Youbet.com Inc. reported an income loss of $357,000 for the second quarter when compared with the previous year. The Woodland Hills-based online wagering firm experienced a challenging second quarter in that it lost Kentucky Derby and Triple Crown content and began to pare $5 million from its budget. The company reported a net loss of $357,000, or a loss of $0.01 per diluted share, on revenues of $37.3 million for the second quarter ending June 30. For the same period in 2006, Youbet had a net income of $2.2 million, or $0.6 per diluted share, on revenues of $39.6 million. The cost reductions are designed to create greater efficiency in account acquisitions and retention to provide greater leverage for our growth, said Youbet CEO Chuck Champion.

Net income dropped in the second quarter for Guitar Center Inc. due to costs related to a proposed merger with a private investment firm. The Westlake Village-based retailer reported a net income of $9.6 million, or $0.32 per diluted share, on revenues of $518.9 million for the period ending June 30. That is a 29 percent decrease from the net income of $13.4 million, or $0.47 per diluted share, on revenues of $458 million for the same period in 2006. In June, the company announced a merger with affiliates of Bain Capital Partners LLC, a private investment firm. Expenses related to that merger were $1.7 million after-tax, or $0.06 per diluted share. Excluding the merger costs, the company’s net income would have been $0.37 per diluted share. The merger is expected to be completed in the fourth quarter.

A Burbank video equipment rental firm has opened offices in the Carolinas to capitalize on increased film and television production taking place there. Wexler Video, owned by Telecorps Communications, opens a Fort Mill, S.C. office Aug. 7 followed by a Wilmington, N.C. location later in the month. The offices will provide rental of premium video equipment. Incentives in both states have created a boom in television and film production that Telecorps, Wexler and Coffey Sound, another Telecorps subsidiary, will assist with its equipment. Entertainment industry veteran Jim Holladay heads the Wilmington office. Gary Ballard, an expert in video equipment sales and systems integration, heads the Fort Mill office.

Internet service provider United Online Inc. posted a 40 percent increase in profits for the second quarter when compared to last year. The Woodland Hills-based firm had a net income of $16.2 million, or $0.23 per diluted share, on revenues of $131.4 million for the quarter ending June 30. That is an increase from the $11.6 million, or $0.18 per diluted share, on revenues of $135 million for the same period in 2006. United Online provides social networking, online loyalty marketing, internet access and e-mail. The company’s content and media segment represented 38 percent of total revenues. The segment added 278,000 new accounts during the second quarter for a total of 2.8 million.

Jonathan Josell and his staff at Wicked Smart Marketing are storytellers but their work won’t be found in a movie theater or be nominated for an Emmy. Instead, the stories they tell appear online with the purpose of getting viewers to interact with an advertising campaign and make an association with a specific brand and message. Take, for instance, the campaign they devised for appliance-maker Bosch. A viewer is met by a screen shot asking if it is possible to prevent the release of 2.6 billion pounds of carbon dioxide emissions. Clicking a link continues the story line of green initiatives by Bosch and how its Series 800 dishwasher saves on energy and cuts down on emissions. Other links take viewers to videos, a blog, editorial content, and information about the company’s approach to an eco-friendly manufacturing process. “Bosch believes in being green from beginning to end,” Josell said. “That makes them uniquely different from every appliance company out there right now.” Bosch is among the newer clients for the firm founded in 2001 by Josell after he left a career in the entertainment industry. Originally located in Santa Monica, Wicked Smart relocated to Calabasas and now operates out of Woodland Hills in a building behind Josell’s home. A client list of two companies grew over time to include major advertising and public relations firms, health care providers, government agencies (CalTrans) and media buyers. Toshiba Copiers has used Wicked Smart for three years. SureFire, maker of flashlights and tactical supplies used by police and the military, has been a client for two and a half years. New work comes by the way of referrals. Industry peers recommended Wicked Smart to Greg Jason, group media director with DGWB Advertising and Communications in Santa Ana and manager of the Toshiba Copier account. Jason sees Wicked Smart as an extension of what his agency does to promote Toshiba Copier products online. The two firms worked together on a campaign putting the Toshiba logo on news articles printed or e-mailed from the Wall Street Journal website. Another campaign targeted information technology executives to drive them to a Toshiba microsite where they could access white papers on the latest developments and trends in the copier industry. “We found that three quarters of IT people will download a white paper before making a decision,” Jason said. In having Wicked Smart redesign the flashlight microsite for SureFire, the company wants to make the best first impression possible. Interactivity Much of the site presents SureFire products in flat images but the new look for the flashlight section uses Flash images that a user can rotate 360 degrees and see individual features in high resolution, said Gabriel Steinmann, e-commerce specialist and website manager. Interactivity by a site visitor gives the best feel for a product without being able to physically touch the product, Steinmann said. “It’s critical, especially with e-commerce being so prevalent, to give that user as much info as possible, not only through words but also visually,” Steinmann said. In making a career change away from film financing, Josell wanted to do something that combined the creativity of film with the new opportunities in sales and technology made possible by the Internet. He worked in a sales position at one job in which he came up with advertising campaign concepts. Josell liked that type of work; the devising of different ways to come up with a message to get across to a customer and for them to interact with that message. Josell thought he could do a better job than his then-employer and so he founded Wicked Smart. For the first several years, the full-time staff was small Josell and one other person. In the past year, he added four full-time people and uses a large number of freelancers. Worldwide Josell said geographical boundaries pose no limits in hiring outside workers. For one campaign, the concept was conceived in Woodland Hills, the photo shoot was in Singapore and the digital imaging done in Thailand. Wherever the work takes place, it’s always the storytelling taking precedence. The creative elements used to tell the story work hand-in-hand with the placement of the content at a website and finding relevance to the product being sold, Josell said. It’s more than just a certain demographic, age range or household income. “It’s also about where they (the target audience) are finding the relevant data,” Josell said. To return to the Bosch example, the media buy was for kitchen-oriented sites affiliated with people who design, plan or review kitchens, Josell added. A recently negotiated deal with cable channel Home & Garden Television gives greater visibility for advertising than through standard banner ads. Wicked Smart’s content allows for interaction with viewers specifically in the kitchen areas of the website. “We wanted to be targeted with the buy,” Josell said. The new media created by Josell and his team complements the traditional advertising used by their clients. The firm’s approach is that all advertising needs to work together, incorporating similar color schemes and tag lines. If a consumer sees a newspaper ad and then an online ad and the creative elements are totally different there is no continuity and no increase in the brand uplift, Josell said. But if both are the same, a week later or a month later that same consumer will have more of a recollection of the product, he added. “That is what we try to get across to our clients we always want to keep everything the same,” Josell said. The mobile space is the next frontier to take online interactive advertising. With the high penetration rate of cell phones and improvements in technology and broadband access making for larger screens and faster connections, agencies such as Wicked Smart will be able to do more with mobile ads and text messaging. After all, Josell said, it’s already been proven that people will look at ads in connection with free content. But the company won’t develop mobile ads just because it can. For the Bosch campaign, the mobile component was not rushed; the Wicked Smart team searched through ideas until it came up with something compelling. That’s where the eco-tip of the week came from, with users receiving information on how not to waste water, how to buy organic, and how to use less soap in the dishwasher. “We believe in utilizing it when it makes sense,” Josell said. SPOTLIGHT: Wicked Smart Marketing Year Founded: 2001 Location: Woodland Hills Revenues in 2005: $2.5 million Revenue in 2007 (projected): $6 million Employees in 2006: 2 Employees in 2007: 6

A triennial study on health care in the San Fernando and Santa Clarita valleys indicates that while the number of uninsured is dropping, the number of households in poverty is rising, contributing to the amount of residents here who have difficulty accessing health care. The Valley Care Community Consortium released the study “Assessing the Community’s Needs: A Triennial Report on the San Fernando and Santa Clarita Valleys 2007” July 25 at Valley Presbyterian Hospital in Van Nuys. Ronald Sorenson, director of the Center for Community Health Improvement, oversaw the project. He didn’t anticipate finding that poverty is spreading in valley households. “One of the things that surprised us when we looked at income data is that households earning less than $25,000 a year actually increased from the last time we did the assessment,” Sorenson said. “Here in the San Fernando Valley it went back in 2003 from 17.4 percent up to 23.2 percent for this assessment in 2005. That’s quite a bump up if you think about it.” During the same period, the number of Santa Clarita Valley households in poverty also increased, only not as drastically. In 2003, 8.7 percent of households there earned less than $25,000 annually. In 2005, the number had increased to 10.8 percent. Sorenson is not sure what’s responsible for the increase of low-income households. “That’s something we need to do exploration around,” he said. “Some people may have lost their jobs or moved into lower paying jobs.” But migration could also be to blame. “Are lower skilled people moving into the area, and, if so, are they typically in lower paying jobs?” he asked. “It could be a lot of factors.” Getting care What’s for sure is that low-income residents frequently have difficulty obtaining health care. According to the assessment, 24 percent of residents said that they had not visited a dentist in the past year because they could not afford it. Moreover, 30 percent of respondents said that accessing medical care was difficult, and 20 percent said that they lacked a regular source of medical care. “If people don’t have access to a primary care physician, they have to use the emergency room for services,” Valley Care Community Consortium program director Joni Novosel said. “It’s more expensive to treat people in the emergency room than it is to spend money on disease management and prevention and education.” Heart disease and cancer, particularly breast cancer and prostate cancer, are plausibly the diseases valley residents need to be educated on the most. They are the leading causes of death here. Meanwhile, obesity, diabetes and asthma are the chronic diseases the consortium has identified as key priorities. Because mental health is the second leading reason valley residents are admitted into hospitals, it is a priority as well. As for hospitals, the consortium found that they have made strides with regards to emergency room diversions. By increasing their number of beds and improving treatment room processes, “the emergency room diversion rate is going down, falling from 32.5 percent in 2003 to 16 percent in 2005,” Novosel said. One reason valley residents who are not gravely ill might visit an emergency room is because they are too transient to have connected with a local medical provider. The highly mobile are more likely to reside in the San Fernando Valley than in the Santa Clarita Valley. In the former, 51 percent of occupied households are owned versus 75 percent in the latter. “This could signify people moving in and out of the community and maybe not being able to establish relationships with a medical provider,” Sorenson said. An area in which the Santa Clarita Valley is arguably at a disadvantage is that the population of residents between the ages of 65 and 84 there is expected to increase by 37 percent. “That definitely has an impact on the types of services that are going to be needed for long term care durable medical equipment and things associated with aging.” Novosel said. “Another impact fiscally is that the numbers of people on Medicare will be increasing, and, yet, the population we need to support the Medicare program is decreasing. That makes a big impact on Medicare dollars. There’s a possibility that co-pays and deductibles will continue to rise for that portion of the population.” A POORER VALLEY – 647,423 households in the San Fernando Valley and 76,552 in the Santa Clarita Valley in 2005 – About 21.82 percent of these combined households reported annual incomes below $25,000. – In the San Fernando Valley, there were 23.18 percent of such households. In the Santa Clarita Valley, there were 10.76 percent of such households. – In the San Fernando Valley, the bulk of these households were in Van Nuys, Glendale and North Hollywood. – In the Santa Clarita Valley, the bulk of these households were in Newhall and Canyon Country. – Based on 2005 data, it is estimated that there are 53,700 families living below the poverty level in the Santa Clarita and San Fernando valleys. – Approximately 19.5 percent of the population in this area relied on some form of public assistance through Cal WORKS, General Relief, C.A.P.I., M.A.O., I.H.S.S. and food stamps, according to 2005 data.

Last December, $30,000 in bonuses were distributed to the employees of Electronic Source Co., a printed circuit board manufacturer in Van Nuys. The payout was how company owner Scott Alyn handles workplace motivation, just one of the many challenges in managing smaller firms these days. At the Van Nuys company, all employees are rewarded for hitting goals in customer satisfaction, delivery responsiveness and communication. Monthly customer surveys determine the amount of the bonus. The result is an enlivened workforce that sees a tie between their work and the satisfaction of those receiving their products. “They are aware of certain customers and whether they are happy,” Alyn said Launching and operating a small business is not easy. The competition is tough; the failure rate high. Added in are the myriad of issues of management of that business the best way to finance, the best way to market, how new technology fits in the picture, etc. Some challenges are more on the minds of small business owners and advocates than others. Take for instance the workplace motivation. Or as Al Portnoy calls it, having the workforce buy into the company vision. “They want to be a part of something, and why they do it is more important than ever,” said Portnoy, co-chair of the Los Angeles chapter of the U.S. Small Business Administration’s SCORE program that gives assistance and counseling to those helming their own companies. At SADA Systems, an information technology company in North Hollywood, owner Tony Safoian said that an entrepreneurial environment helps with motivation. Like Alyn at Electronic Source, Safoian measures customer satisfaction and builds bonuses and profit sharing for his employees around achieving certain performance goals. “Whatever you want people to do, you have to motivate that behavior,” Safoian said. Having owners understand their international competition as well as local competition and how to measure return on investment are other challenges that Portnoy and other SCORE counselors work on. But the one thing Portnoy did not list as a small business management challenge was that of money, as banks are more willing to make loans. “I don’t see that as hurdle for a decently run business,” Portnoy said. How can a business owner meet these challenges head on? By taking their time, assessing their skills and changing their attitudes if need be. “It is not a quick fix,” said Jonathan Goldhill, a management consultant specializing in small business. “It is something that takes time to master.” Not having a plan or strategy in place, confusing activity with accomplishment and not seeing themselves as entrepreneurs and managers are among the challenges he sees small business owners facing, Goldhill said. Ineffective leadership and failure to delegate authority can also cause problems. A big reason why small businesses stay that way is because the owners think small and limit growth by having all management decisions go through a single person, Goldhill said. This happens primarily out of fear fear of losing control over the business, fear of losing accounts because other people will be managing them. “They don’t believe anyone can do as well as they can,” Goldhill said. Delegating responsibilities is a big leap for any business owner, said Safoian. If a business owner is a control freak there is nothing worse but in his case he finds it exciting to see an employee succeed in taking on added responsibilities. “The real power is getting someone to do something better than you can,” Safoian said. “That is what motivates me to delegate.”

By JEFF WEISS Contributing Reporter The Valley has a new rocket on its hands and for once, it has nothing to do with the aerospace industry. Instead, it concerns the world of power supplies and Red Rocket Inc., a new 650-employee power supply firm based in Camarillo. The result of a management buyout by senior executives of Mumbai-based Celetronix Power India Private Limited, Red Rocket has bold plans for growth, aiming to boost revenue from $20 million to $50 million over the next two years. “We’re really excited about the future because we have the leading product in the AC to DC power supplies field,” Red Rocket President and CEO James Schultz said. “We work with top product designers around the world and with dedication and focus, we think we can double the company in the next 18 months. We have great distribution channels, and Red Rocket’s EOS brand of power supplies is very strong and having been around since the early 90s, it comes with a great built-in reputation.” Red Rocket’s sales channels include such industry powerhouses as Arrow Electronics and Future Electronics, as well as XP PLC, Acal Electronics, RS Components, Ultimate Renaissance, Codico and Craftec. Additionally, Red Rocket will serve several major direct accounts in the computing, industrial, automation and telecommunications markets. Currently, Red Rocket has six employees based in Camarillo, with another half dozen remote sales directors scattered across America. The majority of its employees are based in Mumbai, in a 100,000 square foot, manufacturing, engineering and design facility. However, Schultz anticipates a major expansion in the coming months. “The expansion will be global as we grow the business. We will likely expand the sales and marketing teams, the customer service team and some engineering opportunities, primarily in India,” Schultz said. “But it’s likely that we’ll also add an engineering presence in Camarillo and add more marketing locally. We’re aiming to fill out the team in areas that are key to our infrastructure.” Though technically a new firm, Red Rocket’s roots stretch back 15 years, when it was originally founded as Simi Valley-based Celetronix. Celetronix was purchased by India-based Jabil Circuit in April of 2006 and became the firm’s power supply division, before its senior management bought it out and founded Red Rocket. Before becoming the new president/CEO of Red Rocket, Schultz had formerly served as the vice-president and general manager of Celetronix. “We all knew the industry and the competitive landscape very well,” Schultz said. “We saw an opportunity to go to our parent company and buy the business, so we did it. It’s a great product set, providing some of the smallest and most efficient AC/DC power supplies available today. It’s the heartbeat for some of the world’s leading original equipment manufacturers.”

Location filming in Santa Clarita was at an all-time high in the 2006-2007 fiscal year. This resulted in an estimated direct economic benefit of more than $21 million to city businesses. During the period, there was an unprecedented 852 film days, a 26 percent increase over the previous fiscal year. Moreover, 311 film permits were issued in the City of Santa Clarita, a nine percent increase from the previous year. Santa Clarita is home to seven television shows, including “Big Love,” “Deadwood,” “John from Cincinnati” and “The Riches.”

Los Angeles set a new precedent last week. For the first time ever, the L.A. City Council unwisely voted ,unanimously , to overturn a permit issued by the city’s Building & Safety Dept. and reaffirmed by the North Valley Area Planning Commission. While the news reports have simplified the issue into a struggle between Sunland neighborhood activists and Home Depot, the business perspective and long term impacts to economic growth have largely been ignored. To be fair, Sunland residents have opposed a Home Depot store since the company purchased a boarded up K-Mart on Foothill Blvd. several years ago. They contend that such a store is not consistent with the community’s specific plan adopted in 1995, nor does Home Depot fill the void of a general store with the departure of K-Mart. They would prefer to have a Target or a Wal-Mart. The only problem is that Home Depot owns the Sunland property. Other arguments are based on the usual,and legitimate,concerns about traffic and delivery trucks. (I have to guess that K-Mart also generated traffic and had delivery trucks, too). Based on my conversations with some Sunland neighbors, I suspect that much of the opposition is fueled by something else: day laborers. It’s a legitimate concern and one that the city has been unable to adequately resolve with lasting results. In the Valley, day laborers have grown aggressive in their job solicitation methods, resulting in fistfights and even a stabbing or two in the parking lots. Some not lucky enough to find work congregate with others and kill time by smoking or drinking. Then they have to relieve themselves, and they don’t always use the bathrooms,often there aren’t any. The city has tried to resolve the day laborer issue by requiring some stores to designate private property for sites where they can be solicited without disturbing customers. Some sites are operated well and provide services to attract the day laborers to them, such as refreshments, English classes and citizenship assistance. Others don’t work so well and are ignored by many day laborers who return to the parking lots. In many respects, L.A. is having a debate on national immigration reform without really addressing the problem directly. Since Congress cannot agree on immigration reform and the city cannot agree on how to address immigrant labor issues, the Home Depot opponents (with a little help from a competitor) have exposed a loophole in the city planning law that allows one agency to overturn another’s decision to issue a permit. In this case, the issue is whether the proposed remodel of a K-Mart store is defined as a “project” or not. I don’t know the answer, and apparently neither do several experienced city planners, who have been overruled by zoning administrators, commissioners and now the full city council. What concerns business leaders most is how common this strategy will be utilized when a community decides it doesn’t want a certain commercial establishment. The strategy is to keep appealing a building permit until an agreeable bureaucrat is found in another department to reject the original finding. This is dangerous for many reasons. For starters, a competitor can make life difficult by appealing the building permit and adding to the costs and time of construction. Second, residents who don’t want any development at all can continue to appeal until the “right store” comes along. And don’t forget the negative signal this sends to large employers comparing Los Angeles to neighboring cities like Burbank and Santa Clarita. Not only can they save millions of dollars in lower business taxes in other cities, there is also much more certainty in their planning processes. Would you consider investing a few million dollars in a city with as much of an unclear and tumultuous planning process as this? Following the city council’s unanimous vote last week, we should be concerned that L.A.’s perceived business climate is a little worse. And we should expect to see more anti-development forces use the city’s lengthy and complicated permit process as a tactic to scare off employers. L.A.’s business welcome mat just got a little muddier. Let’s hope the city makes more of an effort to clean up its anti-business image. Brendan Huffman is President & CEO of the Valley Industry & Commerce Assn. (VICA).