Groupon Shares Crumple After Dismal Outlook, Take-Rate Cut

SAN FRANCISCO (Reuters) - Groupon Inc lost a quarter of its market value on Wednesday after the company revealed it began to take a smaller cut of revenue on daily deals during the holidays, sacrificing revenue and profits to attract and keep merchants.

The cut in its "take rate", which some analysts had said was needed to revive flagging interest among merchants in its Internet offers, was a blow to fourth-quarter results. And a sharper-than-expected post-holiday slowdown in its new e-commerce business contributed to a disappointing first-quarter sales forecast.

The stream of bad numbers, which included a surprise loss in the fourth quarter, drove Groupon's stock down 26 percent to $4.43 in after hours trade. Overall, the company has shed more than three-quarters of its value since debuting at $20 in November of 2011.

"This raises questions about how these guys are going to be able to scale the business," said Tom White, an analyst at Macquarie. "The forecast is underwhelming."

Groupon is among a group of consumer-focused Internet startups that went public to much fanfare in 2011 - before losing massive chunks of market value as investors realized they had over-rated their prospects.

Within a year, Groupon had run into problems dealing with European merchants and sustaining interest among users as deals fever receded. In 2012, analysts speculated that Chief Executive Andrew Mason, known for a quirky sense of humor, may have fallen out of favor with the board.

A company spokesman said Mason remained in charge and the CEO addressed analysts on Wednesday's post-results call.

Groupon reported fourth-quarter revenue rose 30 percent to $638.3 million from $492.2 million in the year-ago period. But it slid into the red with a 1 cent per share loss excluding items, versus expectations for a slim profit of 3 cents a share.

It forecast first-quarter revenue of $560 million to $610 million, sharply below the $650 million average estimate of analysts polled by Thomson Reuters I/B/E/S.

Chief Financial Officer Jason Child told Reuters that Groupon began sharing more money from its deals with merchants early in the fourth quarter, to persuade them to come onboard and run an offer for the first time, or work on another.

This was done selectively in the United States and in Europe, he added.

Historically, Groupon has kept about 40 percent of the money generated by daily deals. That declined to about 35 percent in the fourth quarter. Groupon then "fine tuned" take rates later in the quarter and Child said the company expects profitability to improve as a result.

"We are focused on driving growth," he said in an interview. "We will make the investments we feel we need to optimize for growth and merchant profitability."

THE GOODS ON EUROPE

Merchants have complained that Groupon takes too large a cut of online offers.

Groupon executives forecast long-term take rates of 30 percent to 40 percent for the daily deals business, during a conference call with analysts. One of the reasons Groupon reduced take rates was to create more daily deals for a new business called Local Marketplace, which launched in November.

Groupon has mostly focused on sending daily emails to customers offering vouchers for activities in their area. Local Marketplace relies instead on people searching for something to do or buy nearby, such as an oil change or a massage. By the end of the third quarter, before the launch, Groupon had amassed an online store of more than 27,000 deals for the new marketplace.

Analysts have said the move has potential because Groupon's deals may be more likely to show up in Google searches. By the end of 2012, Groupon claimed almost 37,000 active deals running in North America, and many were longer-term offers for Local Marketplace.

For now, Groupon Goods, the company's discounted product sales business, generated a lot of the fourth-quarter revenue growth, though it's seasonally volatile and generates lower margins than daily deals.

Groupon's limp outlook revived fears its business model may be in jeopardy. Chief among their concerns have been intensifying competition in e-commerce, and a struggling European division walloped by the recession there.

Executives warned a turnaround effort there would take time, and signaled that cost cuts are coming for the company's International business.

Groupon is trying to fix it by reducing the size of discounts on deals there and testing faster payments to higher-quality merchants. Technology used to automate its U.S. operations and sales efforts is being rolled out in Europe now.

Kal Raman, chief operating officer, said more than the twice the number of people are needed to handle and process an International division deal, than in the United States.

A Groupon spokesman said there are no "definite" plans for International job cuts, but there were staff reductions in the United States when the company automated.

"That is an enormous opportunity to organize Groupon's operations to be both more efficient," Raman told analysts during the conference call.

(Reporting by Alistair Barr; Editing by David Gregorio, Richard Chang and Tim Dobbyn)

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Tribune Co. hires advisors to explore sale of newspaper unit

Tribune Co. has hired investment bankers to advise the media company on the potential sale of its newspaper publishing unit.

The company announced that it has retained JPMorgan Chase & Co. and Evercore Partners to assess whether to sell the division that includes the Los Angeles Times, Chicago Tribune and six other daily newspapers.

The bankers will analyze bids from suitors, but their hiring does not necessarily mean that the assets would be sold.

"There is a lot of interest in our newspapers, which we haven't solicited," Gary Weitman, a Tribune spokesman, said in a statement. "Hiring outside financial advisors will help us determine whether that interest is credible, allow us to consider all of our options, and fulfill our fiduciary responsibility to our shareholders and employees."

Tribune hopes to sell the newspaper group intact instead of selling each paper individually, according to a person familiar with the matter.

The Chicago company has a healthy balance sheet and doesn't feel financial pressure to sell the properties, according to the person. It's unclear how long the process could take.

There has been widespread speculation that Tribune would attempt to unload the newspaper business to focus on its more promising television operations. Rupert Murdoch's News Corp. is among the possible bidders for the newspaper assets.

Tribune emerged from its four-year bankruptcy at the end of 2012 and appointed broadcasting veteran Peter Liguori as chief executive in January.

JPMorgan Chase holds an ownership stake in Tribune.

Evercore Partners, a boutique investment bank, also is working for the parent company of the New York Times on its planned divestiture of the Boston Globe.

walter.hamilton@latimes.com

andrew.tangel@latimes.com

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Advanced Breast Cancer May Be Rising Among Young Women, Study Finds

The incidence of advanced breast cancer among younger women, ages 25 to 39, may have increased slightly over the last three decades, according to a study released Tuesday.

But more research is needed to verify the finding, which was based on an analysis of statistics, the study’s authors said. They do not know what may have caused the apparent increase.

Some outside experts questioned whether the increase was real, and expressed concerns that the report would frighten women needlessly.

The study, published in The Journal of the American Medical Association, found that advanced cases climbed to 2.9 per 100,000 younger women in 2009, from 1.53 per 100,000 women in 1976 — an increase of 1.37 cases per 100,000 women in 34 years. The totals were about 250 such cases per year in the mid-1970s, and more than 800 per year in 2009.

Though small, the increase was statistically significant, and the researchers said it was worrisome because it involved cancer that had already spread to organs like the liver or lungs by the time it was diagnosed, which greatly diminishes the odds of survival.

For now, the only advice the researchers can offer to young women is to see a doctor quickly if they notice lumps, pain or other changes in the breast, and not to assume that they cannot have breast cancer because they are young and healthy, or have no family history of the disease.

“Breast cancer can and does occur in younger women,” said Dr. Rebecca H. Johnson, the first author of the study and medical director of the adolescent and young adult oncology program at Seattle Children’s Hospital.

But Dr. Johnson noted that there is no evidence that screening helps younger women who have an average risk for the disease and no symptoms. “We’re certainly not advocating that young women get mammography at an earlier age than is generally specified,” she said.

Expert groups differ about when screening should begin; some say at age 40, others 50.

Breast cancer is not common in younger women; only 1.8 percent of all cases are diagnosed in women from 20 to 34, and 10 percent in women from 35 to 44. However, when it does occur, the disease tends to be more deadly in younger women than in older ones. Researchers are not sure why.

The researchers analyzed data from SEER, a program run by the National Cancer Institute to collect cancer statistics on 28 percent of the population of the United States. The study also used data from the past when SEER was smaller.

The study is based on information from 936,497 women who had breast cancer from 1976 to 2009. Of those, 53,502 were 25 to 39 years old, including 3,438 who had advanced breast cancer, also called metastatic or distant disease.

Younger women were the only ones in whom metastatic disease seemed to have increased, the researchers found.

Dr. Archie Bleyer, a clinical research professor in radiation medicine at the Knight Cancer Institute at the Oregon Health and Science University in Portland who helped write the study, said scientists needed to verify the increase in advanced breast cancer in young women in the United States and find out whether it is occurring in other developed Western countries. “This is the first report of this kind,” he said, adding that researchers had already asked colleagues in Canada to analyze data there.

“We need this to be sure ourselves about this potentially concerning, almost alarming trend,” Dr. Bleyer said. “Then and only then are we really worried about what is the cause, because we’ve got to be sure it’s real.”

Dr. Johnson said her own experience led her to look into the statistics on the disease in young women. She had breast cancer when she was 27; she is now 44. Over the years, friends and colleagues often referred young women with the disease to her for advice.

“It just struck me how many of those people there were,” she said.

Dr. Donald A. Berry, an expert on breast cancer data and a professor of biostatistics at the University of Texas’ M. D. Anderson Cancer Center in Houston, said he was dubious about the finding, even though it was statistically significant, because the size of the apparent increase was so small — 1.37 cases per 100,000 women, over the course of 30 years.

More screening and more precise tests to identify the stage of cancer at the time of diagnosis might account for the increase, he said.

“Not many women aged 25 to 39 get screened, but some do, but it only takes a few to account for a notable increase from one in 100,000,” Dr. Berry said.

Dr. Silvia C. Formenti, a breast cancer expert and the chairwoman of radiation oncology at New York University Langone Medical Center, questioned the study in part because although it found an increased incidence of advanced disease, it did not find the accompanying increase in deaths that would be expected.

A spokeswoman for an advocacy group for young women with breast cancer, Young Survival Coalition, said the organization also wondered whether improved diagnostic and staging tests might explain all or part of the increase.

“We’re looking at this data with caution,” said the spokeswoman, Michelle Esser. “We don’t want to invite panic or alarm.”

She said it was important to note that the findings applied only to women who had metastatic disease at the time of diagnosis, and did not imply that women who already had early-stage cancer faced an increased risk of advanced disease.

Dr. J. Leonard Lichtenfeld
, deputy chief medical officer of the American Cancer Society, said he and an epidemiologist for the society thought the increase was real.

“We want to make sure this is not oversold or that people suddenly get very frightened that we have a huge problem,” Dr. Lichtenfeld said. “We don’t. But we are concerned that over time, we might have a more serious problem than we have today.”

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DealBook: Wall Street Pay Rises, for Those Who Still Have a Job

7:39 p.m. | Updated

Wall Street may be shrinking — cutting thousands of jobs over the last year — but for those who remain, the pay is still very lucrative.

The average cash bonus for those employed in the financial industry in New York last year rose roughly 9 percent, to $121,900, Thomas P. DiNapoli, New York State’s comptroller, said on Tuesday.

Cash bonuses in total are forecast to increase by roughly 8 percent, to $20 billion this year.

The total, however, is down from 2010, when it was $22.8 billion. Wall Street’s peak came in 2006, before the financial crisis, with a total $34.3 billion in bonuses. The year-end bonus can account for the bulk of a finance professional’s annual compensation.

The report from the state comptroller’s office gives estimates on the bonuses, based on tax withholding data, data from banks and conversations with industry experts. It came the same day that JPMorgan Chase, one of the country’s biggest banks, announced it was eliminating 17,000 jobs over the next two years through layoffs and attrition, adding its name to a string of large banks that continue to cut jobs to reduce expenses.

Wall Street has regained 30 percent of the 28,300 jobs lost during the financial crisis, Mr. DiNapoli said. And firms are continuing to streamline as they cope with a sluggish economic recovery, difficult markets and a heavier regulatory burden. While financial industry employment in New York City was steady in the first half of 2012, it was down slightly in the second half of the year, the comptroller’s office said.

“Wall Street is still in transition, but it is very slowly adjusting to changes in its economic and regulatory environment,” he said.

In an effort to hold down — albeit temporarily — compensation costs, a number of financial firms have deferred cash payments to employees in recent years. Mr. DiNapoli said on Tuesday that part of the increase in 2012 was cash promised in recent years but actually paid out last year. He said that it was difficult to break out what percentage of the total was deferrals, but he believed that it was still a small part of the total.

The ebbs and flows of Wall Street pay have a major impact on the economy of New York City, where 169,700 are employed in finance. Local businesses like restaurants, luxury goods retailers and the upper end of the real estate market pin their fortunes to the flood of cash from year-end bonuses.

Before the start of the financial crisis, business and personal income tax collections from finance-related activities accounted for up to 20 percent of New York State tax revenue. In 2012, that contribution fell to 14 percent.

Yet finance remains the best paying sector in New York City, Mr. DiNapoli told reporters during a conference call.

All told, the average pay package for securities industry employees in New York was $362,900 in 2011, the last year for which data is available, almost unchanged from 2010.

“Profits and bonuses rebounded in 2012, but the industry is still restructuring,” Mr. DiNapoli said. Despite its smaller size, the securities industry is still a very important part of the New York City and New York State economies.”

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A cosmic gift to L.A.

One night on Mt. Wilson about 1908, a short, powerfully built man with a handlebar mustache looked through the largest telescope in the world. What he saw transformed him, and would put Los Angeles at the forefront of a movement to make astronomy the people's science.

We may never know whether Col. Griffith J. Griffith saw the rings of Saturn or another celestial object with the then-new 60-inch reflector telescope, but we can be sure that it inspired his vision of a world-class observatory for the people of Los Angeles, allowing the masses a glimpse of the heavens.

"If all mankind could look through that telescope," he said that night, "it would change the world."

PHOTOS: Images of space

Griffith's contribution was not just his namesake observatory, but his rejection of the notion more common in his time that an observatory belonged on a remote mountaintop and should be restricted to scientists.

Griffith sought to make astronomy a public science — a notion embodied by Griffith Observatory, built near what is now the middle of the city, where it is accessible to anyone.

Or, as observatory Director Ed Krupp says: "Location, location, location."

The observatory has embraced this public-spirited view of science in other ways too: From its beginning in the 1930s, it was popularized by Hollywood, becoming a movie icon in its own right.

"Griffith had an inkling of the power of motion pictures and he wanted a motion picture theater of some kind incorporated into this public observatory," Krupp says. "The planetarium hadn't been invented at the time ... and so a movie theater was really the closest thing that he could imagine to an immersive experience in astronomy and in science."

The 1955 film "Rebel Without a Cause" made the observatory an international emblem of the city, but even before the building opened in 1935, it was used to film scenes in Gene Autry's bizarre cowboy-science fiction mash-up "The Phantom Empire," Krupp says. "At the time, the building seemed classic yet futuristic, and that made it a draw for science fiction," Krupp says. "It was, in fact, the palace of Ming the Merciless on the Planet Mongo in the Flash Gordon space opera."

Today, "its stardom attracts a steady stream of visitors from all over the planet," he says.

Griffith and the observatory were a main focus of a program titled "Making Astronomy Public, Los Angeles Style" held during the American Astronomical Society meeting held earlier this year in Long Beach.

Speakers at the meeting sought to expand the conventional view of Griffith, who donated about 3,000 acres for a city park in 1896, shot his wife in the head in 1903 and served two years in prison for assault with a deadly weapon.

He was a despised character in Los Angeles after the shooting, says Anthony Cook, an astronomer at the observatory who spoke at the conference. But although many have questioned whether the observatory was an attempt to buy back the goodwill of the city, Cook says the gift was sincere.

"He came out of San Quentin after two years really a reformed person. He stayed away from alcohol, he actually supported his ex-wife, any philanthropic enterprise that she wanted to do, helped his son maintain caring for her, and also turned his attentions to what he hoped would benefit everybody, which was by developing Griffith Park."

A onetime newspaper reporter who covered mining and became wealthy as an expert on the subject, Griffith remained a popularizer throughout his life. In drafting the observatory's detailed specifications, he had lengthy discussions with George Ellery Hale, who with Andrew Carnegie founded the first astrophysical telescope in Los Angeles, and Walter Adams, who later became director of the Mt. Wilson Observatory.

Although an observatory — or at least a tower with a telescope — had been suggested for the highest point in the park as early as 1897, it wasn't until Griffith's epiphany on Mt. Wilson that he broadened his vision into an ambitious plan for a large observatory and hall of science.

"Griffith was very civic-minded," Cook says. "He wanted to do things unifying the huge, diverse population settled in Los Angeles."

Before Griffith died in 1919, he established a generous trust fund to build an observatory in Griffith Park — when the time was right. Perhaps due to his lingering notoriety, nothing was done until the 1930s, when a handful of major U.S. cities began building the newly invented planetariums. But unlike those being constructed elsewhere, Los Angeles' planetarium would be a part of what is primarily an observatory.

A competition was held for the design of the building — Richard Neutra proposed a sleek Art Deco structure that raises tantalizing possibilities of what might have been — and prominent civic architects John C. Austin and Frederick M. Ashley were chosen.

The result was what the Smithsonian Institution's David DeVorkin — a former observatory tour guide — calls "the hood ornament of Los Angeles."

True to its public aspirations, the observatory emphasized showmanship. The facility's Hollywood connections meant it could tap skilled studio artists and technicians for exhibits and planetarium shows.

The philosophy from the beginning was to turn visitors into observers in a building full of scientific instruments, Krupp says. In fact, the $93-million renovation and expansion of the observatory in 2006 was guided by the concept that the entire building is an instrument.

Krupp returned to Griffith's famous quote on Mt. Wilson: "If all mankind could look through that telescope it would change the world."

It reflects Griffith's view that seeing into the cosmos could affect people personally, and perhaps transform society. That's what makes his observatory so special, Krupp says: "He wanted a place that would make the universe intelligible to the public through personal engagement with the sky."

larry.harnisch@latimes.com

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Global Health: After Measles Success, Rwanda to Get Rubella Vaccine

Rwanda has been so successful at fighting measles that next month it will be the first country to get donor support to move to the next stage — fighting rubella too.

On March 11, it will hold a nationwide three-day vaccination campaign with a combined measles-rubella vaccine, hoping to reach nearly five million children up to age 14. It will then integrate the dual vaccine into its national health service.

Rwanda can do so “because they’ve done such a good job on measles,” said Christine McNab, a spokeswoman for the Measles and Rubella Initiative, which will provide the vaccine and help pay for the campaign.

Rubella, also called German measles, causes a rash that is very similar to the measles rash, making it hard for health workers to tell the difference.

Rubella is generally mild, even in children, but in pregnant women, it can kill the fetus or cause serious birth defects, including blindness, deafness, mental retardation and chronic heart damage.

Ms. McNab said that Rwanda had proved that it can suppress measles and identify rubella, and it would benefit from the newer, more expensive vaccine.

The dual vaccine costs twice as much — 52 cents a dose at Unicef prices, compared with 24 cents for measles alone. (The MMR vaccine that American children get, which also contains a vaccine against mumps, costs Unicef $1.)

More than 90 percent of Rwandan children now are vaccinated twice against measles, and cases have been near zero since 2007.

The tiny country, which was convulsed by Hutu-Tutsi genocide in 1994, is now leading the way in Africa in delivering medical care to its citizens, Ms. McNab said. Three years ago, it was the first African country to introduce shots against human papilloma virus, or HPV, which causes cervical cancer.

In wealthy countries, measles kills a small number of children — usually those whose parents decline vaccination. But in poor countries, measles is a major killer of malnourished infants. Around the world, the initiative estimates, about 158,000 children die of it each year, or about 430 a day.

Every year, an estimated 112,000 children, mostly in Africa, South Asia and the Pacific islands, are born with handicaps caused by their mothers’ rubella infection.

Thanks in part to the initiative — which until last year was known just as the Measles Initiative — measles deaths among children have declined 71 percent since 2000. The initiative is a partnership of many health agencies, vaccine companies, donors and others, but is led by the American Red Cross, the United Nations Foundation, the Centers for Disease Control and Prevention, Unicef and the World Health Organization.

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Lowe’s Fourth-Quarter Earnings Beat Expectations

Richard Drew/Associated Press

Robert Niblock, chief executive of Lowe’s, said consumer spending was increasing.

The results are a sign that people are beginning to feel better about spending money on their homes as the housing market slowly recovers.

Lowe’s chief executive, Robert A. Niblock, said the company was seeing a pickup in spending even in areas of the country hit hardest by the housing slump, like Florida, Arizona and California.

“Rising home values have given homeowners additional confidence in spending on their homes,” Mr. Niblock said in an interview.

Lowe’s net income fell 11 percent from the previous year’s quarter, which included an extra week of revenue. Its earnings forecast for the year was below expectations but its revenue projection beat the consensus.

Lowe’s has revamped its pricing structure, offering what it says are permanent low prices on many items across the store instead of fleeting discounts. It has also focused on hiring more workers and improving its inventory.

In a call with analysts, Lowe’s chief customer officer, Gregory M. Bridgeford, said the pricing strategy helped spur strong sales of cabinets and countertops, tools and outdoor power equipment.

Lowe’s reported net income totaled $288 million, or 26 cents per share, for the three months ended Feb. 1. That was down from $322 million, or 26 cents a share, a year earlier. Analysts expected 23 cents a share in the latest quarter, according to FactSet.

There were 11 percent fewer shares outstanding in the latest quarter than a year ago. An extra week in the quarter last year had increased year-earlier earnings by 5 cents a share.

Revenue fell 5 percent to $11.05 billion from $11.63 billion a year earlier. Analysts had expected sales of $10.85 billion. Revenue in stores open at least one year rose 1.9 percent. The measure is an important gauge of a retailer’s fiscal health because it excludes stores that open or close during the year.

Lowe’s, which operates 1,754 stores in the United States, Canada and Mexico, expects fiscal 2013 net income of $2.05 a share. Analysts expect $2.10 a share.

The company expects revenue to rise 4 percent, implying revenue of $52.54 billion. Analysts expect $51.69 billion.

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Brown's school funding plan draws mixed reactions

In the Anaheim City School District, where most students are low-income and struggling to learn English, teachers need special training, extra tutoring time and lots of visual materials to help their pupils achieve at grade level.

In the well-heeled Palos Verdes Peninsula Unified School District, poverty and limited English are not widespread problems. But officials there say their student needs include more expensive Advanced Placement classes to challenge them with college-level material in high school.

Who should get more state educational dollars? Last week, school districts got their first glimpse of how that question would be answered under Gov. Jerry Brown's proposed new funding formula: Anaheim would receive an estimated $11,656 per student annually; Palos Verdes would get $8,429 by the time the plan is fully implemented in seven years.

And that disparity draws distinctly different reactions.

"It's great news," said Darren Dang, Anaheim's assistant superintendent of administrative services. "Given our demographics, we'll be getting much-needed resources for our students."

But Lydia Cano, Palos Verdes' deputy superintendent of business services, said she believed the new scheme would shortchange her students. Disadvantaged students already receive a bigger share of state and federal dollars, she said.

"It's not fair," she said. "It will make the divide even bigger."

In the most significant change in four decades in how school dollars would be distributed, Brown is proposing to give all districts a base grant, then add an extra 35% of that for each student who is low-income, struggling with English or in foster care. If such students make up more than 50% of a district's population, another 35% supplement would be given.

The formula is part of Brown's proposed budget, which requires the Legislature's approval.

Under the proposal, the state would do away with most so-called categorical funding — which was earmarked for such specific uses as textbooks, remediation and low-income student aid. Instead, the money would be given directly to districts with no strings attached, to promote Brown's goal of greater local control.

The plan is aimed at reforming what most educators agree is an inequitable, burdensome and overly complex funding system. It is grounded in a 2008 report coauthored by state Board of Education President Michael Kirst that compiled research showing that parental income and English language ability are two critical factors in academic achievement.

Kirst argued that it was more important to help needy students gain grade-level skills than it is to provide college-level work for top-achieving high schoolers. "These are judgments about political priorities," he said.

About 20 states currently distribute extra dollars to needier students, including Rhode Island and New York, according to Margaret Weston of the Public Policy Institute of California. Poor districts in California already receive about 20% more in state and federal dollars than do affluent ones, but Brown's formula would increase that share, she said.

After four years of crippling budget cuts, the Los Angeles Unified School District is expected to receive an estimated boost of $820 more per student over the next two years under Brown's proposal. By 2020, funding is expected to grow to $11,993 per student from $7,509 last year.

L.A. Supt. John Deasy hailed the governor's proposal. "It's morally the right thing to do and educationally the sound thing to do," he said.

Like many administrators, however, Deasy cautioned that it would take a few years of increases to make up for the state's devastating reductions since 2007. New spending could possibly begin in 2015, he said, adding that he would recommend restorations in summer school, counselors, arts and support staff, among other things.

He also said he would make it the district's "policy and practice" to send the state dollars for disadvantaged students directly to their schools to help them. Some officials, such as Dang in Anaheim, have expressed concerns about possible pressure to use the money for salary hikes.

Over the next five years, per-student funding is expected to grow by about $2,700, the state estimates showed. All school districts and charter schools would receive at least as much money this year as last.

In Los Angeles County, funding estimates range from a low of $7,863 per student in the Hermosa Beach City School District to $13,569 for Animo Leadership High, an independent charter school in Inglewood.

Long Beach, San Bernardino City and Santa Ana unified all are estimated to receive funding boosts of $800 to $1,000 per student over the next two years. But the state projects an increase of less than half that for more affluent districts, such as San Marino, Palos Verdes Peninsula and Manhattan Beach unified.

Julie Boucher, San Marino's assistant superintendent of business services, said she was dismayed that Brown was not proposing to first restore general funding that the state has cut since 2007 before allocating additional dollars to specific students.

San Marino's state funding has been slashed by $17 million since 2008 — a total equivalent to 60% of its annual budget. The district has received $3.1 million annually from its nonprofit fundraising foundation and $5.1 million from a parcel tax but still has worked with its employee unions to freeze salaries, require larger contributions for healthcare, cut 26 teaching positions and shorten the school calendar with unpaid furlough days, she said.

"It does not seem equitable given the fact that we're all down," she said of Brown's proposal. "First we need to be made whole. Don't rob Peter to pay Paul."

During a recent visit to Ponderosa Elementary School in Anaheim, however, educators demonstrated how teaching lower-income English learners is more costly and time-consuming.

In Bernadette Grzechowiak's fifth-grade classroom, for instance, students were learning how to find main ideas in a passage about Native Americans. But unlike fluent English speakers, she said, those with limited language skills need far more visual aids — presented every 60 to 90 seconds, according to research. Her room is filled with graphics about colonial America and sentence frames to teach them academic language, such as "One detail that supports the main idea is…"

Grzechowiak said she learned those and other techniques from a district-paid teaching coach.

Ponderosa has also spent $10,000 on a science book series heavy on photos and graphics to help students learning English. And the school has two full-time teachers to provide extra support for struggling students and a bilingual community liaison to help educate the school's largely immigrant parents about their children's academic needs.

"Kids are so hungry and ready to learn," said Maria Villegas, the principal. "It just takes time, opportunity and having a great staff."

teresa.watanabe@latimes.com

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The Texas Tribune: Advocates Seek Mental Health Changes, Including Power to Detain

Matt Rainwaters for Texas Monthly

The Sherman grave of Andre Thomas’s victims.

SHERMAN — A worried call from his daughter’s boyfriend sent Paul Boren rushing to her apartment on the morning of March 27, 2004. He drove the eight blocks to her apartment, peering into his neighbors’ yards, searching for Andre Thomas, Laura Boren’s estranged husband.

Expanded coverage of Texas is produced by The Texas Tribune, a nonprofit news organization. To join the conversation about this article, go to texastribune.org.

For more articles on mental health and criminal justice in Texas, as well as a timeline of the Andre Thomas case: texastribune.org

Matt Rainwaters for Texas Monthly

Laura Boren

He drove past the brightly colored slides, swings and bouncy plastic animals in Fairview Park across the street from the apartment where Ms. Boren, 20, and her two children lived. He pulled into a parking spot below and immediately saw that her door was broken. As his heart raced, Mr. Boren, a white-haired giant of a man, bounded up the stairwell, calling out for his daughter.

He found her on the white carpet, smeared with blood, a gaping hole in her chest. Beside her left leg, a one-dollar bill was folded lengthwise, the radiating eye of the pyramid facing up. Mr. Boren knew she was gone.

In a panic, he rushed past the stuffed animals, dolls and plastic toys strewn along the hallway to the bedroom shared by his two grandchildren. The body of 13-month-old Leyha Hughes lay on the floor next to a blood-spattered doll nearly as big as she was.

Andre Boren, 4, lay on his back in his white children’s bed just above Leyha. He looked as if he could have been sleeping — a moment away from revealing the toothy grin that typically spread from one of his round cheeks to the other — except for the massive chest wound that matched the ones his father, Andre Thomas (the boy was also known as Andre Jr.), had inflicted on his mother and his half-sister as he tried to remove their hearts.

“You just can’t believe that it’s real,” said Sherry Boren, Laura Boren’s mother. “You’re hoping that it’s not, that it’s a dream or something, that you’re going to wake up at any minute.”

Mr. Thomas, who confessed to the murders of his wife, their son and her daughter by another man, was convicted in 2005 and sentenced to death at age 21. While awaiting trial in 2004, he gouged out one of his eyes, and in 2008 on death row, he removed the other and ate it.

At least twice in the three weeks before the crime, Mr. Thomas had sought mental health treatment, babbling illogically and threatening to commit suicide. On two occasions, staff members at the medical facilities were so worried that his psychosis made him a threat to himself or others that they sought emergency detention warrants for him.

Despite talk of suicide and bizarre biblical delusions, he was not detained for treatment. Mr. Thomas later told the police that he was convinced that Ms. Boren was the wicked Jezebel from the Bible, that his own son was the Antichrist and that Leyha was involved in an evil conspiracy with them.

He was on a mission from God, he said, to free their hearts of demons.

Hospitals do not have legal authority to detain people who voluntarily enter their facilities in search of mental health care but then decide to leave. It is one of many holes in the state’s nearly 30-year-old mental health code that advocates, police officers and judges say lawmakers need to fix. In a report last year, Texas Appleseed, a nonprofit advocacy organization, called on lawmakers to replace the existing code with one that reflects contemporary mental health needs.

“It was last fully revised in 1985, and clearly the mental health system has changed drastically since then,” said Susan Stone, a lawyer and psychiatrist who led the two-year Texas Appleseed project to study and recommend reforms to the code. Lawmakers have said that although the code may need to be revamped, it will not happen in this year’s legislative session. Such an undertaking requires legislative studies that have not been conducted. But advocates are urging legislators to make a few critical changes that they say could prevent tragedies, including giving hospitals the right to detain someone who is having a mental health crisis.

From the time Mr. Thomas was 10, he had told friends he heard demons in his head instructing him to do bad things. The cacophony drove him to attempt suicide repeatedly as an adolescent, according to court records. He drank and abused drugs to try to quiet the noise.

bgrissom@texastribune.org

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Barnes & Noble Weighs Its Nook Losses

Elise Amendola/Associated Press

Barnes & Noble has committed heavily to making and selling its own e-readers, and despite an upswing in tablet sales over the Christmas season, the Nook was not a beneficiary.

Even for a company with a lot of bad news lately, the bulletin from Barnes & Noble this month had an ominous feel.

Barnes & Noble, the nation’s largest book chain, warned that when it reports fiscal 2013 third-quarter results on Thursday, losses in its Nook Media division — which includes sales of e-books and devices — will be greater than the year before and that the unit’s revenue for all of fiscal 2013 would be far below projections it gave of $3 billion.

The problem was not so much the extent of the losses, but what the losses might signal: that the digital approach that Barnes & Nobles has been heavily investing in as its future for the last several years has essentially run its course.

A person familiar with Barnes & Nobles’s strategy acknowledged that this quarter, which includes holiday sales, has caused executives to realize the company must move away from its program to engineer and build its own devices and focus more on licensing its content to other device makers.

“They are not completely getting out of the hardware business, but they are going to lean a lot more on the comprehensive digital catalog of content,” said this person, who asked not to be identified discussing corporate strategy.

On Thursday, the person said, the company will emphasize its commitment to intensify partnerships with other tablet producers like Microsoft and Samsung to make deals for content that it controls.

If Barnes & Noble does indeed pull back from building tablets, it would be a 180-degree shift for a company that as late as last year was promoting the Nook as its future. “Had we not launched devices and spent the money we invested in the Nook, investors and analysts would have said, ’Barnes & Noble is crazy, and they’re going to go away,’ ” William Lynch, the company’s chief executive, said in an interview last January.

Since 2009, when Barnes & Noble first decided to invest in building the device, its financial commitment to the division has been substantial. (The company does not disclose exact figures.) At the beginning of 2012, that bet seemed to be paying off and the digital future seemed hopeful.

In May, Microsoft decided to give a cash infusion to the product by pledging more than $600 million to Nook Media. In December, the British textbook publisher Pearson bought a 5 percent stake in the unit for nearly $90 million.

Going into the 2012 Christmas season, the Nook HD, Barnes & Noble’s entrant into the 7-inch and 9-inch tablet market, was winning rave reviews from technology critics who praised its high-quality screen. Editors at CNET called it “a fantastic tablet value” and David Pogue in The New York Times told readers choosing between the Nook HD and Kindle Fire that the Nook “is the one to get.”

But while tablet sales exploded over the Christmas season, Barnes & Noble was not a beneficiary. Buyers preferred Apple devices by a long mile but then went on to buy Samsung, Amazon and Google products before those of Barnes & Noble, according to market analysis by Forrester Research.

“In many ways it is a great product,” Sarah Rotman Epps, a senior analyst at Forrester, said of the Nook tablet. “It was a failure of brand, not product.

“The Barnes & Noble brand is just very small,” she added. “It has done a great job at engaging its existing customers but failed to expand their footprint beyond that.”

Others pointed out that even if the Nook itself was a nice device, its offerings were not as rich as that of its rivals. Shaw Wu, a senior analyst at Sterne Agee, a midsize investment bank in San Francisco, said, “It is a very tough space. It is highly competitive, and extras like the depth of apps are very important. But it requires funding and a lot of attention, and Barnes & Noble is competing against companies like Apple and Google, which literally have unlimited resources.”

Horace Dediu, an independent analyst based in Finland who focuses on the mobile industry, said that the difference in quality among the products was so small as to be increasingly irrelevant.

“We’ve moved beyond a game of specs,” he said. “Now it is about your business model, about distribution and economics of scale.”

He said that while the cellphone business used to have numerous competitors, it now has only two companies that are really profitable: Apple and Samsung. He said he expected a similar consolidation in the tablet market, with companies like Barnes & Noble “maybe falling off the map.”

There is no immediate danger to the book retailer, which has some 677 stores nationwide. The company has said it plans to close about 15 unprofitable stores a year and replace them at a much slower rate. It also still holds roughly one quarter of the digital sales of books and more of magazines.

Still, the threat is large enough that Barnes & Noble executives are working hard to determine a strategy that focuses on core strengths like content distribution. Its content is its “crown jewel,” said the person familiar with the company’s strategy, “and where the profitable income stream lies.”

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