Archive for April, 2010

If approved and funded construction could begin by 2014

By William Jackson
Apr 28, 2010

A Washington audience at the Internet2 spring membership meeting Wednesday was linked by a high-speed, high-definition video to an underground physics lab 1,500 miles away and nearly 5,000 feet underground.

The videoconference introduced about 700 Internet2 attendees to the former Homestake Gold Mine near Lead, S.D., which is being considered by the National Science Foundation as a national Deep Underground Science and Engineering Lab, where physicists, biologists and geologists could research fundamental questions about matter, energy, life and the Earth. It also demonstrated the ability of high-performance research and education networks to link facilities around the world and deliver large amounts of scientific data.

If approved by NSF and funded by Congress, large-scale experiments at Homestake DUSEL would generate huge volumes of data that would be distributed to researchers around the world, said Claude Garelik, chief networking and security officer for the South Dakota Board of Regents, which has led development of the underground lab in the deepest mine in the United States. The regents oversee the state’s six public universities.

“The educational community is out in front with this kind of thing,” Garelik said of the live videoconference link. “High definition is new technology to the industry, but we have been doing videoconferencing for a long time.”

Internet2, established in 1996 to pick up where the NSFnet Internet backbone left off, is a testbed research and education network on which users can try new technologies and applications that might not be feasible on commercial networks. Internet2 also provides bigger pipes to accommodate the needs of power users in the research community. A consortium of more than 200 universities, 70 corporations and 45 affiliate members, including government agencies, operate the network, which provides a 20-gigabit/sec national backbone that is expected to go to 30-gigabits next year.

That backbone, linked with regional networks, provided the link with the old Homestake Mine. The mine, which ceased production in 2002, is the deepest in the United States with 370 miles of tunnels up to 8,000 feet deep. It is a stable, relatively dry hard-rock mine without the volatile gases that can plague coal mines, and the state began pursuing its development as a deep-science venue when the owners announced in 2000 their intentions of closing it down.

Planning and initial development has been funded by state and private money and it now is known as the Sanford Underground Laboratory at Homestake. It was selected in 2007 by NSF as the primary candidate for a national deep underground lab.

DUSEL would fill the need for an interdisciplinary deep science lab to research some of the most basic questions of modern science, including the nature of the dark matter and dark energy that make up more than 95 percent of everything visible in the universe. In addition, the miles of rock shielding would allow the examination of neutrino particles that pervade the cosmos but almost never interact with matter. The deep shafts also would allow geology experiments, research into extreme biology and practical research into technologies such as carbon dioxide sequestration.

The NSF is evaluating design and requirements for large-scale DUSEL facilities, and if approved and funded construction at Homestake could begin by 2014, Kevin Lesko, who is leading the University of California at Berkeley team designing the facility, said from a tunnel 4,850 feet down. The underground campus would contain clean rooms, office space and laboratory facilities, as well as two 100,000-gallon detector tanks that would collect neutrinos generated at the Fermi National Lab outside of Chicago and beamed through the Earth at Homestake. Currently, there are some 20 smaller experiments operating on six levels, down to about 5,000 feet.

Network engineers have installed fiber optic cable in the old mine to support existing research as well as basic infrastructure such as power and ventilation. Although the Homestake is relatively dry and stable as mines go, the underground environment still is harsh for networking. Water, dust, humidity and temperature changes require that cable be protected and that switches and routers be installed in weather-proof boxes.

The fiber supporting the video link extends to the main science and technology office at the surface of the mine, where there is a point of presence connecting it with South Dakota’s Research, Education and Economic Development network, known as REED. REED, which supports multiple 10 gigabit/sec waves and links the state’s six public universities, connects with the Great Plains regional research and education network at Kansas City, which peers with the Internet2 backbone. Internet2 links with the Mid Atlantic regional network, which had a 1-gig link to the conference site in the Washington suburb of Arlington, Va.

The video conference used high-definition equipment donated by Polycom. “It wasn’t especially difficult, except for locating the equipment and getting it set up in the mine,” said Garelik.

New York Times (Blog) -April 14, 2010

By Cyrus Sanati

Corporate executives from around the globe feel more confident about making deals, with many of them planning mergers and acquisitions in the near future, according to a new survey of business confidence by Ernst & Young and the Economist Intelligence Unit.

The Capital Confidence Barometer, a survey of more than 800 professionals worldwide, found that 57 percent of businesses say they are likely or highly likely to acquire a rival in the next 12 months, with 47 percent expecting to reach a deal in the next six months. That compares with six months ago when the biannual survey found that just 33 percent were planning acquisitions over the coming 12 months, with 25 percent expecting deals in the coming six months.

The biannual survey complements another look at mergers and acquisitions released on Wednesday by the Brunswick Group, a corporate communications firm. That survey showed top bankers and lawyers were even more optimistic, with two-thirds saying they thought deal-making activity was on the increase.

The Ernst & Young study also found that confidence in credit conditions was improving, as 62 percent of respondents said they could obtain financing for major capital projects and acquisitions in the next 12 months. Up to now, most deals have been cash-based because of the lack of bank financing.

“Improving market conditions have more companies shopping again and those with capital to deploy are ahead of the game,” Richard Jeanneret, vice chairman of transaction advisory services at Ernst & Young, said in a statement. “There’s a greater focus on growth opportunities and M.&A. is one way to achieve that goal.”

The survey, which was conducted in late March, also found that 76 percent of businesses were now focused on growth, compared with 56 percent six months ago. Those executives in the automotive sector were the most confident of growth, with 81 percent of respondents expecting their businesses to expand — a result that makes sense given the pounding that the auto industry took during the financial crisis.

Meanwhile, executives in the energy and pharmaceuticals sectors said that they were very likely to focus on mergers and acquisitions, as well as divestitures. About 69 percent of oil and gas companies said they were planning to sell a piece of their businesses in the next six months.

But while there was a pickup in sentiment concerning deals, the outlook for the broader economy remained somewhat weak. with just 40 percent of respondents expecting the economic downturn to end within 12 months.

There was a wide dispersion of confidence related to the economy depending on where the respondents were based. The most optimistic countries were Australia at 93 percent, India at 91 percent, Brazil at 83 percent and China at 80 percent.

The Western developed markets were among the least confident of the group, with France at 44 percent, the United States at 56 percent and Britain at 57 percent.

- Cyrus Sanati

United Chief on 3rd Verse of Old Tune

By JAD MOUAWAD

Published: April 8, 2010

When Glenn F. Tilton took the helm at United Airlines eight years ago, he inherited an airline that was fighting for its life.

Glenn F. Tilton, chief executive of UAL Corporation, has long been a champion of merging airlines to reduce capacity.

It hasn’t gotten easier since.

His tenure has since mirrored the roller-coaster ride of the entire industry, as United has gone in and out of bankruptcy, had contentious relations with its unions and suffered steep losses. Even as the airline has sought to cut capacity and reduce costs, it has had only one profitable year since Mr. Tilton took over in 2002.

Now, Mr. Tilton is seeking once more to find salvation in a tie-up with a competing airline. But as United and US Airways resume their merger talks — the third go-round since 2000 — one question remains: Is Mr. Tilton simply trying to make the best of a weak hand?

He has long been a champion of merging airlines to restore consistent profits in the bruising world of airline competition. Along the way, he has held talks with most of the major carriers, courted Continental Airlines and even Delta Air Lines, and rhapsodized at length about the benefits of consolidation.

“If you’ve attended a lunch where Glenn Tilton has spoken in the past eight years, he would dust off the same index card about the need for consolidation,” said Robert W. Mann, an airline analyst based in Port Washington, N.Y. “He has been very consistent, very determined and will not be deterred.”

Mr. Tilton was not available for comment on Thursday.

A combination of United and US Airways would create the second-largest United States carrier by traffic. The merger of Delta Air Lines and Northwest Airlines, completed at the beginning of this year, created the current industry leader.

United and US Airways have not commented, but people who had been briefed on the discussions said on Wednesday that the airlines were discussing a merger. Wall Street investors and analysts welcomed the news. Shares of all airlines rose sharply on Thursday, as investors speculated on other possible mergers.

US Airways shares rose 10.7 percent, to close at $7.55. Shares of UAL Corporation, the parent company of United, rose by 6.75 percent, to $20.23.

“The potential for additional industry consolidation is an unambiguous positive,” wrote Gary Chase, an airline analyst at Barclays Capital. He estimated that a combination of United and US Airways would result in cost savings of $250 million to $400 million a year.

A long-time energy executive, Mr. Tilton joined United in 2002 after serving as chairman of Texaco until it was bought by Chevron. Once at the airline, he brought in a new management team but could not avoid bankruptcy after his application for government loan guarantees after the Sept. 11 terrorist attacks was turned down.

What followed was the industry’s longest bankruptcy proceedings, dragging on for more than three years. While many airlines have sought Chapter 11 protection to restructure their operations, Mr. Tilton used the lengthy proceedings to force pay and benefit cuts on flight attendants, pilots and mechanics, and slashed employee pensions.

Along the way, Mr. Tilton alienated both United pilots and flight attendants, who have called for his resignation.

Capt. Wendy Morse, who represents United pilots, said the merger talks had caused a “great deal of consternation among the pilots.”

Mo Garfinkle, a veteran airline consultant who is close to Mr. Tilton and United, said Mr. Tilton was often not given enough credit. “Glenn was laughed at by people in the industry when he joined, but he is probably the most underestimated and undervalued chief executive in the business,” Mr. Garfinkle said.

The airline industry has been losing money for much of the last decade. It has been pounded by a succession of troubles, starting with the Sept. 11 attacks, followed by the outbreak of the respiratory disease SARS in late 2002, then high fuel costs and finally, a major recession that cut deeply into travel.

Last year, United lost $651 million, a relative improvement from its staggering loss of $5.4 billion in 2008, at a time when oil prices surged. The company says it has been actively working to reduce its capacity, grounding 100 planes and raising new revenue through fees.

On Wednesday, United said that its average revenue per passenger per available seat mile, an industry metric representing how much money it earned from carrying one passenger for one mile, had increased 21.5 to 23.5 percent last month over March 2009. Compared with March 2008, last month’s revenue was 3.2 to 5.2 percent higher.

“A big part of the story here is how we’ve gone from being worst to first in a number of categories,” said Jean Medina, a company spokeswoman.

Perhaps more puzzling about the talks is why United, and Mr. Tilton, are still pursing a merger with US Airways. After all, that airline is not the preferred candidate for United. Continental Airlines would seem a more likely partner since its routes and international network are a far better match. United actively courted Continental in 2008, but Continental eventually walked away from a deal because of United’s poor financial health.

In the end, though, the issue in the airline business may not be who is the better match.

“Airlines are an ego-driven business,” Mr. Mann said. “I joke, but only partly, that the three biggest issues in airline consolidation are: What are we going to call it? Where is it going to be based? And who is going to run it?”

As it turns out, W. Douglas Parker, the chief executive of US Airways, has also been a strong proponent of mergers in the industry. In 2006, he made an unsuccessful bid for Delta, but was rebuffed. Before that, Mr. Parker led America West before it merged with US Airways in 2005.

Since deregulation of the airline industry in the late 1970s, overcapacity has been an issue, and explains why many airlines fail to earn adequate returns.

“We believe the industry needs to evolve into a more rational structure, and that consolidation may be part of that outcome, as it has in telecommunication industry,” said Thomas W. Horton, chief financial officer of AMR Corporation, parent company of American Airlines. “We have an industry that is too fragmented, with too many competitors, and with different ideas of capacity, pricing and strategic activity.”

Mr. Tilton still has many obstacles to overcome to complete a deal. Mergers in the industry are tough to put into practice, and many of the expected savings fail to materialize as they are gobbled up by new contracts and pay raises for employees.

Antitrust issues might also be a challenge, said Severin Borenstein, a professor at the Haas School of Business at the University of California, Berkeley, who served as an adviser to the Justice Department in 2000, when a previous merger attempt between US Airways and United failed.

“Tell me exactly, why you need to be big to compete?” Mr. Borenstein asked. “You also hear at the same time that you need to be small to compete, and that Southwest is eating your lunch. So it’s inconsistent.”

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