Today I was extra careful to make sure the coffee treat I had brought home from the nearby branch of the international coffee seller was free of impish activity. It certainly seemed to be a perfectly normal iced cappuccino...

But look!: while my attention was distracted for only a moment by a squirrel wearing a beret, the little devils struck, transforming my espresso concoction to DIRTY SOCKS!

Or... no... wait a moment... let me check...

Oh! Okay, false alarm: they're clean socks. That's better. Nice socks, too. Gotta say, I Iike the stripey ones. Italian!

But still! I mean! Socks! C'mon! Clean or not, they're socks, not coffee. Some evil is afoot against which we are helpless. From now on I will avoid St*rb*cks, as should you. Come with me instead to sample the far superior product at the famous San Francisco based coffee chain known as PEET'S COFFEE & TEAS. They're older and better than St*rb*cks. It's where Howard Schultz, founder and CEO of St*rb*cks learned the trade. Could be he's in need of remediation.

When I was a management consultant working with Deloitte and PwC on engagements whether they were global in nature or local, we would always say "think globally but act locally".

Words of wisdom I believe, no matter what industry one is in, and especially relevant for real estate.

George

The movement against Starbucks has spread all over the world, even in the Middle East. Contrary to the fact that its easy to find a Starbucks in Jordan, last summer when I was there, I found that there are a great number of Arabs who absolutely refuse to drink it, and have equated it to the drinking of Palestinian blood.

This all started with a letter, (that was circulated through various blogs on the web), supposedly written by CEO Howard Schultz. The letter was addressed to all customers thanking them for buying Starbucks because 'with every cup of coffee' that customers drink they are sponsoring Israeli arms affairs against anti-Semitic Muslims in Palestine. This letter was first posted on this blog:

http://www.ziopedia.org/articles/editorial/a_thankyou_to_all_starbucks_customers/

But right below the letter, something that didn’t reach many inboxes, was a comment written by the blogger who fabricated the letter: "Howard Schultz never wrote that letter, I did. However, all the statements I made in that letter about donations, sponsorships, political views etc. - are based on factual Howard Schultz actions and quotes."

Its true, upon looking up Howard Schultz- his actions and quotes are highly sympathetic to the occupation and its atrocities against as he states "anti-Semites." Well, I would probably disagree with all of his political views. But what does this say about the multi-billion dollar corporation that is Starbucks? It’s hard to tell. But according to my research this is what I found.

When I viewed a few accountability reports in the past few years, it was clear to me that Starbucks does not invest in Israel. –Notice, I could be wrong—this is all public information that is available on the website- there could be private donations that we don't know  about. However, according to the 2006 Corporate Accountability Report, Turkey was the only country in the Middle East that Starbucks invested in-- in promoting local schooling through the Ministry of Education. On the Starbucks website, in the Rumors section it also states that the allegation against Starbucks that it supports the IDF is false, and that Starbucks is a non-political organization and does not support political causes.

Furthermore, there are no Starbucks in Israel-- as of the year 2003, all 6 of them closed. The reasons for closure were "poor sales and" a "failure to find an investor to bail it out of a losing venture." It makes little sense for me that the Starbucks company would be so supportive of Israel, and at the same time Israelis would not even be mildly supportive of it.

Now I could subscribe to the view that if much of the world is pointing a finger at Starbucks as being an evil corporation that disrespects human rights that I should too, but unless I see proof it will remain hard for me to do that.I promise I'm not some coffee freak, but it just annoys me when people make claims and have little but nothing to back themselves up with.

For example, Motorola does indeed support Israeli human rights violations; that is a fact that is undebatable. There is proof. Motorola Inc. and Motorola Israel make the fuses for Israeli cluster bombs (the ones used in the Lebanon war of 2006), as well the radar devices for the 47 illegal settlements that are located on Palestinian land, and it is also the supplier of the Mountain Rose communication system that enhances the monitoring capabilities of the Israeli army—satellite technology that has been used by Israel in maintaining its 41 year illegal occupation. Motorola has also been profiting from the wars in Iraq and Afghanistan and has signed multi-million dollar deals with the U.S. Army for , It has created Tactical Operation Centers for the army: centers that provide “real time battlefield awareness” and more efficient visualization, allowing “commanders and staff to communicate directly with various users of airspace.” Motorola also has built Tactical Airspace Integration Systems, which have contributed to Operation Iraqi Freedom “by empowering Joint and Coalition forces with real-time decision systems.” In the year 2000, the U.S. Army awarded Motorola a contract to continue fielding the TAIS whose total values is 150 million dollars over a five-year period. The deal for the TOCs was made in 1999, also for a five year period, and for a whopping value of $448 million dollars.

For more information GO TO hanguponmotorola.com – Hang Up On Motorola is a campaign that has been launched by the U.S. Campaign to End the Israeli Occupation-- a coalition of over 250 organizations that work to challenge US policy towards the Israel-Palestine Conflict to promote international law and justice, and an end to the occupation.

Another example: Caterpillar Inc. supplies the Israeli Defense Forces with CAT D9 bulldozers that come with a front blade that is more than 6 feet high and 15 feet wide and has a “claw-like hydraulic ‘ripper’ in the back”, made especially for the IDF. Since 1967 Israel has used these bulldozers to demolish over 12,000 Palestinian homes, leaving 70,000 people home-less; at times people have been killed because the IDF did not give fare warning before proceeding with the demolition. The story of Rachel Corrie, a 23-year old American International Solidarity Movement Activist who was run over by an Israeli bulldozer- twice-, as her friends screamed for the driver to stop. For more information: http://www.endtheoccupation.org/downloads/CAT%201-2006.pdf

Now although CATERPILLAR inc does not sell consumer products therefore making it impossible to start a boycott, Motorola does. Boycotting and divestment and activism should start with these two companies as they already have.

Now as for Starbucks, maybe it does contribute to the IDF; Howard Schultz clearly has nothing but the utmost respect for the Israeli Defense Forces.But the fact that it is considered a false rumor on Starbucks website, and has been denied on several occasions is worth considering and looking into.

When we analyze the response by Motorola's Business and Human Rights Resource Center to allegations made against it and those of Starbucks, we see fundamental differences that explain a lot. In a response to a letter sent to CEO Greg Brown by the US Campaign to the Israeli Occupation, the Business and Human Rights Center never specifically denied Motorola's contributions to the IDF. In their letter their only defense was that : Motorola strives to uphold ethical standards. They also posted a few links in the letter to websites containing Motorola's human rights policies. This response is the epitome of sketchiness.

As for Starbucks, I think more research needs to be done, and if the truth is that it does indeed fund human rights abuses, then a REAL campaign should begin—it shouldn’t just be a group of individuals circulating rumors of how bad Starbucks is yet not even able to give one single quote or piece of evidence to support their claim.

Wired Magazine is running a very interesting article in it's latest issue titled, "The Coffee Fix: Can the $11,000 Clover Machine Save Starbucks?" In a nutshell. the Clover for those of you who don't know, is this super amazing coffee machine that you can minutely adjust the water temperature, the timing etc and when done write supposedly makes some really awesome tasting coffee. With all the nonsense that has been going on at Starbucks over the last few years and their efforts to get back to basics, i.e actually make coffee instead of hocking CDs and sandwhiches, maybe the Clover is what they need to save them.

Mathew Honan, the author of the article spent some time in Seattle talking to Zander Nosler, the inventor of the Clover and one of the founders of The Coffee Equipment Company (CEC), the company he formed to manufacture the Clover. Unfortunately, CEC was sold to and is now owned by Starbucks. Apparently Howard Schultz was so wowed by the machines and the coffee they produced that they decided to by CEC least some other coffee company bought it. Now, except for the Clovers that had already been sold to some of the other coffeehouses, the only place you'll get to taste Clover coffee is at your local Starbucks... well maybe not quite your local since there are only a handful of Clovers in certain test store locations.

So will the Clover save Starbucks? The question is up to debate. Being that the coffee is only as the beans you use, and Starbucks is not famous for great beans, will the coffee even be that great at all? Some may question whether the average Starbucks customer will even notice the subtle differences in their coffee, while others wonder if the price of the Clover coffee may be hiked up, which of course means, are consumers willing to pay extra for 'drip'?

I think the article best answers the question in the last paragraph. Earlier in the article, when Zander was making the coffee for Honan, he specifically used a metal whisk to stir the coffee grounds, "being careful not to break the stream, which would cool the water". Zander's coffee was great. The Starbucks barista on the other hand stirred the grounds with a "clunky rubber spatula" and poured to final concoction into a paper cup... Honan couldn't taste anything special from the Starbucks' brew.

But beyond being a victim of the harsh economy, Starbucks made real mistakes. It dramatically over-expanded. And when Howard Schultz, who built the company from a tiny Seattle chain, fired CEO Jim Donald last December - blaming him for the over-expansion - Schultz got cocky, I think. Returning to the CEO role, Schultz assumed he knew best and could save the day. More key defections followed. Many investors believe that Schultz now lacks a viable plan to grow with a profit profile they'd come to expect. So the stock is stuck, 44% below its price a year ago.

I've been critical of Starbucks lately, but I'm actually biased on the company in the positive direction. I start each day sitting in my local Starbucks reading three newspapers (the New York Times, the Wall Street Journal, and the New York Post - always the Post first!) And I've long been a fan of Schultz, whom I've met but don't know well. My boss, Fortune managing editor Andy Serwer, knows him better. Andy recently sat down with Schultz and former UCLA basketball coach John Wooden, now 97, at UCLA's Anderson School of Management. "You could see on his face that this is a very trying period for him," Andy says about Schultz.

When Andy asked the two legends what the key to leadership is, Schultz, 55, replied, "The hardest thing about being a leader is demonstrating or showing vulnerability.... When the leader demonstrates vulnerability and sensibility and brings people together, the team wins."

Winning, of course, is more difficult than that - but good luck, Howard.

P.S. For ex-CEO Jim Donald's take on what went wrong at Starbucks, see my recent Q&A, Lessons of the Fall, with him and two other former chiefs, Ed Zander of Motorola (MOT) and David Neeleman of JetBlue (JBLU). Click here for video of Donald. And for an interesting take on Howard Schultz, the humanist leader, check out this Fortune excerpt from True North by former Medtronic (MDT) CEO Bill George.

"The average net profit margin for the S&P Energy sector, according to figures from Thomson Baseline, is 9.7%. The average for the S&P 500 is 8.5%. So yes, energy companies are more profitable than many others...but not by an inordinate amount."

In 2005, Starbucks' profit margins were 11.5%. Where were the windfall profit taxes? Profits aren't the enemy. Why do oil companies have record profits despite only slightly above average profit margins? Because of supply and demand.

You hear many politicians decrying oil speculators for driving up the price of oil. The heads of many airlines have recently issued a statement to the effect of "the government should crack down on speculation" because it's making their lives harder. Well, I don't hear anyone decrying those in gold or silver speculation. The price of gold is somewhere around a $950 an ounce, yet you don't hear anyone brow beating "Big Gold".

Here's the bottom line: If the supply of oil continues to decrease as demand increases, the price will go up. As the price goes up and speculators see that there are no efforts to increase supply to meet demand, they will buy oil futures because they know the price will continue to rise. Since President Bush lifted the executive ban on off-shore drilling the price of oil has dropped over $20, despite the fact that not one more drop of oil has been added to the supply.

The threat of increased supply will lower the price of oil futures and the actual increase of supply will lower the market value of oil even more. Oil companies are not to blame for high prices, in fact, they don't even purely benefit from higher oil prices as refinery branches of oil companies struggle under higher oil prices. If you want to point a finger at those responsible for high gas prices, just point to the Democrats and Republicans on Capitol Hill who continue to deny the American people the right to drill on our own land for additional oil supplies.

It's cool to live in Seattle because we didn't let the NBA and Clay Bennett hold us hostage for another stadium tax.  Here's the way I see it.  The Sonics didn't leave....some greedy greasy business guy came in...bought a franchise (with full intent to move it) and moved it to OKC.  The Sonics that I loved will alwasy be in Seattle and if they never resurrect...the RIP.  I was not a season ticket holder so I'm just as much to blame for them leaving as everyone else.  Here's my opinion.  I think the NBA is a JOKE!  I'm not sure we should raid another city of their team...nor should we put anything into an expansion team.  Again...Stern is sitting back and saying, " pay up and build a new stadium and then we'll consider giving you another team".  Give me a break.  We can not stand for any more taxes.  Side note....my buddy Howard Schultz, "Mr. Starbucks" doesn't get off the hook that easy.  He should have never sold to Clay.  Please tell me he's not the only person in Seattle that didn't see this coming?  Yet...because I love my Starbucks....I'm quick to forgive uncle Howard.  Stop the bleeding.  Besides...with the Sounders(MLS) coming back...and playing at QWest.....I think we have a new sport in town that will take place of basketball.  I love the fact that QWest will be getting more playing time.

So, good riddens to the group of people and ownership who just moved to OKC.  The are not and never will be the Sonics.  Welcome back Sounders.  I think I might just get season tickets for the MLS.

Makes me proud to live in Seattle.

Why are you proud of your city?

Many thoughts on the Great Sonics Swindle of 2008.

Not being a Sonics fan, I do not have a stake in the team, but I see in the Sonics saga the potential fate of any professional sports team city that has the audacity to stand up and tell billionaires that they are going to have support their own investments.

What happened is this: Former owner and Starbucks magnate Howard Schultz sold the team after failing to get a many hundred million dollar handout form the city and state to renovate the arena they use and reap the profits from. After Schultz realized the people, still sore over the extortion the Seahawks and Mariners laid on them to get Qwest and Safeco Fields, respectively, weren't gonna pony up for a new stadium, he bailed, selling the team to the group led by Clay Bennett, of Oklahoma City.

Oklahoma City picked up a basketball jones after Hurricane Katrina forced the Hornets to relocate to the capital of Flyover Country while their city was pumped out and rebuilding began. Since there is nothing to do in Oklahoma City, the arrival of the NBA was HUGE and the people came out to support the team.

Once the Hornets went back to New Orleans - because the value of a sports team to a city cannot be measured in dollars alone - Oklahoma City got itchy. Sensing opportunity as well as the realization that yes, a sports team has a value that can;t be measured in dollars alone, Bennett turned his sights on the Sonics.

Bennett promised Schultz and the city that he was not there to steal the team - despite internal emails which revealed he was telling his investors exactly the opposite. But even Schultz said he knew selling the team to a guy from Oklahoma City would spur the government into coughing up money for a new stadium.

So Bennett pledged to negotiate in good faith with the city and state to get his shiny new stadium, knowing full well that what he was asking for demanding was ridiculous. Everything went as expected - excepting the offers from other local cities that were also dismissed - and even the NBA Commissioner - and the guy that inducted Clay Bennett into the Oklahoma Hall of Fame - David Stern approved the outright theft of the team.

The owners, of course, were looking out for their own good, knowing that when they wanted shiny new showplaces for their product, their host cities would have no choice but pony up. After all, if the No. 13 market in the country could lose a team to Oklafuckinghoma ( No. 45), anyone could be next.

Meanwhile, Seattle fans struggled and tried to keep their team, which had been systematically run into the ground at every level at nearly a Bush Administration level, ruining almost every last ounce of goodwill the team had built up in its 41 years, while the non-basketball fan majority in the city (which is probably not a Seattle thing, but is proportional to most cities) stuck to its financial guns and refused to sell their city's financial future to the Sonics new owners.

So there was a lawsuit, with the City seeking to force the Sonics to adhere to the final two years of its lease at Key Arena. The City's hope was to find a way to force Bennett to stay sometime in the next few years, but after a flailing season of piss poor attendance dominated by more legal strategy headlines than game strategy headlines, the odds of that were slim at best.

Last week, about two hours before the judge was expected to announce her decision in the lawsuit, the City and Bennett reached a deal and the City took $45 million in exchange for its team. It was over. The Sonics were gone.

But by letting them go, the City kissed a little David Stern ass and put itself at the top of the running for any new franchise to come. The only sticking points remained the team's name and history, it's championship and its records. The deal has the two cities "sharing."

Like the Cleveland Browns before them, the Seattle Sonics are now a logo awaiting the team. When Art Modell stole the Browns about 10 years ago, he just took the franchise, renaming them the Ravens when he got to Baltimore (a city, by the way, that lost its team, its logo and its history in one of the most famous abandonments ever).

Usually, the name and colors go too. It's how San Fran got the "Giants" (New York), Utah ended up with the "Jazz" (New Orleans), Los Angeles got the "Lakers" (Minnesota) and Dallas got the "Stars" (Minnesota again). Sometimes, however, it is clean break, as in the Avalanche (formerly the Quebec Nordiques) or Nationals (Montreal Expos) or even the aforementioned Ravens.

Fans seem to be split.

Here's what I think, as a Seattle(-ish) resident, but not necessarily a Sonics fan: Let them have it. Go. We should treat the team like a family member that died and any new team we may get like a new baby to love with all the capacity this city has, free from the bad taste left by all the bullshit and weight the name "Sonics" now carries.

No, like a family member that was murdered, not one that died. This team was brutally ripped away from the basketball fans in this city. Its life was cut short.

Any new team should not have this baggage, it should not have to be constantly compared to or live up to the (admittedly lackluster) record of the team that once lived here. A new team and a fresh start is what basketball needs in this town.

Seattle's distaste for the Sonics was not just Clay Bennett. Years before Bennett's shadow ever darkened Seattle's doorstep, the failure by Howard Schultz to build a decent team and GM Wally Walker's horrible decisions and leadership had been turning off fans for years.

Bennett is just a vulture and you cannot blame an animal like like that for searching out carrion.

So let the name and colors go. The team Seattle loved is dead now. It's time to move on. If Oklahoma wants the name, fine (though I think the Bandits or the Vultures would be a better choice...), but let them carry the colors like the Mark of Cain, acting as yet another warning to all other cities that are home to a professional sports team.

U.S. coffee drinkers, whose willingness to buy $4 lattes and dark drip concoctions seemed to know no bounds is what helped to fuel Starbucks’ rapid growth.

However, all good things must come to an end, and in the case of Starbucks, the decision to put a store in close proximity to others, resulted in cannibalization and saturated the market.

Starbucks’ Chief Financial Officer Pete Bocain stated during a conference call that 19 percent of all U.S. company-operated stores opened in the last two years will be closed.

The closing will affect about 12, 000 workers or 7 percent of Starbucks’ global work force. According to spokeswoman Valerie O’Neil, the tentative time period for displacing workers will take place between late July and the middle of 2009.

Ms. O’Neil did not know exactly how many jobs will be lost. Starbucks estimated that severance payouts will cost the company $8 million.

The company had previously proposed to close 100 stores. The other 500 had been on the company’s internal watch list.

“They were not profitable, not expected to be profitable in the foreseeable future,” Bocian said, “and the vast majority had been opened near and existing company-operated Starbucks.

Starbucks’ inability to acknowledge what some analysts suspected, that the company’s explosive growth in the U.S. would come back to haunt it as the market saturated, may have led to its undoing.

Similar to an ostrich burying its head in the sand ... Starbucks refused to acknowledge any theory of saturation and pinned the faltering new stores’ opening sales on the economy.

During the conference call however, Bocian stated that 25 to 30 percent of an existing store’s revenues is cannibalized when a new store opens nearby, and that the closures should return some of that revenue to the remaining stores.

Starbucks still plans to open new stores in fiscal 2009, but reduced the number to fewer than 200.

“We believe we still have opportunities to open new locations with strong return on capital,” Bocian said.

This may account for Starbucks decision not to alter the company’s forecast of opening 400 stores in 2010 and 2011.

Chief Executive Howard Schultz expressed concern in May, when the company attributed a 28 percent drop in sales to less traffic from U.S. consumers.

Starbucks has every right to be concerned ... the closing of 600 stores may be a precursor of many more to come.

U.S. consumers’ grappling with the state of the economy, less discretionary income, and having to decide between $4 for gas and $4 for a latte....Are finding it easier to fill the tank and bypass Starbucks for Dunkin Donuts.

It would seem that Starbucks miscalculated consumers’ desire to overspend ... once all the hype has been removed, for what amounts to ... a cup of coffee.

According to the New York Times, Starbucks is going to close 600 stores in the coming year. This is horrendous news for a few of reasons:

1) Starbucks is my home away from home (free air conditioning and a friendly face - sign me up!)

2) Starbucks is my drug, addiction and lifeline

3) So many people are going to lose their jobs in an already difficult economic time (12,000 people to be exact)

I have always admired Starbucks - of course for their delicious coffee and yummy treats - but also because Howard Schultz (Pres. and CEO) strikes me as a truly genuine guy. I have heard him interviewed on countless occasions, and he really seems to care not only about his bottom line, but about the thousands of employees who work for him. Starbucks employees enjoy perks such as stock options and health care. I like that they are called partners, even if it's just a moniker it is one that denotes respect (which they so deserve for dealing with difficult and demanding people all day).

I for one hope (and pray) that this is not the beginning of the end for Starbucks... I seriously have no idea what I would do without my daily coffee. And I am SERIOUSLY praying that my "home base" location is not one of the many affected stores - I am too attached to handle a change like that in my life at the moment.

©ROD MAR / THE SEATTLE TIMES

so it's official. bye bye seattle sonics....it's time to cheer on the oklahoma city sonics. that is...if you even know where oklahoma is.....

the backlash on facebook was quite predictable starting once it broke at 4pm.

"the nba sucks."

"wondering if we get to at least keep the Sonic Dancers... :)"

"believes that the cowardly mayor and city council sold out the people of Seattle by giving away the Sonics for 30 pieces of silver."

"Goodbye Sonics! I will miss you..... =(."

"crying tears of green and gold :*(."

"the NBA is dead to me, starbucks is dead to me."

"bye sonics... : (."

"remembering this dunk: http://youtube.com/watch?v=xL8vUUABdgA."

"saving up his change to buy back the sonics."

"NEVER WATCHING NBA AGAIN UNTIL SEATTLE GETS A NEW TEAM!!!!! STUPID SEATTLE OFFICIALS SOLD THE FANS OUT!! AND NO I WILL NOT BE A BLAZERS FAN!!!"

"will miss the Sonics. :(."

"F*CK CLAY BENNETT AND DAVID STERN!!!"

"hate the nba."

"says goodbye to the Sonics, and will miss the 20 win seasons."

"all you seattlelites can start rooting for the lakers now! :)"

"ready to riot. Can the people of Seattle sue Greg Nickels for being a sell out?"

"can't believe the seattle officials sold out."

"goodbye sonics....."

"eff clay bennet, david stern, and the nba."

"F*ck the NBA!!!!"

"can't believe that the Sonics are really going to Oklahoma City... I guess I'm driving to Portland for hoops now..."

"thinks his city's government sold out. Frickin Clay Bennett."

"has a settlement. we keep the sonics and clay bennett can go f*ck himself. does that work for everyone?"

And some news stories:

Sonics saga sends out a bad message

SuperSonics, Seattle reach last-minute settlement

Sonics are Oklahoma City-bound

Sonics moving to Oklahoma City

Stupid Oklahoma Papers.

Now that Seattle lawsuit has been settled, the NBA is on its way here to stay

Pop the corks and celebrate!

All the greats have hit the wall. Bernie Marcus, who started Home Depot (HD) with Arthur Blank in 1978, used to have a wall—literally—outside his office that he called "The Wall of Shame." Hanging there were framed press clippings about Home Depot—all stories that predicted that the home-improvement retailer's go-go growth was approaching an end. One of my Fortune stories hung on that wall, and Marcus loved to say that I should be embarrassed to be there. Guess what? The skeptical journalists turned out to be right. In 2000, Bob Nardelli swooped into Home Depot from General Electric (GE), then paid for the sins of the company's over-expansion. Home Depot is still struggling under current CEO Frank Blake, and the stock is down 41% in the past year.

Investors in Wal-Mart (WMT) saw growth stall as well. In 1996, four years after founder Sam Walton died, I wrote a story about Wal-Mart's flat stock and the uncertain path to expansion. It took a major innovation, Wal-Mart's supercenters, and a few missteps (like selling fashion-forward apparel) before Wal-Mart got its mojo back. Today, Wal-Mart, hitting the sweet spot of consumer demand by guaranteeing low prices, is the best performer on the Dow, up 19% in the past year. IBM (IBM) and Chevron (CVX), the only other gainers, are up 14% and 17% respectively.

Meanwhile, other retailers suffer. Blockbuster (BBI) yesterday announced that it was abandoning plans to acquire troubled Circuit City (CC). Another sinking stock: Sears Holdings (SHLD). As I told you last week, chairman Eddie Lampert admitted that he's made mistakes managing this combination of Sears and Kmart. One of his errors was loading up on inventory ahead of the consumer-credit collapse. That's a retail classic.

As for Starbucks, Howard Schultz, who built the company from a tiny Seattle-based chain, is now swimming in uncharted territory. After downplaying the threat of cannibalization for years, he now has to deal with the reality of it. It's a complicated challenge. By removing breakfast items, among other products, to focus on Starbucks' core proposition—the coffee experience—he'll find it difficult to lift per-store sales. Meanwhile, McDonald's (MCD), a standout performer throughout the downturn, is ramping up its beverage offerings. McDonald's stock is up 13% during the past year. Starbucks is down 40% and at just below $16, it's trading at its lowest level since 2003.

Management turnover compounds Starbucks' problems. In January, Schultz fired his top operator, CEO Jim Donald. (See my recent interview with Donald and two other ex-CEOs in "Lessons of the Fall.") And since he assumed the CEO role six months ago, Schultz has lost other key managers. One is former U.S. president Launi Skinner, who was considered a potential CEO successor and made Fortune's Most Powerful Women to Watch list last year. Skinner just landed as president and COO at 1-800-Got-Junk, a hot little privately held outfit that calls itself the world's largest junk removal service.

From $4 lattes to junk retrieval. Doesn't that say something about the direction of the economy?

P.S. While Starbucks Chairman and CEO Howard Schultz clearly needs help on the operating side, he stands out for his enduring personal touch. Last January, right before he ousted then-CEO Jim Donald, he hugged him. And while Donald, who was an at-will employee of Starbucks, was due no exit package, Schultz and the board gave him a $1 million severance. By CEO standards, that's a pittance—but still better than nothing. Click here to see Jim Donald talk about his last days at Starbucks.

BTW, Starbucks has doubled in size since 2004 so this would seem an opportune time to prune operations.

Per the Times UK...

US consumers are giving up their luxury coffees as they tighten their belts in the face of rising food and fuel bills. Increasing competition from the likes of McDonald's, which has started selling premium-priced coffees, has also hurt Starbucks.

Starbucks will close the company-operated stores across the US by the end of March 2009. Most of the coffee shops destined for closure have been open for less than two years and were not profitable nor likely to make an acceptable return in the near future.

According to the New York Times, "Starbucks said Tuesday that it planned to close another 500 underperforming stores and eliminate as many as 12,000 full- and part-time positions. The company, which now plans to close a total of 600 underperforming stores, will take related charges totaling more than $325 million. Most of the stores, which are company owned, will be closed by the end of the first half of its fiscal year, which ends September 2009, the company said. Starbucks estimated that total pretax charges associated with the closures, including costs associated with severance, would be $328 million to $348 million. The nation’s largest coffee chain said 70 percent of the stores targeted for closure have been open since the beginning of fiscal 2006. The job losses would represent about 7 percent of the company’s global work force."

These closings are clearly fallout from the housing bust.  As the Times noted, Starbucks had "aggressively opened stores in areas like California and Florida, which have been hardest hit by the housing downturn. "

The next time economists get together to discuss whether we're really in a recession, they may have to meet somewhere other than the local Starbucks. 

It might be closed.

-- Former Starbucks CEO Jim Donald, who has worked for founders Sam Walton at Wal-Mart (WMT) and Joe Albertson at Albertsons supermarkets. Howard Schultz, who built Starbucks (SBUX) from a tiny chain, replaced Donald as CEO this past January.

Back when i worked for Howard, my coworker Greg and i developed the Mendoza Principle. It goes something like this: Everyone has a Mendoza in their life. Everyone has that person who always seems to be at the back of all the mischief for a given period of time. It may be a customer who always demands outrageous add-ons for free. It may be one of your employees. It could last only for an afternoon- or as long as a week. If it goes longer than a week, you should probably seek professional help, we determined.

The Mendoza Principle extends beyond people, though. Greg declared, "Smoking is my Mendoza." And the timeframe becomes a bit more elastic now. The thing he couldn't shake that was always interfering with his plans and purposes.  Smokes were to Greg as Princess Maragurite's spiritual life was to King Stephen's grand schemes. We would occassionaly have troubles with the automated expresso machines and would be unable to pour shots for an hour or two. We would apologise to customers about the machines and say, "Sorry, it's been our Mendoza today." without bothering to explain.

I believe Ranier is my first "succesful" picture posting. Picture posting has, heretofore, been my blog Mendoza. What's your Mendoza?

The show airs Mondays at 9pm Eastern time/6pm Pacific time. More information about the show can be read at http://innovation.cnbc.com/.

The coffee entrepreneur says the company plans to weather tougher times by innovating and providing value to customers. Watch the interview here.