Business: Software developer Headquarters: Calabasas CEO: Najeeb Ghauri Market Cap: $35 million Dividend Yield: N/A* Total Liabilities: $5.5 million P/E: No earnings Long-Term Debt: $300,000 * Netsol International does not pay dividends. NetSol International seems like an unlikely takeover target. A fashion company called Mirage Holdings Inc. that transformed itself into a software company when it acquired a Pakistani software development firm in 1996 and changed its name, NetSol has rarely recorded a profit. In fact, in the four quarters dating back to March 31, 2000, the company had losses of $5.22 million on sales of $7.39 million. But that didn’t stop a group of stockholders, accompanied by armed guards, from taking over the company’s headquarters in Calabasas briefly and temporarily last month. Nor did it stop the management already in place from getting a temporary restraining order forcing the group out again or a judge in Nevada (where NetSol is incorporated) from naming a receiver to run the company while things are sorted out. The rival shareholder group, led by hedge fund manager Jonathan Iseson and his New York-based Blue Water Partners, says that, after a proxy fight, it now has a majority of NetSol’s outstanding stock and on June 11 elected a new board of directors. Current management, led by CEO Najeeb Ghauri and his three brothers, insist they still control the company and Las Vegas District Judge James Mahan has left it to his appointed receiver, George Schwartz, to straighten it all out. But why all the interest in a company that lost $2.4 million on revenues of $1.9 million in the first quarter of 2001, compared to a loss of $800,000 on revenues of $1.8 million in the same quarter a year earlier? “That’s an interesting question,” said Todd Pitcher, an analyst with the Willow Cove Investment Group. “The core business model turned a lot of people’s heads over the last four months.” NetSol makes financing and leasing software for the automotive industry at facilities it operates in Pakistan. Its primary clients are the European subsidiaries of Volvo AB and Daimler-Chrysler AG, makers of Mercedes-Benz. Pitcher said the low cost of doing business in Pakistan (even lower than in India) and the potential for sales to U.S. car dealers has made NetSol more attractive than it might appear. “There’s an opportunity in Pakistan to get more significant price points than in India,” he said, “and they’ve got some real traction with Volvo and Mercedes-Benz.” That unrealized potential is what led NetSol Shareholders Group LLC to announce a proxy contest for control of the company in late April. “The existing management has had ample time to build the company and make it profitable,” said Cary Burch, a member of the group who also happens to be a member of the previous NetSol board. When the shareholders group announced it had taken control of the company on June 11, Burch was named chairman and chief executive. “(Existing management) has failed to turn a profit,” Burch said, “and the shareholders were very, very vocal about this. Management was very tardy about making changes.” Pitcher said, “Historically, there’s been a trend toward talking about opportunities, but they have never seen any numbers materialize.” Neither Najeeb Ghauri, President Salim Ghauri nor COO Naeem Ghauri returned repeated calls from the Business Journal. NetSol’s stock typically traded at less than $10 a share until Blue Water Partners took a very large position in the company in late 1999. NetSol’s stock reached an all-time high on March 3, 2000 of $80 per share, after opening the day at $47. That attracted the attention of Barron’s magazine, which printed a story last summer about Blue Water’s position with the company. That may have led to an investor lawsuit against Blue Water charging stock manipulation a judge eventually rejected the investor demand that Iseson be removed as portfolio manager and the deterioration of NetSol’s market value. By April 9, 2001, NetSol was trading at $1.43. On July 6, it was $1.65. Burch said he would like to see an eventual compromise between investors and management that would lead to the growth he believes the company is capable of. However, he also added, “I’d like to see the Ghauri brothers recognize their bad decisions.” Pitcher said he believes the conflict could eventually strengthen the company, particularly if the current management views it as “a wakeup call.” “I don’t think this will drive the company into the ground,” Pitcher said. “They’re at the end of the line with a lot of efforts, so it’s moving to almost pure profit.”

To get an idea of how close Dick Martinelli and his wife Margie are to the way they have done business for decades, walk through the door of their San Fernando-based office and make a sharp right. There (now behind glass and under lock and key) is a collection of office machinery that includes a 1941 Sunstrand adding machine, a Monroe calculator from 1917, and an army of black manual typewriters the oldest a Remington No. 7, made somewhere between 1896 and the early 1900s. Martinelli’s Office Machines and Equipment first opened its doors on Chatsworth Avenue in 1965, then moved to its present location on Maclay Street in San Fernando in 1969. The relics on display are just a sampling of the types of office machinery the company has sold and serviced over the years. Today, however, the manual typewriters and hand-cranked adding machines have been replaced by palm-sized calculators, fluorescent-colored beepers, Star Spangled Banner-blaring cell phones, fax machines, digital copiers and, yes, the computer and its companion: the Internet. “One morning I woke up and everything was electronic,” said the 71-year-old Martinelli, who began his career fixing typewriters out of a small office in Montrose. He started the company with a whopping $5,000 bank loan. “It’s all changed so fast I don’t know how to describe it.” Truth be told, Martinelli has slowly been handing the reins over to his children Jim, 44; Rick, 48; and daughter Pat, 40 over the last few years. His sons primarily handle the requests for service or parts for personal computers, electronic equipment and Internet set-up and assistance. Pat keeps the finances in order, but it’s all on computer a tool of the trade her parents are not necessarily comfortable with so don’t ask Dick or Margie to tell you how things are panning out. Court reporters once provided a steady stream of business for Martinelli’s, but with the advent of the computerized stenotype machine, they no longer have a need for ribbon replacements. Nevertheless, somewhere on Martinelli’s walls you can find just about every typewriter ribbon still available on the market more than 400. Which is where Margie comes in. She may not be able to tell you the difference between a microchip and a megabyte, but she knows her ribbons, and insists there are plenty of customers out there who still need them. “You’d be surprised how many people have computers but have hung on to their old typewriters because they simply can’t get with electronic equipment,” she said. “Some people come in here and ask us why we still carry all this stuff. I just tell them that we have customers who say they just don’t want to work on the computer, they want to type it out.” Ironically, said Dick Martinelli, it is the so-called high-tech superstores their biggest competitors such as Circuit City Stores and Best Buy Co. that have inadvertently kept the market share strong for companies like Martinelli’s. The number of authorized dealers for equipment made by companies such as IBM, Hewlett Packard and Xerox, for example, has been on the decline as the big retailers have come along with their own in-house service departments. More and more of those big retailers have a hard time keeping their shelves stocked with replacement parts because they grow outdated so quickly or, in some cases, because the manufacturer no longer exists. “I’ve had customers come in and ask me for replacement products for relatively new equipment, because they tell me the store they bought it from just stopped carrying it,” said Jim Martinelli. “That’s how fast technology changes. So we try to track those parts down and keep them here because we know someone is going to want them.” And, unlike many of those large retailers who require their customers to bring their equipment in for service, Martinelli’s will “deliver,” be it to help a small business go on line, or to help a frustrated home-worker clear a jammed printer. The company has taken a few hits over the years, once literally in 1971 when the Sylmar Earthquake struck, damaging much of the store’s stock. Next came the demise of the aerospace industry and the loss of clients like Lockheed Martin Corp., LibraScope and Whitaker. “Our business really went down the pipe when that hit,” said Dick Martinelli. The recession the real recession of the 1990s was a particularly trying period. But ask Dick or Margie if they ever thought of shutting down, and all you’ll get is a shrug of the shoulders. “This is what we do,” said Margie. How did they pull through? “We just started looking more closely at industries we hadn’t been selling to and started offering other products,” he said. Although the company at one time had non-family workers on the payroll, today it is strictly a family-run operation with a distinct “mom-and-pop” mentality as its core business driver. Customers can find Martinelli’s on line now. Inquiries from Asia to Antwerp for rare Smith Corona replacement ribbons, for example, are liable to come through at any moment.

One of the two newly appointed Burbank Airport Authority commissioners has said he’d be willing to revisit the original, albeit highly controversial, plan by the airport to build a new 14-gate terminal on property formerly owned by Lockheed Martin Corp. But before that can happen, airport officials say the city of Burbank must rescind its recent demand for a new environmental impact report on the property. And, regardless of whether there are fresh attitudes ahead for the nine-member commission, airport officials say the EIR request is threatening to add more delays and expenses to what has already cost the two sides close to a combined $20 million in legal fees. City officials, however, say the EIR could have been completed as early as this fall, had the airport stuck with the process already agreed to. That is the atmosphere that greets new airport commission members Bill Wiggins and Dave Newsham, who were selected by the Burbank City Council earlier this month to replace Phil Berlin and Ingolf Klengler. Wiggins is a former Burbank city councilman and Newsham a former Burbank police chief. Sitting Burbank Commissioner Charlie Lombardo was reappointed. Burbank, Glendale and Pasadena city councils each have the authority to select three commissioners to the nine-member airport commission every four years. And, although the terms were up for the three commissioners each from Glendale and Pasadena, the city councils of those cities opted to reappoint all their representatives, dashing Burbank’s hopes for new faces, and perhaps new opportunities for resolution. Burbank city officials, perhaps responding to criticism from constituents, believe commission members from other cities have not been responsive to their concerns. “We were disappointed that neither Glendale nor Pasadena chose to follow suit,” said Burbank City Manager Robert “Bud” Ovrom. “We made changes because we believe that it’s time for some fresh thinking.” It’s no secret that Burbank commissioners have often locked horns with Glendale and Pasadena representatives. And Ovrom said the fact that neither of the other two cities chose to make changes to their panels indicates little interest on their part in putting an end to the status quo. Wiggins said the authority commission, in his view, has been mired in acrimony for years and must change if any progress is going to be made. “I’ve watched the Airport Authority over the last six years and, in my humble opinion, it has been basically dysfunctional,” Wiggins said. “I think there has been so much animosity and so many personalities involved that it just was not working well. I’d like to see some of the rhetoric toned down a few notches.” Newsham, on the Burbank police force for nearly 30 years, 10 as chief of police, said he recognizes the concerns of the citizens of Burbank, but would be open to revisiting the airport’s original plan for building the new terminal on the former B-6 property. In February, the airport commission withdrew its application to build the terminal on that land after Burbank officials requested it submit an updated EIR. The airport has since put the B-6 property up for sale and is now focusing on a plan to place the terminal on a smaller chunk of land, which it already owns, meaning there may be fewer obstacles. Newsham said airport concerns about a new terminal are legitimate and more wrangling over a new EIR will undoubtedly lead to more lawsuits and acrimony between the two camps. “I would hate to think that the original terminal site is totally a dead deal,” said Newsham. “From a facilities point of view, if there is going to be a new terminal, then that site makes sense. But it may very well be that we are too far down the road and it may not be possible. But that is certainly one of the first questions I’d like to ask.” Wiggins said he wasn’t prepared to discuss the possibility of getting original talks for the B-6 site back on track or whether the smaller parcel of land would ever be a viable option for a new terminal. He did, however, indicate that it’s feasible to think the airport and the city could agree to stop the sale of the land, but is fairly certain that that would require an agreement between the two camps. Ovrom said the Glendale City Council intends to get more directly involved in discussions with Burbank and the airport, which he said could help get talks back on track. “Given that none of the commissioners from Glendale or Pasadena were changed, we will start talking directly to the two city councils,” said Ovrom. “No reason to talk to these same commissioners, we know where they stand.” Glendale City Councilman Gus Gomez said the council decided to reappoint its commissioners because of the depth of their experience with airport issues. “I think it would be a mistake to lose that by replacing those commissioners,” Gomez said. Glendale Commissioner and Authority President Carl Meseck has served five consecutive four-year terms on the board. Airport Executive Director Dios Marrero said the makeup of the airport commission is not the stumbling block to moving forward with terminal plans, it’s the city’s request for a new EIR. “In the last two years there has been no acrimony on this commission, and the notion that there has been is just a myth being perpetuated by people (that) is wrong and irresponsible,” said Marrero. He said the commission voting record over the last two years has reflected a stronger sense of camaraderie, and a recognition that old arguments have faded and it’s time to move on. “When do we put to bed the myth that we still have the Hatfields and McCoys here?” asked Marrero.

Awards The Valley Industry and Commerce Association announced its first Excellence in Business Awards June 7. Recipients included Toolshed Inc. of Northridge for Start-Up Entrepreneurial Company of the Year; Meet Each Need With Dignity of Pacoima for Not-for-Profit Organization of the Year; Precision Dynamics Corp. of San Fernando for VICA Member Company of the Year; the San Fernando Valley Business Journal for Small Business of the Year; and Irwin Rosenberg, vice president for Laidlaw Transit Services of Sherman Oaks for Executive of the Year. VICA award recipients were selected through a secret ballot distributed to VICA members and tabulated by the independent auditing firm of Grant Thornton LLP. Ron Bension of Sega Gameworks LLC in Glendale won the 2001 Ernst & Young Entrepreneur of the Year Award in the entertainment/communications category. Monty Fu of Syncor International Corp., headquartered in Woodland Hills, won in the health sciences category. Errol Ginsberg of Ixia in Calabasas won the award in the technology category. Insurance Health Net of California has promoted Gary Jenkins to senior vice president and chief sales officer. In his new capacity, Jenkins is responsible for commercial sales activity throughout California. He is based at the company’s Northern California headquarters in Oakland. Lance Lang, M.D. has been named vice president and senior medical director of quality improvement and medical informatics for Health Net of California. Most recently, Lang was chief medical officer for CareAssured.com, an Internet-based health plan, where he developed the delivery system models for health care provider contracting, reimbursement, care management and quality improvement. Carl Romstadt has been promoted to vice president of labor and trust for Health Net of California. He will be responsible for the development, administration and management of the sales functions for product lines benefiting members in labor and trust organizations. Internet/Technology Westlake Village-based Diodes Inc., a semiconductor manufacturer and supplier, primarily to the communications, computing, electronics and automotive industries, has named Keh-Shew Lu to its board of directors. Lu has been senior vice president of Texas Instruments and manager of its Worldwide Mixed-Signal Products Semiconductor Group since June 1998. Oliver Woyke is Diodes’ new European sales manager. Woyke’s responsibilities will include the development and management of Diodes’ manufacturers’ representative network. Westlake Village-based engineering service provider Aprisa Inc. announced that Mitchell Mondry, co-founder of the Michigan-based private investment firm M Group Inc., has joined Aprisa’s board of directors. M Group was a participant in Aprisa’s second round of funding in February 2000. As vice president of M Group, which specializes in high-tech businesses, Mondry currently sits on the boards of several of the firm’s portfolio companies including Crystallize, KnowledgeLINKS, Paramount Bank, Batteries.com and Stoneage.com. Jim Noonan has been named to the newly created position of senior vice president and general manager, Warner Bros. Online. Noonan will oversee the day-to-day operations of Warner Bros. Online and its Web site, www.warnerbros.com, including production, sales, marketing, legal and business affairs, technology and original programming. Douglas T. Parrish has been named senior vice president, technology and chief information officer for the Walt Disney Internet Group. Parrish will be responsible for overseeing the technology platform, infrastructure and applications for The Walt Disney Co.’s Internet properties. Medical/Pharmaceutical North American Scientific Inc. announced that Robert Morgan has been appointed vice president, regulatory affairs of its subsidiary Theseus Imaging Corp. In this newly created position, Morgan will be responsible for developing and implementing regulatory and drug development strategies in support of Theseus’ development programs in the areas of cardiology and oncology. Research Financial consultant Ken Cafferty was appointed to Pollution Research and Control Corp’s board of directors. Cafferty will serve on a three-man audit committee as an independent, enabling the Glendale company to conform to NASDAQ-small cap audit committee composition requirements. Small Business The United Chambers of Commerce has announced its 2001 Small Business Award honorees. The honorees are: Jim Rule, Acorn Newspaper; Dorothy Barnett, Barnett Notary Public; A.J. Scola, Secural Services Corporation; Sandy Sanderson, Dependable Dodge; Bill Lanting, Radisson Hotel Chatsworth; Gilda Cohen, Gilda R. Cohen, a Law Corp.; Jake Parunian, Kenn Cleaners; Thomas H. Fry, Crown Disposal; Marty Laff, Edward Jones Investments; Joyce Williams, Phoenix House; Stephen L.A. Callahan and Millicent G. Callahan, Thomas F. White Co. Inc. Investment Brokers; Matthew Hunter, Hunter Communications; Mike Berns, Good Swartz Brown & Berns; Bill Slater, Apex Electronics; Mary Lee Tiernan, Snoop’s Desktop Publishing; Bonnie Bernard, Bonnie Bernard Flowers 4U; Paul Lawlor, Farmers Insurance Company; Paul Jacobs, Professional Stationers, Inc.; Lorraine Hasson, Mr. B’s Flowers; Michael J. Miller, State Farm Insurance; and Bob Caine, Caine & Weiner. Telecommunications Chatsworth-based Pacific Coast Cabling has appointed key personnel to management positions. General Manager Tim McManus is overseeing all company sales and operations. McManus has been at Pacific Coast Cabling 10 years and served as the company’s project operations manager since 1991. Human Resources Director Carol Wieser is overseeing the direction of the company’s human resources department. Wieser previously worked as vice president of human resources.

EXECUTIVE SPECIALTIES Year Founded: 1984 Core Business: Manufacturer of Lucite corporate mementos Revenue in 1984: $300,000 Revenue in 2000: $1 million Employees in 1984: 2 Employees in 2000: 6 Goal: To expand beyond the financial industry Driving Force: To fill a market need with businesses based on integrity A company that helps others find ways to honor clients and employees overcomes obstacles to achieve its own success Back in 1984, Valerie Red-Horse, then a film student at UCLA, took a day job at the now-defunct financial services firm of Drexel, Burnham & Lambert in Beverly Hills. Long before the company went belly up though, Red-Horse was an office assistant at the firm. Her top priority: pound the pavement until she came up with an affordable and reliable supplier of corporate mementos or Lucite plaques, which the firm handed out to its employees and customers to commemorate special achievements, such as good stock buys. In the meantime, Red-Horse’s husband, Kurt Mohl, then a member of the UCLA football team who was eventually drafted by an NFL team, blew out his knee, essentially wiping out his career in sports. He took a job in office product sales as Red-Horse climbed the corporate ladder far enough to know she was born to be an entrepreneur, not somebody else’s girl Friday. One day Mohl started helping Red-Horse design the mementos for Drexel and the two found an out-of-state manufacturer who was willing to go the extra mile, as she puts it. Eventually, Red-Horse left Drexel and the couple started their own business, Executive Specialties, from their first home in Encino. Drexel continued to work with Red-Horse after she left the company, essentially serving as her company’s first and largest client. However, the firm’s demise came just as Red-Horse learned she was pregnant with her second child and shortly after the couple had purchased land in Van Nuys where construction of their current home and home office was already underway. “We were terrified,” said Red-Horse. “We had no idea what was going to happen to our business. Drexel was our number one client, they represented the bulk of our orders.” But there was a silver lining. “We started getting all these calls from (Drexel) former employees who had gone to other firms and still wanted the Lucite plaques for their new clients,” said Red-Horse. “So, all of a sudden we had like 15 or 20 new clients, just like that, and we eventually were not able to just survive, but we were able to triple our business.” The company has grown from a two-employee, $300,000 business over the last decade to a six-employee company with annual revenues topping the $1 million mark for the last few years and a place on the Business Journal’s list of the Valley’s top minority-owned businesses. (Red-Horse is part Cherokee.) Executive Specialties’ customers are primarily in the financial services industry, one of the largest consumers of corporate memento products, Red-Horse said. Product samples in the company catalogue include awards in the shape of everything from bottles of champagne to yellow chainsaws, all at a cost of between $30 and $100. Paul Woo with Howe Barnes Investments in Los Angeles said his company has been doing business with Executive Specialties for the last four years. Each time his staff completes a deal it calls for a commemorative piece. Consequently, he said, he spends as much as $3,000 a quarter with Executive Specialties. “We’ve obviously been approached by other Lucite award companies, but we do business with this company because they are able to provide such a wide variety of products for us,” said Woo. “They were a very good referral to us from another investment firm.” Red-Horse said her client base is well into the hundreds. Growth, she said, is part of the long-term game plan, and includes adding more sales staff, but the company has managed to benefit from one of the oldest sales tricks in the book: word of mouth. “We have become known around the world for getting products out quickly, but also getting our manufacturer to do something out of the ordinary for a client,” said Red-Horse. “Word of mouth has worked very well for us because of what we can and will do for our customers. So, what we tell our clients is, if they don’t want something special, our competitors would be fine. But we’ve been known to charter planes to get an order out on time.”

Opponents of the planned 3,000-home development known as Ahmanson Ranch say the recent hiring of former U.S. Interior Secretary Bruce Babbitt as a consultant for the controversial project is a transparent effort by the developers to deflect criticism and a sign of their impending concession to environmentalists. Ahmanson representatives, however, say Babbitt will bring eight years of experience with environmental affairs to the table, clearing the way for better understanding of the project that now has local residents and government officials fighting a powerful out-of-state banking group. Babbitt, who served in the Clinton administration, joined the Washington D.C.-based law firm of Latham & Watkins in January. The firm is representing Seattle-based Washington Mutual Inc., which owns Ahmanson Land Co., developer of the proposed project on Ventura County’s eastern border with Los Angeles County. According to Ahmanson spokesman Tim McGarry, Babbitt will serve as a liaison between Ahmanson developers and environmentalists, including those who have waged a bitter and very public campaign against the project since it was approved by Ventura County officials in 1992. “We hope that Mr. Babbitt will help us communicate the facts of the project to these groups accurately and encourage them to have an accurate understanding of what the project is all about,” said McGarry. McGarry added that Babbitt’s eight-year tenure as secretary of the Interior affords him a high degree of experience with controversial environmental issues and that Ahmanson hopes to draw upon that experience to effectively present its project in the most environmentally friendly way possible. “It’s also reciprocal,” said McGarry. “We hope that he has something to bring to us to provide us with a more accurate understanding of the concerns of the environmental side.” Project opponents say Babbitt’s decision to work for Ahmanson demonstrates his about-face on environmental concerns and a strong indicator that Washington Mutual realizes it is fighting a losing battle. “What Mr. Babbitt’s appointment means is we are gaining ground on them,” said Joe Behar, a Woodland Hills resident and president of the West Valley Community Coalition, a coalition of local homeowners groups formed roughly four years ago. “They are getting so desperate that they have to go out and hire a person like Bruce Babbitt to do their dirty work for them,” said Behar. “As far as I’m concerned, the only thing ‘green’ about Bruce Babbitt is the money he’s getting from Washington Mutual.” McGarry said Babbitt’s appointment should be viewed as an effort by Ahmanson and Washington Mutual to cool the overheated rhetoric on the project, not inflame it. “Clearly there has been a determined effort to castigate Mr. Babbitt for taking on this role and to portray it in very unfair terms,” said McGarry. “It’s certainly ironic that we’ve taken the step of enlisting someone to essentially serve as an ambassador to the environmental community and that the reaction is so negative.” Prominent environmental attorney and Thousand Oaks City Councilman Ed Masry said Babbitt’s involvement is analogous to “putting the Surgeon General to work for big tobacco.” “There is no miscommunication about this project involved here,” said Masry. “Washington Mutual, for its own greedy purposes, is transforming the last real vestige of beautiful parkland to a development that is going to choke the 101 (Freeway) and surrounding communities with traffic. And to say Mr. Babbitt is going to be a liaison, or to cloak him as the white knight, is ludicrous.” Babbitt did not return repeated calls for comment. Washington Mutual was forced earlier this year to submit an updated environmental review on the project because of the increase since 1992 of projected traffic through the 101 corridor. It has been estimated that the project would place an additional 45,000 cars on the 101 Freeway each day, most flowing south toward downtown Los Angeles. The project area includes roughly 2,800 square feet of rolling hills that is also home to the San Fernando Valley spineflower and the California red-legged frog both said to be near extinction. Groups like Behar’s and Save Open Spaces Santa Monica Mountains (SOS) have long pushed to convince Washington Mutual to sell the land off as park space. And, as part of their effort to block construction of the project, which includes plans for a golf course, country club and 300-room hotel, they have been hoping to get federal approval to place the frog and the flower on the federal government’s endangered species list. On June 11, SOS, the city of Calabasas and other environmental groups opposed to the project filed a suit against the U.S. Fish and Wildlife Service to get listing approval. SOS Director Mary Wiesbrock said Babbitt’s involvement won’t have an impact on her group’s efforts to kill the project. “We really believe that they are desperate and they have spent so much money trying to destroy Ahmanson Ranch,” said Weisbrock. “We’ve already concluded that it would cost the developer close to $2 million just to bulldoze the land in preparation for construction, so it doesn’t really pencil out for them and they should just stop their lawsuits and sell it as a park.” McGarry said the spineflower suit wouldn’t have any bearing on Ahmanson’s plans to break ground by 2003. He added that the project area includes 10,000 square feet for park space and a plans for new habitats for the frog and spineflower.

While some analysts remain pessimistic about the future of NetZero Inc. after its acquisition of Juno Online Services, NetZero CEO Mark Goldston pledges the new merged company will be successful. Goldston, speaking a week after the merger of the two companies that pioneered free Internet service was announced, said analysts’ pessimism about the company’s ability to turn a profit is to be expected given the downturn in the economy and last year’s barrage of dot-com failures. “I can’t really concern myself as a CEO with what some people are saying,” he said. “I just go to work every day and try to maximize the value of the company for our shareholders.” On June 7, NetZero agreed to merge with New York-based Juno in a stock transaction valued at $70.7 million. NetZero stockholders will get one share of the new United Online stock for five of their current shares. Juno stockholders will get one share of the new stock for about three of their current shares. NetZero shareholders will end up with just over 60 percent of the new company’s stock. Lanny Baker, an equities analyst for Salomon Smith Barney, said NetZero is on the right track with its merger, but not out of the woods yet. “The deal makes sense from a business standpoint, but they still have to contend with a slow ad market,” Baker said. Westlake Village-based NetZero was one of the first companies to offer free Internet access when it was founded in 1998, but it has yet to show a profit, having lost $98.1 million in 2000 with revenues of $55 million. Juno fared even worse last year, losing $136.9 million with revenues of $114 million. Last Monday check on Friday, NetZero’s stock closed at 92 cents a share while Juno closed at $1.50. The new company will serve a combined 7 million subscribers, with about a million paying for some form of Internet service. Goldston said the elimination of duplicate operations in the two companies would result in cost savings but it is way too early to speculate on how much. “It’s definitely in the tens of millions of dollars,” he said. An estimated 615 people work for the combined companies, with about 280 at NetZero’s main office. Goldston said layoffs are inevitable, although none have yet been planned. Bringing the two companies together, however, was not easy. Goldston said the rivalry between the two firms and litigation over the use of banner ad technology that NetZero claimed had been pilfered by Juno were big challenges. “We’re both fierce competitors and we both have good business sense. Rather than beat each other’s brains out, we realized that we could give consumers something better by this merger,” Goldston said. Likewise, Juno spokesman Gary Baker said the union between the companies seemed inevitable once merger meetings began. “When the two parties sat down at a table, it was clear that the companies had a lot in common,” Gary Baker said. Both started out a few years ago offering free Internet service, both had suffered recently as a result of a soft advertising market and both have tried to move subscribers to paid service programs. Charles E. Ardai, Juno’s CEO and president, would not comment for the Business Journal. Gary Baker said Ardai will leave the company when the merger closes next month. Both companies, among the last to offer free Internet access, had been struggling with a sagging advertising market and only recently began providing pay services to generate revenue. Goldston, however, said the combined company will remain committed to providing free Internet access, but plans to expand the marketing of its pay service. “We see this (free) service as a consumer service for people who want to use it recreationally and not for heavy users,” Goldston said. “But for businesses or people who need to use the net extensively, we have a paid service and we want to stress that.” NetZero charges $9.95 per month for unlimited use without the free service’s advertising banners. Juno’s pay service now costs $14.95 per month, or $9.95 to free subscribers who want to switch to the pay service. But even with a pay service, Lanny Baker said, the company will continue to struggle in a soft ad market. “It’s hard to say how many subscribers they can turn into paying customers and even whether that’s going to be enough,” he said. Goldston, however, believes the company’s new NetZero Platinum pay service will make inroads with its free subscribers. “We started with tremendous success in switching to our pay service and migrating people to that experience, and we don’t see a problem in migrating our customers,” he said. But with the company becoming the second largest Internet service provider, Goldston admits his company could be perceived as a prime acquisition target by the Microsoft Network or EarthLink, both of which are struggling to keep up with Internet top dog America Online, which has 29 million paid subscribers. “We’re not soliciting anyone and we’re not interested in being acquired, so that’s not an issue for us,” he said. Although he would not say when he expects the company to become profitable, Goldston insists he believes the company ultimately will be successful with its combined free and pay services. “The advertising market will recover and it’s going to help us and everybody else,” he said. “This advertising market has not only hurt us and Juno, but a lot of other people newspapers, television, radio. Everyone’s been hurt and we have to maximize our efficiency in our organization in tough times.” Goldston scoffed at reports that the merger was hastily arranged. He said it had been in the works for weeks, but not finalized until earlier this month. “Our top priority is to make a profit,” he said. “Everything we do will be to become a profitable entity and give us the size and scale to gain profitability.”

It seems that when it comes to the Santa Clarita Valley, you can never have too much industrial space. Spirit Properties is breaking ground on what it claims will be the largest new business park developed in Los Angeles County in the past five years. The 240-acre industrial park will accommodate 3 million square feet of space. Spirit will market land parcels along with buildings and build-to-suit facilities for sale and lease. It is located near the intersection of Ruether Avenue and Redview Drive. While industrial leasing has slowed somewhat from the frenzied pace of the last several years, vacancy rates remain low. In Santa Clarita, vacancy levels have remained at 4 percent over the past three years, despite the addition of nearly 3 million square feet of space, according to Jim Linn, a broker with Grubb & Ellis, who is marketing the development with Nigel Stout. Spirit, a Santa Clarita-based developer, acquired the property several years ago and hired Fairway Commercial Partners in Valencia to build and manage the complex on a fee basis. Parcels will range from one to 40 acres. The company is planning to construct three buildings, a 48,000-square-foot facility that can be divided for multiple tenants, a 37,524-square-foot facility and a 33,623-square foot facility for sale or lease. The complex, named Centre Pointe Business Park, will also offer build-to-suit facilities. The developers expect the project to provide 5,000 jobs. Leonard Exits Mark D. Leonard, a principal and senior vice president with Trammell Crow Co., has left the firm. Leonard, who had been responsible for a number of the company’s San Fernando Valley developments, said he is doing some independent brokerage work and residential development. “I will resurface in a more public way later this year,” Leonard said. In the meantime, he is enjoying some leisure time and travel, including a short jaunt to Philadelphia recently to watch the Los Angeles Lakers in their winning series of games against the Philadelphia 76ers. Trammell Crow is one of the current bidders for the 3.2-acre redevelopment project at the site of the old police headquarters in Burbank. The company is also renovating the former Marquardt industrial facility in Van Nuys. Thousand Oaks Sale RVL Packaging has acquired 2.6 acres in Thousand Oaks for $775,000. The company will build a 50,000-square-foot facility for use as administrative offices on the property. Santa Fe Trust, the seller, was represented by Cheryl Richmond, Cory Richmond and Marc Riches of NAI Capital Commercial. The buyer was represented by Tony Buccola of the Buccola Co. Calabasas Lease Fitness Education Worldwide Inc., an education center for personal trainers and rehabilitation facility for athletes, has leased 15,080 square feet of R & D; space at Calabasas Tech Center. Fitness Education renovated the facility, at 26630 W. Agoura Road to include gyms and training rooms as well as offices which the company will use for its administrative departments. Terms of the lease were not disclosed. Ed Ball and Joel Hayes of NAI Capital Commercial represented Fitness Education. The landlord, Arden Realty Limited Partnership, was represented by Michael Slater and Tom Dwyer of CB Richard Ellis. TO Sighting Opnext Inc., an optical research company, has leased 5,597 square feet of office space in Thousand Oaks. The facility, located at 225 West Hillcrest Drive, will be used for research. The five-year lease was valued at $766,653. Sam Monempour of Grubb & Ellis represented Opnext in the transaction. The landlord, 225 West Hillcrest LP, was represented by Cheryl Richmond, Cory Richmond and Marc Riches of NAI Capital Commercial. Oakwood Remodel Two Valley apartment complexes built in the 1970s are getting face-lifts valued at a combined $35 million. Oakwood Worldwide is taking hammer and nails to the Oakwood Woodland Hills, an 883-unit complex at 22122 Victory Blvd. and Oakwood Toluca Hills, a 1,151-unit complex at 3600 Barham Blvd. The two complexes were among the first resort-style apartments to open in the Valley, which has since added scores of such developments. Ribbon Cutting Investment Development Services Inc. cut the ribbon on its $50 million Westlake North Business Park in a grand opening fete that included a photography exhibit by Calabasas nature photographer Tom Garnache. The 330,000-square-foot complex at Russell Ranch Road is 60-percent preleased to tenants including Homestore.com, Genuity Solutions Inc. and Allied Interstate Inc. The photos will remain on permanent exhibit at the complex. News and Notes KKJ Capital Partners LLC has leased 24,120 square feet of industrial space at 6869 and 6875 Tujunga Ave. in North Hollywood for industrial use. The deal is valued at $1.1 million. Loehmann’s Plaza in Reseda is getting two new tenants. Subway leased 1,031 square feet and Starbucks rented 1,726 square feet at the shopping center. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by email at [email protected].

Bob Dylan for 30 bucks? It’s no joke, it’s a bargain. The Grammy and recent Academy Award-winning artist has been added to the entertainment lineup for the Antelope Valley Fair in Lancaster later this summer. To some tour promoters, Lancaster may be nothing more than another dot on the map that they’ve never heard of. But even small towns eventually get their share of the routing pie. In fact, Dylan is part of a lineup of highly sought after entertainers scheduled to perform during the 10-day event, which runs Aug. 24 through Sep. 3. Although he was added to the schedule to replace country performer Alan Jackson who canceled out, Dylan is also booked to perform at three other fairs across the country this summer, supporting claims that the fair industry is increasingly becoming more than just an afterthought for high-profile performers. Tickets for Dylan’s show are selling for $20, $25 and $30. By comparison, fair admission (which is included in the price of the concert ticket) is $6 for adults, $3 for seniors and children 16 and under. Country music performer Wynonna Judd is scheduled to perform on the fair’s opening night. Tickets for her show are $15 and $25. Opening for Judd is Dennis Quaid and the Sharks. And on Aug. 29, the Grammy Award-winning Destiny’s Child will hit the stage, with tickets starting at just $20. Other performances include Lonestar, Tracy Byrd and Chubby Checker. What has traditionally served as a standard summer tour route for country music artists, fair officials say, is slowly shifting to include a more diversified lineup, including contemporary rock acts. In addition, ticket prices for these shows are often well below what standard arenas and amphitheaters typically demand for similar performances. And, as is the case with AV Fair, they often include fair admission. For instance, if you want to catch Dylan at the Sundome Center for the Performing Arts in Sun City, Ariz. on Aug. 23, it will cost you anywhere between $25 and $65. And Destiny’s Child in Albany, N.Y. on July 18 will run you $40.75 to $45.75 per ticket. Fairs are being taken more seriously by musicians and the agents who book their tours, and for solid economic reasons. The softening economy means promoters have a harder time securing acceptable fees for their clients at large arenas and concert halls, and they’re looking for alternatives. “I was visiting with some talent agents over the last few weeks and it seems to me that what I’m hearing from them is that the market is definitely softening for them as a result of the economy, so they are looking at more and more fairs for next year,” said Jim Tucker, president of the International Association of Fairs and Expositions. “Yes, I think there is definitely a trend growing here.” To stay competitive, fairs have had to shift their focus to attract new audiences, and that includes taking a look at what they offer for entertainment. Many, because of their agricultural roots and exhibitions, traditionally have had strong ties to country music. But those rural areas with agricultural roots are becoming distant suburbs like the Antelope Valley and fair managers are trying to respond to the new demographics. While there is still somewhat of a “cheesy” stigma attached to the fair circuit for today’s performer, they have long provided a home for classic rock revival acts, said Randall Tierney, a Los Angeles-based editor for Amusement Business, which covers the fair industry. “The big picture is the fairs have long revived a number of acts that have been floundering over the years,” said Tierney. “Today’s artists know that, so there is definitely a trend in shifting from country to more diversity. Of course, it varies from region to region, but more and more fairs are turning away from country and they are managing to secure acts that normally they wouldn’t go after.” Then there are also those artists, country and otherwise, who simply love the genre. According to Rondal Richardson, general manager for Wynonna Inc., Wynonna Judd’s Nashville-based company, California is coveted territory for touring artists. “When you are a country music artist, it’s sort of mandated that you do the fair circuit,” said Richardson. “But she picks and chooses her shows as they come along and this was not a touring year for us. This particular show was one of my favorites from the beginning, and the Antelope Valley fair representatives there are smart, and these guys just came with the most incredible offer on the table.” Dylan was a late addition to the fair’s lineup. Tickets for his show went on sale Saturday, June 16 and, according to Jacobs, fans were camped out on the fairgrounds a week in advance to get their hands on them. But, interestingly enough, Dylan did not sell out. Yet. “That’s not unusual,” said Dan Jacobs, the fair’s general manager. “We have something like 2,700 bleacher tickets for those concerts, so we don’t typically sell out immediately.” Destiny’s Child, on the other hand, has sold out. The AV Fair made an offer to the group after the release of its Grammy Award-winning hit “Say My Name” came out last fall. The AV Fair has an operating budget of roughly $4 million, $810,000 of which is earmarked for entertainment. That figure is on par with the much larger Del Mar (Calif.) Fair, which has an entertainment budget of roughly $950,000. Dylan is the most expensive act booked for the AV fair this year at $110,000 for his one-day performance. He’s followed by Destiny’s Child at $105,000, then Wynonna Judd at $65,000. Dennis Quaid and the Sharks will get $15,000. Those prices are not exorbitant, according to Jacobs. “Traditionally, we have paid anywhere between $100,000 and $125,000 for our grandstand entertainment,” said Jacobs. “So we are within budget.” “We got very lucky this year, no doubt, but it’s also the way we just kind of fit into some of the routes that the performers were making this year,” Jacobs said. “Sometimes it’s a big juggling act for the promoter or the agent and we just seemed to fit in well this time around.” It may be too soon to say how much of an impact Tejano musician Freddy Fender had on the bottom line for the San Fernando Valley Fair, held June 7 to 10 at Hansen Dam Recreation Area. But paid attendance for the four-day event jumped to 13,000 this year, up from 9,800 in 2000. The fair, which had lost money and visitors over the last few years (paid attendance fell by a third in 2000 and the fair took a loss of roughly $180,000), was taken over by the management team of the AV Fair. Gross revenues, including entertainment fees, were $66,000, up roughly $15,000 from 2000.

They slowly move through the ring and then, with a sudden turn, tear into their opponents. Another round of kick boxing? Backyard brawling? No, it’s “BattleBots,” Comedy Central’s highly-rated cable television show where radio-controlled androids attack each other with rotating saw blades, spring-loaded sledge hammers and an assortment of sharp metal objects. “It’s violence, but not against people. So it’s fun,” said Peter Abrahamson, Burbank-based robot builder and competitor in the world of robot fighting. Since BattleBots hit the airwaves two years ago, the show has grown to become one of the network’s most popular shows. It is the channel’s third most popular program, averaging a 0.3 rating last month and well above the 0.1 average for most cable TV shows, according to Nielsen Media Research. “It seems to attract all kinds of people who are really into these robots,” said Comedy Central spokeswoman Samara Robinson. A competition in San Francisco last month attracted more than 1,400 fans. Two months ago, the 34-year-old Abrahamson transformed his hobby of building metal roughnecks into a business. “It turned to something more as more people were asking me to help them build their own competition robots,” said the USC graduate, who owns Ronin Special Effects in Burbank, which specializes in animatronic figures for movies and is just now moving into the world of battling robots. Abrahamson said he’s made “a few thousand” dollars so far. His own competition robot, “Ronin” (Japanese for warrior without a master), is awaiting its second bout later this summer. Abrahamson would not say how Ronin did against an opponent earlier this year because the BattleBots episode on which the episode appears has not aired yet. In the meantime, Abrahamson has begun building parts for other robot builders who may not have his knack for assembling things like a four-foot metal arm with a 16-inch saw blade attached to it. “Actually, the blade isn’t that effective as a weapon, but it can do damage,” he said. Some robots use more effective sledgehammers or rotating hammer-like devices to deliver a stiff hit; others have large pointy metal objects to skewer and tear open other robots. Since the bouts are scored much like boxing matches, the winner is usually the one that delivers the most effective blows it’s hard to knock a robot unconscious. Abrahamson and fellow robot builder Dan Danknick founded Team Delta Engineering to create these metal warriors for enthusiasts of a trend that at least officials at Comedy Central believe is just about to explode. Danknick said he plans to retire his own battling robot and devote his time to selling robot parts to other builders as part of his partnership with Abrahamson. “It’s very hard to get parts and equipment,” he said, “so it’s easier for people to come to us and know that we can get these things for them.” The partnership has already received a number of orders, but Abrahamson says he hopes to expand into building robots for others as the company grows. BattleBots rules limit fighting robots to dimensions of 8 feet wide and 8 feet high. Flaming fire, chemicals, projectiles and electrical charges are not allowed as weapons. “They probably don’t want somebody blowing themselves up in a garage trying to build a robot, or have someone seriously injured on the show,” Abrahamson said. The robots are sent into a 48-foot-by-48-foot arena surrounded by shatterproof glass to protect audience members and robot controllers from flying shrapnel. The arena, better known as the BattleBox, features traps, sledgehammers, buzz saws and metal spikes that emerge from the floor to offer added hazards to the robots if and when the contests drag. “It’s a little like ancient Rome for robots,” Abrahamson said. The competition is an offshoot of Robot Wars, begun in 1994 in San Francisco by Marc Thorpe, a special effects technician with George Lucas’ Industrial Light and Magic. That competition is still held annually and televised on The Learning Channel, using rules similar to BattleBots. Christian Carlberg, owner of North Hills-based C2 Robotics, is also making his bid for profitability in the robot business. He said his year-old company will break even with about $320,000 in sales this year. “We gained a reputation in being able to build good quality robots for BattleBots. Then we had a couple of people who wanted us to build their robots, so that’s how it started,” Carlberg said. A former aerospace engineer, Carlberg and his two employees can build a BattleBots-ready robot in six weeks that they will retail for between $15,000 and $25,000. But those seeking a championship caliber android will have to shell out more much more, he said. “We can build a $70,000 robot that can beat anyone, but there aren’t too many people that can pay that,” he said. Last year, Carlberg’s “Minion,” with an unusual hammer-like device that caught competitors by surprise, pounded its way to the championship in seeming short order. His other robots, “Buzzcut,” “Overkill” and “Toecrusher,” have also made quick work of robotic pretenders. But the big money, he said, is in robot building, not the competitions. The grand prize for each episode of BattleBots is $8,000; the second-place team gets $4,000. Everybody else is out of the money. Typically, there are three fights on a half-hour episode. “It seems crazy to spend $25,000 to make a robot so you can win $8,000, but we do it because it’s fun,” Abrahamson said. Competitors, however, do share in residual payments whenever BattleBots is aired, usually a few hundred dollars per episode. Like other competitors, Abrahamson has lined up a couple of sponsors a small software maker and a metallurgy firm who subsidize his travel expenses and repairs to injured robots. Abrahamson will get a little bit of added exposure when his Ronin is part of a toy line introduced by Hasbro Inc. next month featuring some of the show’s most popular robots. There, however, will not be any money coming his way: “BattleBots” producers own all licensing rights to the competing robots. “But it’s nice to see that he’s out there in a toy form,” he added. Carlberg hopes eventually to develop specialized robots for theme parks. “The film business doesn’t provide enough volume for us, so we want to branch out,” he said. Abrahamson, on the other hand, plans to keep his day job building animatronic creatures for films. In the past, he’s developed creatures for “Men in Black II,” “Dr. Doolittle,” “Me, Myself and Irene” and the “Energizer Bunny” commercials.