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Thursday, April 14, 2011

Google's rapidly rising expenses crimp 1Q earnings (AP) : Technet

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Google's rapidly rising expenses crimp 1Q earnings (AP) : Technet

Google's rapidly rising expenses crimp 1Q earnings (AP)

Posted: 14 Apr 2011 05:05 PM PDT

By MICHAEL LIEDTKE, AP Technology Writer Michael Liedtke, Ap Technology Writer – Thu Apr 14, 8:05 pm ET

SAN FRANCISCO – Google is helping the economy and hurting its stock. The company is hiring so many employees for projects outside its thriving search advertising business that its expenses are growing much faster than its revenue.

The strategy came into sharper focus in Google Inc.'s first-quarter earnings report released Thursday. Higher costs spooked investors who are already nervous about a new CEO who detests Wall Street's fixation on short-term results.

Google has committed to hiring at least 6,200 workers this year, the most in its 13-year history. It added more than 1,900 people in the first quarter, a pace that would translate to more than 7,600 for the year. Google ended March with more than 26,300 workers, 28 percent higher than a year ago.

The push coincides with Google co-founder Larry Page's return to his original job as CEO. Page, who ended Eric Schmidt's decade-long tenure as CEO after the first quarter ended, has indicated he plans to keep investing in opportunities that may take years to pay off, even if that drags down results in the near term.

Page, known for his aloofness, made a few tame remarks on Google's earnings conference call Thursday. He then turned things over to Chief Financial Officer Patrick Pichette, who has been steering the presentations for the past year.

"I'm very excited about Google and our momentum, and I'm very, very optimistic about our future," Page said.

He also assured listeners that the management transition announced three months ago is unfolding as the company envisioned. Page is overseeing day-to-day operations while Schmidt handles government relations and stalks possible acquisition targets in his new role as executive chairman.

Before taking his new role, Schmidt, 55, regularly shared his thoughts with analysts. He participated in every Google's earnings conference call until a year ago.

Page, 38, evidently intends to avoid the quarterly calls. In a Thursday interview, Pichette said Page only swung by for two minutes Tuesday as a courtesy to reassure investors. "He was just being gracious and dropped in to say hi," Pichette said.

It didn't seem to reduce the anxiety about Google's spending and the competitive threat it faces from Facebook, whose popular website has been drawing Internet traffic and advertising away from Google.

Google shares shed $31.50, or 5.5 percent, to $547.01 in extended trading Thursday after the release of the results. At that price, the stock has now fallen by about 13 percent since the announcement that Schmidt would replace Page.

Although Schmidt always emphasized that he wasn't managing Google to hit analysts' earnings targets, the company exceeded those expectations in all but six of his 27 quarters as CEO — a success rate of 78 percent. His final quarter as CEO turned out to be among the rare misses.

The company earned $2.3 billion, or $7.04 per share, in the period ending in March. That was an 18 percent increase from nearly $2 billion, or $6.06 per share, last year.

If not for the cost of stock-based employee rewards, Google said it would have earned $8.08 per share. That was below the average estimate of $8.11 per share among analysts surveyed by FactSet.

Revenue reached nearly $8.6 billion, a 27 percent increase from last year.

After subtracting the commissions paid to ad partners, Google's revenue stood at $6.54 billion. That figure topped the average analyst estimate of $6.33 billion, according to FactSet.

But those numbers were overshadowed by significantly higher expenses. Excluding the ad commissions and employee stock compensation, first-quarter expenses rose 44 percent from last year to $3.7 billion.

Labor costs appeared to be the biggest factor. The company gave all its workers a 10 percent raise at the beginning of the year and then went on a hiring splurge.

More than half of the new staff is working on products and services to supplement the search advertising network, which makes most of Google's money. The new growth opportunities include video ads on Google's YouTube site, ads on smartphones, and more banner advertising to lessen the company's dependence on text ads that appear alongside search results and other Web content. The company also is spending more to promote its Web browser, Chrome.

"We are doing what we believe is in the interest for the long term for shareholders by building great businesses and great products," Pichette said in an interview.

AP names ex-ABC exec Westin CEO of licensing group (AP)

Posted: 14 Apr 2011 03:25 PM PDT

By PETER SVENSSON, AP Technology Writer Peter Svensson, Ap Technology Writer – Thu Apr 14, 6:25 pm ET

NEW YORK – Former ABC News President David Westin will lead an agency created to help The Associated Press and other media companies generate more revenue by licensing news content for online use.

The need for more revenue at AP and across the news industry was made clear Thursday at the news cooperative's annual meeting: AP reported a net loss of $14.7 million in 2010, in large part because it reduced the fees it charges to help newspapers and broadcasters offset declining advertising revenue. AP's revenue fell for the second straight year.

AP CEO Tom Curley said the top priority of the News Licensing Group will be to ensure that news providers are paid for content appearing on websites, phones, tablet computers and other devices. Potential customers include websites that run or excerpt content from those news providers without paying for it.

Westin said the licensing group will also benefit large online distributors of news, such as Google. "This will allow them, for the first time ever, to have a single place they can go to, and with a reasonable amount of ease, license whatever they need from a very large number of news providers," he said in an interview.

The licensing group is set to start operations in July with content and data from more than 1,000 publications. It will be owned by its founding news organizations and operate independent of the AP. The AP said more than two dozen newspaper companies have pledged to invest in the licensing group. Neither the AP nor Westin would name them.

The AP also announced Thursday that it would change the formula for determining the fees it collects from U.S. newspapers for the first time in 27 years. The goal is to account for the growing number of readers online and on digital devices.

The new formula, which goes into effect in 2012, will be based on the size of a newspaper's print and digital audiences. It replaces a formula based on print circulation that has been in effect since 1985.

The AP says the new formula won't substantially change the rates newspapers pay. But it could help the AP sell more digital services by making the licensing terms easier to understand.

Traditional news companies have been struggling because of the economic downturn and a shift by advertisers to less expensive alternatives on the Internet and mobile devices. The AP's revenue isn't directly tied to advertising because it makes most of its money selling its services to 1,500 U.S. newspapers, thousands of TV and radio stations and websites.

But the struggles in the industry prompted the AP to lower the fees it charges U.S. newspapers and broadcasters by a combined $80 million during the past two years. In addition, some news companies have cut back on the services they get from the AP. Time Warner Inc.'s CNN dropped the AP, and some newspapers have closed.

AP's revenue fell 7 percent in 2010 to $631 million. Last year was the first time since the Great Depression that revenue had fallen two consecutive years. In 2009, AP had net income of $8.8 million on revenue of $676 million. The 2009 results were helped by the sale of a German division.

U.S. newspapers account for about 20 percent of the AP's revenue. That's about the same amount that the AP gets from online and digital customers, Curley said. More than half of AP's revenue comes from video operations that feed TV stations and cater to the rising demand for news, entertainment and sports clips on websites, smartphones and tablet computers such as the iPad.

Curley said the AP hopes to increase revenue modestly this year by expanding the cooperative's video, Internet and mobile services. As part of its video expansion, the AP is investing $30 million to upgrade its technology to deliver more high-definition video to more than 1,000 broadcasters and websites.

Curley said the News Licensing Group will have three main missions:

• To create a united front for news organizations to negotiate with big Internet companies, the emerging distributors of news content.

• To deter unlicensed use of content.

• To help AP's members create products by providing them data on how their news gets used.

The AP is drawing upon research that began in 2007 to establish an enforcement and payment system loosely modeled after the one operated by the American Society of Composers, Authors and Publishers. ASCAP collects royalties and distributes them to more than 390,000 songwriters and others involved in the creation of music.

The AP would not give any revenue projections for the new licensing group. Westin said the group will start out with 15 to 20 employees, some of whom are coming from the AP. One is AP Vice President and General Counsel Srinandan Kasi, who will leave that job to serve as the new group's chief operating officer and executive vice president.

Westin, 58, stepped down late last year after nearly 14 years as president of ABC News, saying he wanted to pursue other opportunities.

Westin had little background in the news business when he took over in March 1997 from television legend Roone Arledge. He was a partner in a Washington law firm before joining Capital Cities/ABC in 1991 as general counsel.

But Westin led the news division through some difficult moments, including the sudden death from cancer of anchor Peter Jennings and the severe wounding of successor Bob Woodruff in an Iraq bombing.

In his final years on the job, Westin oversaw a 25 percent cut in ABC News' staff, as executives at ABC and current parent company Walt Disney Co. pressured the news division to cut costs.

Even as the AP mines new revenue channels, publishers still own the news cooperative. Eighteen of the 19 board members are from companies that own newspapers; some own broadcast stations, too.

Two members joined for three-year terms: Les Hinton, CEO of Wall Street Journal publisher Dow Jones & Co., and David Thompson, publisher of The Oklahoman. Four directors are leaving: Westin; David Lord, vice chairman of Pioneer Newspapers Inc.; Mike Reed, CEO of GateHouse Media Inc.; and Sam Zell, Tribune Co. chairman.

__

AP Technology Writers Michael Liedtke in San Francisco and Joelle Tessler in Washington, D.C., and AP writer David B. Caruso in New York contributed to this report.

Do We Need an Online Trophy Case For Our Digital Achievements? (Mashable)

Posted: 14 Apr 2011 04:38 PM PDT

Jennifer Van Grove Jennifer Van Grove – Thu Apr 14, 7:38 pm ET

This post is made possible by Microsoft BizSpark as a new part of the Spark of Genius series that focuses on a new and innovative startup each day. Every Thursday, the program focuses on startups within the BizSpark program and what they're doing to grow.

In the digital realm, achievements take the shape of badges, pins, points, stamps and other paraphernalia that startups and games dole out to users who check in at locations, complete tasks or repeat some form of "good" behavior.

To some, these achievements are meaningless baubles. To others, they are trophies to be celebrated with friends. For the latter group there exists Score.ly, a fledgling startup.

Score.ly aggregates badges and activities via APIs from 12 different social media and entertainment sites. On Score.ly, users connect accounts such as Facebook, Twitter, Foursquare, Gowalla, GetGlue, Flickr, XBox Live, Netflix and so forth, and Score.ly grabs their earned achievements, awards badges of its own and then houses them all in user "Folios," short for portfolios.

"It's an online trophy case," founder Elizabeth Fuller explains.

An Online Trophy Case

Fuller, ever-curious about the way in which people choose to represent themselves, has been thinking about the discrepancies between real-world achievements and online accomplishments for years.

She, along with business partner David Leibowitz, started to think specifically around the idea of an online trophy case as a place to collect and share achievements in the summer of 2010. The idea grew into a business after the pair pitched the startup at a Startup Weekend event in New York city and won $10,000 in seed money from AOL Ventures.

Score.ly then launched an alpha version of the site in September and has since go on to receive a tempered response for online denizens. The startup isn't publicly releasing the exact size of its user base, but the number is in the tens of thousands.

Are These Collectors Items?

Not all trophies are created equal. An honorable mention is far less memorable than a first place or grand supreme showing. Does the same stratification exist for digital awards, and which, if any, have lasting value?

And will our children and children's children one day see our online trophies as testaments of real achievement? Will they say, grandma, "I can't believe you unlocked the Douchebag badge on Foursquare? Tell me how you did it!"

Perhaps not. Still, Fuller insists that Score.ly's small user base is actively engaged. "We've noticed that people linger on, and get excited about, the LeaderMap," she says.

The LeaderMap is a portion of the site where Score.ly users can sort a leaderboard of friends by achievements, kudos (Score.ly's answer to the "like"), Twitter followers, Foursquare badges and the rest.

But, Fuller sounds uncertain about what the startup can realistically do with the achievements it aggregates in the long run. Her answer to the question, "What's the point of collecting these things?" is barely tangible. "We're looking at new ways to aggregate and spread this information," she says.

The young startup has plenty of time to explore the "So, what?" question, and it even has a few ideas around monetization that Fuller's not ready to disclose.

So, is this a give-it-time-to-mature startup or a service that celebrates a temporary fad in internet culture? That's for you to decide.

Image courtesy of confidence, comely, Flickr

Series Supported by Microsoft BizSpark

The Spark of Genius Series highlights a unique feature of startups and is made possible by Microsoft BizSpark, a startup program that gives you three-year access to the latest Microsoft development tools, as well as connecting you to a nationwide network of investors and incubators. There are no upfront costs, so if your business is privately owned, less than three years old, and generates less than U.S.$1 million in annual revenue, you can sign up today.

What Windows Mango could mean for the mobile app market (Appolicious)

Posted: 14 Apr 2011 05:30 PM PDT

Google shares slide as profit falls short (AFP)

Posted: 14 Apr 2011 04:10 PM PDT

– Thu Apr 14, 7:10 pm ET

SAN FRANCISCO (AFP) – Google shares fell in after-hours trading on Thursday as the Internet giant's earnings came in slightly below Wall Street expectations, dragged down by rising operating expenses.

The Mountain View, California-based Google reported a first-quarter net profit of $2.3 billion, up from $1.96 billion a year ago.

Net revenue rose 29 percent to $6.54 billion in the quarter which ended on March 31, better than the $6.32 billion expected by analysts, but earnings per share of $8.08 came in below the forecast of $8.11.

Google shares fell 5.36 percent to $547.50 in after-hours trading as investors appeared to be concerned about the surge in operating expenses.

Google said operating expenses were $2.84 billion in the first quarter, or 33 percent of revenue, compared to $1.84 billion in the first quarter of 2010, or 27 percent of revenue.

Google said it added nearly 2,000 full-time employees in the quarter, taking the total to 26,316 as of March 31.

Google has announced plans to hire a record 6,000 workers this year as it does battle with rising social networking stars such as Facebook and Twitter.

New chief executive Larry Page, the Google co-founder who replaced Eric Schmidt last week, has made social a priority at the Internet search giant.

Google chief financial officer Patrick Pichette focused on the increased revenue in a statement and said investment was needed to position Google for the future.

"We had a great quarter with 27 percent year-over-year revenue growth," Pichette said.

"These results demonstrate the value of search and search ads to our users and customers, as well as the extraordinary potential of areas like display and mobile," he said. "It's clear that our past investments have been crucial to our success today -- which is why we continue to invest for the long-term."

In a conference call with financial analysts, Pichette said operating costs were also impacted by a 10 percent across-the-board salary hike for "Googlers" at the beginning of the year.

Google also said Thursday that 350,000 mobile devices running the company's Android software were being activated every day around the world and that three billion Android applications have been downloaded.

Page made only a brief appearance on the conference call, thanking outgoing CEO Schmidt and Jonathan Rosenberg, the company's chief of product development who resigned last week, before turning over the call to Pichette.

"Luxury" ice cream latest hot fad for Indonesian middle-class (Reuters)

Posted: 14 Apr 2011 08:44 PM PDT

By Michael Taylor Michael Taylor – 56 mins ago

JAKARTA (Reuters Life!) – Jakartans love new things, and the rapidly growing middle classes of Indonesia's capital always fight to be first -- whether watching the latest Hollywood blockbuster, owning the newest gadget, or being seen in a trendy bar.

But even the most avid trendspotters have been surprised by the craze for Magnum ice cream that has swept the city since the February opening in central Jakarta of the Magnum Cafe, months after the brand was relaunched in Indonesia by parent company and consumer goods giant Unilever.

The success of the cafe, which features the iconic chocolate-coated ice cream on a stick, is a tribute to the rising power of the middle-class, empowered by robust demand and growing investment in the far-flung archipelago.

The queues snake longer each day as ice cream lovers come in droves, waiting for several hours at peak times. "It's the Belgian chocolate that makes it different to other ice creams," said Githa, a teacher in Jakarta.

"The chocolate is amazing." The cafe offers different ways of enjoying Magnums, from dipping into sauces to Magnum appetizers, main courses, desserts and mocktails. The menu, created by an Italian chef, includes Waffle de Aristocrat, Goblet of Chocolate, Crown Jewel and Truffle Royale. "Since its opening day, the café has received great enthusiasm from ice cream lovers in Jakarta," said Meila Putri Handayani, a senior brand manager at Unilever Indonesia. "During peak time, it takes approximately 2.5 to 3 hours." Handayani declined to give the exact number of Magnums sold but said the cafe sells hundreds each day, with numbers ramping up at the weekend. ECONOMY COOLER? Magnum is not your average ice cream. With a slick advertising campaign aimed at adult ice cream lovers, endorsements for the "luxury" ice cream have come from television stars such as Eva Longoria of Desperate Housewives and Hollywood's Benicio del Toro. Last year, fashion guru Karl Lagerfeld was recruited to help launch Magnum products in the United States. At the Magnum Cafe in Jakarta, a Magnum will cost each punter 12,000 rupiah ($1.38) each, in a nation where the average person lives on less than $6 per day, according to World Bank data from 2009. Magnum's popularity is seen by some economists as further proof that Indonesia's surging economy, the largest in Southeast Asia, is benefiting many, with growth of over 6 percent predicted this year. "The World Bank is always going to make a big point about the income gap, which is always going to be present," said Wellian Wiranto, an economist with HSBC in Singapore.

"Consumption for a long time has been the story for Indonesia, and this is just one way it has been manifesting -- both in terms of the lines ... and the purchasing power," he added, referring to the domestic demand for consumer goods that helps keep the economy armored against global shocks. Ensuring that the economy of 17,000-island Indonesia does not overheat is still a concern for many investors. Helping allay these fears, in February the central bank surprised markets by raising its policy rate by 25 basis points to 6.75 percent from a record low of 6.5 percent. But questions remain about whether this has been successful. "Bank Indonesia has been very reluctantly hawkish -- although the stance it has about currency position, may indeed help cut the price of imported ice-cream," added Wiranto, referring to the bank's policy of allowing the rupiah to appreciate and cut the cost of imported goods. "It takes more than just Magnum to cool down the economy."

(Editing by Elaine Lies)

LightSquared Poised to Build Nationwide 4G Network (PC World)

Posted: 14 Apr 2011 05:50 PM PDT

Paul Kapustka Paul Kapustka – Thu Apr 14, 8:50 pm ET

Can a wholesale provider of 4G wireless services be the catalyst for a new era of competition and innovation in the U.S. wireless marketplace? LightSquared, a new telecom company formed by a hedge-fund billionaire around the guts of a satellite-communications concern, thinks so.

Though the company faces a long list of challenges, LightSquared owns a large, precious swath of licensed wireless spectrum and has the backing of billionaire hedge-fund investor Philip Falcone. These advantages may gives LightSquared enough credibility to attract the partners and investors it will need to succeed.

LightSquared hopes to make its money by selling fast wireless broadband to large established providers who will then resell it to consumers or to local or new providers (such as camera manufacturers, large retailers, and e-reader makers) that are looking for a way to add Internet access to their products without having to build a network to provide it.

The potential payoff for U.S. consumers is a number of new wireless devices and services from providers that are free to focus on innovation and marketing while LightSquared takes care of the network.

Right now, LightSquared faces the daunting task of raising billions of dollars to continue financing its network buildout. It must also assure potential customers that it will successfully do so.The company is increasing its visibility at forums such as the recent CTIA Wireless conference in Orlando, Florida, where CEO Sanjiv Ahuja delivered a splashy keynote address to announce LightSquared's first marquee-name deal--a tentative plan for big-box retailer Best Buy to resell LightSquared's network services when they become available.

Rumors of a possible tower-sharing deal with Sprint Nextel indicate that LightSquared may soon join forces with some much-needed collaborators. A potential public offering of stock could provide an infusion of cash as it strives to begin providing live wireless service before the end of 2011.

Roots in Satellite

In March of last year, Falcone's Harbinger Capital Partners completed a $262.5 million acquisition of SkyTerra Communications Inc., a provider of satellite communications services. Then, on July 10, 2010, LightSquared introduced itself and revealed its plans to offer wholesale wireless broadband services based on the Long Term Evolution (LTE) standard. To build out its nationwide network, LightSquared signed a deal with infrastructure provider Nokia Siemens Networks valued at $7 billion over eight years.

To run the company, Falcone chose telecom industry veteran Ahuja, who had served as CEO of the France-based Orange Group from 2004 through 2007. SkyTerra's major asset was its access to approximately 59MHz of wireless spectrum, most of it in the 1.6GHz frequency range--an ideal footprint for wireless services.

The original plan called for LightSquared to offer a combination satellite and wireless service, but in January the FCC granted LightSquared permission to use its spectrum for wireless-only services. This arrangement will be more affordable to LightSquared and any partners it may contract with, because devices that connect to the network will carry only cellular radios inside, instead of expensive satellite links.

The company still faces some regulatory opposition regarding claims that its network may interfere with weaker Global Positioning Satellite (GPS) transmissions in nearby bands, but LightSquared and the FCC are working together to ensure that GPS signals aren't compromised; more testing results are due this summer.

What Is LightSquared Doing Now?

LightSquared is currently conducting LTE network trials in Baltimore, Denver, Las Vegas, and Phoenix, and says that it plans to launch commercial service before the end of 2011. The company hopes that its network will reach 100 million potential customers before the end of 2012.

Though LightSquared has not announced any retail partner, market, or pricing scheme yet, the company says that devices including data cards, mobile wireless routers, and embedded modules (such as modem chips inside laptops) will account for the first wave of end-user access equipment. Smartphones designed to access the LightSquared network are scheduled for production in 2012, the company says.

In addition to the Best Buy deal, LightSquared has announced some lightly defined deals with Leap Wireless's Cricket brand (for unspecified 4G roaming coverage) and with rural service provider Open Range, in a partnership that is not yet fully defined. The Best Buy deal seems solid and impressive--Best Buy has agreed to resell LightSquared service under its Best Buy Connect brand--but trials won't begin until 2012, and no plans, devices, or markets have been announced.

More Funding Needed

On the funding side, LightSquared is likely to need multiple billions of dollars to build out its planned network, and it hasn't raised anywhere near that amount so far.

Establishing a nationwide 4G network is no easy feat in any case. WiMax operator Clearwire has spent at least $6 billion in developing its 71-market WiMax network, and it is struggling to find more funding.

One recent rumor suggested that LightSquared would sign a deal with Sprint to use Sprint's tower infrastructure to help with its buildout costs. Another rumor floated the prospect of a LightSquared IPO to raise money via the public markets. Both avenues are certainly possible, but each carries risks and conditions that may stall or complicate LightSquared's ambitious plans.

Being a wholesale operator, LightSquared will face tough but indirect competition in the marketplace from Verizon Wireless and AT&T, which is in the midst of a push to gain regulatory approval for acquiring T-Mobile USA, the country's fourth-largest wireless operator.

Another key question about LightSquared is whether device makers will support the network. If Best Buy decides to sell a phone that runs on LightSquared's network, a phone maker must agree to design and bake a LightSquared radio chip into the device.

If LightSquared successfully executes its planned network and service rollout, a new class of wireless carriers may get the opportunity to sell fast 4G LTE service and devices. These operators--which could never have built LTE networks of their own--may enter the market and create some much-needed competition for the AT&T-Verizon LTE duopoly, which may in turn help drive down the prices consumers will pay for 4G service.

In the end, LightSquared's spectrum is a rock-solid asset to fall back on. If the recent $39 billion bid by AT&T for T-Mobile--which AT&T says that it made chiefly to obtain more spectrum--is any indication, LightSquared could turn a profit simply by selling its airwaves to a bigger-budget bidder. But while that outcome might make some investors happy, it would also be a stark reminder of the difficulty of creating something revolutionary in the arena of mobile broadband services.

Paul Kapustka is editor and founder of Sidecut Reports, an independent research firm that specializes in wireless technologies.

What's Really Behind the Prep-School Mom's Twitter Meltdown (The Daily Beast)

Posted: 14 Apr 2011 07:44 PM PDT

Texas father accused of killing infant, toddler (AP)

Posted: 14 Apr 2011 06:42 PM PDT

By ANGELA K. BROWN, Associated Press Angela K. Brown, Associated Press – 2 hrs 58 mins ago

FORT WORTH, Texas – A Texas man sent his ex-girlfriend a cell phone photo showing their infant and toddler sons with a "goodbye" message and then a graphic photo that appeared to show the baby dead — a day before authorities found the youngsters' bodies, two of the mother's friends said Thursday.

Gabriel Armandariz, 28, was jailed on $1.5 million bond on a capital murder charge in Young County, where the two small bodies were found early Thursday after an all-night search triggered by a family member's concerned for their welfare, Graham police said. Armandariz does not yet have an attorney.

Authorities declined to say how the children died in Graham, a rural community about 75 miles northwest of Fort Worth, or release other details about the case.

Two people who work with the children's mother in the West Texas town of Sudan said they saw the cell phone pictures sent from Armandariz, her ex-boyfriend, on Wednesday before she went to police in a nearby town.

Douglas Ames, the woman's boss at the Chuck Wagon restaurant, said she was upset Wednesday afternoon, saying Armandariz had been calling her and saying strange things. One photo sent to the woman's phone Wednesday and obtained by The Associated Press, shows 2-year-old Gatlin and 8-month-old Luke sitting on a bed. Another shows Armandariz lying on a bed with a child on either side of him. Under that photo is the message, "We love u goodbye."

Even after seeing a third disturbing picture that appeared to show Luke dead, the children's mother, Ames and the other co-worker initially were not sure if it was real but went to police anyway, Ames said.

The other co-worker, Cynthia Bradley, said the children's mother was crying and in shock.

She was living in Texas Panhandle — about 250 miles northwest of Graham — with a relative and had been working with an attorney to try to get her sons back from Armandariz, who had taken them a few months ago, Bradley said.

"I've held that baby, and he's a chunk. They were sweet children," Bradley said.

Ames said a fund was being set up at First United Bank to help with funeral expenses.

"She's got to plan a funeral for two babies," Ames said.

Some people on Thursday placed stuffed animals outside the house where the boys had been living in Graham, the Wichita Falls Times Record News reported.

In Texas, a defendant convicted of capital murder can be sentenced to death or life in prison without parole.

Girl Does Really Good Animal Impressions, Delights Web [VIDEO] (Mashable)

Posted: 14 Apr 2011 01:18 PM PDT

Brenna Ehrlich Brenna Ehrlich – Thu Apr 14, 4:18 pm ET

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