BUSINESS WEDNESDAY, MAY 14, 2008 THE HARTFORD COURANT SECTION E
Nasdaq composite S&P 500 Courant-Bloomberg CT Russell 2000 10-Year T-Note Yield Gold, cash price Oil
▼ Dow Jones
-44.13, 12,832.18 ▲ +6.63, 2,495.12 ▼ -0.54, 1,403.04 ▲ +0.23, 384.01 ▲ +3.62, 736.85 ▲ +0.11%, 3.91% ▼ -$18.50, $865.00 ▲ +$1.57, $125.80.
Some THE CORNER SHOP: BARONET COFFEE INC.
Seniors SUCCESS BLEND Taking
To Pay $13.2B
Genworth Health ________________________
Premiums To Rise Deal For Tech
By DIANE LEVICK Services Firm
COURANT STAFF WRITER
A 30 percent rate increase By MICHAEL LIEDTKE
for some senior citizens’
health insurance, approved by
the state Tuesday to take effect SAN FRANCISCO — Riding
July 1, ignited sharp criticism a hot streak that has doubled
and a call for legislation to its stock price in the past three
alert customers to such pre- years, Hewlett-Packard Co. is
mium jumps before they’re rolling the dice on a $13.2
final. billion acquisition of technolo-
Connecticut Insurance gy services provider Elec-
Commissioner Thomas R. Sul- tronic Data Systems Corp.
livan approved the 30 percent The all-cash deal announced
increase for Medicare supple- Tuesday represents HP’s big-
ment policies A through G sold gest gamble under the lead-
by Genworth Life and Annuity ership of Mark Hurd, who was
Co., except for “High Deduct- hired as chief executive in
ible Plan F.” No increase was March 2005 to turn around the
allowed for that policy. Palo Alto-based maker of per-
Genworth had only 2,049 sonal computers and printers.
Medicare supplements in As Hurd relentlessly cut
force in Connecticut at the end costs while demanding better
of 2007, but consumer advo- execution from the company’s
cates fought the new increase remaining workers, HP recov-
because it comes after a 30 ered from a nagging financial
percent rate increase in 2007 hangover that was exacerbated
and about 25 percent the previ- by the biggest acquisition in its
ous year. 69-year history — the $19 bil-
“The consumers of Gen- lion purchase of Compaq Com-
worth’s plans have been bur- puter Corp., completed in 2002
dened by outrageous increases over strident shareholder ob-
over the last few years and now jections.
Genworth is back for more,” Now HP will try to show it
said Kevin Lembo, state health learned from its mistakes by
care advocate. “If Genworth is making the second largest deal
unable to stabilize their Con- in its history pay off faster.
necticut program, the com- Investors already are wor-
missioner should have denied ried that HP is taking an unnec-
the increase and referred [the
essary risk on EDS, whose
disappointing profit margins
PLEASE SEE GENWORTH, PAGE E4
had caused its stock to drop by
about 30 percent over the past
year. HP shares sagged $2.56, or
Imminent 5.5 percent, to finish Tuesday at
“It appears to be a very
Airline MICHAEL KODAS / THE HARTFORD COURANT
LEON GOLDMITH, left, and his son, Bruce, are the second and third generations to run Baronet Coffee in Hart-
daunting deal,” American
Fare Hike ford, which has survived and prospered amid growing competition and changing technology. Below, coffee
beans ranging in color from light to dark, are show at three stages of preparation in the roasting process.
PLEASE SEE HP, PAGE E4
Predicted Hartford Roasting Company Protects Its Hot Commodity
By DAVE MONTGOMERY
BY JANICE PODSADA | COURANT STAFF WRITER Hullabaloo
WASHINGTON — Higher
The UAW isn’t having much
airfares are “inevitable” this ike his father and grandfather before him,
summer to help airlines absorb Bruce Goldsmith, president of Baronet Coffee luck getting a permit to protest
soaring fuel costs, the head of Inc., knows his company can’t be content to sit the grand opening of the new
the trade association that rep- still. MGM Grand casino. Page B1
resents the nation’s leading air The 78-year-old coffee roasting and supply company
carriers predicted Tuesday . in Hartford has had to constantly reinvent itself to
James C. May the president
, remain competitive, Goldsmith said.
and chief executive officer of ,
“It’s a very mature industry but changing very rap- INSIDE
the Air Transport Association, ,”
idly said Goldsmith, 43.
declined to speculate on the
size of fare increases, but he
While the basic formula for turning a 150-pound bag
of pea-green coffee beans into a steaming cup of Joe
said that rising ticket prices
are unavoidable as airlines
hasn’t changed much since the 1930s, the business side
of coffee has been transformed in the past 10 years.
struggle with unprecedented Companies like Starbucks and Dunkin’ Donuts have More U.S. homeowners fell
increases in the cost of fuel. introduced coffee and coffee-based drinks to a wider behind on mortgage
Jet fuel prices, he said, are range of people, Goldsmith said, and technology has
altered the way we turn our beans into brew. The old
payments last month, a new
approaching $170 a barrel,
which he called “absolutely stove-top percolators and countertop drip machines report says. Page E3
uncharted territory .” are being replaced by feature-laden, single-serving
As airlines prepare for the coffee machines and espresso makers that have infil-
summer travel season, May’s trated both the home and commercial markets. That’s
organization predicted that been reflected at Baronet. throughout the day for
PLEASE SEE SHOP, PAGE E4 complete stock and index
PLEASE SEE FARES, PAGE E3 updates.
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E4 WEDNESDAY, MAY 14, 2008 M T H E H A RT F O R D C O U R A N T
By MARTIN CRUTSINGER reported no change. 6.7 percent decline in the median, to the same period a year earlier.
The 67 percent of cities reporting $439,300, from $470,900 a year earli- The biggest percentage price de-
price declines was the largest per- er. cline by metro area was a 29.2
Median house prices fell in two- centage of cities reporting price Of the three areas, Greater New percent drop in the Sacramento,
thirds of the cities surveyed during drops in the history of the survey , Haven registered the sharpest de- Calif., metro area.
Market the first three months of this year
and sales declined in 46 states,
compared with a year earlier, ac-
cording to the latest report high-
which goes back to 1979. In the
fourth quarter, prices had fallen in
36 percent of the cities surveyed.
Two of the three metro areas in
cline, falling 9.5 percent, to $255,500,
from $282,200 a year earlier.
The results for the region com-
pare with a 7.7 percent decline for
Sales of existing homes were
down in 46 states for the first three
months of this year, compared with
the same period a year earlier. The
Still In lighting the depth of the nation’s
The National Association of Real-
tors said Tuesday that median
Connecticut that the report covered
saw smaller median price declines
than the nation, but all three per-
formed worse than the Northeast
the nation and a 3.2 percent gain for
the Northeast, the only region in
the country to register an increase
in median prices.
largest percentage plunge was a 38.6
percent drop in Maryland. Only
Alaska, Indiana and New Jersey
reported sales increases during the
Decline prices for existing single-family
houses dropped in 100 of 149 met-
ropolitan areas in the January-
March period, 48 metropolitan ar-
eas saw price increases and one
In Greater Hartford, the median
price fell 3 percent, to $247,300, from
$255,000 a year earlier. The Bridge-
port-Stamford-Norwalk area saw a
Nationally the median home
price — the point at which half of
the homes sold for more, and half for
less — fell to $196,300 in the first
quarter, down by 7.7 percent from
survey period. No data were avail-
able for New Hampshire.
Nationally sales fell by 22.2 per-
cent in the first quarter, compared
with the same period a year earlier.
CONTINUED FROM PAGE E1
Technology Research analyst Shaw
The $25-per-share sale price repre-
sents a nice payoff for EDS stock-
holders, who will receive a nearly 33
percent premium compared to
where the company’s shares stood
before news of the HP talks leaked
out Monday EDS shares added 26
cents to close at $24.34 on Tuesday.
Including EDS’ net debt, HP val-
ues the acquisition at $13.9 billion.
Based on EDS’ nearly 530 million
common shares, restricted stock
units and options, the sales prices
works out to $13.2 billion. That
represents about one-fourth of the
$50 billion increase in HP’s market
value since Hurd joined the com-
HP prizes EDS because it wants to
become a much bigger player in
technology services — a wide-rang-
ing category that includes running
computer data centers, stitching to-
gether software programs and con-
sulting on special projects for busi-
ness and government clients.
The estimated $550 billion market
for technology services has long
been dominated by IBM Corp., which
MICHAEL KODAS / THE HARTFORD COURANT has about a 10 percent share. HP
BRYAN GENOVESE of Manchester, a roast master at Baronet Coffee, pours roasted coffee into a bin where it’s stirred. Ten years ago, Baronet doubled its ranks a distant fifth with a 3 percent
16,000-square-foot facility at 77 Weston St. in Hartford. And now, even with 32,000 square feet, the firm is feeling squeezed again. market share, based on its $16.6
billion in technology services reve-
Shop “Since the beginning of the year, we’ve added
Executives with the family-owned company
which now employs 40, would not reveal any
He built a small retail coffee shop and show-
room inside the company’s headquarters. The
shop is open Monday through Friday from 6:30
a.m. to 4 p.m. There, customers can enjoy a cup
nue in its last fiscal year.
By picking up EDS’ $22 billion in
revenue, HP’s technology services
division will more than double in
CONTINUED FROM PAGE E1 financial details about the firm. of coffee or pick up a pound of any of the com- size and leapfrog into second place
Goldsmith’s grandfather, Isedore, started the pany’s coffees, from Brazilian Bourbon Santo to with a 7 percent market share.
“In the last 10 years, our business volume has Manhattan Coffee and Sugar Co. in New York Fair Trade Guatemala or one of its many fla- Fijitsu and Accenture will fall be-
quadrupled,” Goldsmith said. City in the early 1900s. “He actually started by vored coffees, from eggnog- to babka-flavored. hind the combined HP-EDS.
Coffee drinkers have gotten more particular selling sugar,” Bruce Goldsmith said. Because “My goal was to make Baronet coffee a house- An IBM spokesman declined to
about the coffee they consume. They expect to most people like to add a little coffee to their hold name,” said Goldsmith, who is on the Na- comment on the acquisition.
find it at the office, at convenience stores or the sugar, Bruce Goldsmith said, Isedore began tional Coffee Association’s board of directors. HP has already surpassed IBM as
local gas station. In the past few years, single- selling java, as well. Today Baronet coffee packs its coffee in an
, the world’s largest all-purpose tech-
serve brewing systems, often referred to as pod In 1947, Isedore Goldsmith bought Hartford’s oxygen-free environment to reduce spoilage. The ,
nology company based on revenue.
brewers, have begun popping up both at home Baronet Coffee Co. from its founder, Dave Baron. company’s inventory of unroasted beans is In a sign that Wall Street doesn’t
and in the break room at the office, Goldsmith For the next decade, Baronet focused on the limited to a seven- to 10-day supply to ensure view HP’s expansion as a major
said. wholesale trade, supplying restaurants, hospi- freshness. Light spectrum analysis ensures that threat in technology services, IBM
Single-serve pods allow people to choose the tals and hotels in Connecticut, Massachusetts the beans, which are roasted in 500-pound-capac- shares gained $1.34 to close at $126.58
coffee of their choice, any time, any place, and Rhode Island with fresh ground coffee. ,
ity vats, are roasted correctly said Steve Wall, on Tuesday .
whether it’s a dark roast or a flavored coffee. By 1958, when Bruce Goldsmith’s father, Leon, the company’s executive vice president, who The EDS deal is expected to close
When one of Baronet’s local distributors took over, a new group of potential clients ap- oversees the roasting. during the second half of this year
asked the firm to come up with a method to peared: corporate America. Tired of seeing Baronet continues to supply hotels and restau- and begin boosting HP’s earnings in
deliver single-serving coffee easily and effi- workers stream out the door to grab a cup of rants, and its office service now supplies compa- its fiscal year ending in October 2010.
ciently Baronet turned to an Italian-made pod- coffee at the local luncheonette, many firms nies nationwide. In recent years, Baronet has To wring more profit from the EDS
making machine. realized that making coffee available to its em- begun supplying a network of distributors that takeover, HP indicated it will make
In 2004, Baronet purchased one of the ma- ployees in-house was a necessary and cost-effi- sells coffee to 3,000 independent convenience significant layoffs as it eliminates
chines, which can cost up to $750,000. Pod mak- cient benefit, Bruce Goldsmith said. stores in 21 states. overlapping jobs and cuts other ex-
ers package a single serving of coffee in a light- In response, Baronet launched a service that And now it’s selling pods. penses. Hurd and EDS CEO Ronald
weight, biodegradable pod. The firm has pur- supplied coffee to companies within a 100-mile “That’s four channels,” Goldsmith said. “It Rittenmeyer declined to estimate
chased another three pod-making machines that radius of Hartford. diversifies our distribution mix. It allows us to how many workers might lose their
together produce 400 pods a minute, or 5 million Bruce Goldsmith went to work for the family ride out the ups and downs.” jobs.
pods every month. business in 1988 after earning a mechanical What’s next for Baronet? How about bigger HP already has eliminated about
Baronet now sells single-serving pods filled engineering degree from Union College and pods? 15,000 jobs since Hurd took control.
with all sorts of coffee, from flavored to free working in Procter & Gamble’s manufacturing More Americans are preferring a stronger “There are obviously going to be
trade, to wholesale distributors and online to management program for three years. He said cup of coffee, and Baronet is packing a bigger some changes,” said Rittenmeyer,
consumers. Retail buyers can purchase 18-pod that within a month of joining the family busi- punch into its pods, Wall said. who will run the combined technolo-
packs for about $7.25. Online, a pound of Baron- ness, his former boss at Procter & Gamble sent “We’re making 10-gram and 12-gram pods,” gy services unit and report directly
et’s Donut Shop Blend sells for $8, while a pound him a newspaper article that said by 1993, spe- Wall said. “A lot of coffee pods contain 7 grams, to Hurd.
of Hawaiian Kona sells for $28. cialty or gourmet coffees would represent 23 and that’s just not strong enough for a lot of The combined services business
Ten years ago, Baronet doubled its 16,000- percent of coffee sales. people. We’ve even started experimenting with a would have 210,000 employees in
square-foot facility at 77 Weston St. Now at 32,000 Goldsmith took heed, and began focusing on 14-gram pod.” more than 80 countries. It will retain
square feet, the firm is feeling squeezed again. roasting single-source coffees, such as Sumatra Contact Janice Podsada at jpodsa- the EDS brand and EDS’ Plano,
“We’re running out of space,” Goldsmith said. or Ethiopian Sidamo. email@example.com Texas, headquarters.
Genworth to the department.
The rate increase will bring Gen-
worth’s Plan E to about $302 a month
per person from the current $232, and
premiums in claims on individual
The high ratios mean Genworth is
losing money on the policies here,
five active supplement providers that
have no exclusions for pre-existing
conditions. Eight other insurers do.
State law allows exclusions for up to
essarily knowing whether those
plans will meet their needs.”
“Commissioner Sullivan has a
great interest in equity and good
CONTINUED FROM PAGE E1 its plan A will rise to about $245 from and its premiums aren’t covering six months. business practices,” Stein said. “But
nearly $189. agent commissions, taxes and over- “While the cost might be difficult I fear this could have been a more
matter] to the federal government for A Genworth spokesman did not head, said Paul Lombardo, an actu- to swallow, I’d rather have more objective analysis of whether this
review.” respond Tuesday to multiple re- ary with the Insurance Department. competition and more choices to the increase is justified, particularly giv-
Medicare supplements are bought quests for comment. Vicki Veltri, general counsel in the consumer so that we do have a more en that Genworth had a double digit
by people who are in the traditional Sullivan defended his decision on state Office of the Healthcare Ad- efficient market at the end of the day,” increase last year and the year before
federal Medicare program and 65 or the rate increases, citing the com- vocate, believes the 65 percent loss Sullivan said. as well.”
over, or are under 65 and on Medicare pany’s loss ratio on the policies in ratio requirement should be consid- He said companies that don’t ex- ,
U.S. Rep Joseph Courtney D-2nd
disability The policies fill in the gaps Connecticut — the proportion of ered a floor and not a target. The clude health conditions tend to at- District, and state Sen. Edith Prague,
left by Medicare, such as hospital premiums paid out in claims. department, she said, has discretion tract customers with medical prob- D-Columbia, had also informed Sulli-
deductibles and a portion of physi- “It’s kind of hard to ignore a 102 to approve a rate increase that would lems, another reason they may need van of their concerns about the
cian fees. percent loss ratio,” Sullivan said. result in a higher loss ratio. large premium increases. Genworth increase.
Lembo says he will push for state That means Genworth had $1.02 in Sullivan said he doesn’t want to Judith Stein, executive director of Genworth customers who don’t
legislation next year requiring a claims for every $1 in premiums. risk losing a competitor in Connecti- the Center for Medicare Advocacy , like its Medicare supplement rates
supplement company to notify its Before the 102 percent, Genworth cut’s Medicare supplement market, worries that Genworth’s repeated can switch to another insurer at any
Connecticut customers about any had even worse ratios: 103.3 and 107.3 especially one that agrees to cover increases “will price many older and time, regulators said. Stein, though,
increase it’s seeking approval for. percent, regulators said. Connecti- customers’ pre-existing health prob- disabled people out of the Medigap said, “Just the fact individuals can
That way customers can attend pub- cut allows supplement insurers to lems from day one of the policy. market and into private Medicare change isn’t sufficient to say there’s
lic hearings on the increases or write pay out as little as 65 percent of Genworth, he said, is one of only Advantage plans without them nec- no harm” done by the increase.
STOCKS OF LOCAL INTEREST
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AT&T Inc 39.26 +.15 BkofAm 36.61 -.83 CompTch 2.33 EdacTech n 7.37 -.03 GrafTech !23.86+1.46 Landstar 52.73 +.26 NYFIX n 3.93 +.04 Rayonier 44.11 -.25 TrnsLx 3.40 -.10 Wachovia 27.79 -.43
ATMI Inc 30.98 +.26 Barnes 31.20 +.25 CompSci 46.03 -1.41 EdgrOnl 2.31 +.15 GreenfldOn 12.50 +.09 Lexmark 33.89 +.09 Olin 21.33 +.10 RenegyH n 4.34 +.22 TransAct !8.87 -.16
Accenture 37.80 -.20 Berkley 27.11 -.22 CT BkTr 5.99 EgyEast 24.66 +.18 HartfdFn 68.65 -.63 LillyEli 47.55 -.74 PatrNBcp 14.50 RockvFn 13.62 -.29 TranSwtc h .84 +.01 WebsterFn 27.51 -.02
AcmeU 14.10 -.10 Blyth 18.56 +.26 ConnWtrSv 24.59 +.54 EthanAl 28.92 -.16 HealthNet 27.59 +.02 LincNat 52.98 -1.17 Penney 44.05 -.18 Rogers 35.35 -.07 Travelers 50.36 -.86
Aetna 43.61 +.01 BoltTech s 19.69 -.09 Crane 40.56 -.04 FactsetR 61.57 -.06 Hexcel 21.86 +.17 Lydall 14.04 +.24 PeopUtdF 17.41 +.02 SI Fincl 10.01 UIL Hold 32.28 +.17 WellPoint 51.19 -1.33
Alexion 72.10 -.15 BrMySq 21.60 -.03 CuraGen h .94 -.01 FortuneBr 70.10 +.26 HubbelB 46.73 +.43 MagelnHl 36.90 +.10 Pfizer 19.97 +.06 SovrgnBcp 8.60 +.42 UST Inc 52.60 -.03
AmIntlGp π39.16 +.79 CIGNA s 39.87 -1.04 Diageo 80.78 -1.74 FuelCell 9.13 +.28 HungTel 16.98 +.76 Memry 1.35 -.06 PhnxCos 10.38 -.26 StanlWk 49.76 +.59 UtdNtrlF 18.77 -.15
Amphenol 46.95 +.28 Cabot 32.29 -.08 Disney 34.33 -.44 Gartner 24.00 +.52 ING 37.92 -.55 Neurgn .92 -.05 PitnyBw 37.35 +.20 StarGas 3.00 +.02 UtdTech 74.92 +.35 WldW Ent 16.50 -.43
ApplBio 33.62 -.20 ChoicePt 48.46 +.05 DistEnSy h .32 -.12 GenDynam 92.91 +.31 JDS Uniph 11.40 -.01 NwEngBc 10.95 Praxair 95.33+1.24 SturmRug 7.58 +.12 UtdhlthGp 32.55 -.23
Aristotle π9.51 -.12 Chubb 53.21 -.40 DowChm 41.76 -.01 GenElec 32.33 -.07 JPMorgCh 45.48 -1.76 NewAlliBc 13.43 +.02 priceline 139.66 +.80 TRC Cos 5.92 -.09 UrstdBid 17.37 +.54 Xerox 14.47 +.17
AxsysTech 57.28 +.11 Citigrp 23.03 -.61 EMCOR s 26.80 +.46 GenesWyo!39.61+1.26 Kaman 25.19 -.01 Nordstrm 35.49 -.21 PrmEgy 62.50 -.25 Tenneco 26.08 +.07 VerizonCm 38.11 +.05
Baldw 2.30 -.04 CitzComm 10.55 -.05 EasternCo 18.40 -.37 GerbSc lf 9.05 +.01 KrispKrm 3.18 +.04 NoestUt 27.30 +.09 Prudentl 73.86 -1.37 Terex 72.59 +.04 VionPh rsh 1.43 +.23 Zygo 12.03 -.09