DealBook: Lenovo Sees Server Deal as Part of ‘PC Plus’ Strategy

EBay’s Strategy for Taking On Amazon

The passenger door opened, and out sprang John Donahoe, the chief executive of eBay, who began striding toward the store. It was earlier this year, and from the outside the Westfield Valley Fair mall near San Jose had a kind of ghost-town feel to it. But Donahoe thinks he can change that. As he walked from store to store — a nearly empty GNC, a quiet Foot Locker — he pointed out how little had changed in physical retail stores over the last 30 or 40 years and what would have to change in the next few years in order for these stores to compete with Amazon and Walmart.

As he sat in a patisserie on the mall’s ground floor, Donahoe touched on his usual themes: how technology has driven scale and automation; how the big-box retailers have crushed Main Street; the way in which our shopping experiences have become less dependent on human interaction. And these changes in the commercial landscape, he said, tend to be ‘‘phrased in zero-sum terms: big retailers versus the little guy. Local versus global. The Chinese imports will kill you. Online is going to disrupt offline.’’ 

There has been much talk about Amazon driving retailers out of business — most recently, and somewhat unbelievably, by proposing to use drones to deliver purchases. For some time now, physical retailers have lived in fear of the various ways in which Amazon can undercut them. If you’re looking for a product that you don’t need to try on or try out, Amazon’s customer analytics and nationwide network of 40-plus enormous fulfillment centers is awfully tough to compete with. And even if you do need to try something on, Amazon conveniently includes a bar-code scanner in its mobile application so you can compare prices while you’re in a store and then have the same item shipped to your home with just a few clicks. (Retailers call this act of checking out products in a store and then buying them online from a different vendor ‘‘showrooming.’’) Amazon holds such sway that for many it’s the default place to buy things online.

And yet online commerce currently accounts for only about 6 percent of all commerce in the United States. We still buy more than 90 percent of everything we purchase offline, often by handing over money or swiping a credit card in exchange for the goods we want. But the proliferation of smartphones and tablets has increasingly led to the use of digital technology to help us make those purchases, and it’s in that convergence that eBay sees its opportunity. As Donahoe puts it: ‘‘We view it actually as and. Not online, not offline: Both.’’ 

Most people think of eBay as an online auction house, the world’s biggest garage sale, which it has been for most of its life. But since Donahoe took over in 2008, he has slowly moved the company beyond auctions, developing technology partnerships with big retailers like Home Depot, Macy’s, Toys ‘‘R’’ Us and Target and expanding eBay’s online marketplace to include reliable, returnable goods at fixed prices. (Auctions currently represent just 30 percent of the purchases made at eBay.com; the site sells 13,000 cars a week through its mobile app alone, many at fixed prices.)

Under Donahoe, eBay has made 34 acquisitions over the last five years, most of them to provide the company and its retail partners with enhanced technology. EBay can help with the back end of websites, create interactive storefronts in real-world locations, streamline the electronic-payment process or help monitor inventory in real time. (Outsourcing some of the digital strategy and technological operations to eBay frees up companies to focus on what they presumably do best: Make and market their own products.) In select cities, eBay has also recently introduced eBay Now, an app that allows you to order goods from participating local vendors and have them delivered to your door in about an hour for a $5 fee. The company is betting its future on the idea that its interactive technology can turn shopping into a kind of entertainment, or at least make commerce something more than simply working through price-plus-shipping calculations. If eBay can get enough people into Dick’s Sporting Goods to try out a new set of golf clubs and then get them to buy those clubs in the store, instead of from Amazon, there’s a business model there. 

A?key element of eBay’s vision of the future is the digital wallet. On a basic level, having a ‘‘digital wallet’’ means paying with your phone, but it’s about a lot more than that; it’s as much a concept as a product. EBay bought PayPal in 2002, after PayPal established itself as a safe way to transfer money between people who didn’t know each other (thus facilitating eBay purchases). For the last several years, eBay has regarded digital payments through mobile devices as having the potential to change everything — to become, as David Marcus, PayPal’s president, puts it, ‘‘Money 3.0.’’

Jeff Himmelman is a contributing writer for the magazine and the author of “Yours in Truth: A Personal Portrait of Ben Bradlee.”

Editor: Dean Robinson

News Analysis: The Challenge of Creating a Unified Organizational Strategy

To be clear, it is hard to do. The default behavior for human beings is to think in terms of tribes. If you work in a small department in a big company, you’re naturally going to identify most closely with your immediate colleagues. You’ll have lunch or coffee together, and maybe even socialize with them outside the office.

Other colleagues you see in the hallway and on the elevator can seem like total strangers, even though you work for the same company. Divisions fighting for resources and attention can exacerbate the problem.

It’s a theme that has come up often in my interviews with more than 200 leaders for my column, Corner Office, and smart leaders recognize that us-versus-them behavior can ultimately destroy companies.

So what should leaders do? A few tips have emerged from my interviews.

Create a ‘One Company’ Culture

Symbolism is important, in both the language that leaders use and the organizational chart they create.

Here’s how Kathleen L. Flanagan, the chief executive of Abt Associates, tackled the issue.

“We’ve grown from $180 million in annual revenue a few years ago to $425 million today. As the company grew, more business units were created, and so we had more silos in the organization. My objective two years ago in coming into this job was to take down the silos. So I reorganized the company. It used to be organized around lines of business — international, U.S.-based, data collection — and there used to be senior vice presidents who led each of those big businesses. I took those senior V.P. positions away and hired one executive vice president for global business who shared my vision for what I call One Global Abt.

At the heart of that is taking down the walls so people can collaborate more freely, so that we can leverage all of Abt. We now ask people to pick their heads up out of their project work or their division focus and look across the whole company. So I now ask my managers to wear two hats. Everybody’s got their job in the big picture of the company, but they all have to wear an Abt hat. It’s really easy, given the time pressures and the pace of our work, to put blinders on and be very project-focused. It’s harder to take a step back and ask, “How does this apply to the whole company?”

Simplify the Scoreboard

A big part of a leader’s job is to establish a simple set of performance metrics so that everyone in the company can feel as if they’re part of a broader team, and can understand how the work they do contributes to the broader goals. Chief executives have to choose those metrics carefully because, as the saying goes, what gets measured gets managed.

A powerful example of this came from Shivan S. Subramaniam, the chief executive of FM Global, a commercial and industrial property insurer, who shared with me how his team worked hard to develop very simple goals.

“We call them key result areas, or K.R.A.’s. We’re multinational — we’ve got 5,100 people, 1,800 of whom are engineers. We’re very analytical. But we have three K.R.A.’s, nothing terribly fancy. And everybody focuses on them. One is on profitability. One is on retention of existing clients. And one is on attracting new clients. That’s it.

You can talk to people in San Francisco, Sydney or Singapore, and they’ll know what the three K.R.A.’s are. All of our incentive plans are designed around our K.R.A.’s, and every one of those K.R.A.’s is very transparent. Our employees know how we’re doing. And, most importantly, they understand them, whether they’re the most senior manager or a file clerk, so they know that ‘If I do this, it helps this K.R.A. in this manner.’”

Communicate Relentlessly to the Entire Staff

There’s a reason that so many companies hold regular all-hands meetings (and with technology, it’s possible to do them in large and sprawling companies now). Again, it’s about tribal behavior. You have to bring everybody together and speak to everyone as a group for people to identify themselves with the broadest group. Leaders then have to take their simple plan and hammer it home, again and again, even if they feel like everybody has heard it before a hundred times.

It’s a lesson that Christopher J. Nassetta, the Hilton Worldwide chief, told me that he learned over time.

“You have to be careful as a leader, particularly of a big organization. You can find yourself communicating the same thing so many times that you get tired of hearing it. And so you might alter how you say it, or shorthand it, because you have literally said it so many times that you think nobody else on earth could want to hear this. But you can’t stop. In my case, there are 300,000 people who need to hear it, and I can’t say it enough. So what might sound mundane and like old news to me isn’t for a lot of other people. That is an important lesson I learned as I worked in bigger organizations.”

Steve Ballmer’s challenge as the chief executive of Microsoft is not unlike the challenge that it faces with technology: how to take something very complicated — be it a software program or a sprawling organizational chart — and make it simple to operate. This may be the toughest task of his career.

Adam Bryant writes the Corner Office column, which appears on Fridays and Sundays.

DealBook: Kleiner Perkins Shifts Strategy After a Rough Decade

During the dot-com boom, Kleiner Perkins Caufield & Byers, the venture capital investment firm, all but minted money, making prescient early investments in Netscape Communications, Amazon.com and Google and delivering astonishing returns to investors. Along the way, it became a symbol of Silicon Valley.

But the firm has hit a rough patch over the last decade, frustrated by unsuccessful forays into clean technology and by a catch-up effort to take later-stage stakes in social media companies.

Kleiner has held a series of status-report meetings with its outside investors this year, acknowledging that recent fund performance “wasn’t great,” one attendee said. “They really believed green tech was going to be the next big technology wave,” this investor added.

Kleiner has also cut some management fees and reorganized its investment approach, eliminating three “silos” that separated teams making investments in clean technology, health care and technology. The firm has added more investing partners with digital expertise, like the former Twitter executive Mike Abbott, after it missed the early window on hot media start-ups like Facebook and Twitter and jumped in later at higher valuations.

A spokeswoman for Kleiner, which manages $7 billion, said the firm’s partners declined to comment.

The latest setback is the fading fortunes of Fisker Automotive, the green-car start-up backed by Kleiner that has laid off much of its work force and hired bankruptcy advisers.

At a Congressional hearing last month, Republican members of a House oversight committee asked witnesses from Fisker and the Energy Department whether Democratic political contributions and influence of Kleiner partners, led by the Obama adviser John Doerr, had helped Fisker gain $192 million in government green-energy loans.

While the questions were clearly partisan, the spotlight on Kleiner added a new level of public criticism to a reputational injury that has been building for several years, denting Kleiner’s status as one of the top technology venture capital firms.

Some experts predict Fisker could become one of the biggest venture-capital losses ever. Fisker has raised $1.1 billion in venture financing, the most for any clean-technology start-up, compared with $848 million for Solyndra, the solar-panel maker that filed for bankruptcy in 2011, according to the Cleantech Group, which tracks such investments.

Kleiner investors say that three venture funds the firm raised in 1994, 1996 and 1999 — which contained Juniper Networks, Amazon and Google — delivered staggering returns. The 1994 fund delivered 32 times the investors’ money, the 1996 fund 17 times, and 1999, six times. But since then, they note, funds raised in 2000 and 2004 have been unprofitable. A $1 billion fund raised in 2008 devoted to clean technology is also showing losses, one investor says.

“They had stellar returns for years, but their reputation has been tarnished by performance of late,” said Nancy Lambert, a former private banker at Citigroup who is now an independent adviser to wealthy families and foundations. “It doesn’t seem like investors are turning away, they’re just more cautious.”

Kleiner’s investors have included top universities like Harvard and Yale, the Ford Foundation and certain venture capital funds-of-funds.

The firm’s reputation was also dented last year when a junior partner, Ellen Pao, filed a sex discrimination lawsuit. She contended that the firm improperly retaliated against her after she complained about being pressured into a sexual relationship by a colleague, resulting in lower compensation and poor performance reviews.

Kleiner has denied all the claims and said that it chose not to promote her based on valid “performance concerns.”

The shift in Kleiner’s fortunes is emblematic of the venture capital business as a whole, where the titanic returns from the late-1990s dot-com bubble have ebbed, and investor dollars flowing into new funds have slowed as well.

“The days of huge returns in venture are long gone,” said Scott Ryles, a longtime Silicon Valley banker who has led two Kleiner-backed companies.

Venture funds returned 35.7 percent annually in the decade ending in 2000, but they lost 1.9 percent annually in the decade ending in 2010, according to data compiled by Cambridge Associates for the National Venture Capital Association.

As a result, annual commitments to venture funds have fallen from $56.1 billion in the four years ending in 2001, to $17.3 billion in the four years ending in 2012, according to Thomson Reuters data compiled by the association.

Founded in 1972, Kleiner scored big early returns on Tandem Computers, a maker of processors used by banks and brokerage firms, and Genentech, the biotechnology start-up whose initial public offering electrified the stock market in 1980. The firm cashed in on a spate of hot Internet offerings, led by Netscape and Amazon, during the dot-com bubble.

About five years after the bubble burst, clean technology became Kleiner’s marquee strategy. Kleiner hired Al Gore, the former vice president, soon after his 2006 film about global warming, “An Inconvenient Truth,” won two Oscars. A member of President Obama’s economic recovery advisory board, Mr. Doerr has advocated for government policies and subsidies favoring clean-technology innovation.

“Going green is bigger than the Internet,” Mr. Doerr said in 2007. “It could be the biggest economic opportunity of the 21st century.”

Kleiner has invested in 88 clean-technology companies since 1999, more than any other venture firm, according to the Cleantech Group. They include the personal-transport device Segway, the fuel-cell developer Bloom Energy and the utility smart-grid provider Silver Spring Networks, which went public in March.

In funds raised in 2006, 2008 and 2010, green technology was one of three main strategies, under the aegis of the general partners Ray Lane and Bill Joy — who have since both become partners emeritus. While still committed to clean technology, Kleiner has played down the sector and sought to make less expensive investments within it.

Some of the clean technology bets, like the Mascoma Corporation, a specialized ethanol start-up, and Sundrop Fuels, a developer of biogasoline, require plants that cost hundreds of millions of dollars, according to Pavel Molchanov, a biofuels analyst at Raymond James. In March, Mascoma withdrew plans for a stock offering first filed in September 2011, citing market conditions.

The green-technology portfolio has had its share of flops. Think Global, a Norwegian electric-car company, failed in 2011. Kleiner’s investment in MiaSolé, a solar-panel producer, was wiped out when the company was sold to a Chinese clean-energy company at the end of last year. Plans have stalled for V-Vehicle, a plastic-car company later renamed Next Autoworks, which also had backing from Google Ventures and T. Boone Pickens.

Because Kleiner did not invest in earlier clean-technology blowups like Solyndra and Range Fuels, which also received government loans, Fisker presents a new level of public criticism. At the House hearing on April 24, Jim Jordan, Republican of Ohio, asked Fisker’s founder and former executive chairman, Henrik Fisker, about Kleiner’s ability to help obtain government loans.

Kleiner Perkins has helped raise “over $2 million in political contributions in the 2008 election cycle, most of which went to Democrats including President Obama,” Mr. Jordan said. He asked if that, or Mr. Doerr’s role as an Obama adviser, helped Fisker “to get a loan, get taxpayer money from the Department of Energy?”

Mr. Fisker denied “any undue political favors or anything like that,” and noted that it was Mr. Lane, not Mr. Doerr, who had served as Kleiner’s representative on the Fisker board.

As it focused on green technology, Kleiner lost ground to some rivals like Accel Partners and Greylock Partners, which made early investments in Facebook, which Kleiner missed. The firm seemed to address the issue in late 2010 by hiring Mary Meeker, the former Morgan Stanley Internet analyst known as the “Queen of the Net” during the bubble.

Ms. Meeker has led a $1 billion digital growth fund started in 2011 that has made about 25 later-stage bets including several hot social media start-ups, putting Kleiner in that game but at higher valuations.

While a bet on Facebook is up slightly, its shares of the game developer Zynga are down sharply. Kleiner’s biggest current holding, in Twitter, is valued at more than double Kleiner’s cost, and the fund is up so far over all, a person briefed on the fund said.

Some of Kleiner’s later clean-technology investments have a more digital focus, like Nest Labs, which makes smart thermostats, OPower, which offers energy-efficiency strategies for utility customers, and Clean Power Finance, which finances solar-power installations.

But one of its largest investments, at more than $100 million, is Fisker. In mid-April, the Energy Department seized $21 million from a Fisker reserve account about 10 days before a scheduled loan repayment. Fisker is seeking new funds. But with its car production stalled since mid-2012, any outcome is likely to shred the value of Kleiner’s stake.

Media Decoder Blog: Barnes & Noble Rethinks Its Strategy for the Nook

7:15 p.m. | Updated Barnes & Noble, reporting a sharp drop in sales of its Nook tablets, said on Thursday that it would pull back on its ambitions for its device business, shrinking it in size while focusing more on digital content.

Jae C. Hong/Associated Press Barnes & Noble reported a sharp drop in sales of the Nook.

Calling Nook sales over the holiday period an “obvious disappointment,” the bookseller’s chief executive, William Lynch, said the company was taking “significant actions to right size investments” in its digital hardware division through steep cuts in advertising and the manufacturing of devices. Mr. Lynch made his remarks in a conference call with analysts shortly after Barnes & Noble reported a 26 percent decline in the fiscal third quarter for the Nook segment, which includes digital tablets and e-readers.

The retrenching of the Nook unit represents a setback to the Barnes & Noble plan to build up its device business as a way of staying competitive in the rapidly changing e-book market. Last year, the company separated the division from the rest of its operations and struck deals with Microsoft and Pearson for hundreds of millions of dollars in financing — signs that it viewed its digital business as the linchpin of future growth.

But the Nook, while drawing favorable reviews, failed to gain traction against more popular tablets like Amazon’s Kindle Fire and Apple’s iPad, and its performance over the 2012 holiday season was tepid. Barnes & Noble warned last month that Nook sales for the quarter would fall below expectations, and executives hinted recently that the strategy of operating in the highly competitive tablet space had run its course.

“The Nook is not a failure, not technically,” said James McQuivey, an analyst at Forrester Research. “If you go back two years and ask the Nook product managers how many Nooks they would want to sell by now, I bet they have blown past that number. The problem is the fact that the overall tablet market has actually blown way past the Nook’s performance.”

While saying that Barnes & Noble remained committed to the tablet and e-reader market, Mr. Lynch said the company would adjust its strategy quickly. “We are not going to continue doing what we’re doing,” he said in the conference call.

The results announced Thursday underscored the challenges. The company said that Nook revenue declined to $316 million for the quarter that ended Jan. 26, from $426 million over the same period a year ago. Losses in the unit increased to $190 million, from $83 million last year, as measured before interest, taxes, depreciation and amortization.

Over all, the company had a net loss in the quarter of just over $6 million, compared with net income of $52 million a year ago. Revenue in all three major units — Nook, retail and college — was down.

The losses were largely because of lower-than-anticipated sales, inventory charges and higher operating expenses because of advertising costs, the company said.

Mr. Lynch said Thursday that a reformulated Nook strategy would focus more on digital content like e-books and magazines, sales of which increased by 6.8 percent in the quarter. He also said the company planned to be a leader in “digital education” and that it expected that to be a growth area.

In the call with analysts, Mr. Lynch was pressed on whether Barnes & Noble’s digital content was really proprietary. Mr. Lynch acknowledged that what the bookseller possessed was the ability to sell publishers’ content, but he insisted that it was “a strategic asset that is hard to replicate.”

Wall Street seemed heartened by the company’s acknowledgment that it needed to recalibrate its device business, perhaps anticipating that it would accelerate a breakup of the device and retail units. Shares of Barnes & Noble rose 3.35 percent, to close at $15.74.

The company said that there was clear evidence that digital trade book sales were “flattening,” meaning that the bookseller’s physical retail position would be strong in the future. Mr. Lynch said Barnes & Noble continued to take market share from other physical book retailers. The company also promoted prototypes for new stores to be opened in malls and the growth of the college bookstore business.

Combined with the announcement on Monday that Leonard Riggio, the company’s chairman and largest shareholder, was considering purchasing the retail segment, the news added a positive gloss to the brick-and-mortar business that it had not had for some time.

That notion got some support with the earnings report. Retail sales fell just more than 10 percent in the quarter, largely because of the closing of some unprofitable stores. But Barnes & Noble had largely anticipated the lower revenue and despite the sales decline, retail profits increased 7.3 percent, to $212 million, in part because of higher sales margins and “expense management,” the company said.

Despite the shift in digital strategy, Mr. Lynch emphasized that the company was not abandoning the Nook division.

“Nook Media has been financing itself since October of 2012 due to the strong investment partners we’ve been able to attract in Microsoft and Pearson,” he said. He added that the Nook segment and the physical stores drove traffic to each other and needed to remain in partnership.

But analysts sounded a skeptical note. “Barnes & Noble stands at a fork in the road and rather than choose one path, it will likely need to split into two companies and let the retail business go down one path while freeing the Nook division to go down another,” said Mr. McQuivey, of Forrester. “There’s no guarantee that either path will lead to the promised land, but the two units are facing such different challenges and such unique prospects that it doesn’t make sense for them to try to work together to solve such different problems.”

Media Decoder Blog: Barnes & Noble's Strategy Is Questioned as Holiday Nook Sales Decline

Brendan McDermid/Reuters A Barnes & Noble store in New York City. Overall sales in the nine-week holiday season for the retailer fell 10.9 percent.

8:21 a.m. | Updated For Barnes & Noble, the digital future is not what it used to be.

After a year spent signaling its commitment to build its business through its Nook division, Barnes & Noble on Thursday announced disappointing holiday sales figures, with steep declines that underscored the challenge it faces in transforming from its traditional retail format.

Retail sales from the company’s bookstores and its Web site, BN.com, decreased 10.9 percent from the comparable nine-week holiday period a year earlier, to $1.2 billion, the company reported. More worrisome for the long-term future of the company, sales in the Nook unit that includes e-readers, tablets, digital content and accessories decreased 12.6 percent over the same period, to $311 million.

“They are not selling the devices, they are not selling books and traffic is down,” said Mike Shatzkin, the founder and chief executive of Idea Logical, a consultant to publishers. “I’m looking for an optimistic sign and not seeing one. It is concerning.”

Julio Cortez/Associated Press Nooks at a Barnes & Noble distribution center. The e-reader unit’s holiday sales fell 12.6 percent.

The results, covering a period that ended Dec. 29, are a sobering development for the nation’s largest bookstore chain. The declines occurred during what is supposed to be peak buying season. And the Nook unit’s sagging fortunes came despite a 13 percent increase in sales of digital content, suggesting that it is the tepid demand for Nook devices that is dragging down the unit’s performance.

Barnes & Noble has invested heavily in developing a tablet that can compete with offerings from media giants like Google, Apple and Amazon.com. Last April, in announcing a $300 million investment in Nook by Microsoft, the chief executive of Barnes & Noble’s chief executive, William J. Lynch, said the company wanted “to solidify our position as a leader in the exploding market for digital content in the consumer and education segments.”

A few months after that, the bookseller began breaking out the financial results of the Nook division, In October it completed its strategic partnership with Microsoft by creating Nook Media, a subsidiary and a signal that it was ready to ride its digital business into the future.

But while Barnes & Noble’s most recent Nooks have won critical praise, they have failed to gain significant traction with consumers.

Other companies do not break out sales of their digital tablets, but Amazon has been saying sales of its Kindle Fire were strong. Analysts say Apple’s iPads also appear to be doing well.

“The problem is not whether or not the Nook is good,” said James L. McQuivey, a media analyst for Forrester Research. “What matters is whether you are locked into a Kindle library or an iTunes library or a Nook library. In the end, who holds the content that you value?”

For an increasing number of consumers, he said, the answer is not Barnes & Noble.

Though the company’s stock was down only slightly — falling 2 percent to $14.22 — the reaction in the financial world was unsparing. Analysts stopped short of saying that this was a do-or-die moment for the Nook Media division, but they acknowledged that options for a strong digital future were narrowing.

In a note to clients, S&P Capital IQ said, “We think this portends greater market share losses for the Nook over the medium term” and downgraded its recommendation on Barnes & Noble stock from hold to sell. Barclays said in a note that the Nook’s precipitous decline was “quite concerning” and “below even our modest expectations.”

The declining retail numbers were also troubling when viewed in the context of a rise in sales among independent booksellers. The American Booksellers Association, which has not yet released official holiday sales, estimated Thursday that its members’ sales would be up about 8 percent over last year.

Barnes & Noble executives were not available Thursday to discuss the sales numbers. But a statement from Mr. Lynch indicated that the company was searching for a solution.

“Nook device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday,” Mr. Lynch said. “We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward.”

The most intriguing, and troublesome, question is whether the company can stay in the digital device business at all over the long run. Nook has been expensive to develop and market and the company does not have the hefty financial resources of its competitors.

Other options are strategic partnerships. Microsoft’s investment last spring was seen at the time as a way to promote Nook through a powerful partner. But sales of the Windows 8 operating system have been disappointing and the Nook has been featured as little more than an app among hundreds on the Windows 8 platform.

“It is going to prove to be a missed opportunity,” said Mr. McQuivey of Forrester.

Last month, Barnes & Noble announced that Pearson, the British education and publishing conglomerate, was taking a 5 percent stake in Nook for $89.5 million. Analysts said that cash investment was welcome and the partnership with Pearson, a major publisher of educational textbooks, might herald a strategy to move toward dominating an education niche market. Still, that would be a significantly smaller business.

Social Media Strategy Crucial for Transit Agencies After Storm

“I have asked nicely several times about what’s going on with the 317 bus,” the rider, who identified herself as Mary Scandell, fumed on the Facebook page of New Jersey Transit a few days after Hurricane Sandy. “Now I’m gonna ask in a nasty way.”

Change the scene to New York. A commuter named Jim Temple posted a question on the Long Island Rail Road’s Facebook page, asking for a status update of the damaged Long Beach line. The railroad promptly replied. “Thank you for the info,” Mr. Temple answered.

If there is one lesson transit officials have learned from Hurricane Sandy, it is that in the Internet era, keeping riders up to date is just as important as tracks and rolling stock. Blow it, and they will let you know. As workers raced to bring washed-out tracks, flooded tunnels and swamped electrical equipment back online, they also faced the daunting task of keeping millions of riders informed of conditions and schedules that sometimes shifted by the minute, using tools that included Facebook, Twitter, Flickr and YouTube.

A look at how New Jersey Transit and the Long Island Rail Road communicated, as viewed through the prism of Facebook, showed how approaches to messaging could make the difference between shaping expectations or fueling the ire of customers forced to find new ways to get to work and home.

The Long Island Rail Road continually updated its Facebook page with photographs and videos of storm preparations before Hurricane Sandy hit. The dispatches continued as high winds and surge waters ripped down power lines and clogged rail lines with wayward boats and other debris. The agency frequently answered passengers’ questions and posted other helpful updates, like where to seek federal assistance for damaged homes.

New Jersey Transit also regularly updated its page — but did not start posting photographs until after noon on Oct. 30, after the storm had barreled through. It answered riders’ questions sporadically, sometimes referring them to incorrect information on its Web site, even as commuters grew more confused trying to figure out shifting schedules.

The result: the Long Island Rail Road conveyed a narrative of shared pain, of workers fighting back against unprecedented damage that was beyond their control. Passengers frequently and vociferously critical of the railroad suddenly sympathized and even praised communication efforts that, if not perfect, were viewed as improved.

New Jersey Transit’s communications, on the other hand, became for many commuters yet another source of misery.

“Long Island Rail Road learned the lesson of telling their riders what’s going on,” said Mitchell Moss, director of the Rudin Center for Transportation at the New York University Wagner Graduate School of Public Service. “And it turns out that is as important as the level of service you are providing.”

The Long Island Rail Road and New Jersey Transit also used Twitter extensively. But The New York Times examined the Facebook pages of each agency because they allow for more detailed comments — providing a deeper look at how passengers were viewing communications — and more of a back-and-forth discussion. The Port Authority of New York and New Jersey, which was also criticized for its communications, used Twitter but does not have a Facebook page.

New Jersey Transit has come under scrutiny after the storm damaged more than 300 train cars and locomotives parked in rail yards in Hoboken and the Meadowlands that prestorm warnings indicated would flood.

But even before that decision became widely known, passenger tensions were spiking.

New Jersey Transit officials defended their communications throughout and after the storm.

“We were tweeting information practically 24 hours a day,” said John Durso Jr., the agency’s spokesman. He said the agency also continually updated its Web site; sent out e-mail alerts; placed advertisements in newspapers on emergency shuttle, bus and ferry service; and made frequent appearances on television and radio broadcasts.

Bits Blog: One on One: Google Android Director on Nexus Strategy

John Lagerling, director of business development for Android.

Google on Monday introduced new Android devices in small, medium and large: a phone, the Nexus 4; an upgraded seven-inch tablet, the Nexus 7; and a 10-inch tablet, the Nexus 10. That puts Google in even more direct competition with Apple, which offers a similar family of three: the iPhone, the iPad Mini and the iPad.

In an interview, John Lagerling, director of business development for Android, talked about the company’s strategy with the Nexus brand, one that revolves around lower prices. An edited transcript of the interview follows.

What do you think are the highlights of the new Nexus devices?

My personal favorites are the 360-degree panoramic photo, Photo Sphere, and the fact that you can do inductive charging so you don’t need to fiddle with a plug — you can just put it on a surface to charge. On a Nexus 10 it’s the fact that it’s so thin and light, and the resolution is 2.5 K, so it has very crisp text and pictures.

And the price. I negotiated the prices and I’m very pleased with being able to deliver these things at these prices; $299 for an unlocked Nexus 4 — I think that’s pretty revolutionary.

How did you get the prices lower?

Basically we felt that we wanted to prove you don’t have to charge $600 to deliver a phone that has the latest-generation technologies. Simply that level of margin is sometimes even unreasonable, and we believed that we could do this. For Nexus 7, we were able to ramp those new memory SKUs at the same price. These move so fast that we knew after a few months, from an economical perspective, it was doable. Between us and our partners we have a very good understanding of supply chains. We’ve all done the best we can to really reach these prices — $399, $299 is pretty amazing, if I may say so.

I noticed each Nexus device is made by a different manufacturer. Is this to keep the playing field fair for Android partners?

It’s not so much fairness as it is to sort of work with partners who happen to be in good “phase match” with us in what we’re trying to do. So Samsung just happens to be in a good phase match on a high-end display, which is exactly what we wanted to do at a low cost. LG had a good phase match with the hardware they were working on. Asus as well. It’s just more about the timing being right.

From top: the Nexus 4, Nexus 7 and Nexus 10.

We’ve always done that with our lead devices. Even before the Nexus One we did the lead device with HTC. We did the Xoom, which was a lead device with Motorola. And now we’ve sort of streamlined what the Nexus program is. We did really well with the Nexus 7, I feel, because nobody really pushed the envelope with seven-inch in terms of price and performance. It really proved that category. We felt the 10-inch category was overpriced and underpowered, and we wanted to see what we could do for that from our perspective.

Where does Motorola stand in all this? You haven’t used them yet for the Nexus program.

They stand where Sharp would stand, or Sony would stand or Huawei would stand. From my perspective as a partnership director, they are another partner. We are really walled between the Motorola team and the Android team. They would bid on doing a Nexus device just like any other company.

So how does Google take advantage of the Motorola acquisition?

The way I understand it is, it’s mostly about the patents, the way you can sort of disarm this huge attack against Android. We talked about prices. There are players in the industry who were unhappy about more competitive pricing for the consumers. They want to keep the prices high, they want to force the price to be so high that operators have to subsidize the devices very highly. That’s not only the Cupertino guys but also for the guys up in Seattle. They want higher margins, they want to charge more for software.

We simply believe there’s a better way of doing it without extracting that much payment from end users, because there are other ways to drive revenues. Patents were used as a weapon to try to stop that evolution and scare people away from lower-cost alternatives. And I think with the Motorola acquisition we’ve shown we’re able to put skin in the game and push back.

With Nexus phones, the lack of carrier support is the big roadblock. Only having the marketing and retail support of one carrier — T-Mobile, in the case of the Nexus 4 — isn’t as good as having the Big Four. In the past you’ve sold Nexus phones through the Google online store, and it was a failure.

Nexus One was very early. People didn’t know what Nexus was or what Android phones were. I feel we’re in a very different environment now and I feel the Nexus 7 has set the stage for the Nexus program at a new level, so we feel the time is right.

Approaching one million sales a month for the Nexus 7, right? According to Asus.

We haven’t announced numbers. We typically don’t allow our partners to announce numbers. All I can say is it has sold way above expectations. That could mean one of two things: Either we have very low expectations or we’ve done amazing well. But we’re very pleased with how we’ve done with the Nexus 7.

Most of the apps in the Google Play store are for phones, not for tablets. How many are there for tablets?

I don’t have a number for how many apps are properly adding those APIs that you need to put fully to use the extra screen real estate. What I can say is that the Nexus 7 has been a superstrong catalyst to kick off developers’ attention to making those expansions, so we’ve seen tremendous growth in apps for the larger screen size. The trending is very positive because of the Nexus 7.

But before, I’ll be honest and say, yes, there was a lack of tablet apps that supported bigger screen real estate. But I’ll add that, I know we talked about the Cupertino guys, but obviously people who have smartphones are a huge target for us. If you look globally that’s something we worry more about, not so much about competing with other smartphones, but more about, how can we get more people onto the Internet on mobile phones? And that’s a big deal. That’s why low cost is so important.

Android software has gotten to the point where it’s more respectable. There used to be these two very polarized camps, where a lot of people would say iOS was the greatest and Android was ugly. But the lines are blurring as Android has gotten polished. What happened?

We had such a long laundry list of things we wanted to do, and the fact we had to roll it out so it would work on a multitude of devices, it simply took a bit more time for us to get here. But the structure we’ve had for an operating system from day one including widgets, actual multitasking, notifications, it’s finally coming to its true form right as the software has come into final polish. Project Butter for Jelly Bean, to get every pixel to move really beautifully, it’s finally showing off those capabilities we’ve always planned to have. We have the right teams and maturity to deliver what we’ve always wanted to do. I’ll admit we’re finally much more closer to our actual vision in the past year than we have ever been.