President Obama's Mexico visit comes with backdrop of uncertainty

WASHINGTON — President Obama travels to Mexico this week amid signs that the relationship between the United States and its southern neighbor's new government faces a new period of uncertainty after years of unprecedented closeness forged by the deadly war against Mexican drug cartels.

The government of Mexican President Enrique Peña Nieto is said to be wary of the level of U.S. involvement in security affairs that characterized the administration of his predecessor, Felipe Calderon. As a result, the Mexican government is expected to narrow U.S. involvement in its attorney general's office and Interior Ministry, the agencies that oversee police and intelligence, current and former U.S. and Mexican officials say.

Instead, Peña Nieto and officials from his Institutional Revolutionary Party, or PRI, want to concentrate U.S. participation in less sensitive but potentially profitable areas such as the economy.

Privately, the shifts have led to a large degree of concern in Washington about what the day-to-day working relationship will look like.

Publicly, the Obama administration has welcomed a broader agenda.

"We don't want to define this relationship with Mexico … in the context of security or counter-narcotics trafficking," U.S. Secretary of State John F. Kerry said April 19 in Washington, with his Mexican counterpart, Jose Antonio Meade, at his side.

"We want to define it much larger in the context of our citizens' economic needs and our capacity to do more on the economic frontier. I am convinced we're going to grow that relationship."

Under Calderon, the United States expanded its role in Mexico to a level never before seen, sending drone aircraft, intelligence agents, police trainers and other assistance worth $2 billion over a six-year period to help fight the drug war. U.S. intelligence, in particular, was instrumental in the killing or capture of 25 drug kingpins, or capos.

The number of U.S. employees at the American Embassy and elsewhere snowballed, coming from agencies as diverse as the Drug Enforcement Administration, CIA, FBI and Treasury. Many participated directly in planning and carrying out drug-war missions with the Mexicans.

Much of that is likely to change.

"The U.S. knows it's going to be different and they're actively trying to find ways to work with the Mexican government," said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington.

Washington is "waiting to see how comfortable [the Mexicans] are with the kind of cooperation that has been going on," Wood added. "The [Mexican] government recognizes that reliable flows of information and intelligence are crucial, but they would rather build up their own capacity than depend on the U.S."

The PRI wants to assert much more control over how U.S. officials operate in Mexico, said a former Mexican official with close ties to the administration. "The doors [to the Americans] are closing," he said.

One of Peña Nieto's most senior staff members, Atty. Gen. Jesus Murillo Karam, is openly critical of two areas where U.S. advisors have been especially active — and where their work seems to have backfired: a series of high-profile corruption prosecutions and a botched program of police vetting.

Millions of U.S. dollars have gone to training prosecutors and police. But the corruption cases collapsed because of what Murillo now says was flimsy evidence, and the vetting has failed to rid police forces of bad cops and may also have resulted in the firing of good officers.

"In a desire of simple imitation," Murillo said, "we let ourselves be guided by the values of other latitudes, other countries."

Some in the Mexican government portray the changing relationship as more tweak than rupture.

One official said Mexico seeks continued U.S. support and advice in the drug war, but wants to reinstate a more formal relationship through "proper," high-level channels, not across-the-board contacts throughout its agencies.

"It's how the PRI does things, always centralizing the channels," said the official, who was not authorized to speak publicly about the government's thinking.

The PRI ruled Mexico uninterrupted for seven decades until it was booted out in 2000. It returned to the presidency in December and has steadily reprised its tradition of concentrating power in a few hands.

For one thing, it is consolidating control over the drug war under the Interior Ministry, including plans to establish a 10,000-member national gendarmerie and add at least 35,000 officers to the federal police force. A powerful Public Security Ministry that existed under Calderon and received substantial U.S. attention has been dissolved; its main body, the federal police, subsumed into the Interior Ministry.

Experts say that the PRI's long-standing concern for protecting Mexican sovereignty could provide a cover for rolling back U.S. involvement. But it may not be easy.

Despite Calderon's U.S.-backed frontal assault on drug cartels, or perhaps because of it, violence skyrocketed, and experts and former officials say that Peña Nieto may have difficulty scaling back U.S. involvement because it has become so deeply entrenched in Mexico's security establishment.

Military attention to Mexico has also grown; in January, the Pentagon announced that it was creating a new headquarters for special operations forces at Colorado-based U.S. Northern Command, which covers Mexico. The number of special operations personnel could increase fivefold to about 125; they would help oversee sensitive training operations requested by Mexican security forces.

U.S. troops aren't expected to get involved in combat in Mexico because of Mexican resistance to a foreign presence, but officials say the special operations expansion has further entrenched a mission the military already has begun.

"Obviously we have a good military-to-military relationship with Mexico, and a lot of that involves special operations," said the command's spokesman, Capt. Jeff Davis. "The bread and butter of what they do is build capacity and train forces.... It's no change in operation, but it provides us better accountability and better command and control."

shashank.bengali@latimes.com

wilkinson@latimes.com

Bengali reported from Washington and Wilkinson from Mexico City.

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After Dorner claim, other fired LAPD cops want cases reviewed

In the wake of Christopher Dorner's claim that his firing from the Los Angeles Police Department was a result of corruption and bias, more than three dozen other fired LAPD cops want department officials to review their cases.

The 40 requests, which were tallied by the union that represents rank-and-file officers, have come in the two months since Dorner sought revenge for his 2009 firing by targeting police officers and their families in a killing rampage that left four dead and others injured.

Dorner's allegations of a department plagued by racism and special interests left Chief Charlie Beck scrambling to stem a growing chorus of others who condemned Dorner's violence but said his complaints about the department were accurate. To assuage concerns, Beck vowed to re-examine the cases of other former officers who believed they had been wrongly expelled from the force.

Now, details of how the department plans to make good on Beck's offer are becoming clear. And, for at least some of the disgruntled ex-officers, they will be disappointing.

In letters to those wishing to have their case reviewed, department officials explain that the city's charter, which spells out the authority granted to various public officials, prevents the police chief from opening new disciplinary proceedings for an officer fired more than three years ago.

"Therefore the Department does not have the power to reinstate officers whose terminations occurred more than three years ago," wrote Gerald Chaleff, the LAPD's special assistant for constitutional policing. "You are being informed of this to forestall any misconceptions about the power of the department."

The reviews remain one of the unsettled postscripts to the Dorner saga. In February, three years after he was fired for allegedly fabricating a story about his partner inappropriately kicking a handcuffed suspect, Dorner resurfaced in violent fashion, bent on seeking revenge for his ouster.

After killing the daughter of the attorney who defended him at his disciplinary hearing and her fiance, Dorner killed two police officers and wounded three other people as he evaded capture during a massive manhunt. After more than a week on the run, Dorner was chased into a cabin in the mountains near Big Bear, where he died from what appeared to be a self-inflicted gunshot wound.

Dorner had posted online an angry manifesto of sorts in which he claimed that he had been a victim of a racist, corrupt police organization that protects its favored officers at the expense of those trying to report abuses. Those accusations tapped into deep wells of discontent and distrust that officers and minority communities have felt toward the department. Beck sought to reassure doubters that years of reforms had changed the department and buried the "ghosts" of the past. He then offered to review past discipline cases.

Fired officers who wish to have their terminations re-examined must first submit an affidavit or similar declaration within two months of receiving the letter from Chaleff, according to a copy obtained by The Times. The letter was sent in recent weeks to the former officers who have already come forward.

Using "clear and convincing language," the letter instructs ex-officers to explain "the new evidence or change in circumstances that would justify a re-examination of your termination."

LAPD Cmdr. Andrew Smith said Chaleff will conduct a review for anyone who follows the rules laid out in the letter. "We will do whatever it takes on the cases, including redoing interviews, if necessary," he wrote in an email.

The department and the Protective League declined to release the names of former officers who have requested reviews.

Gary Ingemunson, a longtime attorney for the League, used the case reviews as an opportunity to revive the League's perennial criticism that disciplinary hearings, called Boards of Rights, are stacked against officers.

"The Board of Rights system could be fair, but for the last few years the Department has consistently outdone itself in the attempt to completely skew the system against the officer. The Department wants to win. End of story," Ingemunson wrote in a column in the current issue of the union's monthly magazine.

One of the problems, Ingemunson and other union lawyers have said, is the makeup of the three-person panels that decide an officer's fate. Two of judges are senior-level LAPD officers, while the third is a civilian.

According to the critics, that arrangement is unfair because officers are sent to boards whenever the chief wants them fired and the officers on the panel will feel pressure to do as the chief wants.

Smith rejected that idea, saying board members are completely free to decide as they see fit. He pointed to department figures showing that over the last three years, officers sent by the chief to Boards of Rights were fired in only about 60% of the cases.

Smith defended the department's disciplinary system in general, saying it has been in place for decades and stood up under repeated scrutiny by oversight bodies.

Another allowance Beck made after Dorner's rampage, Smith noted, was to launch a broad review of disciplinary procedures to identify areas that officers believe are unfair and possibly make changes to address those concerns.

joel.rubin@latimes.com

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Syria prime minister survives bomb attack

BEIRUT -- Syria's prime minister survived a bomb attack Monday that targeted his convoy in the capital of Damascus, state media reported, in the latest apparent assassination attempt against a top official in the government of President Bashar Assad.

Prime Minister Wael al-Halqi "is safe and he survived the explosion," reported the official Syrian Arab News Agency. There were unconfirmed reports that the prime minister's bodyguard and several others were killed in the blast.

Footage on state television showed several heavily damaged vehicles and debris scattered along a major street in the Mazzeh district, an upscale neighborhood in western Damascus that is home to many senior officials and diplomats.

The state media reported "casualties and material damage," but there was no official word on how many people were injured or if anyone had been killed.

The attack appeared to be a car bomb, though official accounts did not provide specifics.

Halqi, a senior figure in the governing Baath Party, was appointed prime minister last year after his predecessor, Riad Hijab, defected to the opposition and fled to Jordan.

No one immediately claimed responsibility for the attack. The government blamed "terrorists," its standard term for the armed opposition.

Rebels fighting to oust Assad have regularly deployed car bombs and have been blamed for several such attacks in the capital, including a devastating explosion in February on a busy roadway in central Damascus  that killed more than 50 people.

The heavily guarded capital is largely under tight government control. But rebels based in suburbs have shown the ability to set off bombs in the city and shell the capital from positions on the outskirts. The military has thwarted several rebel attempts to storm the city from strongholds east of the capital. In recent days the government has been mounting a major counteroffensive against rebels based outside the capital.

Senior government figures have often been targeted for assassination during the two-year uprising against Assad's rule.

Last summer, four top security officials were killed by what the government called a bomb planted in a security building in the capital. A bombing attack at the Interior Ministry in December reportedly wounded Interior Minister Mohammed al-Shaar.

Special correspondent Nabih Bulos in Amman, Jordan, contributed to this report.

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The starkly new face of the Netherlands' monarchy

AMSTERDAM — Even by the unconventional standards of the Dutch, their new king is going to be a bit of a novelty.

He has a license to fly commercial airliners. He's married to a South American, a lively Argentine who's more popular than he is. He says he won't mind it if people fail to address him as "Your Majesty" because he's no "protocol fetishist" — an amusing description here in a city that caters to nearly every fetish imaginable.

But his biggest break with Dutch history of the last 120 years is the simple fact that he's a he. Queens have reigned over the Netherlands since 1890, a matriarchy that will come to an end Tuesday when Crown Prince Willem-Alexander is sworn in as monarch.

His soon-to-be subjects are taking the shift in stride, though no one alive today can recall a time when people spoke of their koning (king) rather than their koningin (queen).

"It's strange," 68-year-old Ineke Flier says, rolling the word around in her mouth. "But he's nice.… He can do a lot of good things for Holland."

Chief among his duties will be to represent the Netherlands as its head of state, its standard-bearer around the world. Here at home, he's supposed to be the uniter-in-chief, a symbol of Dutch identity, cohesion and continuity.

But some are wondering whether things will feel different when the nation's public face is one that has whiskers. The last king was Willem-Alexander's great-great-grandfather, Willem III; first-born daughters of the House of Orange-Nassau have succeeded him since. (In the Netherlands, the monarch's eldest child is heir to the throne regardless of gender, unlike in Britain, where a son takes precedence over older sisters. The British Parliament is currently amending that rule.)

"Having a female head of state has been so much the style that [there's] a kind of feeling it's going to be harder for a male to fit the mold," says James Kennedy, a historian at the University of Amsterdam. "Some people say that the Dutch monarchy has taken on … a caring, nurturing style — the maternal thing. How is Willem-Alexander going to be able to do that?"

The prince, who turned 46 on Saturday, will also be the youngest sovereign in Europe, where most of the remaining crowned heads are gray (or balding).

But that doesn't faze his compatriots, who are confident that his feckless days as "Prince Pils," the nickname he earned as a beer-swilling college student, are well behind him.

"He's serious enough to be king," says Flier, a retired designer. "The world is changing. In America it's a young president."

Contrast that with Britain's Prince Charles, who at 64 is seemingly no closer to ascending to the throne than when he was Willem-Alexander's age nearly two decades ago. Charles' mother, Queen Elizabeth II, is in excellent health at 87.

In fact, Willem-Alexander's succession is possible only because of a tradition that would horrify the British royals. Beatrix, the prince's 75-year-old mother, is voluntarily stepping down as queen, as did her mother before her, in 1980, and her grandmother, in 1948.

Those abdications, almost in the manner of CEOs opting for a comfortable retirement, illustrate just how different the Dutch royal family is from the House of Windsor.

As institutions of hereditary privilege go, the Dutch monarchy is a relative newcomer, created after the Netherlands won its independence from Napoleon about 200 years ago. It's therefore not so freighted — or burdened — with the same weight of history and expectations that surround its much older British counterpart.

Tuesday's investiture of Willem-Alexander, the oldest of three brothers, isn't even a "coronation." Dutch kings and queens are sworn in, not crowned, during a special joint session of the two chambers of parliament, which form the Netherlands' democratically elected government. The prime minister remains the country's political leader.

"It's often been said that this is a republic ruled over by a monarch," Kennedy says. "There is this kind of notion that the queen or the king really does need to know this was once a republic and that monarchs are kind of guests in the Netherlands. They serve at the pleasure of the people."

Particularly in the 20th century, the Dutch royals have cultivated a far greater sense of informality and closeness to the people than has the British monarchy, which strives to maintain an otherworldly aura through its matchless pomp and circumstance.

Juliana, the present queen's mother, was often seen riding her bicycle in public, sometimes to the supermarket. Today's princes and princesses are expected to hold down "real" jobs, making them more like royal professionals than professional royals. Willem-Alexander's career focus has been water management. (The commercial pilot's license is just a hobby.)

As queen, Beatrix is credited with dispatching her duties with businesslike efficiency and dedication but also with a certain aloofness, in contrast to Juliana's affectionate style.

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With new arrest, ricin case takes a strange turn

TUPELO, Miss. — Federal agents of all sorts invaded northeast Mississippi several days ago, on a mission: Find the man who sent a poison-laced letter to the president. But the United States government quickly found itself entangled, once again, in a misunderstood land dominated by squabbling tribes and petty vengeances.

Agents first arrested an Elvis impersonator, released him, then on Saturday arrested his nemesis, a karate instructor. Gradually investigators concluded that what they had descended upon was probably less about the president — or the U.S. senator and retired state judge who also received letters — than a serious case of indigenous bickering.

That shocks no one here. "Tupelo is a kaleidoscope," said sociologist Mark Franks, who grew up in nearby Booneville. There are true geniuses walking the streets of Tupelo, he said, and incredibly wealthy, generous people. But also, "every wall-eyed uncle and 'yard cousin' — just referencing the local pejorative — makes it into Tupelo, Miss. It creates a peculiar culture."

Tupelo is best known as the hometown of Elvis Presley, after whom it has named streets, waterways and dry cleaners.

Unlike many other Southern towns its size, it boasts several excellent museums, street art and a large public arena. An arena large enough, in fact, to attract the Ringling Bros. and Barnum & Bailey Circus this month. That's when someone shot Carol, a circus elephant, in what seems to be the first elephantine drive-by ever. Carol is recovering, but Tupelo Police Capt. Rusty Haynes said his investigation has stalled. "Because, to be honest, there are a lot of possible perpetrators."

So people in the area were bemused more than surprised when the FBI, Secret Service and other agencies showed up looking for the soul who had sent letters laced with ricin to President Obama, Sen. Roger Wicker (R-Miss.) and retired Mississippi judge Sadie Holland.

The agents quickly nabbed an odd character in nearby Corinth named Paul Kevin Curtis. He worked as an Elvis impersonator, spun wild conspiracies about the local hospital selling body parts and apparently signed the poisoned letters with his own initials.

But the FBI found no evidence of ricin in Curtis' home. No incriminating research on his computer. They decided he hadn't sent the letters after all and released him Tuesday. Within hours agents had raided the home of his archenemy: J. Everett Dutschke, karate instructor.

Curtis claimed Dutschke wanted to frame him. It wouldn't be the first skirmish between Tupelo's most famous son and a karate man. In 1973, several men climbed on stage during a concert by the actual Elvis. Elvis felt threatened and fought the men, alongside his bodyguards. He felt sure the men had been sent by estranged wife Priscilla's new boyfriend, his own personal nemesis: Mike Stone, karate instructor.

Curtis, 45, and Dutschke, 41, seem locked in an elaborate piece of tribute performance art. Their lives have entwined for years, feuding over small-town grievances as labyrinthine and intricate as any global conspiracy. They met in 2005, and were friendly for a time. When he wasn't teaching karate, Dutschke worked for Curtis' brother Jack at an insurance office. Both men knew Sen. Wicker, and both had connections to the 80-year-old Judge Holland.

It's unclear at what moment the hostilities began, but a few years ago Curtis, who worked at the local hospital, developed a theory that doctors were harvesting organs to sell on the black market. He wrote a book about it called "Missing Pieces." Dutschke published a local newsletter at the time, and after some negotiations apparently rejected Curtis' writings.

There was the question, too, of who had the bigger intellect. Dutschke was a member of Mensa, the club for people with high IQs. A few years ago, Curtis posted a fake Mensa certificate on his Facebook page, which sent Dutschke into a rage. "I threatened to sue him for fraud for posting a Mensa certificate that is a lie," Dutschke told Tupelo's newspaper, the Daily Journal. "That certificate is a lie."

"Aw, yeah. I don't know why Kevin did that," Curtis' father, Jack, said recently in Cleveland, Miss. "These boys were just after each other."

Both men have made multiple trips to jail. Curtis was arrested for, among other things, assaulting a Tupelo lawyer — for which he received a six-month sentence from Judge Holland. In January, Tupelo authorities charged Dutschke with molesting children. He pleaded not guilty, but he shut down his karate school, called Tupelo Taekwondo Plus, while awaiting trial.

After the FBI released Curtis, the two enemies' paths diverged. Curtis headed for New York. "Can you believe that?" Jack Curtis said. "Now he's got publishers all trying to jump the gun on each other to publish his book first. Isn't that something?"

Dutschke, meanwhile, watched federal agents in protective masks search his home, his karate studio and his van.

On Wednesday, Dutschke slipped from sight, traveling with his friend Kirk Kitchens to a remote house in neighboring Itawamba County.

They entered the house and turned on the television, then slipped out the back door and down a wooded path, where they met a waiting car, Kitchens later told a Memphis television station.

Itawamba County Sheriff Chris Dickinson said Dutschke had escaped surveillance.

But the next evening, Dutschke pulled into the driveway at his house and stepped from his minivan like a man returning from routine errands.

On Saturday the U.S. attorney charged him with "knowingly developing, producing" and stockpiling ricin. If convicted he faces maximum penalties of life imprisonment and a $250,000 fine.

Hours before his arrest, Dutschke answered his door by opening it just enough to look out with one dark eye. He held a kitten, which also looked outside. "I'm sorry, I just...," he started. His voice was soft. "I can't talk. I'm so, so sorry."

Could he say, at least, what started this mess?

"Just look around you," he said. "This place is crazy."

matthew.teague@latimes.com

Twitter: @matthewteague

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Problems keep proliferating at discredited private foster care agency

A decade ago, a team of Los Angeles County auditors delivered a damning assessment of Teens Happy Homes, a private foster care agency responsible for hundreds of children.

Agency workers bought beer and cigarettes with public funds intended for mistreated children, auditors found. It billed the state and county more than $100,000 for care it never provided. Employees wrote checks to themselves worth thousands of dollars and kept no receipts.

The auditors' conclusion: The county needed to give Teens closer supervision or cancel its contract.

Not only did the county Board of Supervisors continue the Teens contract but it tripled its value, from $1 million a year to as much as $3.6 million, according to the agency's tax returns. Between 2008 and 2011, 1,154 children lived in its homes.

Interviews and an examination of public records by The Times found that questionable financial practices proliferated in recent years. At the same time, children suffered abuse and neglect repeatedly.

Robert Fellmeth, director of the Children's Advocacy Institute at the University of San Diego School of Law, said the long delay in reviewing the agency is indicative of the state and county's inattention to private foster care agencies that were created over 25 years ago.

"There are some clear failures indicating the need for financial auditing and performance oversight," Fellmeth said. "There is a need for systemic reform in this regulatory scheme."

County Supervisor Gloria Molina said Teens should finally lose its contract, and Supervisor Zev Yaroslavsky said that if the allegations against Teens prove true, they "would constitute a serious misuse of public funds and represent a grave threat to the health and safety of the foster children."

Philip Browning, director of the Department of Children and Family Services, said in an interview Thursday that he was startled to learn of the depth of problems at Teens, and that he was enlisting the help of retired homicide detectives to examine allegations of child abuse and financial malfeasance at foster care contractors.

"My marching orders are to figure out what's going on and fix it," Browning said. "I think we have a long way to go in terms of improving the monitoring of these agencies."

::

Teens' chief executive, Beautina Robinson, grew up in foster care and knew the life from the inside out. She established the South Los Angeles agency's group home in 1990 and expanded with foster homes throughout Southern California.

As a private group, Teens was only loosely monitored by the state and county, which typically audits the finances at private agencies once a decade.

The routine audit of Teens in 2003 faced problems from the beginning. Shortly before auditors arrived, a sewage backup destroyed many financial records. The remaining documents painted a picture of financial chaos.

There were canceled checks showing the agency repeatedly bought cigarettes and beer with foster care money — in one instance, 30 cases' worth. There was $46,000 in unpaid federal payroll taxes. The agency's bookkeeper wrote $13,000 in checks to herself. "The agency was unable to explain the nature of these expenditures," auditors wrote.

The bookkeeper, fearing criminal prosecution, wrote to county auditors, saying Robinson had ordered two workers to "come up with receipts" to help keep staff "out of jail."

The plan fell apart when one manager refused. "He was not going to get caught up in falsifying any documents," the bookkeeper wrote in her letter, which was obtained by The Times.

An attorney for Teens declined to comment for this story.

In the end, auditors told county officials they "should consider whether to continue contracting with this agency due to the nature of these financial issues."

But the agency retained its contract, and the auditor-controller never completed another financial audit to see if problems had been fixed.

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Boston bombing suspect transferred to federal site

Surveillance video provided by the Boston Regional Intelligence Center shows bombing suspect Dzhokhar Tsarnaev at a Bank of America ATM in Watertown, Mass. at 11:18 p.m. on April 18, 2013. The next day, police intercepted Dzhokhar and his 26-year-old brother, Tamerlan, in a gun battle that left the elder brother dead. (Uncredited, AP / April 18, 2013)

From the Associated Press

April 26, 2013, 3:48 a.m.

BOSTON -- The surviving Boston Marathon bombings suspect has been released from a civilian hospital and transferred to a federal medical detention center in central Massachusetts.

The U.S. Marshals Service said Friday that Dzhokhar Tsarnaev left Beth Israel Deaconess Medical Center overnight and was taken to the Federal Medical Center Devens about 40 miles west of Boston.

The facility, on the decommissioned Fort Devens U.S. Army base, treats federal prisoners and detainees who require specialized long-term medical or mental health care.

The 19-year-old Tsarnaev is recovering from a gunshot wound to the throat and other injuries suffered during his attempted getaway.

The Massachusetts college student was charged with setting off the shrapnel-packed pressure-cooker bombs that killed three people and wounded more than 260 at the marathon finish line April 15.

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Consumers' shift to older iPhones raises concerns on Wall Street

How strange to think that Vicki Macchiavello's decision to buy an iPhone after years of using a BlackBerry could be bad news for Apple.

And yet, because the Oakland resident opted to buy a cheaper, older iPhone 4 rather than the latest, pricier iPhone 5, she represents a trend that has become a growing concern on Wall Street.

In recent months, such an unusually large proportion of consumers are opting to buy older iPhone models that some analysts have begun to wonder whether Apple has lost its ability to create new versions that have enough dazzle to justify their high prices.

Not only has the shift toward cheaper phones nibbled away at Apple's profit margins, it's been dramatic enough for some analysts to view the iPhone 5 as a disappointment.

"I think it's no surprise then that the iPhone 5 is selling worse than expected," said Brian Colello, an analyst at Morningstar.

When Macchiavello went shopping recently for a new phone, she wasn't thinking about the bigger screen size of the iPhone 5, its faster processor, or the fact it could come with 32 gigabytes of memory. What she did think about was its price, ranging from $199 to $399.

So instead, she gravitated to the iPhone 4, which to some may border on heresy in the gadget-obsessed Bay Area. Macchiavello got the iPhone with a mere 8 gigabytes of memory for practically free from AT&T in exchange for signing a two-year service contract.

"I'm not one who feels like I need to get the coolest things right away," Macchiavello said. "After a short period of time, the coolest thing isn't that cool anymore, and then it gets a lot cheaper."

Apple would argue that it's happy to have customers like Macchiavello. The company has found that once people buy Apple products, they tend to keeping buying more Apple products over time. Customer satisfaction is so high, and loyalty so strong, that a customer that starts small today is likely to grow into a bigger one down the road.

"Apple's 'black hole' ecosystem captures subscribers who never leave," Yankee Group analyst Carl Howe wrote in a recent report that argues these factors will give Apple a long-term advantage over rivals that run on operating platforms such as Google's Android.

Many analysts are not entirely convinced.

That's because Apple has built its reputation and much of its business in recent years on the ability to consistently deliver new versions of it products, especially the iPhone, that consumers were more than happy to buy in ever greater numbers at premium prices.

That was true at first of the iPhone 5 that went on sale last September. Apple said it sold 5 million units in the first three days, compared with 4 million of the iPhone 4S in 2011 and 1.7 million of the iPhone 4 in 2010.

But sales growth has slowed. In January, Apple executives said the company could have sold more iPhones if had the ability to make more older models.

After the Apple earnings conference call Tuesday, several analysts noted that the average selling price of iPhones had fallen to $613 from $641 in the previous quarter, the result of what William Power, a Baird analyst, said in a report was "greater focus on the lower-priced iPhone 4."

Although Apple did not give specific breakdowns between versions, a recent report by Chicago-based Consumer Intelligence Research Partners found that for the first three months of 2013, 53% of those surveyed bought an iPhone 5, compared with 73% for the iPhone 4S for the same period after its launch.

Ben Reitzes, an analyst at Barclays, wrote in a note to clients this week that "the reception of the iPhone 5 and execution of late has tested our patience."

Beyond just profit margins in the short term, analysts also worry that people like Macchiavello who buy older phones with less memory are also less likely to buy other things like music and apps. Indeed, Macchiavello said she had downloaded only 11 apps for her phone so far.

And going forward, Wall Street wonders whether there will really be enough new features on the rumored iPhone 5S presumably coming this fall to generate the kind of enthusiasm to cause fans to set new sales records and return the company to the faster growth investors crave.

"It begs the question: Can Apple bounce back with an iPhone 5S?" said Colello of Morningstar. "Can they add enough that's new to make enough people believe it's worth it to buy a premium phone again?"

chris.obrien@latimes.com

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U.S. economy grows at 2.5% rate in 1st quarter

WASHINGTON -- U.S. economic growth accelerated from January through March, buoyed by the strongest consumer spending in more than two years. The strength offset further declines in government spending that are expected to drag on growth throughout the year.

The Commerce Department said Friday that the overall economy expanded at an annual rate of 2.5 percent in the first quarter, rebounding from the anemic 0.4 percent growth rate in the October-December quarter.

Much of the gain reflected a jump in consumer spending, which rose at an annual rate of 3.2 percent. That's the best since the end of 2010.

Businesses responded to the greater demand by rebuilding their stockpiles. And home construction rose further.

But government spending fell at a 4.1 percent rate, led by another deep cut in federal defense spending. That kept growth below economists' expectations of a rate exceeding 3 percent. And broad government spending cuts that began in March are expected to weigh on the economy for the rest of the year, while higher taxes have started to make some consumers and businesses cautious.

Many economists say they think growth as measured by the gross domestic product is slowing in the April-June quarter to an annual rate of just 2 percent. Most foresee growth remaining around this subpar level for the rest of the year.

GDP is the broadest gauge of the economy's health. It measures the total output of goods and services produced in the United States, from haircuts and hamburgers to airplanes and automobiles.

The cuts in government spending have forced federal agencies to furlough workers, reduced spending on key public projects and made businesses more nervous about investing and hiring this year.

The cuts came two months after President Barack Obama and Congress allowed a Social Security tax cut to expire. That left a person earning $50,000 a year with about $1,000 less to spend this year. A household with two high-paid workers has up to $4,500 less.

Consumers' take-home pay is crucial to the economy because their spending drives roughly 70 percent of growth.

Americans appeared to shrug off the tax increase at the start of the year. They boosted spending in January and February, helped by a stronger job market. In part, that's why growth is expected to be solid in the first quarter.

But hiring slowed sharply in March. And consumers cut back their spending at retail businesses, a sign that many were starting to feel the tax increase. Economists expect spending to stay weak in the second quarter as consumers adjust to their smaller paychecks.

Ben Herzon, an economist at Macroeconomics Advisers, said the tax increases could shave roughly 1 percentage point from growth this year. He also expects the government spending cuts to reduce growth by about 0.6 percentage point.

12.18 | 0 komentar | Read More

Death toll in China quake hits 113

Reporting from Beijing --  A strong earthquake struck China's mountainous Sichuan province  Saturday morning, leaving at least 113 people dead and more than 3,000 injured.

Chinese authorities assessed the magnitude of the quake at 7.0, while the U.S. Geological Survey reported 6.6.

Although nowhere near in magnitude, the tremor evoked troubling memories of the great earthquake almost exactly five years ago along the same fault line that killed almost 90,000.

The earthquake's epicenter was about 80 miles southwest of the provincial capital of Chengdu, in Lushan country near the city of Ya'an. The city of 1.5 milion is best-known for its panda breeding research center, which was reported not to have sustained serious damage.

 Jiang Haikun, an official with the China Earthquake Network Center, told the official New China news agency that Saturday's quake is similar to the May 12, 2008, disaster centered in Wenchuan -- about 150 miles away -- as both occurred on the same Longmen mountain fault zone.

 Officials also warned of aftershocks and secondary disasters such as landslides and road and cave collapses, especially since a light rain was falling over the mountainous  area Saturday.

 The 8 a.m. quake jolted residents out of bed, and people ran into the streets wearing their pajamas, according to reports from the scene.

"We were very calm. We have gained experience from the last earthquake. It took us 30 seconds to leave everything and run," one middle-aged man told Chinese media.

A 22-year-old woman despaired that her house survived the first earthquake, but not this latest one.

"When the May 12th earthquake happened, I thought I was lucky ....  I still had a home to go back to. Now our house can't be lived in anymore. I feel really lost. Where I should go? What I should do after all this?'' she wrote on a microblog posting.

 The rescue effort will be a test for the newly installed government of Xi Jinping, who took over as president in March. His premier, Li Keqiang, toured the earthquake-stricken area  Saturday.

"The current most urgent issue is grasping the first 24 hours after the quake's occurrence, the golden time for saving lives, to take scientific rescue measures and save peoples' lives," Li was quoted as telling state media.

About 2,000 soldiers from Chengdu command of the People's Liberation Army were rushed to the epicenter, while two helicopters hovered overhead assessing the damage below.  

Compounding the tragedy, a military vehicle carrying 17 soldiers slid off a cliff into a river, killing one soldier and seriously injuring three.

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