for being upwardly mobile. David Volk

Your Flight Has Been Delayed Indefinitely Dept.: Waiting on the Dreamliner

If you think some of the flight delays you’ve had to deal with lately are bad, consider the fate of executives at the 50 or so airlines that opted to order Boeing’s composite-hulled 787 Dreamliner. Although it was originally slated to start flying in mid-2008, there have been so many delays that the plane, now nicknamed the 7L87, is scheduled for completion in late 2010. Delivery of the 747-8 has also been delayed. What frustrates airline execs even more is that every time they call Boeing to check on arrival time, they’re told their plane will arrive on schedule. David Volk

Toughest Out-of-State Competitor That Isn’t Google: South Carolina

So goes Boeing, so goes the local economy, and it looks as if Boeing is headed South.

The former Vought Aircraft Industries plant in North Charleston, S.C., was one of the key suppliers of 787 fuselage sections. After Boeing completely failed to see how outsourcing the manufacture and assembly of the 787 to a dozen companies around the world might produce a little logisitics problem, it bought the plant from Vought last year.

Cue the conniptions in Seattle. After speculation that oh-no-Boeing’s-going and milquetoast promises of hometown loyalty a la the Sonics, Boeing announced in October that, well gol-darnit, they will open the second 787 production line down south after all! No official mention of that inconvenient strike by the local Machinsts last year, right when Boeing’s jumbo-sized production problems were coming to light, except in the snarky comment sections of local websites.

With a backlog of 787 orders expected to last several years, there won’t be a shortage of aerospace work in Washington for a while. But aerospace, the largest source of employment in Washington state, is intensely cyclical. When the next slowdown hits, Boeing will be looking for places to cut back. Given their track record, we’re not optimistic that Washington won’t be one of them. Chris Winters

Most Prescient Quote: Phil Condit, former CEO, The Boeing Co.

“We have started a very fundamental transformation of Boeing.” March 21, 2001, on announcing Boeing would move its headquarters out of Seattle.

Second-Worst Breakup: Russell to Tacoma: “It’s Not Me, It’s You.”

We’re not sure what Tacoma officials were told when Russell Investments execs called to say they were moving to Seattle after 73 years in the City of Destiny, but we wouldn’t be surprised if it was a contender for lamest breakup line ever.

Given the number of incentives it offered to keep one of its marquee businesses, Tacoma did everything but show a little leg while all Seattle did was bat its eyelashes seductively … and offer dirt-cheap real estate. The Tacoma News-Tribune reported that the collapse of Washington Mutual allowed Russell’s parent, Northwestern Mutual Life, to buy the former WaMu Tower for $150 per square foot, far less than the $400 per square foot it cost to build the 863,000-square-foot building.

What’s good for Russell is good for Seattle, apparently, but in an editorial, the ever-conciliatory Seattle Times tried to smear some butter on the burn by saying Seattle still felt the loss of Boeing’s corporate headquarters. The piece then added insult to injury by referring to Russell founder Frank Russell, saying, “Tacoma never was the logical place to put the company he built.” The paper might as well have added, “You should stick to timber” and finished it off with “Have you ever heard of deodorant?”

There’s nothing like a sore winner. David Volk

Dept. of Facepalm: Costco and Microsoft discover the postracial society hasn’t arrived yet

Costco’s progressive employment policies may make it the darling of liberals, but even the mega-retailer of all things mega makes mistakes, and when it does, it’s a doozy. The Kirkland-based company stopped selling a children’s doll when it got complaints from its East Coast stores. Apparently, customers weren’t happy to see African-American and Hispanic dolls wearing a headband that said “Lil Monkey,” even if the dolls were sitting next to a banana and a small monkey. At least the firm didn’t put out “Lil Jihadi” dolls in Arab garb.

Microsoft earned an even bigger “What Were They Thinking” award when the geniuses in marketing decided to localize an illustration for the Polish market. The English version of the page shows an Asian man, a black man and a white woman sitting in what appears to be a conference room. The Polish-language version uses the same photo, but the black man’s head had been Photoshopped out and replaced with the head of a white man. We admit there probably aren’t all that many black people in Poland, but we bet there are even fewer white guys with black hands. David Volk

Worst Way to Game Amazon’s Ranking System: Amazon’s Mechanical Turk

It should come as no surprise that friends and relatives of authors write glowing reviews of their books on Amazon.com. Likewise, people who dislike a particular author also write negative reviews just to drive down ratings of the writer’s work. Still, most of them do it out of passion even if they haven’t read the book.

An employee at the electronics company Belkin took the practice to a new low when he offered users of Mechanical TurkAmazon’s “crowdsourcing” service, which amalgamates labor en masse for doing repetitive and/or boring business tasks65 cents apiece for each five-star review they posted on Amazon about a router they didn’t own, and then marking any negative reviews as “unhelpful.” Judging from current reviews on Amazon, they had their work cut out for them. Of 19 reviews posted (assuming none were from the Turks), only two were positive. One review was headlined “Don’t buy it. Don’t. Seriously. Don’t.” Another said, “I’d Enter 0 stars if I could.”

The company later apologized for the “rogue employees'” marketing strategy, but the damage was done. People who comment on reviews left cynical responses to the only two positive reviews that remain.

“Well, I’m glad you got your 65 cents,” one said in response to a five-star review. A four-star review prompted another to write, “He won’t get his 65 cents. He didn’t mark the product five stars.” David Volk

Bedford Falls II: Potter’s Revenge: Banks Fail, No George Bailey in Sight

No matter how hard we try, we can’t think of anything funny to say about bank closures after three Washington institutions bit the dust this past year: the Bank of Clark County in Vancouver, Westsound Bank in Bremerton and Venture Bank in Lacey. All three were seized by regulators and sold off to other banks. Only Westsound Bank’s new owner, Kitsap Bank, is based in Washington state. And as Seattle Business went to print, Sterling Bank, the state’s largest independent bank, was also at risk following a federal order that requires it to raise $300 million by closing branches and selling assets. David Volk

Worst Use of Dead Trees: Clearwire’s Mass Mailing

It took a while, but America Online finally realized we just weren’t that into them. And it’s a good thing, too, because we were running out of things to do with those free downloadable CDs promising more free hours of an internet service in a month than there are hours in a month. Hell, we’ve even been using the CDs for skeet.

We only hope Clearwire will learn the lesson a little bit faster. A word to the wise: If we haven’t already taken you up on your offer after the first 20 mailers, it won’t help to address the letter to the people who lived here before we did. David Volk

Worst Travel Scam by a Legitimate Company: Expedia Sticks it to The Man, Both Little and Big

In the good old days of travel, you didn’t have to worry about pickpockets until you arrived at your destination. Thanks to the internet and Expedia.com, however, the process of parting tourists from their money became much more efficient. Travelers who booked hotels on the site from 2003 to 2006 got their wallets lightened before they even left home when Expedia charged customers hotel taxes based on the retail price while the site was paying taxes based on the wholesale rate. Unhappy consumers filed suit and a criminal probe resulted in Expedia having to pay $184 million for the overcharges. David Volk

Worst Workplace (That Hasn’t Closed): How Lowe Can You Go? Dept.

A Lowe’s hardware store in Longview was ordered to pay $1.74 million in an odd sexual harassment suit filed by three employees. Two of the employees were men who became victims of harassment because their co-workers thought they were gay. When the two men tired of the grief, they reported the problem to a manager who was busy harassing a female underling. The situation was enough to prompt an attorney with the Equal Employment Opportunities Commission to call the store a “cesspool of harassment.” David Volk

Most Inflated Resumes: Two to Concur

Concur Technologies investors found themselves singing the blues when it was discovered that CEO Steve Singh claimed that he had graduated from the University of Michigan when that wasn’t the case. The revelation sent the stock plunging 20 percent. Although such a violation of business ethics could be punished by dismissal, the company’s board of directors expressed confidence in Singh.

Of course, it didn’t hurt that Singh’s brother, Rajeev, the chief financial officer of the firm, is also on the board and was sympathetic to his situation. As it turns out, Rajeev Singh claimed that he had a degree from noted science and engineering school Kettering University, when in fact he had received his engineering degree from the more humble Western Michigan University.

A runner-up in this category is Peter Christothoulou, the co-founder and chief operating officer of Seattle-based Marchex. He was caught in March claiming to have received a bachelor’s in economics from the University of Washington, when in fact he had never graduated. The information was removed from his corporate biography. David Volk, Chris Winters

Bankruptcy Has Its Privileges Dept.: Goodbye Yellowstone Club

Maybe Groucho Marx was right when he said he wouldn’t belong to any club that would accept him as a member.

A select few of America’s super-rich-Bill Gates was reportedly a member-accepted invitations to the Yellowstone Club, a residential, members-only Montana ski resort, and look where it got them: Even paying $250,000 to become a member, at least $5 million for a home and dues of $20,000 wasn’t enough to insulate them from the economic downturn. The resort became something of a white elephant in the divorce case between local timber investor Tim Blixseth and his ex-wife Edra Blixseth, now a California socialite. Edra took it over after their divorce, but after running up debts of $157 million was forced into bankruptcy liquidation. Court papers attest her profligate spending-she’d pay $15,000 to fly in her housekeeper from Palm Springs in a private Gulfstream jet to clean her Seattle condo, and often used the plane to fly in her dogs as well-led to the financial crunch. She sold off the club in the summer for $115 million, although it’s not clear whether Tim Blixseth has recouped any of his investment. Lawyers are currently fighting over lawyer fees in the case.

The members joined the ranks of a slightly less exclusive group: those who live in a troubled housing development. Can unfixed broken windows and graffiti be far behind? David Volk, Chris Winters

Worst Unintentional Irony: Amazon Plays Big Brother

When Amazon.com remotely deleted some electronic books from users’ Kindles in July, it caused an indignant backlash over rights to purchased property. The problem emerged from a dispute between Amazon and MobileReference over whether MobileReference had the rights to offer the books for sale electronically. CEO Jeff Bezos has since issued an apology and refund certificates to those affected, settling with one 17-year-old student who filed suit over the deletions, but that didn’t prevent perceptions that the act was uncannily Big Brotheresqueparticularly since one of the deleted e-books was George Orwell’s 1984. Amazon’s ability to delete files without notifying customers or obtaining their permission is a frightening reminder of the rising power that large internet companies have over our lives. Kate Vesper

Shortest Lived Victory Dept.: RealNetworks’ Stock Battles Gravity

RealNetworks’ real excitement over its first real positive news in a really long time turned into a really big bummer really fast after an industry analyst hit the firm with a dose of reality.

Less than 24 hours after the firm’s stock shot up 7 percent on news that RealNetworks’ Rhapsody subscription music streaming service would become an application available for iPhones and the iPod touch, the expert said it really wasn’t that big a deal. To add insult to injury, JPMorgan analyst Vasily Karasyo reminded the market that Real was still facing litigation worth millions of dollars.

The stock gave back all its gains before the day was out. David Volk

The Bottom 10 Stocks of 2009

Worst Trend: Fees, Fees and More Fees

Despite the hard economic times, or perhaps because of them, bigger corporations like airlines and banks have increased the ways in which they can nickel-and-dime their customers by adding and increasing fees for services that were once free.

With fewer people able to afford to fly and fuel costs on the rise, the airlines were left with the task of making up for losses somehow. It started with checking a second bag (now $50 on American Airlines), charging for food on domestic flights ($7 sandwiches on Alaska Airlines, credit or debit only), sitting in an exit row or aisle seat ($15 on US Airways) or extra fees for unaccompanied minors ($75 on Alaska Airlines).

United Airlines alone expects to rake in more than $1 billion this year in fees, ranging from baggage to accelerated frequent flier awards, while US Airways brought in more than $100 million in fees for checked bags in the second quarter alone.

Banks are no exception when it comes to racking up fees to help offset massive loan losses. Watching your credit cards’ interest rates creep (or rocket) skyward is old news, as is being dinged for transferring your balance to a lower-rate card. But some of the country’s largest banks, like JPMorgan Chase (which now owns WaMu’s business), US Bank and Wells Fargo recently billed small-business customers for federal deposit insurance increases, the New York Times reports, while Citigroup and PNC Financial are charging customers nearly 3 percent international transaction fees when consumers use their debit cards abroad. And free checking, long a staple of WaMu’s offerings in the Northwest, may be a thing of the past in most other corners of the country: Bank of America raised fees on its basic monthly checking account from $5.95 to $8.95. Meanwhile, average ATM charges rose to $1.97 from $1.78 in 2008, and the harshest fee around-the dreaded overdraft fee-rose 4 percent, to an average of $26, with Bank of America charging $35.

In this new world, everything has a price. Talia Schmidt