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MONDAY, MAY 12, 2008

INVESTORS.COM

Market share, by visits, April ’08

MySpace Getting Less Social MySpace rules the social networking arena, but fewer people are visiting and they’re spending less time on the site than they used to. No. 2 Facebook grew by nearly a third. The U.S. has the biggest mobile audience. Sources: Hitwise (hitwise.com), Nielsen Mobile (nielsenmobile.com)

BlackPlanet Others 8% Bebo 1.1% 1% myYearbook MySpace 1.3% 74% Facebook 15%

Gains/losses, by visits, April ’07 to April ’08

Facebook BlackPlanet

475% 32% 15%

MySpace -5% Total does not equal 100% due to rounding

Average time spent on site, April ’08 Average time per user Year-over-year change

myYearbook

Bebo -13%

MySpace

29m 54s

-3%

Facebook

20m 52s

57%

myYearbook

32m 54s

51%

Bebo

30m 01s

-3%

BlackPlanet

24m 39s

9%

Social networking sites’ mobile reach, Q1 ’08 U.S. U.K. Italy

4,079,000 812,000 293,000

Spain

291,000

France

255,000

Mobile subscribers who access social networks over their phone

Germany 141,000

INTERNET & TECHNOLOGY No Storming Beach For The U.S. Military With New Advances Hey, That’s No Fishing Trawler Northrop, Boeing and Bell ready with next-generation craft to assist armed forces BY DOUG TSURUOKA INVESTOR'S BUSINESS DAILY

In World War II, amphibious warfare was all about “hitting the beach.” Marines, backed by planes and ships, stormed out of landing craft and fought in the dunes with enemy troops. In 2008, advances in military technology make it possible to skip the beach altogether. “The idea now is to keep going,” said John Pike, who heads research firm GlobalSecurity.org. “U.S. forces are going to fly directly from ships to a target or use vehicles to push straight inland without stopping.” The revolutionary change in land and sea war hinges on a new generation of ships, planes and vehicles packed with advanced gear and communications. That is generating profits for big defense contractors like Northrop GrummanNOC, BoeingBA and Bell Helicopter, which are supplying the Navy and Marines with these new weapons. Some projects are triggering problems. Northrop’s first-quarter earnings miss in April stemmed in large part from wiring glitches that will delay delivery of the Makin Island, a new Navy aircraft carrier that uses planes and helicopters to ferry troops into combat. The setback contributed heavily to a $326 million charge the defense contractor announced for the quarter. Still, the effort is creating big opportunities for defense firms. One of the biggest isNorthrop’s amphibious shipbuilding efforts, a showcase for the new war strategies. The company already is deploying a “San Antonio” class of amphibious transport ships, also known as landing platform docks, or LPDs. Ships of this class have angled “stealth” superstructures that can make them look like ordinary fishing trawlers on radar. They also carry V-22 Osprey troop planes that take off and land like helicopters,

but can switch in flight into regular, high-speed turboprop aircraft to fly over long distances. The Osprey was developed as a joint project between Boeing and Bell Helicopter, a unit of defense contractor TextronTXT. Bell and Boeing received a $10.4 billion Pentagon contract in March 28 for 167 Ospreys. The Marines will get 141 of the new planes. (See related story, this page .) The latest of nine planned San Antonio-class ships is the USS New York. It was christened in New Orleans on March 1. The 684-foot-long transport ship — which can carry a fully equipped battalion of Marines — has seven tons of recycled steel in its bow from the World Trade Center to commemorate the 9/11 terrorist attacks. Northrop has built three of the ships at a cost of $1 billion or more each. The San Antonio ship program has faced cost overruns, funding doubts and design glitches. But backers say they’re more economical than the 1960s-era Navy troop transports the new ships replace. The ships fill an operating gap for the Navy and Marines, Northrop spokesman Bill Glenn says. “They’re versatile ships,” he said. “The fact that they deploy Marines makes them an asset in fighting terrorism around the world.” The ships can hit speeds of 22 knots and carry air-cushion boats for special operations. The Marines tapped General DynamicsGD to build prototypes of an expeditionary fighting vehicle, or EFV, to work with the new ships and planes. The vehicles, set to deploy in 2015, will be designed to zip across water or land at high speeds after disembarking from one of the new San Antonio ships. Together, the new ships, planes and vehicles form the cornerstone of a U.S. strategic plan known as “Forward . . .from the sea.” The concept is to assault enemies from the sea without having troops depending on prepositioned supplies or bases in nearby nations. “The biggest single advantage is the ability to deliver heavily armed U.S. Marines in ill humor, at times and places that are inconvenient to

For Concur, Move To Web Now Pays Off Gambled On New Biz Model After lean years, maker of online travel management software seeing big growth BY J. BONASIA INVESTOR'S BUSINESS DAILY

The USS Mesa Verde (above), a Northrop Grumman LPD, or landing platform dock, is shown in the Gulf of Mexico during trials. Below is the firm’s LHD-8 assault ship, the Makin Island, under construction.

our enemies,” said Joseph Callo, a retired rear admiral in the Naval Reserve and an expert on amphibious warfare. He saysthe LPDclass of shipscombines the functions of three or four previous ship types and can hide more effectively from radar, strike from farther away and move faster to hot spots. Pike says the Marines have been hunting for alternatives to old-fashioned land and sea warfare since the 1982 Falklands War between the U.K. and Argentina. The conflict erupted when Argentina seized a group of disputed islands in the South Atlantic. It used a small number of air-to-ship missiles to inflict surprisingly heavy losses on British ships trying to retake the islands, though Britain ultimately prevailed. “The Marines realized that their traditional way of getting across the beach wasn’t going to cut it any-

more,” Pike said. “Having amphibious assault ships a few miles off the beach was just going to turn them into targets.” The British Navy could jam longrange missiles with sophisticated homing devices that were fired at its ships from a distance, Pike says. But it had no defense against socalled point-and-shoot short-range missiles fired from shore. “Shorter range missiles have nothing to jam,” he said. To avoid a similar situation, U.S. Marines and Pentagon planners decided the only option was to move troop ships as far from shore as possible in an amphibious assault. The Navy also needed fast, longrange aircraft that could carry Marines from these ships and fly them over the beach to their targets. After almost two decades of research, the result is the new San Antonio-class ships paired with V-22 Ospreys and the new expeditionary

vehicle. “The new Marine vehicle is a speedboat that thinks it’s a tank,” Pike said. “It needs to be fast enough in the water so it can get to the beach the same day it was launched.” In future wars, this means U.S. ships attacking a hostile coast will wait 25 or more miles offshore, hidden by stealth technology. Ospreys will take off from these ships and ferry Marines to their targets many miles inland. At the same time, vehicles will be launched from these ships to support the Marines who have already landed. Once they leave the water, they will plow ahead without stopping. The new strategy has critics, who question its usefulness in the wars that are likely to erupt in the 21st century. Pike notes that U.S. forces haven’t made a major sea landing under fire since the Korean War. He says future conflicts probably would involve large-scale use of air power or land-based forces. He says it’s highly unlikely that the U.S. would stage a large sea-based assault like the D-Day landings in Normandy 64 years ago. Callo strongly disagrees. “Modern expeditionary warfare — projecting military power from the sea — is a lot more than over-thebeach-type landings,” he said. “One of the most essential ingredients is flexibility, and that’s a crucial military dimension (that) the LDP-class ships and their Osprey aircraft, helicopters, air-cushion vehicles and Marine expeditionary fighting vehicles add to U.S. military capability.”

It’s A Helicopter? A Plane? No, It’s Both V-22 Osprey pushes the envelope for ‘vertical/short takeoff and landing’ class BY DOUG TSURUOKA INVESTOR'S BUSINESS DAILY

The V-22 Osprey rises and swoops like its bird-of-prey namesake. The aircraft’s outsize rotors spin awesomely in flight. It’s the result of over half a century of efforts to build a troop carrier that takes off and lands like a heli-

copter but flies like a fixed-wing plane in flight. Known in military jargon as a Vertical/Short Takeoff and Landing, or V/Stol, the Osprey’s two propeller enginesrotate in midair from a vertical to a horizontal position, allowing it to fly at high speeds and altitudes like a turboprop aircraft. Made jointly by BoeingBA and Bell Helicopter, it can carry 24 troops and their equipment or 6,000 pounds of cargo. The Osprey can cruise at 246 miles per hour and has a range of more than 1,000 miles.

“The Osprey is the fastest verticallift turboprop aircraft in the world. It has enormous speed and range,” said Bob Leder, a spokesman for Bell Helicopter, which is owned by TextronTXT. The planes cost about $110 million each and took 25 years and more than $20 billion to develop. The aircraft, in service with the Marines have been deployed to Iraq. Boeing’s role in a $10.4 billion contract to build 167 Ospreys for the U.S. military helped offset its recent loss of a $35 billion contract to build Air Force tankers to a group led by Northrop GrummanNOC and Airbus (see related story, this page). The military says the Osprey’s big edgein combat is that it takes off and lands in cramped spaces and flies twice as fast as a helicopter, at much longer ranges. This means troops and supplies move a lot faster. “The Osprey significantly increases the reach of expeditionary forces and decreases the time and risk involved in the process,” said Joseph Callo, a retired rear admiral in the U.S. Naval Reserve. The V-22 is designed for all branches of the U.S. military and can be used for virtually any mission — including amphibious and commando-style assaults, transport, medical evacuation and refueling operations.

The Osprey — this is the AeroScout MV-22a — lands and takes off like a helicopter but flies like a plane. It’s made jointly by Boeing and Bell Helicopter.

The plane can mount rapid-fire guns and other weapons to suppress resistance before it lands. Engineers from different nations struggledduring the Cold Warto design a plane that does what the Osprey does. The challenge of building a plane that could take off like a helicopter and fly like an airplane didn’t take serious form until the late ’60s, with the advent of fighters such as Britain’s Harrier jump jet. But building a successful verticaltakeoff plane for troop transport duties proved elusive until the 1990s. Some prototypes built by various countries crashed. The chieftechnical hurdle was getting the engines powering such planes to shift from vertical takeoff

to forward flight and back again without stalling. The Osprey saw its share of accidents before those problems were worked out. Osprey prototypes have crashed four times since 1990. The worst occurred in 2000, when two crashes killed 19 Marines on training missions. Engineers redesigned parts of the V-22, and its makers say the problems are solved — though reports have surfaced of more mechanical problems in flight. The Pentagon OKed full-scale production of the Osprey in September 2005. “The (V-22) has done very well in Iraq. They’ve been used for a multitude of missions and are flying a lot of hours,” Bell’s Leder said.

The soft economy has hurt many software makers, butConcur Technologies isn’t one of them. ConcurCNQR has accelerated its sales growth for four straight quarters. In its second fiscal quarter ended March 31, revenue grew 74% over the year-earlier period to $53.7 million. Minus special items, earnings rose 63% to 13 cents per share. Based in Redmond, Wash., Concur offers a Web-based software service to manage corporate travel and expenses. Analysts say this approach can save time and money over standard travel management processes. Many companies, no matter the size, want to cut travel costs. Concur’s service also simplifies expense reporting for weary business travelers. It helps financial managers exert more control over their expense policies to rein in so-called maverick spenders, Deutsche Bank analyst Tom Ernst says. “Concur’s software doesn’t need to be customized or integrated,” he said. “They make it easy to sign up and go live within weeks.”

“It is hard to add that many people and still ensure that your growth remains disciplined.” Steve Singh, Concur CEO

Ernst rates the stock a buy. Deutsche Bank has done investment banking for Concur in the past year. Observers say Concur has the early lead in this new category for travel and expense management software. But American ExpressAXP, the market leader in corporate credit cards, looms as a major rival. Amex partners with IBMIBM on its service. OracleORCL and SAPSAP, both business software leaders, also offer travel-related products. Their travel management software systems are licensed upfront, not offered via online subscriptions, which can be less expensive for users. In 2002, Concur Chief Executive Steve Singh switched his company to on-demand subscriptions from conventional upfront licensing. He did so assuming the stock — and the company’s financials — would struggle for a few years while the new business model took hold. By early 2005, the model started to work, and the company’s fortunes, and share price, improved. In 2004, its sales of $57 million were on par with 2003. Since then, its annual sales have risen 27%, 35% and 33% and are expected to jump 72% this year to more than $222 million. Also, the new business model makes it easier for Concur to gauge future sales, Singh says. The company can predict 95% of its revenue at the start of each quarter, he says, because its 7,000 customers pay per user, per month. “We are in a fortunate position to be the clear leader in this emerging market,” Singh said. “We think over the next decade this market will reach $1 billion — at least — in recurring annual revenue.” A new Aberdeen Group study, sponsored by Concur, of 160 global companies found that firms with best-in-classpolicies forexpense reporting can process each report for $6.70 on average. That compares with $10.89 for all others. The top performers also complied with SEE CONCUR ON A5

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