Analysis: For tech investors, it’s hard to know when to bolt

(Reuters) – When Hewlett-Packard Co agreed to buy British software company Autonomy in August last year for $ 11.1 billion, two well-known investors made diametrically different bets on how the big deal would play out.

To short seller Jim Chanos, who had been raising red flags on Autonomy for years and had started shorting shares of HP in 2011, the deal was another nail in the coffin of the Silicon Valley tech giant, according to a source familiar with his thinking.

But to activist investor Ralph Whitworth, co-founder of Relational Investors LLC, it was time to commit to HP and the turnaround story the company was trying to sell to Wall Street. His fund bought more than 17.5 million HP shares after the deal was announced, and Whitworth received a seat on the company’s board. This year, Relational roughly doubled its stake in HP.

In the wake of HP’s decision to take an $ 8.8 billion write-down on the deal because of alleged accounting irregularities at Autonomy, it appears Chanos – whose call to short Enron before the energy company collapsed in a corporate scandal may be his most famous trade – was more astute.

HP’s shares are down 36 percent since Relational, which declined to comment, built its stake in the third quarter of 2011.

BARRIERS TO ENTRY

Relational’s big move into HP is a reminder that even smart investors can get things wrong in the fast-evolving technology sector, where once hot global names like Research in Motion and Yahoo can quickly become yesterday’s news.

It is a world where a company may effectively erect barriers to entry in a market only to have them torn down by a rival with a new whizz-bang product – just as Apple‘s iPhone broke the dominance that Research in Motion’s BlackBerry had enjoyed.

One warning sign that a tech company may be on the verge of losing its edge is when it makes acquisitions outside of its main area of expertise to move into new product lines. Savvy tech investors also say be wary of companies that experience a succession of management changes, or when a successful core business starts looking tired.

The pace of change in the technology sector is much faster than in other industries, said Kaushik Roy, an analyst at Hercules Technology Growth Capital. “It attracts new talent and capital, many startups are formed, which can be extremely disruptive to incumbents,” Roy said. “In other words, yesterday’s winners can rapidly become today’s losers and vice versa.”

In the case of HP, the company not only has had four CEOs since 1999, it has been striving to find another niche to dominate as demand for one of its core products – computer printers – wanes and as its PC business stumbles.

Or consider online search pioneer Yahoo, which has gone through six chief executives and is struggling to keep pace with Google.

Josh Spencer, a portfolio manager at T. Rowe Price, said frequent turnover in the executive suite at Yahoo was a warning sign to him. Spencer said he does not own Yahoo shares and has not in the recent past.

RED FLAGS

While a company may view an acquisition as a fresh start – that is what HP was trying to say about Autonomy – some investors see it as a warning the core business is struggling.

Spencer noted that the technology industry’s most successful companies – Apple and Samsung – generally have not made acquisitions and instead developed new products internally.

For Margaret Patel, managing director at Wells Capital Management, one of the first red flags she saw at HP was when former CEO Carly Fiorina bought Compaq for roughly $ 25 billion in 2002.

“I felt then that the acquisition was too large and expensive, and personal computers were not their core strength,” said Patel, who has since avoided investing in HP.

Of course, timing can be everything even if an investor is eventually proven right. Patel missed out on a 137 percent gain in HP’s stock price from the time of the Compaq deal up until the end of 2010.

PREMIUM VALUATIONS

A few money managers see a flashing yellow light in the big sell-off of Apple shares in the past few months.

Apple, the most valuable U.S. company, has shed nearly 30 percent of its value in the last three months.

Since the death of co-founder Steve Jobs – the driving force behind Apple’s iPod, iPhone and iPad – DoubleLine co-founder Jeffrey Gundlach has been recommending that investors short the company’s shares because “the product innovator isn’t there anymore.”

Gundlach said he began shorting Apple’s stock at around $ 610 and maintains that it could drop to $ 425. He declined to comment on Tim Cook, who succeeded Jobs over a year ago and is seen by many as less visionary and innovative than Jobs.

Christian Bertelsen, chief investment officer at Global Financial Private Capital, with assets under management of $ 1.7 billion, said his firm began paring back its exposure to Apple this fall because he felt the expectations for the company’s new iPhone5 had gotten overheated.

He said his firm dramatically took down its exposure to Apple shares when the stock hit $ 670 a share. “For us, the light bulb went off this fall,” he said. Mind you, Apple’s shares still remain up about 25 percent for the whole year.

And then there’s Research in Motion. Once a leader in smartphones, it’s now in danger of becoming irrelevant.

“They saw the move towards all touch-screen phones and didn’t move with it,” said Stuart Jeffrey, an analyst at Nomura Securities who noted how the BlackBerry 10 touch-screen phone will debut on January 30, 2013, six years after Apple released its first iPhone in 2007.

Robert Stimpson, a portfolio manager at Oak Associates Funds whose fund does not own any shares of Research in Motion, said the company’s BlackBerry phones are on a downward slope and it will be tough for the company to regain its lost luster.

“The end of the road is a long, lonely journey,” Stimpson said of Research in Motion. “I think they will fight the good fight for many years, probably unsuccessfully.”

(Reporting by Nicola Leske and Sam Forgione in New York; Editing by Paritosh Bansal, Tiffany Wu, Jennifer Ablan and Matthew Goldstein; Editing by Steve Orlofsky)

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It's husband No. 3 for actress Kate Winslet

NEW YORK (AP) — Kate Winslet has tied the knot again.

The Oscar-winning actress wed Ned Rocknroll in New York earlier this month. The private ceremony was attended by Winslet's two children as well as a few friends and family members, her representative said Thursday.

It is the third marriage for the 37-year-old Winslet. She was previously married to film directors Jim Threapleton and Sam Mendes.

The 34-year-old Rocknroll, who was born Abel Smith, is a nephew of billionaire Virgin Group founder Richard Branson.

The couple had been engaged since last summer.

Winslet won a Best Actress Oscar for her performance in the 2008 film "The Reader."

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Starz will face new, challenging world as public company

Pay-TV channel Starz is trying to chart a new orbit.

Early next year, its parent company, Liberty Media, plans to spin off the premium network and its sister channel Encore into a new, stand-alone, publicly traded company.

Such a move would normally be cause for celebration. But for Starz, the separation comes amid uncertainty.

Its track record producing original shows has been mixed. The market is getting increasingly crowded not only from Starz's traditional competitors, HBO and Showtime, but also from new rivals including Netflix, Amazon and Redbox. And, starting in 2017, the network will lose one of its key suppliers of movies — Walt Disney Studios — to Netflix.

"It's an interesting time for Starz," said Matthew Harrigan, a media analyst with Wunderlich Securities. "Losing those Disney movies makes life a little more difficult, and it becomes even more important for them to create successful original programming."

STORY: On Location

Liberty Media is spinning off Starz in part to make it more attractive to potential buyers. Companies mentioned by analysts as possible suitors include Comcast Corp., parent of Universal Pictures. Other deep-pocketed prospective buyers could be News Corp., Walt Disney Co. and Viacom Inc. HBO and Showtime probably would face anti-trust issues if either of them made a run at Starz.

The shift also raises the stakes for Starz and its chief executive, Chris Albrecht, who has been given the task of building an original programming pipeline. Albrecht, who joined Starz nearly three years ago, has the experience. As the former head of HBO, he was a key architect of that network's success by helping nurture such culture-defining hits as "Sex and the City" and "The Sopranos."

Achieving those heights again, this time at Starz, has proved more elusive. Starz made a splash with its gladiator series "Spartacus," but another high-profile drama, "Boss," about a corrupt Chicago mayor played by Kelsey Grammer ("Frasier"), failed to deliver ratings to match its critical acclaim. "Boss" was canceled after two seasons. Last year's "Camelot," about a young King Arthur, started strong but then fell on its sword.

Starz, which has 20.8 million subscribers in the U.S., has spent the last few years playing catch-up. The network began developing original dramas much later than industry leaders HBO and Showtime, and also lags behind basic cable channels FX, AMC and USA Network.

At the same time, the availability of movies through other venues has increased dramatically, and film fans can just as easily get their fix by buying or renting DVDs — online or at supermarket kiosks — or through Internet streaming services. That makes the need for strong original content even greater.

Starz executives declined to comment for this story, citing the "quiet period" mandated by regulators before the public stock offering.

Hollywood movie studios have a strong incentive to protect the premium channels, which have long served as their unofficial ATMs. The channels, including HBO, Starz and Showtime, spit out hundreds of millions of dollars each year to movie studios in exchange for the first-run TV rights to recent releases. The fees — which can approach $30 million for a single blockbuster film — have helped studios turn deficits into profits for many movies.

The parent companies of HBO (Time Warner), Showtime (CBS Corp.) and Starz (Liberty Media), also have long collected hundreds of millions of dollars each year in profit from the channels in distribution fees from cable and satellite operators. According to consulting firm SNL Kagan, Starz and sister channel Encore this year will generate revenue of $1.34 billion and $414 million in cash flow, a metric similar to operating income.

Just a few years ago, Starz trailed HBO as the No. 2 movie channel in terms of distribution. But it has since been surpassed by Showtime. The CBS Corp. network has staged a string of hits including "Weeds," the serial killer drama "Dexter," the pill-popping dark comedy "Nurse Jackie" and its latest hit, the terrorist thriller "Homeland," which this fall won the Emmy for TV's best drama.

According to SNL Kagan, Showtime has 21 million subscribers and 2012 revenue of $1.6 billion. Cash flow for Showtime and its sister channels TMC and Flix should approach $690 million combined for this year. Showtime's programming expenses are slightly less because it ended its relationships with movie studios several years ago.

"Showtime has been doing something similar [to Starz] with their strategy, but they have programming that people are talking about," said BTIG analyst Richard Greenfield said. "The question is how does Starz stack up?"

Its shows have largely failed to attract the buzz that can drive subscriptions and ratings. "Spartacus" was Starz's most popular show, averaging more than 5 million viewers an episode during the third season when viewing on all platforms was counted. "Magic City," the channel's stylistic drama about Miami gangsters in the 1950s, averaged 3.1 million viewers an episode when it debuted this year, while "Boss" collared just 2.2 million an episode.

Starz is betting heavily on its lineup for next two years, which includes the second season of "Magic City" and the new prospects "Da Vinci's Demons," a drama about Leonardo's early days from David S. Goyer, a co-writer of the "Dark Knight Rises" film trilogy, and "Black Sails," a swashbuckling adventure from "Transformers" and "Pirates of the Caribbean" filmmaker Michael Bay.

The company this year is spending about $692 million on programming, with four-fifths of that amount earmarked for buying products from Disney and Sony Pictures Entertainment, according to SNL Kagan, which said Starz spends less than $100 million annually creating original series.

"They still need the movies to fill their schedule, but at the same time Starz needs some unique programs to define the channel," said Deana Myers, an SNL Kagan television analyst. "It's not an easy market to get into because a lot of other networks are doing original productions."

Although Starz will continue to receive the Disney movies for three years, the eventual loss puts pressure on the company to keep Sony as a supplier beyond 2016, when the parties' current arrangement ends. The loss of Disney movies and the coming end of the Sony contract could also complicate the picture as Starz tries to attract a new owner.

Potential suitor Viacom already has a presence in the premium channel business. The parent of Paramount Pictures teamed in 2009 with two other studios, Lions Gate Entertainment Corp. and Metro-Goldwyn-Mayer Studios Inc., to launch the movie service Epix. The upstart has struggled to make distribution deals with leading cable and satellite TV systems. That could make a merger between Epix and Starz enticing. Given that Epix is not nearly as powerful as HBO and Showtime, such a deal may also be able to pass regulatory muster.

meg.james@latimes.com

joe.flint@latimes.com

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Deadly storm moves on to Northeast

A massive storm system upended post-Christmas travel plans Wednesday as it marched toward the Northeast after dumping snow and sleet on the middle of the country and producing tornadoes through the South on Christmas Day.

The storm stretched from Michigan to Florida and had been blamed for seven deaths so far.

The nation's airlines had canceled more than 1,800 flights and delayed more than 9,000 by at least 15 minutes, mostly into and out of Dallas, Philadelphia, Cleveland, Chicago, Indianapolis and New York, according to the airline monitoring website Flightstats.com.

PHOTOS: Northeast braces for winter storm

Los Angeles International Airport, the nation's fifth-busiest, has been largely spared the impact of the storm, with only a handful of delays and cancellations Wednesday, to airports including New York's John F. Kennedy International and Chicago's O'Hare International.

The storm could dump 12 to 18 inches of snow from the lower Great Lakes to northern New England, the National Weather Service said.

A tornado watch had been in effect for part of the day in eastern North Carolina and northeastern South Carolina.

"It is a significant storm in terms of its size and its range of impacts from severe weather to winter weather," said Chris Vaccaro, spokesman for the weather service.

The storm was expected to clear most of the mid-Atlantic states Wednesday night, the service said, and northern New England could expect steady snow starting Thursday morning.

On Christmas Day alone, the weather service received 34 reports of tornadoes in eastern Texas, Alabama, Louisiana and Mississippi, Vaccaro said.

A twister touched down in Mobile, Ala., on Tuesday, blowing roofs off homes and knocking down trees and power lines. Several mobile homes north of the city were toppled, but no serious injuries were reported.

"Right now it's cleanup and damage assessment," said Donald Leeth, plans and operations officer with the Mobile County Emergency Management Agency.

The storm caused tens of thousands of customers to lose power across Alabama, but most had it back by Wednesday.

Snow and ice hit Arkansas hard, with about 200,000 customers losing power. Gov. Mike Beebe declared a statewide disaster Wednesday. The Arkansas Department of Emergency Management said two counties had opened shelters for those without heat.

The department received a report that a man died when a tree fell on his house in Saline County. Two children died on Christmas when the car they were in crossed the center line of an icy Arkansas highway and struck an SUV.

In Oklahoma, two people were killed in separate crashes Tuesday.

On Christmas, the storm's winds were blamed for toppling a tree onto a pickup in Texas, killing the driver, and for knocking another tree onto a house in Louisiana, killing a man there, the Associated Press reported.

Mississippi Gov. Phil Bryant declared a state of emergency for several counties after the storm injured more than 25 people.

The New York City Office of Emergency Management issued a travel advisory for Wednesday evening through Thursday morning, citing forecasts of "snow with sleet and freezing rain." The area was also under a high wind warning, with gusts of up to 60 mph possible, Vaccaro said.

The worst of the weather should be gone by Friday, he said. "Come Friday morning, it will largely be a sunny day across the eastern third of the country."

andrew.khouri@latimes.com

Times staff writer Hugo Martin contributed to this report.

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Patrick Dempsey brews up coffee shop purchase

LOS ANGELES (AP) — Patrick Dempsey says he wants to rescue a coffee house chain and more than 500 jobs.

The "Grey's Anatomy" star said Wednesday he's leading a group attempting to buy Tully's Coffee. The Seattle-based company filed for Chapter 11 bankruptcy protection in October.

Dempsey said he's excited about the chance to help hundreds of workers and give back to Seattle.

The actor has a strong TV tie to the city: He plays Dr. Derek Shepherd on "Grey's Anatomy," the ABC drama set at fictional Seattle Grace Hospital.

Tully's has 47 company-run stores in Washington and California, as well as five franchised stores and 58 licensed locations in the U.S.

Any sale would have to be approved by a judge. A bankruptcy court hearing is set for Jan. 11 in Seattle.

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New York’s Mental Health System Thrashed by Services Lost to Storm

Marcus Yam for The New York Times

Dr. Richard Rosenthal of Continuum Health Partners, which owns Beth Israel, Roosevelt and St. Luke's hospitals, said he noticed more mentally ill people in the streets now  than he had in years.

When a young woman in the grip of paranoid delusions threatened a neighbor with a meat cleaver one Saturday last month, the police took her by ambulance to the nearest psychiatric emergency room. Or rather, they took her to Beth Israel Medical Center, the only comprehensive psychiatric E.R. functioning in Lower Manhattan since Hurricane Sandy shrank and strained New York’s mental health resources.

The case was one of 9,548 “emotionally disturbed person” calls that the Police Department answered in November, and one of the 2,848 that resulted in transportation to a hospital, a small increase over a year earlier.

But the woman was discharged within hours, to the shock of the mental health professionals who had called the police. It took four more days, and strong protests from her psychiatrist and caseworkers, to get her admitted for two weeks of inpatient treatment, said Tony Lee, who works for Community Access, a nonprofit agency that provides supportive housing to people with mental illness, managing the Lower East Side apartment building where she lives.

Psychiatric hospital admission is always a judgment call. But in the city, according to hospital records and interviews with psychiatrists and veteran advocates of community care, the odds of securing mental health treatment in a crisis have worsened significantly since the hurricane. The storm’s surge knocked out several of the city’s largest psychiatric hospitals, disrupted outpatient services and flooded scores of coastal nursing homes and “adult homes” where many mentally ill people had found housing of last resort.

One of the most affected hospitals, Beth Israel, recorded a 69 percent spike in psychiatric emergency room cases last month, with its inpatient slots overflowing. Instead of admitting more than one out of three such cases, as it did in November 2011, it admitted only one out of four of the 691 emergency arrivals this November, records show. Capacity was so overtaxed that ambulances had to be diverted to other hospitals 15 times in the month, almost double the rate last year, in periods typically lasting for eight hours, officials said.

Dr. Richard Rosenthal, physician in chief of behavioral services for Continuum Health Partners, Beth Israel’s parent organization, said he was proud of how much Continuum’s hospitals had done to handle psychiatric overflow since storm damage shuttered Bellevue Hospital Center, the city’s flagship public hospital; NYU Langone Medical Center; and the Veterans Affairs Hospital. But these days, he said, as he walks on Amsterdam Avenue between Continuum’s Roosevelt hospital on West 59th Street and its St. Luke’s hospital on West 114th Street, he notices more mentally ill people in the streets than he has seen in years.

“When you have the most vulnerable folks, all you need is one chink in the system and you lose them,” Dr. Rosenthal said. “Whether they lost their housing, or the outpatient services they usually go to were closed and they were lost to follow-up, they have become disconnected, with predictable results.”

Similar patterns are playing out in Brooklyn, where Maimonides Medical Center has been overwhelmed with mental health emergencies from the Coney Island vicinity since Coney Island Hospital, one of the city’s largest acute care psychiatric hospitals, suspended operations, hospital officials said.

“Triage has reached a different level: You have to get sicker to get in,” said Dr. Andrew Kolodny, the chairman of psychiatry at Maimonides, citing a 56 percent increase in psychiatric emergency room visits there from Oct. 26 to Dec. 7, compared with the same period last year, and a 24 percent rise in admissions. The increase in admissions was possible only with emergency permission from the state to exceed licensed limits.

“Not only is there decreased capacity, because Bellevue and Coney Island are off line,” Dr. Kolodny added, “but there’s increased demand because the storm or the loss of their residence has been a stressor for mental illness.”

The storm battered a mental health system that still relies heavily on private nursing homes and substandard adult homes to house people with mental illness. Such institutions have a sordid history of neglect and exploitation, and the courts have repeatedly found that their overuse by the state isolated thousands of people in violation of the Americans With Disabilities Act.

Plans are under way to increase supportive housing — dwellings where mentally ill people can live relatively independently, with support services. But even before Hurricane Sandy, the expansion fell far short of demand.

The storm underscored the fragility of the system. Many disabled evacuees who were sent first to makeshift school shelters lost access to the psychiatric medications that kept their symptoms at bay, Dr. Kolodny said. Even those lucky enough to have the drugs they need are at greater risk of relapse as they experience crowded living conditions. “If they’re now sleeping in a gym with 100 people, that can tip them over the edge and start making them really paranoid,” he said.

On Staten Island, where the chief of psychiatry at Richmond University Medical Center says psychiatric resources have been stretched to the limit, clergy members report that mentally ill people transferred to a large adult home in New Brighton from one that was washed away in Far Rockaway, Queens, are now showing up at church rectories, begging for socks and underwear.

“It’s heartbreaking, because they just found us by chance,” said Margaret Moschetto, a missionary at the Church of Assumption-St. Paul in New Brighton. “They were just walking around the neighborhood. They really didn’t know where they were.”

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Toyota to pay big to settle suits

Toyota Motor Corp., moving to put years of legal problems behind it, has agreed to pay more than $1 billion to settle dozens of lawsuits relating to sudden acceleration.

The proposed deal, filed Wednesday in federal court, would be among the largest ever paid out by an automaker. It applies to numerous suits claiming economic damages caused by safety defects in the automaker's vehicles, but does not cover dozens of personal injury and wrongful-death suits that are still pending around the nation.

The suits were filed over the last three years by Toyota and Lexus owners who claimed that the value of their vehicles had been hurt by the potential for defects, including floor mats that could cause the vehicles to surge out of control.

ROAD TO RECALL: Read The Times' award winning coverage

In addition, Toyota said it is close to settling suits filed by the Orange County district attorney and a coalition of state attorneys general who had accused the automaker of deceptive business practices. The costs of those agreements would be included in a $1.1-billion charge the Japanese automaker said it will take against earnings to cover the actions.

"We concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers," Christopher Reynolds, Toyota's chief counsel in the U.S., said in a statement.

Toyota's lengthy history of sudden acceleration was the subject of a series of Los Angeles Times articles in 2009, after a horrific crash outside San Diego that took the life of an off-duty California Highway Patrol officer and his family.

Under terms of the agreement, which has not yet been approved in court, Toyota would install brake override systems in numerous models and provide cash payments from a $250-million fund to owners whose vehicles cannot be modified to incorporate that safety measure.

In addition, the automaker plans to offer extended repair coverage on throttle systems in 16 million vehicles and offer cash payments from a separate $250-million fund to Toyota and Lexus owners who sold their vehicles or turned them in at the end of a lease in 2009 or 2010. The total value of the settlement could reach $1.4 billion, according to Steve Berman, the lead plaintiff attorney in the case.

The lawsuits, filed over the last several years, had been seeking class certification.

News of the agreement comes scarcely a week after Toyota agreed to pay a record $17.35-million fine to the National Highway Traffic Safety Administration for failing to report a potential floor mat defect in a Lexus SUV. Those come on top of almost $50 million in fines paid by Toyota for other violations related to sudden acceleration since 2010.

The massive settlement does not, however, put Toyota's legal woes to rest. The automaker still faces numerous injury and wrongful death claims around the country, including a group of cases that have been consolidated in federal court in Santa Ana, and other cases awaiting trial in Los Angeles County.

The first of the federal cases, involving a Utah man who was killed in a Camry that slammed into a wall in 2010, is slated for trial in mid-February.

The California cases are set to begin in April, among them a suit involving a 66-year-old Upland woman who was killed after her vehicle allegedly reached 100 miles per hour and slammed into a tree.

Edgar Heiskell III, a West Virginia attorney who has a dozen pending suits against Toyota, said he is preparing to go to trial this summer in a case that involved a Flint, Mich., woman who was killed when her 2005 Camry suddenly accelerated near her home.

"We are proceeding with absolute confidence that we can get our cases heard on the merits and that we expect to prove defects in Toyota's electronic control system," he said.

Toyota spokesman Mike Michels said the settlement would have no bearing on the personal injury cases.

"All carmakers face these kinds of suits," he said. "We'll defend those as we normally would."

The giant automaker's sudden acceleration problems first gained widespread attention after the August 2009 crash of a Lexus ES outside San Diego.

That accident set off a string of recalls, an unprecedented decision to temporarily stop sales of all Toyota vehicles and a string of investigations, including a highly unusual apology by Toyota President Akio Toyoda before a congressional committee. Eventually Toyota recalled more than 10 million vehicles worldwide and has since spent huge sums — estimated at more than $2 billion, not including Wednesday's proposed settlement — to repair both its automobiles and public image.

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Lakers snap Christmas Day streak with win over Knicks

Lakers 100, Knicks 94 (final)

The Lakers closed out the New York Knicks on Christmas Day to win their fifth in a row, avenging a Dec. 13 loss in New York, the low point of the season during a four-game losing streak. 

The Lakers haven't dropped a game since.

With the Lakers up by three points, Pau Gasol found a lane to the basket from the high post and flushed down a dunk to seal the victory with 11.6 seconds left.  Steve Nash, in his second game back from a leg injury, scored 16 points and dished 11 assists.

The Lakers shot 48.1% from the field but it was their defense that was instrumental in the victory, holding New York to only 16 points in the fourth quarter.

The Knicks shot 42.7% from the field despite 34 from Carmelo Anthony (13-23 shooting), who exploded in the third quarter to give the Knicks a nine-point lead.  The Lakers never led by more than five points.

Kobe Bryant also scored 34 points on 14-for-24 shooting.  Metta World Peace fouled out after scoring 20.  For the second consecutive game, Pau Gasol had six assists.

Knicks center Tyson Chandler also fouled out, finishing with six points and nine rebounds.  J.R. Smith helped carry the offensive load for New York with 25 points.

The Lakers will play on Wednesday night against the Nuggets in Denver.

Knicks 78, Lakers 77 (end of third quarter)

The Lakers survived a 17-point quarter from Carmelo Anthony to close to within one point after three quarters.

Falling behind by as many as nine points after halftime, the Lakers had a chance to go up by a point but Kobe Bryant missed a pair of free throws with 2.6 seconds left in the quarter.

Anthony climbed to 27 points for the game on 11-for-20 shooting while his Knicks shot 43.8% through three.  J.R. Smith contributed 20 points off the bench.

The Lakers were led by Bryant's 26 points on 11-for-18 shooting, while getting 18 points from Metta World Peace and 14 from Steve Nash.

Some of New York's lead was earned from behind the three-point line with eight makes in 22 tries.  The Lakers shot 48.3% from the field but only five of 18 (27.8%) from three-point range.

World Peace started the second half in place of Darius Morris but Anthony had the hot hand.

Lakers 51, Knicks 49 (halftime)

For the second consecutive quarter, the Lakers closed well against the Knicks. After New York's reserves had helped push the Knicks to a six-point advantage, the Lakers rallied to take a two-point lead at halftime.

Carmelo Anthony and Metta World Peace battled through a very physical period, challenging each other in the post. Anthony finished the half with 10 points while World Peace had a game-high 16 points after coming off the Lakers' bench.

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Jessica Simpson's Christmas gift: She's pregnant

NEW YORK (AP) — Jessica Simpson's daughter has the news all spelled out: "Big Sis."

Simpson on Tuesday tweeted a photo of her baby daughter Maxwell playing in the sand, the words "Big Sis" spelled out.

The 32-year-old old singer and personality has been rumored to be expecting again. The tweet appears to confirm the rumors.

"Merry Christmas from my family to yours" is the picture's caption. Simpson used a tweet on Halloween in 2011 to announce she was pregnant with Maxwell. She is engaged to Eric Johnson and gave birth to Maxwell in May.

One possible complication regarding her pregnancy: She is a spokeswoman for Weight Watchers.

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Op-Ed Contributor: Our Failed Approach to Schizophrenia

TOO many pendulums have swung in the wrong directions in the United States. I am not referring only to the bizarre all-or-nothing rhetoric around gun control, but to the swing in mental health care over the past 50 years: too little institutionalizing of teenagers and young adults (particularly men, generally more prone to violence) who have had a recent onset of schizophrenia; too little education about the public health impact of untreated mental illness; too few psychiatrists to talk about and treat severe mental disorders — even though the medications available in the past 15 to 20 years can be remarkably effective.

Instead we have too much concern about privacy, labeling and stereotyping, about the civil liberties of people who have horrifically distorted thinking. In our concern for the rights of people with mental illness, we have come to neglect the rights of ordinary Americans to be safe from the fear of being shot — at home and at schools, in movie theaters, houses of worship and shopping malls.

“Psychosis” — a loss of touch with reality — is an umbrella term, not unlike “fever.” As with fevers, there are many causes, from drugs and alcohol to head injuries and dementias. The most common source of severe psychosis in young adults is schizophrenia, a badly named disorder that, in the original Greek, means “split mind.” In fact, schizophrenia has nothing to do with multiple personality, a disorder that is usually caused by major repeated traumas in childhood. Schizophrenia is a physiological disorder caused by changes in the prefrontal cortex, an area of the brain that is essential for language, abstract thinking and appropriate social behavior. This highly evolved brain area is weakened by stress, as often occurs in adolescence.

Psychiatrists and neurobiologists have observed biochemical changes and alterations in brain connections in patients with schizophrenia. For example, miscommunications between the prefrontal cortex and the language area in the temporal cortex may result in auditory hallucinations, as well as disorganized thoughts. When the voices become commands, all bets are off. The commands might insist, for example, that a person jump out of a window, even if he has no intention of dying, or grab a set of guns and kill people, without any sense that he is wreaking havoc. Additional symptoms include other distorted thinking, like the notion that something — even a spaceship, or a comic book character — is controlling one’s thoughts and actions.

Schizophrenia generally rears its head between the ages of 15 and 24, with a slightly later age for females. Early signs may include being a quirky loner — often mistaken for Asperger’s syndrome — but acute signs and symptoms do not appear until adolescence or young adulthood.

People with schizophrenia are unaware of how strange their thinking is and do not seek out treatment. At Virginia Tech, where Seung-Hui Cho killed 32 people in a rampage shooting in 2007, professors knew something was terribly wrong, but he was not hospitalized for long enough to get well. The parents and community-college classmates of Jared L. Loughner, who killed 6 people and shot and injured 13 others (including a member of Congress) in 2011, did not know where to turn. We may never know with certainty what demons tormented Adam Lanza, who slaughtered 26 people at an elementary school in Newtown, Conn., on Dec. 14, though his acts strongly suggest undiagnosed schizophrenia.

I write this despite the so-called Goldwater Rule, an ethical standard the American Psychiatric Association adopted in the 1970s that directs psychiatrists not to comment on someone’s mental state if they have not examined him and gotten permission to discuss his case. It has had a chilling effect. After mass murders, our airwaves are filled with unfounded speculations about video games, our culture of hedonism and our loss of religious faith, while psychiatrists, the ones who know the most about severe mental illness, are largely marginalized.

Severely ill people like Mr. Lanza fall through the cracks, in part because school counselors are more familiar with anxiety and depression than with psychosis. Hospitalizations for acute onset of schizophrenia have been shortened to the point of absurdity. Insurance companies and families try to get patients out of hospitals as quickly as possible because of the prohibitively high cost of care.

As documented by writers like the law professor Elyn R. Saks, author of the memoir “The Center Cannot Hold: My Journey Through Madness,” medication and treatment work. The vast majority of people with schizophrenia, treated or untreated, are not violent, though they are more likely than others to commit violent crimes. When treated with medication after a rampage, many perpetrators who have shown signs of schizophrenia — including John Lennon’s killer and Ronald Reagan’s would-be assassin — have recognized the heinousness of their actions and expressed deep remorse.

It takes a village to stop a rampage. We need reasonable controls on semiautomatic weapons; criminal penalties for those who sell weapons to people with clear signs of psychosis; greater insurance coverage and capacity at private and public hospitals for lengthier care for patients with schizophrenia; intense public education about how to deal with schizophrenia; greater willingness to seek involuntary commitment of those who pose a threat to themselves or others; and greater incentives for psychiatrists (and other mental health professionals) to treat the disorder, rather than less dangerous conditions.

Too many people with acute schizophrenia have gone untreated. There have been too many Glocks, too many kids and adults cut down in their prime. Enough already.

Paul Steinberg is a psychiatrist in private practice.

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