Despite Deal, Countrywide Sticks to Out-of-State Plans By SHELLY GARCIA Senior Reporter Countrywide Financial Corp. may not think California holds much promise for business expansion, but there’s no arguing with a good real estate deal. The Calabasas-based company is said to be close to a deal to acquire a 257,000-square-foot building on Agoura Road in Westlake Village, for about $25 million, a price, sources in the real estate community say, that is well below market value. Brokers said the building has an unusual configuration not readily adaptable to many businesses, so most of the potential buyers for the property were developers who planned to tear it down. “Since the owners were looking at selling the land for land value, for a user it’s going to be a very good deal,” said one broker familiar with the transaction. Countrywide, which has previously announced its intention to seek other locations outside California for expansion, is not expected to use the facility for added business units or personnel. Rather, brokers said, the company is taking advantage of a good real estate deal to better accommodate the existing workers in its current area facilities, many of which have been bulging at the seams as a result of the growth the company has undergone in recent years. The final bidding was down to three prospective buyers, all developers, when Countrywide came in and made its offer, which though probably higher than the top price developers were willing to pay, was still well below the per-square-foot price of other standing properties in the area. The two-story structure has been occupied by a division of State Farm Mutual Automobile Insurance Co. Countrywide officials last year took a very public position over the business climate in California and said a deal to build a new facility in Lancaster would be the company’s last in the state. Business taxes and wage rates, the cost of living, lack of affordable housing and an ever more restrictive and costly regulatory climate were some of the reasons the company cited for its decision. Instead, Countrywide said, it would focus its future expansion in other areas of the country, mainly in Texas and Arizona. This latest acquisition comes as Countrywide has had difficulty accommodating its local staff in its existing facilities. Countrywide now operates four sites in Calabasas along with Simi Valley, West Hills and Thousand Oaks. In 2002, Countrywide acquired another office property in Agoura Hills. Executives at Countrywide would not comment on the pending acquisition, but they did reiterate their concerns about the California business climate and their decision to cease expansion activity here. “Any purchase that Countrywide would be making in Southern California should not be considered an expansion and should not be considered to be contrary to our continuing expression of dismay over the California business climate,” said Rick Simon, a spokesman for the company. “If we do purchase a building, it will be needed for what we already have here in California for various reasons, some because our leases are expiring or because currently we are over our manageable capacity in our facilities in Southern California.”

Reasons Why Some Owners of Firms Get Themselves Trapped By Jonathan Goldhill Most entrepreneurs start a business with the best of intentions to achieve greater happiness, however they define it. Most want more freedom, fulfillment and financial success. Most want to feel the pride of being an independent business owner in control of their own destiny. Unfortunately, after a few years, the entrepreneurial dream starts to warp into a partial nightmare. An insidious form of slavery sets in. The owner is trapped on the treadmill, working harder and harder but going nowhere. As discussed in last issue’s article, many business owners and managers feel like slaves to their businesses, employees and customers. They feel trapped working “in” their businesses instead of “on” their businesses. This article will focus on the common causes of business owner bondage. Based upon my insights working with hundreds of business owners over the last 20 years, I believe five areas to be the most common causes of business slavery. Technical Tendencies Habits determine destiny. Too many entrepreneurs are former technicians now masquerading as owners. They think they are entrepreneurs, but they don’t act that way. As once accomplished technicians, they have a hard time letting go of such expertise and familiarity. They remain trapped in a technical comfort zone, mindset and work approach. Sadly, such technical expertise is insufficient for managing a business. Busy-ness Many owners and managers confuse activity with accomplishment. They confuse busyness with results. Hard work with smart work. Perspiration with purpose. Instead of working smarter, many owners hold tight to the delusion that working harder and harder is the solution. The more the business grows, the harder they work, the more imprisoned they become. Ineffective Leadership and Delegation Far too many small business owners are by default small leaders. Instead of leadership, they excel at doer-ship. They are micromanagers that like to touch and control everything. They trust no one but themselves. They believe “no one does it as well as me”. They seldom delegate, if at all. To lead effectively, one must trust others. Inadequate Business Systems A vast majority of owners don’t know how to design a new business or re-engineer an existing one to be more systems-oriented and professionally equipped with plans, procedures and policies. As a result, entrepreneurs don’t create and document the processes (specific and repeatable ways to do something), procedures and policies that allow for well organized, smoothly running, easier-to-manage companies. Without defining and documenting the specific work that needs to be done, owners can’t delegate effectively and eventually remove themselves from their technical roles. Growing Business Complexities A growing business with its increasing number of customers, transactions and problems will eventually crush a business not properly designed and prepared to handle such growth. Without effective leadership and adequate business systems, a growing company does not stand a chance. Producing predictable and consistent results will be nearly impossible. By failing to plan for growth, you are by default planning to fail. Busyness, technical bias, poor delegation, inadequate leadership and business systems, and the growing complexities of a business lead to a life sentence of working on the chain gang your company. Jonathan Goldhill is CEO of The Growth Coach in Los Angeles, a small business coaching and consulting firm dedicated to helping entrepreneurs get more out of their businesses and personal lives. He can be reached at (818) 716-8826 or emailed at [email protected].

Capitol Punishment: Make Legislators Resolve Issues GUEST COLUMN by Gregory N. Lippe Congratulations to our governor and the people of California for accomplishing the passage of Propositions 57 and 58, two of the most significant propositions in the history of our state. As I sit here wearing my T-shirt with the logo “57YES58” I am reminded of the enthusiasm demonstrated at the rally I participated in at Universal CityWalk on February 27. That day, I witnessed a tremendous example of democracy at work and the accomplishments that can be achieved when people forget about partisanship and work together for the common good. Participants included Gov. Schwarzenegger (Republican), State Controller Steve Westley (Democrat), former Mayor of Los Angeles Richard Riordan (Republican), Speaker of the Assembly Fabian Nunez (Democrat), Assemblymember Keith Richman (Republican), a number of other elected officials of both parties, numerous unions, business organizations and other supporters. It was a terrific event that helped significantly to achieve a great result. Now that we have seen the positive results of people working together, it is very disappointing to see the current gridlock in the California legislature over the reform of our tremendously broken system of workers’ compensation, a system that continues to create budget deficits in our local governments and is forcing companies out of business and out of California, resulting in many lost jobs. Gov. Schwarzenegger warned the legislators that, if they cannot achieve meaningful workers’ compensation reform by March 31, he will utilize the initiative process to enable the voters to decide on reform in November. March 31 is the deadline (unless extended) for placing an initiative on the ballot. Recently, Los Angeles Councilmembers Wendy Greuel and Dennis Zine introduced a motion into the council calling for reform of the system and setting forth a seven-point plan that they believe can break the current gridlock. They issued a call to the legislature and the governor to work day and night to solve the problem. Zine added: “If Sacramento doesn’t do something, the people of California will do something.” He was referring to the proposed initiative. The legislature may or may not achieve the greatly needed reform by March 31 (the governor was pushing for the framework of a bill to be worked out by March 26). If they are successful, we will all win. If they are not, unlike the successes achieved with Propositions 57 and 58, the proposed solution of a ballot initiative for workers’ compensation could easily result in virtual suicide for reform and a serious negative impact to all residents of California. Taking legislation to the people, whether by referendum or initiative, is not a “one size fits all” solution. Propositions 57 and 58 were relatively short, to the point and easy to understand. Unfortunately so many facets of the workers’ compensation system are broken that there is no way to present the issues in a simplified format. Voters, who are not experts in workers’ compensation or have not been significantly involved in working with the highly complex issues, will have an extremely difficult time understanding the initiative. As a co-chair of VICA’s Committee on Workers’ Compensation Reform, I am familiar with the issues of causation, apportionment, medical treatment controls, “Section 5814” penalties, objective and subjective determinations of partial and total permanent disability, rate regulation, fee schedules, anti-fraud measures etc., etc. It is no wonder that during the last legislative session, a total of 65 separate bills were introduced in an attempt to reform workers’ compensation. How can we expect voters who are unfamiliar with these issues to make an informed vote? Most voters will not vote for an initiative that they don’t understand. Therefore it is highly likely that the measure would fail. Not only would this be devastating for California, it would also reward those in the legislature that truly don’t want reform and absolve them of the responsibility. Once the people turn down reform, the legislators can say “it is the will of the people.” It is unfair and unconscionable for our legislators to push the responsibility for solving complex problems of the magnitude of workers’ compensation reform onto the electorate. These legislators should not be given an easy way out now or in the future by allowing them to shirk their responsibilities and pass the buck to the initiative process. Side bar: I recently received a copy of the petition for the workers’ compensation reform initiative and found it to be lengthy, complex and unable to be read without a magnifying glass. I have chosen the following anti-job/anti-business bill to profile this month: AB 1541: This bill, authored by Assemblymember Cindy Montanez, classifies a failure to file paperwork on time as a “serious violation” equivalent to dumping unauthorized levels of pollutants into bodies of water. Companies that hold NPDES (National Pollutant Discharge Elimination System) permits and comply with the numeric requirements for discharge, but are unable to file their required monitoring report in time, will be penalized the same as if they exceeded their authorized discharge levels. This penalty for tardy paperwork is $3,000 for each 30-day period a report is not submitted as required. The result will be increased costs to businesses, increased costs to consumers and potential reduction in jobs. Status: Passed Assembly and Senate, approved by Gov. Davis Sept. 29, 2003. Valley legislators voting for bill: Assembly, Frommer, Koretz, Levine, Montanez, Pavley; Senate, Alarcon, Kuehl. Valley legislators voting against bill: Assembly, Richman, Strickland; Senate, Knight, McClintock. Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).

Economic ‘Gut Feelings’ Take Turn for Worse By SHELLY GARCIA Senior Reporter You may want to toss out the relentless stream of data that shows the economic picture is improving. A number of local executives say they’re seeing signs that the economy has actually worsened since the beginning of the year, even as stock prices have risen and the GDP seems to be back on track. Escalating gas prices are threatening the almighty consumer that held recession at bay through most of last year. Corporations remain stingy with their dollars. Hiring has stalled. And the recent terrorist attacks threaten to further dampen an already weak export market. These insights may not be coming from the latest economists’ reports, but some executives say their sources are just as valid the gut feeling that comes from watching the world around them. “I think the times are harder than are being acknowledged,” said Dan E. Levine, executive vice president at Celebrity Escrow Corp. in Northridge. “You see it in the trenches. If you go two days before payday, some people are saying I’m skipping lunch today. Durable goods are up, but they’re not talking about shoes for your kids.” Ask most executives running companies and they will say they’ve got their own way to gauge the economy, and they are getting signals that are often in conflict with what the economic reports indicate. “I’ve told people for years that in order to figure out the economic growth of China you need to open the draperies in the hotel and count cranes,” said Ron Nechemia, president of Eurorient, an investment and merchant banking group in Encino. “If you see less than six or 10 cranes from each window, you know the economy is getting into recession. When the economy is on the go you can feel it in your belly.” Lately, Nechemia and others say, there’s a nagging feeling in their bellies. Nechemia wonders if all those folks shopping at the mall are making any purchases and he suspects that a quick survey of the Los Angeles Port would show that many of those containers being unloaded are going back to Asia empty, a sign that U.S. companies are not getting their fair share of international markets. Others point out that loan activity seems to be sputtering. And the job market seems to have vanished altogether. “One way I tell is the number of resumes I get bombarded with,” said Carlos Garcia, founder and president of Garcia Research Associates Inc., a Hispanic market research firm in Burbank. “When I start getting resumes from people all over the country who aren’t Hispanic, who don’t speak Spanish, who have no reason to think a company like mine would be able to hire them, I get a sense that there is a lot of desperation out there.” Initial unemployment claims, which rose again over the most recent four-week period, are perhaps the one economic indicator that coincides with the more intuitive criteria sending up red flags. But while many reports like a just-released survey conducted by the National Association of Manufacturers are upbeat, the local executives surveyed by the Business Journal are not so certain. The bottom line may be improving, but there is little evidence that companies are ready to expand staff, they say. Going offshore For one thing, a lot of jobs moved overseas. “The thing that really taints the whole thing is a lot of jobs are gone to Asia forever,” said Doug Sink, CFO at Remo Inc., a maker of drums and other percussion instruments in Valencia. “That’s what scares me about California’s economy. You’ve got all the people coming here and these jobs aren’t there.” And many of the same companies that report business is bouncing back are still refraining from any hiring, whether it’s here or abroad. “These are very unusual times,” said Christian K. Bement, president and CEO at Earl Scheib Inc. in Sherman Oaks. “All the other times when manufacturing is up, it was automatic that employment was up. That’s not the case anymore. I think employment will increase down the line, but right now we’re able to increase business without having to add employees.” Then too, companies are still holding tight to the purse strings when it comes to any type of expansion. Roberto Barragan, president of the Valley Economic Development Center, said he often measures the economy by talking to the folks seeking to do business with the organization. Last year there was a spate of activity, although a lot of it came from small business owners seeking loans to stay afloat, Barragan said. This year, “actually, I think loan demand is down. And that’s not a good sign either,” Barragan said. “Everyone is staying static, few people are hiring, few people are investing because no one knows where the economy is going.” The low interest rate environment, although it has kept the housing market afire, has done little to encourage businesses to invest. “It’s gotten to the point where interest rates are so low and the economy is still having trouble,” said Bob Pearlstein, a partner at BDO Seidman LLP. “They can’t make interest rates any lower so it’s a what do we do now.” Low interest rates have not fueled any real desire to resume capital spending, and even the apparent improvement in the mergers and acquisitions market may not be especially significant, said Brent Reinke, a managing partner at Reed Smith LLP in Westlake Village. Because his law firm handles a lot of transaction work, Reinke said it serves as a good barometer of the economy clients will come calling in greater numbers for help with acquisitions and financing when the economy is good and conversely, they’ll have little need for his services when the economy is failing. Lately, Reinke said, business has picked up at Reed Smith, but it is from new clients, not necessarily new activity. “Our law firm is getting more and more of a reputation on the corridor, so we’re gaining additional clients, and that’s keeping us busy,” said Reinke. “Are those clients individually more active than they were four or five years ago? Probably not. I think there is an uptick in activity, but people aren’t comfortable at all that it is going to be a sustained uptick.” The consumer factor Perhaps the pivotal question remains the consumer, and whether the buying frenzy that has kept the economy afloat for the past several years will continue. Most agree that the refinancing activity that put cash into the pockets of consumers is over, although spending, at least so far, appears to be continuing. “When you go outside your office just in your own neighborhood, you see the economy is doing well,” said Rick Mateus, executive vice president and CFO at Encino State Bank. “I see people going to restaurants, entertaining themselves in movie theaters. I see a lot of spending money.” To be sure, executives say, the lines at Costco and Home Depot are long. At Remo, which sells to music stores, schools and professionals, backorders are the highest they’ve been in the company’s history. “That tells us at least in the music industry that everything is bouncing back,” said Sink. Ditto for Earl Scheib, which for its most recent reporting period saw same-store sales increase by 6 percent, up from relatively flat performance in prior periods. But other indicators suggest there may be more trouble ahead. “My friends, not too many are getting let go, but it seems like the ones that are seem to be having a more difficult time getting other jobs,” said Michael Choe, director of business development at Cherokee Inc., a marketing and licensing company. Levine said his employees, although well paid in an industry that has continued to see gains, have been staying home more, particularly since the price of gas shot up. “What I realize is it’s impacting their life,” Levine said. “They’re not renting hotels. They’re staying home over Memorial Day.” And perhaps most unsettling, there are signs that even consumer goods manufacturers are getting nervous. Garcia Research Associates, which provides expertise to marketers seeking ethnic customers, fares best when there is a slump in the general market. “During the last recession in 2002, our phone was ringing off the hook and our growth was 20 percent,” said Garcia. “During the last year with the economy starting to recover, our growth rate slowed to 7 percent, and now the phone is starting to ring more aggressively. When there are other opportunities out there, the ethnic markets are more likely to be shunted aside and when the economy starts to sputter, this one bright spot becomes the only bright spot.”

Working Hard at Adapting Firms Shift Focus to Survive By JEFF WEISS Contributing Reporter As technology rapidly changes the face of business, companies are forced to often adjust on the fly. With little time to regroup, businesses must make bold decisions to reorganize, expand their scope, or even shift the company’s focus entirely. This can be difficult for some family owned businesses which often can be steeped in tradition handed down over the years. But in addition to technology, governmental pressures and society itself can also affect a business’ success. As several Valley-area family owned companies have found out, it takes foresight and determination to succeed in an evolving environment and some of these firms have adapted to changing conditions quite well. When Phil Carter, owner of Tarzana-based Red Barn Feed and Saddlery, bought his store in 1984, the shop only did a fraction of the business it does now. Formerly based in Reseda and previously known as Reseda Feed and Seed, Carter’s business was founded more than 50 years ago to supply the many horse owners then living in the San Fernando Valley. As urban growth changed the Valley from a sleepy pastoral outpost into a heavily populated metropolis, Carter realized his store would have to change to meet the ever evolving needs of the city. Expanding his business to include all pet owners, Carter watched business soar, with revenues rising from $300,000 in 1984 to $4.5 million in 2002. “When we bought the place it had always had a couple pet products since it opened in 1955 but it mainly serviced the needs of horse owners,” Carter said. “But it was very obvious when I bought it that we’d have to expand the product line to keep up with the changing needs of the Valley. Now we have just about any kind of product of food for any animal. It’s grown in terms of volume and customer base. We started out with six people and we have 20 people now. For a small store it has become pretty big.” Analyzing the situation, Carter understood that in order for his business to survive, it would have to adapt. Twenty years after his experiment to expand the focus of his store, Carter has no regrets. “It’s been a lot of fun. It’s a fun product and 99 percent of the customers are good people because they like to take care of animals. We really are an extra stop for them to come to because you can get feed at supermarkets as well. It’s a fairly committed customer base and they’re special people,” Carter said. Changing a business Where Carter merely needed to expand the services he offered to increase business, David Feldman, CEO of Canoga Park-based Pipedream Products Inc., decided to switch the focus of his company entirely. Founded in 1973 by Feldman’s brother Bob and his father Gene, Pipedream Products initially distributed smoking accessories such as cigarettes, pipes, lighters, rolling papers, etc. But in 1989, with anti-smoking sentiment starting to build, the Feldmans realized that the time might be right to switch Pipedream’s focus. “The business was bringing in $3 million a year in revenue, but with all the anti-smoking sentiment we thought that we should change gears,” David Feldman said. “We got into gifts and gags and lotions and we started to look at crossover customers from head shops and tobacco shops to adult stores. We began selling romantic lotions. Some of our cross-over companies carried the lotions and they started to want adult novelty toys. So we started to distribute gag and novelty presents and eventually adult toys.” The decision paid off as Pipedream’s sales in 2004 are expected to exceed $30 million. “We’ve gotten a broader market to sell to. There have been bigger profit margins to work with,” Feldman said. “I’m definitely glad we changed because it opened up the world to us. We now distribute directly to other companies. Sex is just more acceptable than smoking; a lot more people have sex than smoke.” Ernest Doud Jr., managing partner of DoudHausnerVistar, a strategic family business advising firm, advises businesses to constantly assess the company and the market in order to know the right time to shift focus. “A discipline that any business would be well advised to follow is the discipline of strategic planning. The reality is that a very small percentage of middle market businesses engage in any kind of formal strategic planning, very few have yet articulated a vision,” Doud said. “It becomes difficult for companies to adjust to changing market conditions if they aren’t systematically and routinely looking at the issues inside and external to the business that may impact them. If you look around at what’s happening you won’t have to get lucky to succeed. You want to look at external conditions, competitors, customer base, technology, regulatory environment, and customer demographics, to see what kind of opportunities and barriers it creates. You have to ask, are we equipped to deal with this? You need to make the changes accordingly.” Interesting alternative In the case of Northridge’s L.A. Surplus Inc., the decision to shift gears not only led to increased business but made president and owner Steven Price feel more fulfilled. “We started out in the adhesive tape and shipping supplies business. My father had introduced me to a guy in Chicago who was in the tape manufacturing business, so I spoke to him and decided to go into that field,” Price said. With the tape business only marginally profitable and generally lacking in excitement for Price, the entrepreneur began to examine other possibilities. “Somewhere along the line, I learned how the closeout business works. When I was taught how liquidators work and how to buy and sell distressed merchandise, a light bulb went off. I realized that I wanted to be in the wheeling and dealing business. That’s when I started the new business and eventually dropped the tape business which was only marginally successful in the first place. The new business has been a much bigger success.” The business has grown steadily through the years from $250,000 a year to $5 million a year in sales. Along with the business’ fortune, Price prefers the distressed merchandise game over the tape world. “I’ve been a lot happier with this new business. I’m more interested in this business because I constantly get to deal with different things, different companies and different customers. It’s fast paced and interesting to work at.”

Firms Grapple With Logistics Of Offshoring By SLAV KANDYBA Staff Reporter The politics of offshore outsourcing is a hot topic both in and out of the technology industry these days. The question of whether it is right to move part of a company’s business to other countries has been widely discussed but the practical aspects of doing so seldom gets mentioned. According to executives of several local tech firms, offshore outsourcing can be a logistical nightmare and, in the end, not always cheaper. At a Software Council of Southern California Valley Chapter meeting on March 16 in Woodland Hills, four panelists talked about their experiences establishing overseas operations not always successful endeavors. Dimitri Nikouline, president and CEO of Woodland Hills-based Murano Software, Inc., was joined on the panel by RealtyTech Inc. President Richard Uzelac, Homestore Inc. Chief Information Officer Phil Dawley, Rick Hopfer, vice president for information technology at Sony Pictures Entertainment, and Deepak Sharma, president of Santa Clarita-based Software Development Center Inc. Calabasas-based RealtyTech, a real estate Web site builder, is an example of a company that turned to outsourcing only to second-guess it. “We’re in the middle of the road,” said Uzelac. “Half of the development is here and half is offshore.” The company originally outsourced to India, but found obstacles came with cheaper labor. It now outsources in St. Petersburg, Russia. “The major issue was communications between staff in the U.S. and the staff in India,” Uzelac said. “Our liaison was an engineer but he lacked sufficient interpersonal skills to develop relationships with Bombay staff.” That person chose to communicate via e-mail, as opposed to phone conferencing, and it didn’t work out. Uzelac said he believes it didn’t work because Indian engineers “felt no affinity for us as a company” and did not meet his expectations. But it didn’t stop there. Problems ranging from time difference to language and cultural barriers stand in the way of outsourcing running seamlessly. “Some days they’re off when we’re not off,” Uzelac said of the engineer team he used to employ in India. The workers were either Muslim or Hindu and couldn’t work some days because of religious obligations. Firm provides help Partly because of the problems Uzelac and many other Valley-area tech firms have experienced, a new kind of IT firm is benefiting. Santa Clarita-based Software Development Center Inc. is finding its business picking up because of problems RealtyTech and others are having. Software Development Center is a service provider that works directly with engineers in India, Sri Lanka and a host of other countries. It essentially acts as a go-between for U.S. firms who outsource in India. Problems setting up shop overseas raise questions about whether the cost-cutting that outsourcing gives truly amounts to savings. In fact, many software companies are telling Deepak Sharma at SDC they are not getting their money’s worth from some of these operations because some of the software just doesn’t work. In RealtyTech’s case, engineers working overseas for the company are also not exactly cheap, contrary to widespread belief. RealtyTech paid its Indian employees $15 to $30 per hour, Uzelac said, while American engineers receive $50 to $60 per hour. The savings may be on paper, but there were hidden costs: “Things do take a little bit longer to get work done so it’s somewhere in-between in terms of numbers and what you actually get,” he said. After outsourcing in India failed, Uzelac turned to Nikouline, his former colleague at Homestore, Inc. Nikouline, himself a former software engineer, turned to outsourcing to St. Petersburg earlier. Through a partner in St. Petersburg, he employed engineers to write code for him. Nikouline said he recently went to a conference that convinced him offshore outsourcing was here to stay for good. “Globalization is going to be more prevalent as time passes,” he said. Through Nikouline’s help, Uzelac assembled a team of engineers that works for RealtyTech. Things are going well, he said. “I push the button and it actually works,” Uzelac said. Coming aboard Sony’s moviemaking company one-and-a-half years ago, Rick Hopfer said he instantly looked to make changes to make the company leaner. He looked at two ways of doing that: converting jobs and outsourcing to India. New job To address communications issues, Hopfer said he will hire a full-time relationship manager a job that never before existed at Sony Pictures, he said. The job was created directly because of outsourcing. Homestore’s Dawley said his company only ships out work that it doesn’t consider its most important. RealtyTech’s Uzelac said he was surprised to hear some companies think quality control the final stage of software development could be done by engineers overseas. He made his position on the subject clear. “No matter what level is done overseas, the home office needs to do quality control,” he said. “If you don’t, you’re failing the product.” Uzelac says he wishes the need for outsourcing would go away, but he is also realistic: “If we could meet our budget in the U.S.,” Uzelac said, “we would do so.” The Software Council of Southern California is doing a position paper on offshore outsourcing and is asking for input from IT companies. Lee Schaeffer, SCSC president, said the Council has received dozens of e-mails from people who oppose offshore outsourcing.

VALLEY BRIEFS Nursing Scholarships Awarded The Encino-Tarzana Hospital Charitable Foundation has awarded nursing scholarships to Laura Castro of Canyon Country, Mona Munoz of Reseda, Sandra Holguin of Burbank, Debbie Mireles of Saugus, and Tatiana Balas of Los Angeles. The $1,200 scholarships are awarded to local students who are currently pursuing Bachelor of Science degrees in Nursing. Recipients are required to be currently enrolled in school, demonstrate good school attendance, honesty and integrity, show initiative and dedication to exploring career opportunities in the medical field. Anheuser- Busch Ranks First A survey of 10,000 business leaders and securities analysts named Anheuser-Busch Cos. Inc. first overall in quality of products and services among nearly 600 companies in Fortune magazine’s 2004 “America’s Most Admired Companies listing.” Anheuser-Busch, whose main West Coast plant is located in Van Nuys, ranked first in its industry in all eight categories: innovation, employee talent, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment and quality of products/services. Pasta Pomodoro to Open Pasta Pomodoro, Inc., the San Francisco-based Italian chain, opens its newest location March 15 in Woodland Hills. Run by Italian-born chef, Adriano Paganini, Pasta Pomodoro’s newest location joins its sister Southern California restaurants located in Irvine, Newport Coast, Laguna Beach, Corona, and Manhattan Beach. There are 36 Pomodoro Cucina Italiana and Pasta Pomodoro restaurants located throughout the West Coast. In 2003, the company racked up $41 million in sales with each average unit at $1.4 million. Rockwell Forms Firm Thousand Oaks-based Rockwell Scientific Company LLC will be a substantial stakeholder in a newly formed company called Altasens, Inc., a direct spin-off of Rockwell Scientific’s CMOS Image Sensors Business Group. Altasens came about from a collaboration between Rockwell and ITX International Holdings Inc., based in Mountain View. It will manufacture image sensors for entertainment, industrial and consumer uses. ML to Acquire Company Camarillo-based AML Communications, Inc. signed a letter of intent to acquire Microwave Power, Inc. in a stock-for-stock transaction. AML will give about 2.1 million shares in exchange for all shares of MPI, a privately held manufacturer and distributor of high power microwave amplifiers. AML manufactures and distributes amplifiers for military microwave and wireless communications markets. MannKind Raises Funds MannKind Corp., a Valencia-based privately held biopharmaceutical company, raised $50 million through placement of more than 980,000 shares of stock. Cash and investment securities at the completion of the placement to institutional and private investors totaled about $64 million. Electro Rent Enters New Market Van Nuys-based renter of computers and electronic test equipment Electro Rent Corp. acquired some quick-ship services contracts from CIT, a NYSE-traded company. The move signifies Electro Rent is entering the business continuity/disaster recovery market. The terms of the deal were not released. 3D Systems Reports Revenue Growth, Net Loss Valencia-based 3D Systems Corp., a manufacturer of solid imaging machines, reported revenue growth of 10 percent in the fourth quarter of 2003 compared to the same period in 2002. The company took in $35.2 million in the quarter in 2003 as opposed to $32 million in 2002. 3D reported a net loss of $12 million for the fourth quarter, claiming a change in accounting principles and legal fees. It reported $15.7 million in net loss in the same period in 2002. SunGard Named ‘Best Treasury System’ Calabasas-based SunGard Treasury Systems, a unit of SunGard, a global leader in IT integration, was recognized as the “Best Treasury Management System” in North American and Asia by the Global Finance Magazine. The awards represent the second consecutive year the company has been honored by Global Finance. SunGard will be featured in the April issue of the magazine. Homestore Reports Net Loss Westlake Village-based Homestore, Inc., a provider of real estate media and technology, reported revenue in the fourth quarter of 2003 was at $54.9 million, compared to $60.8 in the same quarter in 2002. The company reported $12 million in net losses in the fourth quarter, compared to $36.6 million in the same period last year. World’s First Power Over Ethernet Test Solution Calabasas based Ixia, a global provider of IP network testing solutions, announced that it has developed the world’s first Power over Ethernet (PoE) test solution for validating power-enabled equipment. Ixia’s new hardware conforms to the IEEE 802.3af standard for PoE via emulation of the powered device (PD). It is designed to operate in conjunction with Ixia’s line of Ethernet network interface modules, which provide data traffic generation and analysis, to verify that data is not impacted by varied power load conditions.

FORUM: Back in the Market With the Southern California supermarket strike turning into a bitter four-and-a-half month war of attrition, many shoppers changed their shopping patterns. Chains such as Trader Joe’s, Gelson’s and Stater Bros., along with numerous independent small grocers saw an increase in business from customers wary of crossing the picket lines. Now that the strike has concluded, the Business Journal asks: Did you change your shopping patterns during the strike? And if so, are you going to return to the place where you had previously marketed? Larry G. Mankin Chief Executive Officer Santa Clarita Chamber of Commerce Certainly, some of the smaller independent businesses in the food business have seen a dramatic increase in their sales from their pre-strike basis. It’s opened up the doors to a number of companies to expand. I now discovered a wonderful butcher shop that I now go to once a week, while I may have gone to that place previously, there was no guarantee that I would have. Although I was sympathetic to the unions’ cause, I also continued going to the Ralphs and Albertson’s Don Grant Co-owner Orlando Art Gallery, Tarzana I’ve gone back to the Ralphs where I had shopped before the strike because they’re back now and the store is back to normal. But I do like Stater Bros., where I had shopped during the strike. I’m not sure yet exactly what I’m going to do. We’ll probably go back to the Ralphs a bit more because it’s closer. But I think I’ll probably continue shopping at Stater Bros as well, which I wouldn’t have done pre-strike. Paul Doyle Owner Think Vitamins and Sports Supplements, Woodland Hills During the strike, at first we changed our shopping habits, but then as it dragged on I just went back to the original store. So I guess I didn’t change that much to begin with. Hakim Chambers Renovations Coordinator University Student Union, Cal State Northridge It kind of changed my shopping patterns. I’ve been going to Vallarta, but I think I will eventually make my way back to Vons. Vallarta was cool for the time being because there weren’t any people striking in front of the store. That looks really bad, and to have a chain like Vons, Ralphs, Albertson’s taking four to six months to settle a labor dispute is ridiculous in this day and age.” Janelle Paige Owner Layers: A Cake Design Studio, Sherman Oaks I would say that once they get back into order I’ll do it. But right now it looks pretty bad. They’re just stocked with alcohol and candy and once they get it up to par, I’ll return.

Banks Get Cozy, Boost Local Services By SHELLY GARCIA Senior Reporter Used to be a walk inside the bank branch got you a 20-minute wait for a cold stare from an anonymous teller who might just send you packing after reciting the rules about transactions that can only be conducted at your home branch. But anyone bypassing the ATM machine for a visit behind the doors of a bank branch these days is more likely to get a warm hello, a cup of joe and a conversation that takes place face-to-face no shouting through bullet-proof glass required. The disappearance of community banks, stock market declines over the past several years, the bust in the business economy coupled with a boom in consumer spending has sent most banks running straight for the retail customer, a segment that many had shunned since the 1990s when the nation’s largest banks beat a frenzied path to automate their retail banking services. “It’s the reversal of a trend where banks were focusing on technology so customers don’t have to come into the branch,” said Tracey Mills, a spokeswoman for the American Bankers Association, a Washington, D.C.,based trade group. “Community banks have always been really good at the customer service thing and getting to know their customers, and larger banks are noticing customers respond to that, so they’re competing by putting banks in communities and trying to focus on customer service.” In the San Fernando Valley, where there are less than a handful of independent community banks remaining, some of the largest players in the banking industry have opened new branches, remodeled old ones and added staff in an effort to attract retail customers. A new look “We’ve remodeled 80 percent of our branches in the San Fernando Valley, but we have also upgraded the quality and caliber of our team members,” said Vince Liuzzi, president of community banking in the San Fernando Valley for Wells Fargo Bank. “We have determined our customers want to bank when, where and how they want. So in response we have put business bankers, financial planners licensed insurance representatives in the branches.” Wells Fargo, which operates 27 branches within its Valley division, which stretches from Toluca Lake to Calabasas and up to the 118 Freeway, is set to open two new branches in the area within the coming year, in part because the company has added to its staff here by about 30 percent. Washington Mutual, which last month announced that it would add about 250 new branches across the country this year, is also expanding in the local area, although the company could not break out the number of new branches it planned in the Valley as yet. WaMu has opened 56 branches in the greater San Fernando Valley, an area that also includes the Simi, Conejo, Santa Clarita and Antelope valleys, since it entered the California market in 1996. “In the late 1990s we took a really hard look at how the branch bank services the needs of our customer base, and we saw a lot of banks were pushing customers into less costly means of servicing,” said Kendall Bateman, senior vice president for planning and franchise development for WaMu. “What we found was that our customers want to do business with friendly, competent people in a comfortable environment. Based on that, we began our expansion into a number of different markets.” The consolidations of the 1990s helped banks to locate branches in local communities throughout the country. But as the merger frenzy subsided there were 239 deals last year compared to 504 M & A; transactions in 1998, according to data from research group SNL Financial banks began identifying voids in the market and began building new branches to fill them. “When you have this mass consolidation, there’s a lot of thought that people can come in and feast on the remnants,” said John McCune, research manager for the financial institutions group at Charlottesville, Va.-based SNL. “One would normally think it’s an opportunity for community banks. What we’ve seen is some of these regional banks that are consumer savvy making a play for these customers.” A prime target The Valley is considered by some a particularly appetizing feeding ground because of its large population and because there are areas that simply are underserved in the community. Even commercial banks have moved to establish a presence here. American Business Bank, which launched in L.A. in 1998, late last year opened a Valley office in Warner Center staffed with two relationship managers, Regional Vice President Gary Coleman and Vice President Ron Call, both residents of Calabasas. “We think of it as a city almost the size of Dallas that we would be remiss if we didn’t have a local presence with people who work out there and live out there,” said Don Johnson, president and CEO of American Business Bank. “The mergers helped us, but that’s just kind of a backdrop to the fact that it’s just an ideal place to do business.” For the retail banking segment too, there have been other reasons besides the bank mergers and consolidations to expand. Chief among them has been the strength of consumers’ buying power and a decided turn away from using brokerage houses for investment services, largely as a result of the stock market bust at the beginning of the decade. “What our customers told us is that as opposed to using an online brokerage house they prefer to sit across a desk from a financial consultant and talk about their portfolio,” said Liuzzi. Banks like Wells Fargo, which this year plans to add some 25 branches in Los Angeles and hire as many as 400 new workers to staff them as part of a 100-branch expansion nationwide, say a large part of the reason for the expansion is the addition of services in recent years. Expanded services Besides traditional retail banking transactions, most banks now offer financial planning services, trust and insurance services, along with a full menu of home mortgage, home equity and other loan products. The added staffing helps not only to secure these new businesses but also to cross sell products to existing customers. “We consider ourselves a financial institution and because customers are moving more of their relationships to us, when you bring your mortgage over and your trust accounts over, we have to make sure we have a specialty banker for each of those products,” Liuzzi said. And because these added services typically take more time than the traditional banking transaction, banks have also had to revisit the design of their branches so that they invite more lengthy visits. Across the country, some banks have installed fireplaces and lounge areas, plasma TV screens and ticker tapes flashing stock market information. There are even partnerships brewing with Starbucks, said American Bankers’ Mills. WaMu, considered a leader in retail banking, has developed a new prototype branch the bank calls Occasio, that eschews the traditional bank design in favor of a concept that borrows from the retail and hotel industry. Visitors are greeted by a khaki-clad concierge and directed to a central counter where they can interact with bank employees without lines and teller windows. And there is a kids area equipped with video games. “A lot of our competitors were focused on corporate business and high net worth individuals and they lost sight of the consumer,” said WaMu’s Bateman. “We have always been a retailer for consumers, so we maintained our customers, and some of that commercial business has gotten a lot less lucrative, and it’s caused some of our competitors to reexamine their position, and they’ve rediscovered the value of branch banking.”