Sex & Violence – News Syndication

Can a chief executive be successful, drive innovation and create elegant products? David Weidner has the answer on Mean Street. Photo: Justin Sullivan/Getty Images.

Since Walter Isaacson’s portrait was published shortly after [Steve] Jobs’s death last October at the age of 56, some executives have treated it as a sort of management bible, raiding it for nuggets of inspiration. — The Wall Street Journal, March 31

It’s not surprising that Walter Isaacson’s biography is being picked up by aspiring managers who want to replicate Apple Inc.’s

success. The book is full of examples of how to run a successful business, innovate, negotiate and get the best out of people. 

Ultimately, a reader comes away from the book with a greater appreciation for the chief executive.

Unfortunately, that CEO is not Mr. Jobs, whose successes are well known. It is Bill Gates, the co-founder and former chief executive of Microsoft Corp.

And what about Mr. Jobs?

Most readers come away stunned at how much of a jerk the guy was.

Mr. Jobs as chief executive in Mr. Isaacson’s book is “a success story” and equally “a cautionary tale,” says David A. Garvin, a professor at Harvard Business School.

This isn’t to say, Mr. Gates got it right and Mr. Jobs got it wrong. Their successes and failures are well-known. Mr. Jobs’s products are elegant, Mr. Gates’s are nerdy. Mr. Jobs was uncharitable. Mr. Gates has spent his fortune on charity. Mr. Jobs drove hard bargains and used monopoly power to shut out collaborators. Mr. Gates sometimes did the same, but his product philosophy was more about sharing and openness.

Mr. Isaacson’s monument underscores contrasts between Messrs. Jobs and Gates, while showing in stark detail the pickle of modern-day management: Can a chief executive be successful, drive innovation and create elegant products?

The answer is yes.

Can the CEO do the same thing without humiliating dedicated employees, making a wreck of his or her personal life and eschewing any sort of social responsibility? 

That’s not so easy.

In other words, could the same Apple have been reinvigorated by someone who didn’t have Mr. Jobs’s penchant for teenage narcissism? Does a leader have to shame someone to drive him or her to perfection?

Most of the management studies on Messrs. Jobs and Gates seem to offer the same analysis: Each philosophy has its own strengths and weaknesses. The advice usually comes down to managers sifting through the ideas that worked.

“Neither Bill nor Steve is too perfect or too wicked,” management consultant Rehan Ahktar wrote in a 2009 comparative study, “and they are only humans.”

His advice: “Try to find a balance in which I can discard the dross and select the essentials.”

The problem: Mr. Jobs’s management style was so outside the lines of traditional management that the buffet approach probably won’t work. Mr. Jobs “was navigating a territory that is often obscure to management: the creation of meaning, both for customers and employees,” Roberto Verganti wrote for the Harvard Business Review in October.

“Experts and academics in business schools have often dismissed this approach as the outcome of the unique personality of Steve Jobs,” Mr. Verganti wrote. “A kind of guru process,’ as a colleague once told me. Nothing to be considered as a role model.”

In contrast, studies of Mr. Gates’s leadership style suggest he followed a much more traditional path: He tried to meet the needs of consumers, not create them. Mr. Gates was far more collaborative than the imperial Mr. Jobs.

Mr. Gates’s lesson to managers was more along the lines of innovate, work hard and trust the customer through open systems.

Yet both men both were successful. Under Mr. Gates,  Microsoft was the highest-valued company in the world, a status Apple enjoys today.

“You judge a leader by what they’ve accomplished,” says Mr. Garvin, “as well as how they’ve accomplished it. Mr. Jobs ran roughshod over his people. In terms of creating an environment that is developmentally oriented, that builds your people’s capabilities, Steve Jobs didn’t do a very good job.”

But does a friendlier, more accommodating style work? Yes, some management researchers say.

They point to Mr. Gates. Another example: Daniel Vasella, who led Novartis AG

until 2010. He was idolized by his employees, many of them creative types. A.G. Laffley, who led Procter & Gamble

until 2010, was also regarded as someone who built a company by successful means—and made friends along the way.

Unlike Mr. Jobs, Mr. Laffley embraced market research and created several successful products as a result. P&G is highly regarded for its profits and ranks consistently among the best big corporations for which to work.

“It is certainly not necessary or even desirable to be a jerk,” says Roderick Kramer, a professor at Stanford University’s business school. “Many talented, creative individuals opt to not work for them and leave the organization—to the organization’s detriment.”

It’s also true that many employees will stay to work with a visionary and be a part of something special, Mr. Kramer adds. The bottom line is that a CEO doesn’t need either Mr. Jobs’s gifts or flaws to create loved products—and a collegial workplace.

Mr. Kramer says a company with Apple ties actually proves that being abrasive and tyrannical don’t go hand in hand with innovation and success.

“Leaders such as Pixar’s John Lasseter extract much more creativity and commitment from their people by not being a jerk,” he says.

Ultimately, Messrs. Jobs and Gates’s lessons to managers aren’t about being cruel to be kind or successful. These leaders created companies that revolutionized the technology industries in different ways. 

The biggest hurdle they had to overcome was themselves.

Write to David Weidner at david.weidner@dowjones.com

Send your prediction to
crystalball@wsj.com
by midnight EDT Sunday, with your full name, city, state and phone number. The first reader who gets it right will be named in next Saturday’s paper.

On Monday Tyson Foods

reports earnings for the quarter that ended in March. In the past year, the company’s stock price has ranged from $15.60 to $21.06 a share. What will it close at on Monday?

Kudos to Gary Brown of TheWoodlands, Texas, for coming closest to guessing NYSE Euronext‘s

diluted earnings per share of 34 cents for the last quarter.

A version of this article appeared May 5, 2012, on page B8 in some U.S. editions of The Wall Street Journal, with the headline: Crystal Ball.

By ZVI BODIE AND RACHELLE TAQQU

Most people can get the money they need for retirement without gambling heavily on equities, Rachelle Taqqu reports on Markets Hub. Photo: Reuters/Adam Hunger.

A growing sense of urgency is driving many investors to take reckless risks with their money.

Even though they experienced the hazards of stock ownership firsthand in 2008, investors are venturing back into equities again. They’ve been advised that there’s no other way to make up the losses they suffered—or meet their looming retirement requirements—and, not to worry, the risk of stocks diminishes the longer you hold them. The Federal Reserve, meanwhile, has announced that it intends to keep interest rates low through 2014—providing a powerful inducement to stay in stocks since bonds will probably generate unusually low returns.

The desire to get back what you lost is understandable. But, as behavioral economists have shown, it can also cloud your judgment and lead you to take more risk than you can handle.

Despite the assurances of the financial industry, stocks are always a risky investment, and the longer you hold them, the better your chances of getting blindsided by a downturn. The usual way of mitigating that risk, diversification, holds no guarantees, either—for the simple reason that investments don’t always move the way we want in relation to one another.

A safer way to build and protect retirement assets is to picture your goals as clearly as possible. Then pare things back to the basics. Figure out the bare-bones level of income you need and invest in products that guarantee it, such as inflation-protected bonds. Use the rest of your investment money to build reserves to fund your aspirational goals.

Bill Mayer

But when you’re aiming to meet your aspirational goals, there is a way to limit your downside risk—by using instruments that let you limit your losses at the cost of some upside potential. You can do this through direct purchases of options, or you can buy mutual funds that use complex hedging strategies. These funds aren’t as transparent as stocks, but their aim is to protect your money from disaster.

A Hard Look at Stocks

It may be hard to let go of the belief that buying and holding stocks is a sure-fire key to asset growth. But that’s because people have been lulled into thinking that long-term stock investing greatly reduces the risks. The truth is that stocks are risky no matter how long you hold them.

Yes, equities can be expected to produce a superior average return in comparison to safer investments. That’s as it should be, because the higher return compensates investors for taking the added risk. But this does not mean that stocks become less risky over long time horizons.

There are a number of different approaches that demonstrate why the conventional wisdom about stocks is wrong. One of them has to do with bear markets, which happen regularly; the long growth stretch that began in 1983 and lasted through the 1990s has not been the norm. And the longer you hold onto your stocks, the greater your chances of running into one of those downturns.

Even with the long boom, bonds outperformed stocks over the 30 years since the fall of 1981—delivering an average annual return of 11.5% vs. 10.8%, respectively—with less risk and less volatility than equities.

To prove their claim that stocks are not very risky in the long run, stock enthusiasts argue that stocks have beaten bonds for every 30-year period starting in 1861—except for the most recent one. But their evidence is much thinner than it appears: Since 1861, there have been only five non-overlapping 30-year periods! Statistically, that’s simply too few independent periods to justify the conventional conclusions.

What’s more, the idea that “stocks do well in the long run” isn’t a practical guideline for individuals. For one thing, the “long run” means something different to different people depending on their ages and goals—for some, it’s 10 years, for others 30. And while the odds of getting good stock performance over that time are good, the consequences of a downturn can be severe, depending on how steeply markets decline, how much you have in the market, and when the downturn hits in your lifetime.

If you’re expecting stocks to outperform, say, 70% of the time, you need to think about how much you stand to lose the other 30% of the time. It does not do you a lot of good to have 20 years of great performance, only to be trounced in a crash just before you retire.

The usual way of protecting a portfolio—through diversification—is sensible and advisable. But it’s hardly a guarantee. Diversification aims to provide stability by mixing up different classes of assets, which are expected to behave differently in different circumstances.

Yet the correlations it’s based on aren’t constant. Bonds and stocks have moved in opposite directions at times, but in other periods they have not. And foreign markets are growing less and less decoupled from the U.S. Recently, prices of assets as diverse as large-cap domestic stocks, emerging-market stocks, oil and gold have been fluctuating together rather than in counterpoint.

A Safer Strategy

What’s a better approach to building a portfolio? First, forget the idea of “catching up.” Most of us find loss so painful that we’re willing to go out on a limb just to recover what’s gone. We’re willing to take risks we’d normally avoid to recoup what we see as rightfully our own.

Instead, when you start by looking at your destination and focus on what you absolutely need, you protect yourself from missing your essentials if the market falls short. And you steel yourself against a blind obsession with recouping loss.

Separate your basic must-have needs from your aspirations or wants, and create an investment plan that guarantees the basics with inflation-protected, safe investments. You may be surprised at how much less you need than you want, but try hard to be honest with yourself. Then put any other investment dollars you have available each year into riskier vehicles to meet your aspirational goals.

Intuitive and straightforward as this approach may seem, it’s not commonly pursued by most investors and advisers. Assessing what’s really necessary takes time and reflection. Few people do it systematically, if at all.

Once you decide how much money you need for your basics, create a safety net to guarantee that you can cover them. That’s where securities that protect against inflation—such as TIPS and I bonds—come in. (Although many people include insured bank certificates of deposit in this mix, CDs don’t provide inflation protection.)

For the best safety net, put together a “ladder” of TIPS, held in tax-deferred or tax-exempt accounts. Figure out how much money you need each year, then invest in TIPS with maturities that match your future spending dates. Your plan won’t be perfect, of course: Your personal rate of inflation may not match the Consumer Price Index, taxes may intervene, and life happens. But don’t let the perfect be the enemy of the safest available choice.

Today’s low-interest-rate environment poses some difficult challenges even with a bare-bones safety net in place. Today, TIPS and I Bonds do not yield more than the rate of inflation. And many people are starting practically from scratch, whether because the market collapse set them back enormously, or because they have not managed saving much for retirement yet.

It’s impossible to generalize about every investor’s situation, but many households are probably facing the prospect of a very small safety net in retirement.

With that outcome in store, many people may be tempted to gamble on riskier investments to meet their retirement needs. But your safety net is meant to be the money you can count on. By definition, you don’t want to put it at risk. If you bet your basics in the market and lose, you can easily end up worse off, with less to spend on your essentials.

If you don’t think you can create a safety net that’s big enough, there are other steps you can consider, although they can be tough. You might spend less today to save more for tomorrow. You might work extra jobs, move to a higher-paying career or retire later. You can also try scaling back your definition of needs.

How low can you imagine turning down the jets if need be? Is a community college a viable alternative for your child’s first two years out of high school? Can you lower your expenses in retirement by moving to a less-expensive location, downsizing your residence or traveling less?

It’s this kind of assessment that should be driving your risk decisions. It requires careful and honest introspection, as well as a lot of consulting with the key partners in your life.

Limiting Your Risk

Now that you’ve separated your needs from your wants, you can decide how much to limit the risk you take with your aspirational investments. If you’ve lived through 2008, you probably don’t want to see losses of 30% to 40% ever again.

There are several ways to protect the money outside your safety net. For instance, there are investment products that protect either principal or income by using hedging strategies involving various combinations of derivatives.

But you must be careful to read the fine print. You need to understand the managers’ strategy in detail, including which risks they’re hedging and which risks remain unhedged. It’s also important to weigh a fund’s expenses, both embedded and explicit. The costs of these transactions can be high, so do look carefully at the expense ratios of the fund along with all its fees.

Investors who are more seasoned can undertake some of these complex strategies on their own. For instance, when you buy an investment such as the S&P 500, you can buy a put option on it, too. This gives you the right (but not the obligation) to sell the investment at a future date at a price you determine at the time of purchase. Since your investment can’t fall further than the “strike price” you’ve selected, you’re effectively setting a floor on your losses.

Let’s say you buy SPY, an ETF that tracks Standard & Poor’s 500-stock index, at its recent price of $136.41. You’re willing to sustain a 15% loss, but not more, so you buy a put with a strike price of $116. Since you can now sell SPY at $116, you’re protected in case it drops any lower. Essentially, you have bought insurance with a deductible of 15%; that’s all you can lose.

Is it worth it? The put in this example, which expires in four months, would have cost $2.16 at the time you priced and bought your ETF shares. But the good news is that there is a way to avoid the cost of the put, by trading away some of the upside of your SPY shares. You can sell a call on your investment. This means that you are selling someone else the right to buy it at a stated strike price on or before a future date. If the shares reach the strike price, you are obligated to sell.

In order to end up with a near-zero cost for your options, the prices of the put and the call will have to be roughly the same. In our example, there is a four-month call that is priced at $2.17—close to the $2.16 you paid for your put—and it has a strike price of $143.

When you sell this call, your proceeds fully offset the cost of your put. If the value of the ETF rises before the option expires, you get to keep everything up to $143. But not more than that: Your gains beyond $143 have been traded away. So the strike price of the call you sell is the upper bound on your potential gain.

In this strategy, called a zero-cost collar, your costs are limited to your transaction costs alone, since your proceeds from selling the calls will zero out the cost of the puts. And your investment outcomes are now limited as well: In this case, you can’t lose more than 15% on the downside or gain more than 6% on the upside.

If you want to increase your potential upside and still have the costs cancel out, you’ll need to lower your floor. In our example, you can increase your potential gains to $147 if you are willing to take losses all the way to a lower threshold of $108 (that’s a loss of just over 20%). It’s akin to increasing your deductible on insurance in exchange for a reduction in the premium you pay.

For the most part, “structured” products for limiting risk are still on the drawing table. They remain to be perfected. But the notion of sacrificing a limited amount of safety in exchange for upside potential is profoundly relevant to retail investors’ needs right now.

So keep your eye out for them: It should not be long before growing consumer demand transforms them from next-generation investments into products whose time has come.

Drs. Bodie and Taqqu are co-authors of “Risk Less and Prosper: Your Guide to Safer Investing.” Dr. Bodie is the Norman and Adele Barron Professor of Management at Boston University, and Dr. Taqqu is a financial consultant in the Boston area. They can be reached at reports@wsj.com.

Corrections & Amplifications

Investors can purchase up to $10,000 a year in I Bonds through TreasuryDirect. A chart in an earlier version of this article incorrectly said the amount was $5,000.

A version of this article appeared March 12, 2012, on page R1 in some U.S. editions of The Wall Street Journal, with the headline: Why Stocks Are Riskier Than You Think.

The Barron’s 500 is our annual salute to companies that have done the best job of growing their businesses. In some cases, growth owes largely to timely and well-executed acquisitions. In others, impressive organic growth has been buttressed by an improving economy.

This year’s top-ranked company, CF Industries Holdings, falls firmly in the first camp. The Deerfield, Ill.-based fertilizer producer purchased Terra Industries, another fertilizer concern, in 2010, doubling its size just as fertilizer demand and pricing took off.

No. 6-ranked Intel, on the other hand, prospered as corporations opened their wallets again to spend on computers and servers, as fears of a second recession receded. In both cases, shareholders benefited from the resulting strength in revenue and cash-flow growth, on which companies in the Barron’s 500 are judged. While there is no guarantee that such good performance will continue, landing at the top of our ranking, now in its 14th year, is an acknowledgment of a superb recent track record, and a bow to the managers who engineered it.

Technology names are well represented toward the top of this year’s list, with Apple landing at No. 2. Its revenue and cash flow soared in the past few years on the strength of its iPhones and iPads. Now Apple has decided to share the wealth with investors, having announced that it will start paying a dividend. Other tech stalwarts high on the 2012 list include Qualcomm, EMC and IBM .

SOME COMPANIES REGULARLY find themselves near the top of our ranking because their businesses aren’t capital-intensive and they generate lots of cash flow. Credit-card processor Visa is among the top 10 again this year, while Fidelity National Information Services, a transaction processor for banks, is No. 25, down from No. 3 last year. Both companies could enjoy tremendous operating leverage as business improves.

The auto industry’s revived fortunes are apparent in this year’s Barron’s 500, as several industry suppliers have risen in the rankings. Auto-parts manufacturer BorgWarner clocks in at No. 19, up from No. 46 in 2011, and Autoliv, which makes auto-safety systems, is No. 21, advancing from No. 89 last year. Many commodities-focused companies also fared well, including No. 3-ranked Southern Copper, a copper producer.

The Barron’s 500 is a unique ranking of the largest publicly traded companies in the U.S. and Canada, as measured by sales in each company’s latest fiscal year. Prepared by HOLT, a unit of Credit Suisse, it seeks to identify companies with superior financial performance. HOLT compares the 500 companies using three equally weighted measures: sales growth in the latest fiscal year, adjusted for divestitures; median three-year return on investment, based on a cash-flow calculation the firm calls CFROI, and the change in CFROI in the latest fiscal year relative to the three-year median. (For a detailed explanation, see below.)

Results of the Barron’s 500 don’t necessarily reflect the views of Credit Suisse analysts.

EACH YEAR, THE ROSTER OF COMPANIES in our rankings changes. Some companies join the club because their revenue has risen, as happened at Wynn Resorts and CVR Energy, a petroleum-and-fertilizer concern. Companies with revenue of $4.8 billion or more made the final cut in the latest survey.

Companies also drop off the list for a variety of reasons. Home builders PulteGroup (ticker: PHM) and D.R. Horton (DHI) aren’t included this year because their sales fell below our cutoff. American Airlines’ parent, AMR, was disqualified when it filed for bankruptcy protection. Other companies, such as BJ’s Wholesale Club, were acquired. In all, 32 names that were on the 2011 list are absent this year, replaced by newcomers such as CF Industries.

Ascending to the top of the list is no easy task. To receive an A this year, companies had to log sales growth of 22% in their latest fiscal year. For industrials, the maximum cash-flow return on investment was 15%. For financials, for which HOLT calculates cash-flow return on tangible equity, 12% was tops. Only four companies managed to earn straight A’s in our latest ranking, half as many as in 2011.

Here is a closer look at some companies that rose to prominence on the list.

CF Industries Holdings

For CF Industries, 2011 was the year when everything went right. The price of nitrogen fertilizer, its main product, jumped 25%, and the cost of natural gas, one of its largest expenses, fell 30%. How convenient, then, that CF had purchased Terra in April 2010, for $4.7 billion. “We essentially doubled our size as a nitrogen producer, and we did it at the right time,” says Stephen Wilson, chairman and CEO.

CF had nitrogen plants in Louisiana and Alberta, Canada, and Terra had plants in Ontario, Oklahoma, Mississippi and Iowa. The combined company boasts more production points, shorter shipping distances to clients, improved logistics, and better customer service. “It was an absolutely superb fit,” says Wilson.

The deal made CF the largest nitrogen producer in North America and the second-largest in the world. Revenue jumped 54% last year, to $6 billion, and earnings per share surged 312% to $21.98. The company reported first-quarter profit Thursday, and that, too, impressed. Revenue rose 30% to $1.5 billion, compared with the year-earlier level, and earnings were up 42% to $5.54 a share.

CF quadrupled its dividend last August to $1.60 a share, for a yield of 0.8%. At the same time, it announced a $1.5 billion stock buyback, and a plan to invest up to $1.5 billion to improve and expand its factories.

At a recent $186, CF shares are up 43% in the past year and almost 140% over two years, although they fell about 7% Friday on fears that fertilizer prices in the current cycle have peaked. Analysts see full-year profit falling in 2013 to $20.58, as a result.

Michael Cox, an analyst at Piper Jaffray, is more bullish than the consensus, with an Overweight rating and a profit target of $22.72 for 2013. Natural-gas prices have stayed lower than expected, and the agricultural cycle “tends to be a long one,” he says.

Wilson declined to comment on the direction of commodity prices or on the company’s earnings. But he noted that fertilizer demand typically grows by 2% to 3% per year, spurred by population growth and greater demand for more protein-rich diets. Corn is a key animal feed, and corn production requires fertilizer. Wilson notes the ratio of corn inventory to use is “historically low,” and says it will take “many years of strong production to get that number up to where it has been.”

CF sells for eight times this year’s expected earnings of $23.70 a share.

Philip Morris International

Philip Morris International‘s stock has been smoking ever since its 2008 split from Altria, the U.S. cigarette concern. The shares have climbed 30% in the past year, to $90, in tandem with rising cigarette prices and higher sales volume.

Philip Morris, which garnered seventh place in this year’s Barron’s 500, up from No. 34 last year, grew revenue (excluding excise taxes) by 14% in 2011, to $31 billion. Operating income rose 19% to $13.6 billion, and earnings per share were up 24%, to $4.85. Earnings benefited by 15 cents a share from the Japanese tsunami, which disrupted operations at Japan Tobacco (2914.Japan), leaving Philip Morris and British American Tobacco (BTI) to fill the void.

This year, comparisons will be tough for the company, which sells cigarettes and tobacco products outside the U.S. But analysts still see earnings growing 9%, to $5.29 a share. In general, Philip Morris aims to boost annual volume by 1%, and revenue by 4% to 6% on a constant-currency basis. The company aims to have operating income improve by 6% to 8% a year, leading to earnings-per-share growth of 10% to 12%, says CEO Louis Camilleri.

Philip Morris has a stable of strong brands, the largest of which is Marlboro, which kicks in about 33% of cigarette volume per year. Other brands include Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, and Lark. “We have seven of the top 15 brands in the world,” Camilleri says.

The company is growing at double-digit rates in emerging markets, but first-quarter operating income, excluding the impact of currency, rose only 5% in the European Union. Asia accounted for 40% of operating income in the period; the EU, 30%, and Eastern Europe, the Middle East and Africa, 23%. “Asia has been very much a growth driver for us,” says Camilleri.

And that’s despite the fact that Philip Morris International doesn’t sell cigarettes in China, where the market is controlled by a state-run company.

Tobacco stocks used to trade at a discount to the broader market due to the threat of litigation. Now international cigarette makers trade at a premium, while those with U.S. litigation risk have lower multiples. Philip Morris shares trade for 17 times this year’s expected earnings of $5.29 a share, compared with 14.5 times for Altria and 13 times for the S&P 500.

Qualcomm

Qualcomm made a bet on its technology that has paid off in spades. Every 3G and 4G smartphone in the world has a chip sold by the San Diego company, or a chip using technology licensed from it. Last year, Qualcomm sold 483 million chips, up from 99 million in 2003.

While the market for traditional cellphones is maturing, the smartphone market is growing at a furious pace. In the first quarter, smartphone shipments climbed 41% on an annualized basis, to 145 million units, according to Strategy Analytics. Global smartphone shipments are set to rise by 35% for the full year, to 44% of the total cell-phone market, according to IHS.

Qualcomm’s revenue jumped 36% in the fiscal year ended September, to $15 billion. About two-thirds of sales came from chips that the company sells, and the other third reflected royalties. But because royalties are highly profitable, they contributed about two-thirds of earnings.

Qualcomm recently reported profit that beat estimates, but management provided disappointing guidance for the June quarter. Qualcomm outsources the production of its chips and is having difficulty meeting demand.

Insufficient supply could plague the company for the next quarter or so, but Wall Street’s fiscal 2012 consensus earnings estimate hasn’t budged from $3.76 a share, which would reflect an 18% gain from the prior year. The company has told the Street to expect earnings of $3.61 to $3.76 a share. Qualcomm aims to deliver double-digit revenue and profit growth through 2015, CEO Paul Jacobs said in an e-mail to Barron’s.

Qualcomm trades for $61, or 16 times expected earnings. Exclude the company’s $14.75 a share in net cash and investments, and the price/earnings multiple falls to 12.5.

Betting that the future lies in smart devices beyond the cellphone, Qualcomm purchased Atheros Communications last year for $3.1 billion. Atheros’ technology will help it expand into tablets and home-electronics devices. Qualcomm sees a world in which its chips are added to all sorts of devices to enable communication. “We have the opportunity to deliver a unique set of technologies for the expanding Internet of everything,” wrote Jacobs.

Intel

Intel finds itself just two spots behind Qualcomm in the Barron’s 500. The positioning is ironic, considering that each company is in the other’s sights. Intel would like to make more chips for mobile devices, while Qualcomm would like to invade the market for computer chips.

Intel CEO Paul Otellini has said he would be disappointed if his company isn’t a major player in the smartphone business in a few years. The company has ramped up the development timeline for its low-power line of microprocessors, dubbed Atom. “We decided to accelerate the pace at which we bring that leading-edge performance to the chips that are going into the most demanding applications for mobile,” Otellini recently told Barrons.com.

That said, it was the tech giant’s traditional business — making chips for computers, netbooks, and servers — that landed it near the top of the Barron’s 500. Revenue jumped 24% last year, to $54 billion; operating income rose 18%, to $18.4 billion, and earnings per share jumped 25%, to $2.53.

“I don’t think last year’s performance was about the snapback from the recession,” Otellini contended. “It was really for us about enterprise demand rebounding. The consumer still hasn’t fully recovered. It has really been about emerging markets, where income levels are rising. Brazil is now the third-largest market in the world for PCs.”

Intel has continued to pull ahead of competitors in the PC market. It has put more graphics on processors, and the average selling price has gone up, says Richard Whittington, a former semiconductor analyst who owns the stock and now covers the defense industry for Drexel Hamilton. He’s hopeful that Intel will successfully reduce the power consumption of its chips to make them attractive to manufacturers of portable devices. And he believes that consumers will want their portable devices to have access to Microsoft Office products via Intel’s chips.

Intel is also becoming a manufacturer for hire. Netronome announced in April that it will use Intel Custom Foundry services to produce its network processors. Some have speculated that Intel might even produce processors for Apple.

Intel’s modest price/earnings ratio of 12 suggests that investors are somewhat skeptical of its new ventures. A 3% dividend yield could force some to reconsider.

MetLife

Few financial companies have landed near the top of the Barron’s 500 in recent years, but insurer MetLife cracked the top 10 this year, moving up to No. 9 from No. 124. Its monster advance owes in part to the $16.3 billion acquisition of American Life Insurance Co. (Alico) from American International Group (AIG) in November 2010.

The deal vastly expanded MetLife’s international reach, placing the insurer in markets growing faster than the U.S. “Alico gave MetLife an opportunity to transform itself…into a truly global insurance powerhouse with operations in nearly 50 countries,” CEO Steve Kandarian wrote in an e-mail to Barron’s.

Even so, MetLife’s shares, at $34, seem cheap. They are trading for just 6.5 times this year’s expected earnings, although earnings are likely to grow 8% over the next year.

One issue weighing on MetLife is today’s low interest rates, which limit what the company’s investment portfolio can earn. “Investors should know that we have positioned our company to weather a protracted low-interest-rate environment,” Kandarian wrote. “We started purchasing interest-rate floors and other hedges against low interest rates in 2004, when the 10-year Treasury was trading above 4%. Our interest-rate protection doesn’t just last for a few years, but beyond 2020.”

MetLife flunked the Federal Reserve’s Comprehensive Capital Analysis and Review test, or “stress test,” this year. The Fed mandates that minimum risk-based capital should be 8% of total assets, and estimated that MetLife’s would be 6%. Flunking the test has precluded the company from increasing dividends or buying back shares.

Kandarian has since decided to sell the MetLife Bank unit, which he says “represented just 2%” of the company’s operating earnings. He added that “we didn’t believe it was appropriate for the overwhelming majority of our business to be governed by regulations written for banks.”

Nigel Daily, a Morgan Stanley analyst with an Overweight rating and a $46 price target on MetLife, believes the company will relinquish its bank charter around July and proceed with stock buybacks in the second half. Now might be a good time to get ahead of the action.

E-mail:
editors@barrons.com

In the summer of 2008, friends Rich Aberman and Bill Clerico came up with an idea for an online payment-processing business. But the duo couldn’t afford to build the technology platform that they envisioned.

So they used free animation software to create a video describing their entrepreneurial dream and emailed it to about a dozen professional investors. They soon raised $20,000 and today their Palo Alto, Calif., start-up, WePay.com, has nearly 40 employees. They also now have some $20 million in venture-capital funding.

Producing the video, which features stick-figure characters and lasts less

than a minute, “wasn’t rocket science,” says Mr. Aberman, 27 years old. Because it was meant just for investors, “it didn’t need to be as polished as a video you’re putting on a website for customers.”

These days, making a video to promote a start-up doesn’t require Hollywood skillfulness or a fat wallet. There are many video-editing programs you can download for little or no cost, such as Apple’s iMovie and Microsoft’s Movie Maker. Plus, entrepreneurs can take advantage of free and widely viewed distribution channels like YouTube.com and Vimeo.com.

Video can be a highly effective marketing tool for a start-up because “sight, sound and motion communicate much better than written copy and static images,” says Bob Gilbreath, author of “The Next Evolution of Marketing.” Audiences are generally receptive to low-budget productions because they’re now commonplace and tend to convey authenticity, he adds.

First-time entrepreneur Adam Johnson recently made a video for his New York start-up, the Juicebox, a company that’s in the process of developing a secure smartphone-charging station for bars, movie theaters and other public venues. He says he got the idea for the product while working as a bartender because customers would often ask to use an outlet to charge their phones.

Mr. Johnson’s video is roughly two minutes long and explains how the Juicebox works. He says a friend who’s a professional filmmaker helped him produce it for free.

The 27-year-old posted the video to Vimeo in January and says he almost immediately began receiving emails from businesses interested in becoming customers. He has secured three dozen pre-orders for his product, which is expected to be ready for distribution in New York this summer.

Mr. Johnson’s best tip for using video: “Don’t make it too explanatory or didactic,” he says. “Show, don’t tell.”

Steffany Boldrini of Mountain View, Calif., has created more than 100 videos for ecobold.com, an online platform for buying and selling environmentally friendly goods. The roughly two-minute-long videos show her reviewing various “green” products, and she often dons a playful costume to inject humor into them. For example, she wears a French-maid outfit for reviews of cleaning products.

“Try to be funny because people love humor and they will come back for more,” she says.

Ms. Boldrini, 29, started her business in late 2009 with just a few hundred dollars in savings, and used part of it to buy a $600 video camera.

Ms. Boldrini says she spent a few hours every day for months searching Twitter for users whose profiles or “tweets” indicated an interest in organic and nontoxic goods. She then followed their posts, hoping they would follow hers in return—and many did. She used a similar approach with Facebook and says her social-media connections began to pay attention whenever she posted a link to one of her videos.

“It took a lot of work,” Ms. Boldrini says, but the views her videos garnered were soon averaging about 5,000 hits within six months of getting posted to her company website and YouTube. Her most popular video boasts nearly 200,000 views.

Of course, a video might be seen by far more eyeballs if it goes viral—meaning it spreads like wildfire across the Internet. But since this happens rarely, entrepreneurs shouldn’t spend all their time and energy making a video, nor should they expect going down this path to turn their business into an overnight sensation.

“You can count the number of business videos that have gone viral on one hand,” says WePay’s Mr. Aberman.

—
sarah.needleman@wsj.com

Last month, Angel Wilkes came down with a cold that should have kept her bedridden for several days.

But despite suffering from a sore throat, fever and nausea, the 28-year-old still answered customers’ calls, assigned tasks to contract workers and handled administrative duties. She allowed herself only a single day of rest once she reached a point where she could hardly lift her head.

“If I don’t work, I don’t eat,” says Ms. Wilkes, who started Children’s Party Plus of Charlotte, N.C., in 2009 after her contract position at a nonprofit ended and wasn’t renewed.

If you’re starting a business on your own, taking time off for just about any reason could result in lost sales, customer-service problems or a slowdown in momentum. Many solo entrepreneurs, therefore, do whatever they can to keep plugging along—even if that means putting their health or other personal obligations to the wayside.

Dave Whammond

Victor W. Hwang, a small-business adviser and venture capitalist in Los Altos, Calif., says making your start-up a top priority is—at least to some extent—necessary for success. “You have to do it. You have to be willing to make huge sacrifices that a person with a normal job wouldn’t have to do,” he says.

Still, he warns that it’s also important for entrepreneurs to avoid going overboard by putting their lives or relationships with loved ones at risk. “The goal in entrepreneurship is to not get so consumed that it eats you up,” says Mr. Hwang, also author of “The Rainforest: The Secret to Building the Next Silicon Valley.”

One tip he has for keeping relationships intact while building a business is to sit down with close family and friends early on and let them know what your schedule is likely to entail.

“Make sure everyone’s expectations are clear about what it’s going to take,” he says. “You need to put everything on the table.”

Entrepreneurs also may want to hold off on efforts to initiate new relationships while starting a business. Tom Popomaronis says he would like a girlfriend, but he won’t try to spark a romance until his online auction company, Auctionopia.com, is more established.

“It takes time to make a relationship work,” Mr. Popomaronis says, and that’s something he has little of to spare these days.

The 25-year-old, who began building his business after graduating from college in 2008, says he also has had to set aside several other personal goals to keep the momentum for his start-up going strong.

For example, last summer he skipped a friend’s wedding because it took place on a day when he had planned to deploy a major change to his company’s website. He says five technology professionals, who are now his business partners, were counting on him to oversee the project.

“I couldn’t justify leaving,” says Mr. Popomaronis, who’s based in Phoenix, Md.

Patricia Brett, founder of an online swimwear brand for women with breast cancer, says she recently came down with a bout of food poisoning but refused to cancel a phone meeting with a potential investor she had met in person a week earlier.

“I had to strike while the iron was hot,” says Ms. Brett, 48, who named her start-up Veronica Brett after an aunt who died of breast cancer in 1975. She launched it in May 2010, just when a temporary stint with an architecture firm came to an end.

“When you’ve engaged someone and have their attention on your business, you can’t put them off,” she says.

Keep in mind that making personal sacrifices for a start-up can potentially do more harm than good. For instance, if you’re feeling depressed or grumpy because you’ve stopped socializing with friends, you might be less inclined to respond to a difficult customer with poise.

“When you’re sick, you don’t always make the most rational decisions,” says Ms. Wilkes, the party planner. “Sometimes you have to step back and say ‘I need a break.’ “

George Burke says his Long Branch, N.J.-based online book-lending business, BookSwim.com, suffered when he stopped exercising regularly in order to focus on building it. The more out of shape he became, the less he was able to concentrate and feel good about what he was doing, he says.

After putting on 30 pounds, Mr. Burke, who started the business in 2006 following a layoff from a technology firm, says he went back to spending one hour a day at a gym, and hasn’t stopped since.

Today, BookSwim.com is profitable and the 30-year-old is now working on a second start-up.

“When you make time for yourself to be healthy, your business will thrive,” he says. “It’s not a sacrifice. It’s a shift in attitude.”

Write to Sarah E. Needleman at sarah.needleman@wsj.com