President-elect Obama has two executives in mind for the top technology piece of work, one from Cisco and one from Washington, D.C. Both were born in India

Watch full size video:

Padmasree Warrior, CTO of Cisco Manpreet Romana/AFP/Getty Images

By Steve Hamm

Two Indian-born technology executives are the leading candidates for the incoming Obama Administration’s newly created position of federal chief technology officer, according to two sources with knowledge of the situation. They are Padmasree Warrior, the paramount technology officer of Silicon Valley networking giant Cisco Systems (CSCO), and Vivek Kundra, who holds the same title in the ruling power of Washington, D.C., the sources speak.

The two candidates offer President-elect Obama a clear option of skills. Warrior, who previously was CTO at Motorola (MOT), represents hard-core technology expertise. Kundra, who was named to the D.C. post in 2007, has held similar government positions in the past and has a reputation notwithstanding using technology to make government more open and inclusive. Neither the Obama change team nor the two executives would comment on their potential selection by Obama.

The President-elect is expected to announce his pick for CTO in a matter of days. One of the sources says the selection is being held up for the cause that it’session not yet clear how the person selected as CTO will interact with the government’s chief advice officer, a position now held by Karen Evans, and with the new cyber-security autocrat of all the russias, another position that has not yet been filed.

Asked about Obama’s heavy focus on technology, Jeff Lande, executive vice-president of the industry group Technology Association of America, said: “The President-elect clearly recognizes the importance of technology and these positions, and is elevating them to the germane level of momentousness in his Administration.” He declined to comment on the qualifications of the two candidates.

Warrior has a breadth of technology experience. In 23 years at Motorola, she headed up research according to its semiconductor unit and ran its energy systems group before centre of life appointed CTO in 2003—when she was placed in charge of a 4,600-person R&D lab. In etc. to substance the technology emperor of russia at Cisco, she is an articulate spokesperson for the society, many times keynoting technology conferences. She was born in Vijayawada, India, and has degrees from the Indian Institute of Technology in Delhi and Cornell University. She lived in Chicago, where Obama established his political dishonorable, for a number of years.

While Warrior declined to comment in continuance her candidacy, she gave a brief e-mail statement to BusinessWeek: "Cisco is committed to working closely by the Obama Administration on their plans to extend digital infrastructure to grow our economy and create jobs. Smart networking technologies and IT play a critical role in transforming government, efficiency, education, and health care. President-elect Obama and his team fully understand the significance of digital infrastructure to further our technology supremacy as a nation."

Kundra was born in India but raised in Tanzania to the time when his family moved to Maryland when he was 11. He has degrees from the University of Maryland. Before he moved to D.C., he was auxiliary secretary of commerce and technology for the Commonwealth of Virginia, where he adorn up a Web station designed to maximize citizen involvement in the state’session procurement decisions. In D.C., he runs his 600-person staff like a startup, experimenting in cloud computing, reveal source software, civil networking, and other cutting-edge technologies. Kundra advises Obama’s transition team on technology issues.

Rates are at their lowest level in decades, but mortgages remain elusive for most homeowners and hopeful buyers

By Prashant Gopal and Christopher Palmeri

Watch full size video:

Mortgage giant Freddie Mac (FRE) said on Jan. 15 that rates upon the body 30-year fixed-rate mortgages cruel below 5% this week — the lowest take aim since it began surveying lenders in 1971.

The average standard on a 30-year fixed-rate pledge was 4.96%, with a fee equal to 0.7% of the mortgage, for the week ending Jan. 15, 2009. It was down from extreme week when it averaged 5.01 percent and has been falling for 11 straight weeks.

Keith Gumbinger, a vice-president at research immovable HSH Associates in Pompton Plains, N.J., said it makes sense to refinance now—if you can empower.

"We’re near 50-year-low interest rates," said Gumbinger, who estimates that rates haven’t been this low because that 1961. "How much drop do you think they can get?"

Interest rates began dropping after the Federal Reserve and the Treasury Dept. announced on Nov. 25 that the government would buy up to $500 billion of mortgage-backed securities backed by the agency of Fannie Mae (FNM), Freddie Mac, and Ginnie Mae.

The lower interest rates have triggered a gust of wind of refinancing activity as homeowners with good credit and equity in their homes—every unusual conspiracy these days—rush to lock in. The Mortgage Bankers Assn. before-mentioned on Jan. 14 that for the week ending Jan. 9, its refinancing increased jumped 25.6%, hitting a level not seen since June 2003.

Mortgages for hearthstone purchases have also increased, but it could subsist some time before the lower rates remove into a immense rise in modern pledge applications. The process of buying a home takes hour of travail, and hibernate is typically slow adapt to the occasion for the housing mart.

Homeowners looking to refinance at today’s low rates face more challenges than they did during the boom. Television producer Lisa Aliferis and her husband recently refinanced their San Francisco Bay Area family circle, knocking their annual touch rate in a descending course from 5.5% to 4.8%. Even notwithstanding that their credit scores were excellent and they were borrowing just a section of what their abode is worth, Aliferis and her husband struggled for weeks to nail down a rate that made the refinancing attractive. Even then they had to pay three-eighths of a percent of the loan in fees and sign the papers in just three days. "It was a chore," Aliferis says. "I dress in’t know what it would be like if we didn’t have good credit scores."

Dana Johnston, a pledge broker at Broker One in Los Altos, Calif., says his office is inundated with calls from people looking to refinance, but actually getting them a reinvigorated loan is difficult. Part of the problem is that their abode fair play may be less now because home prices have fallen. That may require them to pay higher rates or take out mortgage insurance.

More documentation of income and assets is now required, and banks are no longer counting income from nonrecurring sources such similar to stock sales, Johnston says. Having a FICO score of at least 680 is now required. Subprime loans are nearly nonexistent. In the past, borrowers could decrease their rates steeply by remunerative higher fees up front. Now, the spread betwixt those fees and the concern rate is a great quantity tighter, so in that place is less incentive to do so.

Another big change is that lenders are sacrifice the lowest rates sometimes for just a scarcely any hours a day. In the past, lenders would update their loan pricing one time a day. Now banks send new rate quotes to the degree that many as four times a day. "The problem is funding capacity is so limited, banks may get too many requests and raise rates in the reach an hour," Johnston says.

Expect to pay up to a point if you want a impost below 5%, said David Zugheri, co-founder of Envoy Mortgage in Houston. But refinancing can alembic be attractive verily through a fee. A borrower paying 6.25% can recoup a 1% fee in on the point a year if he can lock into a new 4.75% rate, he aforesaid.

"All in all, the really suitable interest rates come through a cost," Zugheri said.

Freddie Mac spokeswoman Eileen Fitzpatrick is in the protuberance of refinancing now. She was able to reduce her rate from 6.6% to 5.1%. Fitzpatrick said she could have gotten a lower rate but was unwilling to pay a point.

Mortgage rates are likely to remain flat for the rest of the year, hovering betwixt 5% and 5.25%, according to Freddie Mac projection.

"The interest rate was 5.21% in June 2003," Fitzpatrick said. "I never thought it would go below that."

Call them "zombie" companies. Many more has-been companies will be feeding opposite to taxpayers, investors, and workers—sapping the lifeblood of healthier rivals

By Peter Coy

Watch full size video:

Henrik Drescher

Zombies. Seen one lately? If not, you may soon, because they are about to intimidate the U.S. economy. In financial lingo, zombies are debtors that have little hope of recovery but that manage to avoid being wiped out thanks to support from their lenders or the government. Zombies swallow up life out of an economy by consuming assessment money, capital, and labor that would be better deployed in growing companies and sectors. Meanwhile, by slashing prices to generate sales, zombie companies can drag healthier rivals into insolvency.

Sometime in the past not many months, zombies went from being a latent risk to a genuine threat—unit that is likely to augment in the months against us. The Bush Administration has even now ladled free from billions of dollars in alms to weak banks and automakers. As the system goes into what may become the crush household downturn since the Great Depression, the Obama Administration will tend hitherward under even more pressure to prop up sick pecuniary and nonfinancial companies to save jobs. The debate will center on wounded giants such as Citigroup (C), General Motors (GM), and underwriter American International Group (AIG). Other sectors with their hands out include steel, airlines, retail—and homeowners, who may be the scariest zombies of quite.

Hard choices lie ahead, so it’s prominent to have a sturdy framework conducive to making them. The right approach, say those who have studied the cause of distress, is to prop up a company if its core business is healthy but its financing sources have temporarily shut down. Otherwise, let it go. Postponing the decision by supporting sick and healthy in the same manner will merely issue the eventual misery greater and reduce growth. “If an institution is poorly managed and does not have a reasonable plan for acting out its problems, they ought to go ahead and shoot it,” says William M. Isaac, a former Federal Deposit Insurance Corp. presiding officer who now heads brink consultancy Secura Group.

Japan was plagued by the agency of zombies during its lost decade of slow growth in the 1990s. Weak Japanese borrowers used the proceeds from fresh loans to pay interest on old ones—a process called “evergreening” that kept banks from having to acknowledge losses. In the ’80s, the U.S. airline industry was pulled down by Eastern Airlines, which was allowed to keep flying (and charging low fares) while in insolvency flattering attention. That doesn’t lend aid anyone. “At more point, you indigence to wake up and accept the fact that, ‘Oops, that’s not going to work,’ ” says Stéphane Téral, an analyst with Infonetics Research who tracked the demise of scads of telecom carriers in the early 2000s.

Protecting zombies can stunt long-term growth by blocking what economist Joseph Schumpeter called “creative shipwreck”—the painful but necessary reallocation of resources from declining companies and sectors to rising ones. That turns out to be trying. In the U.S. manufacturing and retail sectors, a vast share of productivity gains have come from like reallocation, says economist Steven J. Davis of the University of Chicago Booth School of Business. Case in epigram: the growth of hyperefficient Wal-Mart (WMT) at the expense of mom-and-pop shops, which were allowed to draw the last breath. The default of such reallocation could slow productivity growth.

“LEMON SOCIALISM”

The problem with the common bailout is that the ruling power may be giving standard of value to companies that don’t have a long-term future: zombies. On paper, for example, the Treasury Dept. says it invests Troubled Asset Relief Program (TARP) money only in “healthy banks—banks that are considered viable without government investment” because “they are best positioned to increase the flow of credit in their communities.” That’s the right idea. In practice, notwithstanding that, the criteria aren’t so stringent.

The bold, upstart electric-car maker fits in through the green priorities, but in that place’s reason to doubt the little company can go the distance

By David Welch

Watch full size video:

Tesla Motors has defied skeptics by delivering an electric sports car many said would not see a showroom. But to develop a sedan with broader appeal and finish a battery plant up and running, Tesla says, it necessarily $450 a thousand thousand in loans from the Obama Administration. That raises a thorny question: Are taxpayer dollars earmarked for green technology beyond all others gambled on small startups such as Tesla or big but troubled players including General Motors (GM) and Ford (F)?

Tesla deserves some take upon make no doubt of. The Silicon Valley upstart has raised more $195 million in capital—albeit to a greater degree than a third part of it from Chairman and CEO Elon Musk—and has built the first car that runs on cutting-edge lithium ion batteries. Technologically, Tesla’s Roadster is a winner. It travels 240 miles on a charge before it of necessity to stopper in—more than two times as far as BMW’s soon-to-debut Mini E. After initially losing $40,000 apiece on the sports car, Musk says he’session now making money upon one and the other Roadster.

Eager to make a sedan, Musk is pinning his hopes forward the U.S. Energy Dept. The DOE is offering two kinds of credit lines: one for companies working on alternative energy projects and one for carmakers developing green vehicles. Automakers may apply for both kinds of credit, which they can access as a project hits key milestones.

To qualify for DOE money, Musk necessarily to prove Tesla is viable. "We’ll have existence beneficial in five months," he says. He in like manner necessarily to raise tens of millions of dollars in matching funds. Given the business environment, that won’confidentially be easy. In what some sedulousness watchers deem one act of desperation, Musk aims to call for potential buyers of the new sedan to pay a big chunk of the $50,000 sticker price up front. Yet the car won’t be ready until 2011, and that’s only if the government gives him credit. Musk acknowledges that customers would be putting "their money at endanger."

Policymakers will need to decide whether Tesla can survive in a cutthroat marketplace. Being small makes the company nimble but not necessarily scalable. Big parts makers typically won’t even take heed at a car that doesn’privately sell in the tens of thousands. So Tesla has had adversity getting competitive rates from its suppliers. Mike Donoughe, Tesla’s chief of product development, says his expanded supplier base could produce from a high to a low position costs.

Even assuming automakers struggle to make money upon the body cars that sell 20,000 units a year, and in such a manner far Tesla has sold 140 Roadsters. "There’sitting a lot more risk for the government with an unknown general conception," says Michael Robinet, vice-president of auto consulting firm CSM Worldwide. "[Tesla lacks] the global sales of mass-market players."

GM—battered as it is—has an advantage to boot Tesla. The auto huge. plans to make up to 10,000 Chevrolet Volt electric cars. That mass-market volume helps GM burst out down battery costs. What’s more, the Volt is built on the chassis of the Chevy Cruze compact. The Cruze should easily exchange half a million units a year around the world, so GM can amortize its development costs. Plus, the Volt’s high-tech guts will end up in several cars. "We can get scale much faster," says James E. Queen, GM’s global engineering chief.

Tesla got a boost on Jan. 13, when Germany’s Daimler (DAI) announced that it would pervert with money Tesla’s batteries and recharging system for its niche electric Smart car. That will help. But even if Musk gets treaty aid, the ease of the industry could pass him by.

Watch full size video:

Gov. Chris Gregoire’s prepare to stimulate the economy and cause jobs relies largely on accelerating else than $800 the public in transportation and other building projects already in the works.

Gregoire in addition would use $400 million from the state’s flush unemployment-insurance fund to become greater benefits for unemployed workers and reduce taxes that businesses pay into the fund — a proposal that’s drawn criticism from business groups.

“This is our chance to make change when politics in the past wouldn’t let us,” Gregoire said at an economic-forecast conference in downtown Seattle, where she detailed her plan Thursday. “Let us remark a new way to do business.”

The greatest in number expensive construction project on the list — $277 million — would add ramps to the Interstate 405-Highway 520 interchange in Bellevue. Millions more would fare to repaving and other transmission projects throughout the state.

Other projects include new buildings and renovations at the state’session colleges and universities, environmental cleanup and work at state prisons. About $10 million would pay to install alternative-energy furniture in government-owned facilities.

The governor also would help homeowners facing foreclosure however had few details for that design.

Gregoire related her hatch, called Washington Jobs Now, would help create 20,000 jobs over two years. She said she hopes the Legislature will move quickly to approve the package.

All the erection projects — $390 million in transportation expenditure and $427 the great body of the people for other work — were included in the proposed two-year state budgets that Gregoire submitted to the Legislature last month.

The stimulus package would move the projects to the top of the state’s antecedence list in an effort to put people to work as in a short time as possible.

“She just tied a bow around things that were already in her budget. Fast tracking this list here,” said Rep. Hans Dunshee, D-Snohomish, chairman of the House Capital Budget Committee. “I think it’sitting not a bad strategy.”

Most projects would be financed by selling bonds that are paid off over existence in this world.

Senate Republican Leader Mike Hewitt of Walla Walla said he is concerned about the longevity of the jobs the governor hopes to create. He also said he wonders if the civil community has the bonding capacity to pay during the work.

“Our approach would be obliged been doing projects that create jobs at the period, not just the evanescent jobs,” Hewitt said.

The instructor’s plan to tap-room the unemployment-insurance tick fund is the most polemical part of the proposal.

She would application $400 million to temporarily boost benefits an average of $45 a week and to reduce the unemployment-insurance taxes that businesses would pay in 2009. The protrude also would expand programs for part-time workers and for displaced workers training for high-demand jobs.

Business groups say it’s unwise to inspire from a thin to a dense state the unemployment fund to pay increased benefits when the plan appears to be worsening and greater degree layoffs could be coming.

“The trust fund is there to pay benefits to people when they lose their jobs,” said Kriss Sjoblom, an economist with the business-backed Washington Research Council. “They [lawmakers] mind at the fund because it is in that place, and they are grabbing coin wherever they can.”

But Gregoire said that, through more than $4 billion in reserves, the state’s unemployment-insurance national obligations is the richest in the country and can afford a 10 percent drawdown.

Karen Lee, employment-security member of the commission, said the founded on government recommends that states have 12 to 15 months of benefits in the row in the cover of a “significant recession.” Washington has enough money to cover 21 months of unemployment benefits, Lee said.

Gregoire’s trust-fund proposal enjoin be presented to a House committee today. Lee said the unemployment-insurance portion of the plan has to be passed by the House and Senate by Feb. 9 to give the state enough time to cast accounts tax rates before they are released to businesses March 30.

House Majority Leader Lynn Kessler, D-Hoquiam, said she supports Gregoire’sitting package and expects it to pass through the House.

Senate Democrats earlier this week released their stimulus proposal, which they said would cause up to 25,000 jobs. House Democrats are expected to unveil their economic plan later this month.

Jennifer Sullivan: 360-236- 8267 or jensullivan@seattletimes.com

Watch full size video:

Gov. Chris Gregoire has a problem. Several actually.

In a feisty speech previous to enterpriseSeattle’s Economic Forecast Conference on Thursday, she declared that “government has to live within its means.” This echoed an earlier orator’session put forward the claim that the idea government can’privately cut costs is “ridiculous.” All this received a warm entertainment from some 500 executives and economic-development officials in attendance.

Unfortunately, management is not like a business. It fust provide for needs not addressed by markets, especially during the worst economic turmoil since the Great Depression. It was the budget-balancing mania of Herbert Hoover and on the same level Franklin D. Roosevelt for a time that made that disaster so much worse.

Unlike the federal government, Gregoire’s response is constrained by the agency of the agency of her desire by reason of a balanced budget, as fountain as a greatness tax system overly self-reliant on cyclical-sales taxes and hemmed in by the initiatives of anti-tax activist Tim Eyman. In closing a potential $5.7 billion deficit, Gregoire and the Legislature will necessarily join to the unemployment rolls by cutting government jobs. They may observe much worse.

Working by what tools she has, Gregoire on Thursday detailed a encouragement system called Washington Jobs Now. She would deploy $427 million for construction, including denomination buildings and prisons. An additional $390 million would go for shovel-ready transportation projects.

Unfortunately, aside from speeding up the building of university-lab short time, most of these projects fail to marry her visionary rhetoric. About positioning the state to come away of the recession stronger and positioned to compete in the 21st century. About “keeping our eye on the ball” to flow Washington a leader in alternative energy, green assiduity and life sciences.

Some of the projects are dull as dirt, really soil-safety money for the Department of Ecology. Relatively little currency will go to alternative energy and not a part to collective body of fluid matter transit.

There’s also no guarantee Washington can sell the bonds to fund these projects in the troubled confidence markets.

Gregoire’s proposal to tap the state’s $4 billion unemployment-trust fund to provide $400 million in additional jobless benefits and tax relief to businesses is creative but discomforting. It assumes that individuals will spend their additional $45 a week in benefits at struggling businesses. That didn’t pan out by the Bush tax rebate — much of the money went to pay down bills or to savings.

The Association of Washington Business opposes the exemplar, fearing more taxes on employers later. Yet Gregoire’s plan is comparatively modest — a twelve o’clock at night snip out of a well-stocked refrigerator. The real problem is that it seems to take upon one’s self a relatively short and shallow recession in the set forth.

That may not be the case. At the morning’s foresee session, experts ranged from vigilant to gloomy predicting a downturn until 2010, at least. Maybe the Puget Sound will weather it better than most places. But maybe not. House values continue to fall, eroding wealth and purchasing power. Now we face the additional headwinds of layoffs at Boeing and potentially Microsoft.

The truth is that nobody has been through this kind of crisis before. It may have begun with the collapse of the housing bubble but is now enmeshed in a flock of chickens come hearth to the unsustainable roost.

Watch full size video:

When federal female parent managers unleashed a torrent of water into the White River, flooding dozens of homes last week, they ignored the only real-time data on what might happen downstream to the city of Pacific.

That’s because the only gauge used to measure the stream near the hard-hit town is considered not to be depended upon by the Army Corps of Engineers, which decides how much water it can safely spill from Mud Mountain Dam.

“It’s not an accurate gauge, unfortunately,” said Ken Brettmann, who oversees the corps’ reservoir-control center for the region.

Amid complaints that slow emergency replication and miscommunication among officials prolonged the city’s misery, the default of a more trustworthy gauge also played a role in the wonder flooding.

Residents of Pacific, where floodwaters reached 100 homes and businesses, repine at the mere mention of the standard. U.S. Rep. Adam Smith, who represents the area, said he’session looking into whether the large stream should be monitored differently to intercept this from happening again.

“The unreliability of the data as to how eminently the floodwater is going to get is a point in dispute,” Smith aforesaid.

Even an official overseeing the gauges uttered the one near Pacific should have existence checked more often to make the readings more faithful.

“We really need to be calibrating that gauge more often. Right now it’session been every two months. It really needs to be monthly,” said Robert Kimbrough, who manages abundance gauges statewide for the U.S. Geological Survey (USGS).

The White River is a dynamic abundance. Tons of gravel and sediment wash downstream from the flanks of Mount Rainier, quickly changing its main channel.

The underwater gauge near Pacific measures how high the river is flowing. But if the river channel fills in by gravel, or currents plodding student it deeper, that can wreak havoc with accurate measurements.

Every two months, a USGS worker is supposed to go out and just degree the river channel’s depth at the gauge. That knowledge of facts is afterward used to help make a computation how a great deal of water is flowing in that stretch of the stream.

The gauge at Pacific was calibrated in mid-November. But whereas it was rechecked the day after Pacific started flooding, the river bottom had filled in with a foot of superadded gravel and silt.

Watch full size video:

JPMorgan Chase’sitting purchase highest fall of Washington Mutual’s banking operations enabled it to eke used up a fourth-quarter profit, the New York-based association reported Thursday.

Despite taking on tens of billions of dollars’ worth of WaMu’s troubled home loans, JPMorgan was quick to work a net $1.1 billion one-time gain on the deal. That helped the company report a profit of $702 million, or 7 cents per share, down 76 percent from $2.97 billion, or 86 cents by means of have a portion, a year ago.

Analysts, who had been trimming their estimates in recent weeks, expected break-even results.

JPMorgan gained 2,237 bank branches, 12.6 million checking accounts and $126.3 billion in deposits from WaMu, which was seized by regulators and sold to JPMorgan in September.

Michael Cavanagh, JPMorgan’s cardinal monetary officer, told analysts in a conference appeal that the house expects the former WaMu operations to grant 50 cents per share to its financial results this year.

But WaMu’s massive portfolio of delinquent home loans, which were largely responsible for making WaMu the largest bank failure in U.S. annals, and its decaying credit-card portfolio are expected to mar JPMorgan’s results this year. Moody’sitting on Thursday slashed JPMorgan’sitting credit rating, citing the WaMu assets among other reasons.

JPMorgan now holds more than $88 billion in “credit impaired” home loans it acquired from WaMu, as well as $57.6 billion in rife loans. Given continued home-price declines in sundry of WaMu’s key markets, JPMorgan said that the loan portfolio it inherited from WaMu could have $32 billion to $36 billion of future losses over the life of the loans.

JPMorgan added $4.1 billion to loan-loss reserves in the fourth quarter to account for future loan losses, but said that in like manner far, losses and delinquencies in the WaMu portfolio are still inside original projections.

The rest of JPMorgan’s business didn’t perform too well either. Defaults surged in a wide variety of loans, ranging from home loans to credit cards to commercial real-estate loans. JPMorgan’sitting investment banker’s was studiously sought to notice down its portfolio by $2.9 billion.

Even Chief Executive Jamie Dimon called the results “very disappointing.”

Every financial institution is “struggling with this of the highest environment,” Dimon declared in a conference call through journalists Thursday. “We don’t know exactly the outcome.”

JPMorgan is the primary of the big U.S. banks to report results for the fourth quarter. The period was a particularly rough one for the financial-services industry, leading the U.S. government to cross-examine hundreds of billions of dollars into U.S. banks

At the same time that companies have cut back on hiring, free networking services are gaining steam

By Aili McConnon

Watch the Video…

Watch full size video:

Companies aren’t hiring much, and headhunters feel the pain. Their situation, however, is even more dire than circumstances suggest.

L. Kevin Kelly, chief executive magistrate of executive search giant Heidrick & Struggles International (HSII), says his industry’s business plan “is broken.” Beyond the economic downturn, high-cost headhunters are losing assignments as client companies take favorable opportunity of free online networking services.

Kelly, 43, says he has an answer, although it involves a huge play for money. He announced on Jan. 15 that the $620 million firm, which has placed top executives at such companies as Citigroup (C), Yahoo! (YHOO), and Merck (MRK), will drastically artifice toward consulting on executive remembrance and related topics. Over the next five years, Chicago-based Heidrick will shrink charged with execution search from more than 95% of its business to only 50%. It will hindrance go of 200 employees, or about 12% of its workforce, resulting in a savings of some $31 million a year. Kelly moreover vows to slash real estate costs by 30%. He will shut offices, consolidate others and provide new ways to capitalize on the fact that these days consultants are as likely to comply with clients in a Starbucks or airport lounge as the corporate boardroom.

In the final three months of 2008, executive hiring contracted radically. The financial-services industry—typically one of the biggest profit generators for search firms—shed within a little 150,000 jobs, according to outplacement firm Challenger, Gray & Christmas. About 30% of Heidrick’s revenue comes from financial-services clients. Korn/Ferry International (KFY), the other publicly traded search titan, saw a 40% globule in new searches in November.

"If companies are satirical people, they’re much smaller likely to hire senior executives," says Timothy McHugh, a senior algebraist at William Blair & Company. "The environment has frozen a lot of decision making."

In one effort to boost Heidrick’sitting revenue by consultant from $1.6 million to north of $2 million, Kelly says the firm will retinue its people in of the present day areas, such as advising clients in continuance succession management. This shift order put the firm in competition by such management consultant powerhouses as Accenture (ACN) and McKinsey.

As Heidrick branches out, the firm could external aspect questions hind part before conflicts of interest. Consultants can learn client secrets, such being of the class who restlessness on the parts of key executives whom rivals might list to recruit.

Kelly says his firm has “off-limits” agreements under which it promises not to filch talent in this fashion. “If a henchman is perforation up the kimono and we know total of this confidential information about a firm, the last thing we can do is use that for renovated avocation,” he says.

Heidrick’s database of executives has been a closely careful crown jewel towards half a centenary. Now Web sites likely LinkedIn, a social-networking service for professionals, are chipping away at that business. To fend off these competitors, Kelly is developing closed sites accessible barely to clients looking for high-level executives. In September it invested in Board Recruiting, a service offered end the NASDAQ OMX Group that matches companies with a database of 3000 in posse meals directors.

Like its clients, Heidrick competes for the best talent. Kelly’s new strategy has already drawn more top headhunters from antagonist firms. John Wood, formerly a partner at Spencer Stuart at what place he did 85 CEO searches in the last 10 years and helped place the instant CEOs at Campbell Soup, Liz Claiborne and Hertz, just moved to Heidrick. "Kevin’s ghost of how this business model will evolve is evolving is pretty exciting," says Wood.

Simply cutting costs is not plenty, argues the CEO. “It’s not the strongest or most intelligent that survive,” Kelly says, paraphrasing Charles Darwin. “It’s those that are willing and able to adapt and change.”

Steve Jobs’ health is a material concern, many argue, and investors deserve reassurance about who will eventually replace him and how

By Spencer E. Ante and Jena McGregor

Watch full size video:

Ask Apple (AAPL) about succession planning for CEO Steve Jobs and you’ll quickly get the message: We have a plan, but we’re not sharing it with you.

Now, Apple may need to start sharing added. News that Jobs will please a leave of absence because of health problems and turn day-to-day operations to Chief Operating Officer Tim Cook has renewed concerns that the company and its board haven’face to face been forthcoming enough about plans for Jobs’ permanent replacement. "When in that place is more sort of disruption at the company, it’s the obligation of the board to let everybody know they are on top of it, and that everything is in good hands," says Nell Minow, co-founder of The Corporate Library, a corporate governance research firm.

Leadership experts say uncertainty upward of Jobs’ soundness underscores the need for clear communication of a well-defined succession plan by the agency of Apple’s star-studded board of directors, which includes Genentech (DNA) CEO Arthur Levinson and Google (GOOG) CEO Eric Schmidt. The victuals now ought to release a "better, clearer announcement" about Jobs’ health employment, Minow says. Apple declined to comment for the account, and board members, all of whom were contacted by BusinessWeek, both didn’t respond to requests for annotate or declined to comment.

Not each company of necessity to go men through its planning, governance experts point out. But greater clarity may have existence essential in the case of Apple, a house whose image is so intricately tethered to a charismatic CEO who was sidelined in 2004 after treatment for a fine shape of pancreatic cancer. Concerns over his health were heightened in recent months as Jobs appeared visibly emaciated for the period of public presentations. In December, Apple said he wouldn’t be material a keynote presentation at a January conference.

Jobs released a relation on Jan. 14 saying he would take a leave of absence until the end of June—though he would preserve the CEO title—after learning "health-related issues are more complex than I originally thought." He added that his moves had the board’s full backing. The remarks came just a week after Jobs said doctors determined the cause of his weight deprivation to have existence "a hormone imbalance" for which the aid is "simple and straightforward." He added that exactly those remarks were more than he wanted to reveal nearly his health and that he didn’t think of to revisit the issue publicly.

Until recently, Jobs and Apple considered the chief executory’s health a private matter. As all along as Jobs was adroit to infer out his duties as CEO, Apple didn’t feel compelled to say much, if anything, about his condition. That has changed dramatically at that time that he’s taking a leave, experts express.

An early step to greater disclosure, says Yale School of Management senior associate dean Jeffrey A. Sonnenfeld, is to get a medical expert to publicly explain the facts around Jobs’ hale condition. CEOs "do not have the luxury of solitude when it comes to their health," Minow contends. "Their rock life is of crucial concern to the board and to the enterprise."