Thursday, September 30, 2010

Nokia Ships New N8 Smartphone

The Wall Street Journal

Nokia Corp. said Thursday it has started shipping its much-anticipated N8 smartphone, having warned only last week that it would hold shipments to do some final amendments.

Preorder customers were due to receive the phone by the end of September, but will now have to wait until October. The mobile-phone company warned last week that deliveries would be pushed back a few weeks, without explaining what had gone wrong.

However, Nokia said Thursday that customers who have preordered the phone will be the first to receive it. Market availability will vary by country and operator, with broad availability in coming weeks, the company added.

Nokia, based in Espoo, Finland, said it had decided to hold the N8 shipments for some time to make some final changes, spokeswoman Maija Taimi said. The Nokia N8 will reach most of the company's main markets over the next few weeks, she said, adding that its other new smartphones based on the upgraded Symbian 3 operating platform—the E7, C6 and C7—will start shipping before the end of the year.

"The Nokia N8 has received the highest amount of consumer preorders in Nokia history," Jo Harlow, senior vice president of smartphones, said in a written statement, adding that 100 wireless operators have been signed up to offer the phone.

Nokia hopes the N8, with a new version of Symbian software, will compete with rival high-end smartphones from Apple Inc. and those based on Google Inc.'s Android software, but the launch has been dogged by delays to the development of the Symbian 3 software used in the phone as well as last week's unexplained problems.

The N8 comes with a 12-megapixel camera and high-definition video capabilities.

The phone will be priced at €370, or about $500, in Europe, excluding taxes and subsidies.

Analyst Greger Johansson at Redeye said investors are relieved that the N8 will now be widely available to consumers ahead of the holiday season, when sales tend to be particularly high.

The N8 will sell at a relatively high price so it should be able to give Nokia's profit margins a boost, he added. Nokia's new smartphone doesn't match Apple's iPhone in terms of services and application availability, but it could still sell well in the wider smartphone market because it offers good hardware for its price, Mr. Johansson said.

BlackBerry PlayBook to take on the iPad

USA Today

BlackBerry-maker Research In Motion just unveiled its answer to Apple's iPad -- the BlackBerry Playbook.

The tablet PC is aimed at professionals, who already make up RIM's core market. Here's how it compares to the iPad:

                                        BlackBerry PlayBook                 
Screen size                       7 inches                                          
Weight                             0.9 pounds                                      
Thickness                         0.4 inches                                        
Storage                            1 GB                                               
Connectivity                    Wi-Fi + cellular through a BlackBerry
Cameras                          Two (front and back)                                      

                                       Apple iPad (several models available)
Screen size                      9.7 inches
Weight                            1.5 pounds or 1.6 pounds
Thickness                        0.5 inches
Storage                           16, 32, or 64 GB
Connectivity                    Wi-Fi or Wi-Fi + cellular through AT&T
Cameras                         None

Research in Motion showed off the tablet for the first time Monday and is set to launch it early 2011, with an international rollout later in the year. With it RIM is betting on a smaller, lighter device than Apple's iPad, which kicked-started the tablet market when it launched in April.

The PlayBook will have a 7-inch screen, making it half the size of the iPad, and weigh about to the iPad's. And unlike the iPad, it will have two cameras, front and back.

The PlayBook will be able to act as a second, larger screen for a BlackBerry phone, through a secure short-range wireless link. When the connection is severed — perhaps because the user walks away with the phone — no sensitive data like company e-mails are left on the tablet. Outside of Wi-Fi range, it will be able to pick up cellular service to access the Web by linking to a BlackBerry.

But the tablet will also work as a standalone device. RIM co-Chief Executive Jim Balsillie said its goal is to present the full Web experience of a computer, including the ability to display Flash, Adobe Systems's format for video and interactive material on the Web. That means the tablet will be less dependent on third-party applications or "apps," Balsillie said.

"I don't need to download a YouTube app if I've got YouTube on the Web," said Balsillie, who leads the company along with co-CEO Mike Lazaridis.

Apple CEO Steve Jobs has resisted allowing Flash on any of the company's mobile gadgets, arguing the software has too many bugs and sucks too much battery life.

"Much of the market has been defined in terms of how you fit the Web to mobility," Balsillie said. "What we're launching is really the first mobile product that is designed to give full Web fidelity."

In part, the PlayBook is a move by RIM to protect its position as the top provider of mobile gadgets for the business set. Balsillie says he has had briefings with company chief information officers and "this is hands-down, slam-dunk what they're looking for."

Analysts agree that RIM's close relationship with its corporate clients could help the company establish a comfortable niche in the tablet market despite Apple's early lead.

"We do think that RIM has a play with enterprise customers because it has established relationships with so many businesses, and its technology is so deeply integrated with their IT departments," IDC analyst Susan Kevorkian said.

RIM is using a new operating system, built by QNX Software Systems, which it took over earlier this year, to harness the power of the tablet, but Balsillie said it will run existing apps for BlackBerry phones.

IDC predicts that the corporate market for tablet computers will grow as a portion of overall sales over the next few years. The firm forecasts that roughly 11% of overall tablet shipments, or 6.5 million units, will be to businesses, government agencies or schools by 2014. That would be up from just 2%, or 300,000 units, this year. And that figure doesn't count those who buy tablet computers on their own and use them for work.

RIM doesn't want the PlayBook to be just for work — the company invited video game maker Electronic Arts to help introduce the Playbook at an event in San Francisco on Monday — but it's clear that its advantages will lie in the work arena.

The iPad has prompted a wave of competitors, so RIM won't be alone going after the tablet market. Computer maker Dell came out with its own tablet computer in August called the Streak. Samsung Electronics plans to launch the Galaxy Tab next month and has already lined up all four major U.S. carriers to sell it and provide wireless service for it. Cisco Systems is also going after business customers with a tablet called the Cius early next year.

Wednesday, September 29, 2010

HP Provides Rosy Outlook, No Guidance on New CEO

Associated Press

Hewlett-Packard Co. offered a rosy financial outlook Tuesday without giving any guidance on the biggest issue hanging over the world's largest technology company: the identity of its next CEO.

The leading maker of personal computers and printers has been looking for a new leader since its board pressured Mark Hurd, its CEO of five years, to step down in an early August scandal revolving around allegations of sexual harassment and deceptive expense reports.

Although HP didn't shed any light on its CEO search at Tuesday's analyst meeting, its current executives left little doubt that they believe the company will prosper no matter who is at the helm.

The company's interim CEO, Cathie Lesjak, told analysts HP's per-share earnings for its fiscal year ending in October 2011 will range from $5.05 to $5.15, excluding certain accounting items related to its recent acquisition spree. That would be up by as much as 14 percent from this year and ahead of the average estimate of $4.99 per share among analysts polled by Thomson Reuters.

Next year's revenue is expected to total $131.5 billion to $133.5 billion, an increase of 5 percent to 7 percent. Analysts were looking for $131.4 billion in revenue.

The projections reflect HP's confidence that it can boost profit margins as it expands into consulting services, computer security and storage while maintaining its lead in PCs and printers. The company also expects to keep grabbing market share through acquisitions, having already spent about $31 billion buying 35 companies during the past four years.

One of those recent acquisitions, Palm Inc., will provide the operating system for a computer tablet that HP plans to introduce next year to compete against Apple Inc.'s popular iPad. HP spent $1.8 billion to snap up the long-struggling Palm while Hurd was still CEO.

Until he was forced out, Hurd had delighted Wall Street by consistently increasing HP's earnings, largely through mass layoffs and other cost cutting. Investor doubts about whether HP will do as well without Hurd calling the shots have contributed to a 10 percent drop in the company's stock price since the board forced him out.

HP shares gained 36 cents to close Tuesday at $41.62, then added another 42 cents in extended trading.

The company, based in Palo Alto, anticipates a "robust" recovery in its stock price next year, Lesjak said. If the shares remain in a funk, HP plans to buy back more of its stock in an effort to boost the price.

There had been some speculation that HP might introduce Hurd's replacement Tuesday, but the company only provided a glimpse at some of his possible replacements.

This group includes: Todd Bradley, who oversees HP's personal computer division; Ann Livermore, who runs the company's rapidly expanding technology services; and Vyomesh "VJ" Joshi, who steers HP's highly profitable printer-ink operations.

Most analysts have anointed Bradley as the front-runner if HP promotes from its own ranks.

Without mentioning names, Lesjak said HP has been considering CEO candidates from inside and outside the company. She gave no indication when the board might announce its decision.

Lesjak, who is also HP's chief financial officer, has previously said she has no interest in holding the top job on a permanent basis.

Some investors reacted earlier Tuesday to rumors that HP was poised to hire Apple Inc.'s chief operating officer, Tim Cook, as its CEO. But that speculation died down after Gleacher & Co. analyst Brian Marshall told various media outlets that Cook had informed him that he planned to stay at Apple.

"He said he's happy at Apple and that the rumors (about him leaving) are ridiculous," Marshall said in an interview with The Associated Press.

The encounter occurred at a Palo Alto coffee shop, Marshall said, and Cook "had an iPad with him, not a HP notebook, so I don't think he is going anywhere."

Apple spokesman Steve Dowling declined to comment on the rumors about Cook and HP.

Tuesday, September 28, 2010

Kno Offers a Second, Lighter Tablet

NY Times

Most of the companies that hope to take on Apple in the white-hot market for tablets are industry giants like Dell, Google, HP, Microsoft and Samsung. But among the startups looking to become tablet contenders, Kno stands out.

I first wrote about Kno in June, when the company unveiled a dual-screen tablet aimed at college students. The knock against the chunky, 14-inch screen was its heft; it weighs 5.5 pounds, or nearly four times more than Apple’s iPad, and each slab was more than half an inch thick.

It seems as if the criticism was heard. On Monday, months before the first tablet, called the Kno, will ship, the company is unveiling a second model. The new Kno is a single-screen version of the previous device. Both are expected to begin shipping in December.

“From the college perspective, the overwhelming feedback is that the dual panel is great, but some students think a single panel is better for them,” said Osman Rashid, a founder and the chief executive of Kno. “At the end of the day, we don’t want to lock anyone out of our system because of form factor.” Mr. Rashid said the single-panel model is likely to appeal to the K-12 market in particular.

Kno’s mission is to create not only hardware, but also a software system geared for students that will allow them to read textbooks, take notes and perform other tasks. The software system is expected to work not only on Kno’s tablets, but also on PCs, iPads and other devices.

Shedding half its bulk and weight is certainly a move in the right direction for Kno.

Among the tablet’s biggest fans is Marc Andreessen, the Netscape founder who is now a venture capitalist and a director at eBay, Facebook, Hewlett-Packard and Skype. Mr. Andreessen recently led a $46 million round of financing for Kno. That brought the total raised by the startup to $55 million.

Whether that is enough to help Kno break into the tablet market remains to be seen.

Malware Hits Computerized Industrial Equipment

NY Times

The technology industry is being rattled by a quiet and sophisticated malicious software program that has infiltrated factory computers.

The malware, known as Stuxnet, was discovered by VirusBlokAda, a Belarussian computer security company in July, at least several months after its creation.

Security experts say Stuxnet attacked the software in specialized industrial control equipment made by Siemens by exploiting a previously unknown hole in the Windows operating system.

The malware is the first such attack on critical industrial infrastructure that sits at the foundation of modern economies.

It also displays an array of novel tactics — like an ability to steal design documents or even sabotage equipment in a factory — that suggest its creators are much more sophisticated than hackers whose work has been seen before. The malware casts a spotlight on several security weaknesses.

Eric Chien, the technical director of Symantec Security Response, a security software maker that has studied Stuxnet, said it appeared that the malware was created to attack an Iranian industrial facility. Security experts say that it was most likely staged by a government or government-backed group, in light of the significant expertise and resources required to create it. The specific facility that was in Stuxnet’s crosshairs is not known, though speculation has centered on gas and nuclear installations.

Since it was unleashed, Stuxnet has spread to plants around the world., affecting operations and warehouse material handling. Siemens said it had received 15 reports from affected customers, 5 of which were located in Germany. All of these sites successfully removed the malicious program, which can be detected and removed by commercial antivirus programs.

“Up to now there have been no instances where production operations have been influenced,” the company said in an e-mailed statement.

Security researchers initially believed Stuxnet’s primary purpose was espionage because of its ability to steal design documents for industrial control systems. But more in-depth study of the program, which is extremely large and highly complex by malware standards, has revealed that it can also make changes to those systems.

Exactly what Stuxnet might command industrial equipment to do still is not known. But malware experts say it could have been designed to trigger such Hollywood-style bedlam as overloaded turbines, exploding pipelines and nuclear centrifuges spinning so fast that they break.

“The true end goal of Stuxnet is cyber sabotage. It’s a cyber weapon basically,” said Roel Schouwenberg, a senior antivirus researcher at Kaspersky, a security software maker. “But how it exactly manifests in real life, I can’t say.”

Stuxnet’s remarkable sophistication has surprised many security professionals. Its authors had detailed knowledge of Siemens’ software and its security weaknesses. They discovered and used four unknown security flaws in Microsoft’s Windows operating system. And they masked their attack with the aid of sensitive intellectual property stolen from two hardware companies, Realtek and JMicron, which are located in the same office park in Taiwan.

“It’s impossible this was created by some teenager in his basement,” Mr. Chien said. “The amount of resources and man hours to put this together,” he said, show “it has to be something that was state originated.”

2010 Technology Innovation Awards

The Wall Street Journal
Among the winners: computer screens that can bend, adjustable eyeglasses, a low-cost genetic test, an online marketplace for receivables and a new way to battle malware
The world is still dealing with the effects of a severe economic crisis. But judging from the results of this year's Wall Street Journal Technology Innovation Awards, there's no crisis in tech innovation.

The Journal's independent panel of judges decided to give out awards to 49 entries this year, equal to the previous record in 2006. More than a quarter of them are from outside the U.S.

"An economic downturn simply couldn't constrain the awesome innovation energy that exists around the world," says Scott D. Anthony, managing director of Innosight Ventures and one of the judges of the awards. "It gives one a lot of hope for the future."

At the top of the list this year was Taiwan's Industrial Technology Research Institute, or ITRI, which won the Gold award for its work in developing high-quality displays made from materials that can be bent or folded. Zoom Focus Eyewear LLC took the Silver award for its TruFocal eyeglasses, which allow the wearer to manually adjust the focus, depending on whether he or she needs to see something close up or at a distance. And the Bronze award went to Counsyl Inc., for a low-cost test that covers more than 100 genetic disorders.

This year—the awards' 10th—the Journal received 597 applications from companies, organizations and individuals in 30 countries. Journal editors reviewed the entries and forwarded about 275 to a panel of judges from research institutions, venture-capital firms and other companies. From that pool, the judges chose 49 for awards.

The judges assessed the applications on three criteria:

—Does the innovation break with conventional ideas or processes in its field?

—Does it go beyond marginal improvements on something that already exists?

—Will it have a wide impact on future technology in its field or in other fields?

As you'll see in our report, we cover a lot of ground in 17 categories, from computing systems to wireless. Yes, there are some gadgets, as one might expect in a technology contest. But there are also innovations that will improve the quality of life for many people around the world, such as MIT Mobility Lab's wheelchair that can travel on practically any terrain. Or the environmental innovations that promise cleaner air and water.

As Mr. Anthony says: "A number of the applicants have the potential to literally change the world."

Monday, September 27, 2010

Austin is at the Center of ARM's Rising Challenge to Intel

Austin American-Statesman

On a warm Friday afternoon in early September, many of the workers at ARM Holdings' chip design center on South MoPac Boulevard convened on the roof of the nearest parking garage to celebrate.

They put on their company T-shirts, drank beer or margaritas and hung out under shade canopies while listening to rock music.

They weren't exactly kicking out the jams, but they were celebrating a job well done: the completion of a major new chip project.

ARM had announced the completion of "Eagle" — officially called the Cortex A-15 processor — a few days before. The new design, which probably won't show up in products until 2012, dramatically expands the capabilities of ARM's product line and the kinds of markets it can serve.

The Eagle had landed right in the middle of a computer market dominated by Intel Corp., the biggest and toughest chip company in the world.

Although ARM is based nearly 4,900 miles away in Cambridge, England, Austin is becoming an important focal point for the company. Four years ago, the Austin team designed the Cortex A-8, which these days is being used in smart phones and tablet computers, including Apple Inc.'s popular iPad. The A-15 could extend ARM's reach into energy-efficient computing, wireless base stations and power-efficient Web servers.

"Our team is square in the middle of ARM's strategy," said Ken Reimer, ARM's design center manager in Austin. "For me, there is no better place to do processor design."

ARM, with about 1,700 workers worldwide, is a smallish chip company that punches far above its weight. That's partly because it licenses many of its designs to some of the biggest chipmakers in the world, including Samsung Electronics Co. Ltd., Texas Instruments Inc. and STMicroelectronics NV.

Analysts say TI and Samsung probably paid millions of dollars to be partners in the Eagle project, taking part in detailed discussions about the processor as it was being designed. Not only could they influence the design that evolved, but their engineering teams also got an early look at the technical characteristics of the new processor, so they could plan their own specialized versions of it in the years ahead. (ARM says the licensing fees and other payments it receives from its partners are confidential.)

"On Eagle, we are all over it," said Keith Hawkins, who heads Samsung's newly created processor design team in Austin. "It is a big part of our future."

Samsung is intent on passing Intel to become the world's largest chipmaker, and expanding its production and sales of low-power processors is a big part of its expansion plans.

In Austin, ARM's team has grown to more than 190 people, including chip designers, sales, marketing and support workers, who work with ARM's many partners. Those customer companies turn ARM designs into about 4 billion chips a year, used in everything from smart phones to computer disk drives and industrial control equipment.

Ahead of the power curve

From its earliest days, ARM has focused on chip designs that minimize electrical consumption. Chips that use less power can be used in more products and require fewer engineering steps to keep them running cool.

Whereas many personal computers use chips that consume as much power as a 100-watt light bulb, ARM chips typically use a fraction of a watt. That miserly power usage makes ARM chips a natural for battery-powered mobile devices and for other products for which power savings are crucial.

In Austin, the company has built an engineering team from veterans of other companies, including Texas Instruments, IBM Corp., Advanced Micro Devices Inc. and Freescale Semiconductor Inc.

Newcomers pick up quickly on the company's relentless focus on reducing power consumption. Every thousandth of a watt counts.

They also tune in to the company's collaborative style. New ideas count, but they are frequently challenged and must be proved to be superior.

"Ideas, no matter where they come from, are openly challenged at all levels," said Kerry McGuire, ARM's manager of strategic alliances in Austin. "There is the sense that if you believe in your idea, you will pursue it, and if it is a good idea, it will survive."

ARM focused on power consumption before the rest of the electronics industry realized how important low-power design would become. Now the entire industry is power-aware.

The industry once focused on performance for PCs and servers, but "the entire industry is now driven by mobile devices," said analyst Jim McGregor with technology research firm In-Stat. "Power efficiency is a key factor in all they are working on — even at the server level. It's a dramatic change, and it brings the whole industry around toward ARM."

Squaring up against an industry heavyweight

Intel, formerly an ARM partner, has morphed into a competitor. Intel acquired an Austin-based ARM design effort in 1998 and later sold the business to Marvell Technology Group in 2006.

While it was selling off that business, Intel was stepping up its effort on a new family of low-power Windows-compatible chips called Atom aimed at mobile products. Atom has become a big seller for Intel, especially in the emerging category of smaller, power-efficient subnotebook computers.

While Intel attempts to stretch toward low-power applications, the company dominates the market for processors that go into servers, the workhorse computers that do the heavy lifting involved in running the Internet and much of the world's business and technical computing.

It's a market where ARM had never openly challenged Intel — until now. One of the potential markets for the Eagle chip is seen as low-power Internet servers that do the repetitive work of fetching information for Web users.

To underscore its new interest in the server market, ARM is one of the investors in Smooth-Stone Inc., an Austin startup that aims to create complex server chips from a basic ARM design. Smooth-Stone thinks there is an important market developing among Web companies that want to buy large quantities of low-power servers to handle their sites.

Analyst Joe Byrne sees the coming rivalry between ARM and Intel as a contrast between two companies with different histories and very different business models. Intel, with its enormous revenue and profit, controls everything about its chips — from the engineering design to the manufacturing and the marketing and sales.

But ARM is a much smaller company that gets by with a lot of help from its friends. It had $489 million in revenue last year, compared with Intel's $35 billion.

ARM licenses its basic chip designs to a wide variety of partners that turn them into more specialized commercial products. ARM makes far less profit from the chips it designs, but it works with many customers, each of which takes its own risks on making and selling its end products.

"The fact that they spread their bets is very good for them," Byrne said. "They don't care if TI loses to Qualcomm Inc. because they supply designs to both companies. They have a lot of horses in the race."

ARM's top executives downplay the budding rivalry with Intel. "People want there to be this David-and-Goliath struggle between us and Intel," CEO Warren East told The New York Times recently. "It just isn't that way."

But in Austin, ARM managers know their new chips are starting to tread on Intel's turf.

"In Austin, we have Intel squarely in our view," McGuire said. "We want to defend our place in the mobile market and go after Intel's stronghold in computing and servers."

Sunday, September 26, 2010

Six Tech Firms Settle Federal Hiring Probe

The Wall Street Journal

The Justice Department and six leading technology companies reached a settlement Friday over civil charges that the companies violated antitrust law by agreeing not to poach each other's skilled employees.

The settlement prevents Google Inc., Apple Inc., Intel Corp., Adobe Systems Inc., Intuit Inc. and Walt Disney Co. unit Pixar Animation from agreeing not to solicit, recruit or compete for each other's talent. The companies didn't admit wrongdoing or pay a fine under the settlement.

The deal allows both sides to come away with something while avoiding the risk of fighting the case in court. The Justice Department can say it halted conduct it found improper, while the companies can maintain their position that their agreements were legal and avoid the potential consequence of a court loss—a wave of lawsuits brought by employees.

The Justice Department alleged that senior executives at the companies agreed not to cold-call each other's workers. For example, the department said, Apple and Google had such an agreement since at least 2006, while Google had similar agreements with Intel and Intuit since at least 2007.

The Justice Department said the agreements amounted to a form of collusion to restrict competition. It said cold-calling is an important way for high-tech companies to recruit highly skilled employees.

"The agreements … distorted the competitive process," Justice Department antitrust lawyer Molly Boast said in a statement.

In statements, representatives of Intel, Intuit, Adobe and Google said they didn't believe their actions violated the law. They predicted settling the matter wouldn't affect their ability to do business. Apple and Pixar didn't immediately respond to requests for comment.

Amy Lambert, associate general counsel for Google, said in a blog post that the search giant agreed not to cold-call employees at partner companies "to maintain a good working relationship," but dropped the policy last year. She said there was no evidence the policy hindered hiring or affected wages.

Laura Fennell, Intuit's general counsel, said her company has "agreed to disagree with the DOJ on the issue of any wrongdoing in this matter."

Intel spokesman Chuck Mulloy said the company "is settling the matter because it believes it would not harm the company or its ability to do business."

Adobe spokeswoman Holly Campbell said "we firmly believe that our recruiting policies have been consistent with the antitrust laws and have in no way diminished competition for talent in the marketplace."

The Justice Department has been investigating hiring practices in the technology industry for more than a year. The companies argued they needed to be able to offer each other assurances that they wouldn't lure away star employees if they were to collaborate.

Until this probe, policing the labor markets hadn't been a central focus of antitrust enforcers. The department said Friday it is continuing to investigate other no-solicitation agreements.

Friday, September 24, 2010

Microsoft Sells $4.75 Billion of Bonds With Portions at Record-Low Coupons‏


Microsoft Corp., one of four non- financial U.S. companies with AAA ratings, sold $4.75 billion of bonds, including three- and five-year maturities at the lowest coupons on record.

The company’s $1 billion of 0.875 percent notes due in 2013 and $1.75 billion of 1.625 percent debt maturing in 2015 have the lowest interest rates of more than 3,500 securities in the Barclays Capital U.S. Corporate Index of investment-grade company debt.

The world’s biggest software maker sold the bonds a day after its board boosted its dividend and approved the issuance of as much as $6 billion in new debt. The offering came as yields on investment-grade debt fell to 3.718 percent, the lowest level since daily records began on Oct. 31, 1986, according to Bank of America Merrill Lynch index data.

“A name like Microsoft is always going to garner the biggest and best investors,” said Anne Daley, managing director at Barclays Capital in New York, which helped underwrite the sale.

Microsoft, based in Redmond, Washington, also sold $1 billion each of 10- and 30-year bonds, according to data compiled by Bloomberg. The 4.5 percent, 30-year debt tied for the lowest coupon with an issue last month from Johnson & Johnson.

Cash Held Overseas

Proceeds from Microsoft’s sale may be used to fund working capital, capital expenditures, stock buybacks and acquisitions, the company said today in a regulatory filing. The company also plans to pay for dividends and share repurchases because much of its cash is held overseas, a person familiar with the matter said last week.

Peter Wootton, a Microsoft spokesman, wasn’t available to comment today.

The 3-year notes yield 25 basis points more than similar- maturity Treasuries; the 5-year debt pays a 40 basis-point spread; the 3 percent securities due in 2020 pay 55 basis points; and 30-year bonds pay 83 basis points, Bloomberg data show. A basis point is 0.01 percentage point.

Spreads on investment-grade debt rose 1 basis point today to 184 basis points, Bank of America Merrill Lynch index data show.

Standard & Poor’s and Moody’s Investors Service also rank Exxon Mobil Corp., Johnson & Johnson and Automatic Data Processing Inc. as AAA, or an equivalent Aaa, the same level they assign to U.S. government debt.

Higher Dividend

Microsoft reported $36.8 billion in cash and short-term investments at the end of last quarter. Much of that is held overseas, forcing the company to pay taxes on any of the money used for dividends or stock repurchases.

Microsoft boosted its quarterly dividend by 3 cents, or 23 percent, to 16 cents a share yesterday.

The dividend and share repurchase programs reflect Microsoft’s commitment to returning capital to shareholders and confidence in its long-term growth prospects, Chief Financial Officer Peter Klein said yesterday in a statement.

“You can take it as a sign of soft expected future stock- market performance,” said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “Microsoft doesn’t have a lot of acquisition opportunities, doesn’t have a lot to do internally, apparently, with this capital, so they’re giving it back to shareholders.”

Debut Sale

Microsoft sold its first bond in May 2009, a $3.75 billion offering, in a bid to diversify its capital structure and add to its cash pile for acquisitions, capital expenses and share buybacks. The sale comprised $2 billion of 2.95 percent, 5-year notes; $1 billion of 4.2 percent, 10-year debt; and $750 million of 5.2 percent, 30-year bonds.

In June, Microsoft raised $1.15 billion of interest-free financing from its first sale of convertible bonds.

“It’s a perfect storm for issuers right now between low rates, tight spreads and the fact that investors continue to have cash to put to work,” Daley said. “We expect the active new issue calendar to continue.”

In addition to Barclays, Citigroup Inc. and JPMorgan Chase & Co. helped underwrite today’s sale.

Verizon Picks McAdam to Lead in Era of Apple, Google


In 2008, Lowell McAdam, head of Verizon Wireless, introduced an unlimited wireless calling plan for $99.99 a month that sparked investor concerns he was starting a price war.

The company argued the plan would boost revenue over time as customers used their mobile phones more, and AT&T Inc. and T- Mobile USA Inc. matched the move within hours. McAdam, who this week was named Verizon Communications Inc.’s chief operating officer and heir apparent, had a clear vision for the future that has helped his company succeed, said Larry Babbio, a former president of Verizon Communications, co-owner of Verizon Wireless with Vodafone Group Plc.

“He understood the business not just intellectually, but intuitively,” Babbio, now a senior adviser at Warburg Pincus in New York, said in an interview. “Lowell was able to create a vision for the entire company, and then he was able to execute in every element of the business.”

His skills helped McAdam, 56, build Verizon Wireless into the biggest wireless business in the U.S. Now McAdam, who started his private-sector career in 1983 as the old Ma Bell was being broken into pieces, will need those skills to help Verizon succeed in an industry being remade by Apple Inc. and Google Inc.

“It’s a changing landscape,” Blair Levin, a fellow at the Aspen Institute in Washington, said in an interview. “There’s a whole new set of issues, new rules of the road.”

McAdam’s Sept. 20 promotion puts him in line to succeed Chief Executive Officer Ivan Seidenberg, who is expected to retire by his 65th birthday in December 2011. McAdam and Seidenberg declined to comment through spokesman Marquett Smith.

Verizon’s Struggles

The appointment comes as Verizon is struggling with the loss of traditional telephone customers. Though the company has come to rely increasingly on Verizon Wireless, the largest wireless business in the U.S., for revenue growth, that growth is slowing as more people get mobile phones. Verizon’s sales may shrink in 2010 for the first time in five years, according to the estimates of analysts surveyed by Bloomberg.

Companies such as Verizon need to figure out new approaches to business, Levin said. The challenge, he said, is that a company like Google is both partner and rival. Google markets mobile applications that compete with Verizon’s products, even as Android phones operate on Verizon Wireless.

McAdam will have to be ready to capitalize on the opportunities for cooperation, while competing where needed, Levin said.

“His leadership qualities have been pretty clear from my dealings with him,” said Levin, who crafted the U.S. broadband plan with telecom and Internet companies while he worked at the Federal Communications Commission. “An important part of that is political leadership.”

McAdam’s Early Years

McAdam grew up in upstate New York. His family owned a farm machinery business and McAdam would fiddle with welding and machining tools, while his father ran the shop, according to an interview McAdam did last year with the University of San Diego.

He got his MBA from USD after receiving a bachelor’s degree in engineering at Cornell University. In between the two schools, he was an engineer in the U.S. Navy, serving in San Diego and Okinawa, according to an interview with a veterans’ publication.

McAdam is still a tinkerer. In his spare time, he restores old cars, particularly 1970s-era muscle cars. One recent project was fixing up one car built as a pacer for the 1969 Indianapolis 500, according to the USD video.

“He has a well-documented love of cars, and he restores classic cars,” said David Pyke, dean of the San Diego business school, where McAdam graduated in 1983. “Some people do their roses, and he’s in his workshop making really old, ugly looking cars look fabulous.”

Fine-Tuning Verizon

McAdam has been fine-tuning Verizon Wireless ever since he took over at the beginning of 2007. He helped engineer the acquisition of Alltel Corp., which allowed the company surpass AT&T as the largest wireless company in the U.S.

He has also championed the Android smartphones made by Motorola Inc. and HTC Corp., helping the company compete against AT&T, the exclusive carrier for the iPhone in the U.S. Android phones outsold the iPhone and the BlackBerry from Research In Motion Ltd. in the U.S. in the second quarter, according to researcher Gartner Inc.

McAdam has also led the push toward fourth-generation wireless technology, called long-term evolution. The technology will debut later this year with speeds similar to what customers get on fixed broadband connections at home. To promote the new service, McAdam oversaw the creation of labs for building LTE products, as well as a $1.3 billion venture capital fund.

Succession Planning

Verizon Communications rose 7 cents to $32.39 in New York Stock Exchange composite trading at 4 p.m. The shares have increased 4.6 percent this year.

Babbio said that Seidenberg, who has been Verizon’s only CEO since it was created in 2000, has been planning for his retirement for years. Six or eight years ago, Verizon’s management chose a handful of potential successors and put them in roles that would illustrate their abilities, he said.

McAdam’s work since then has convinced Seidenberg he’s the right person to lead Verizon as it faces such dramatic change, Babbio said.

“Your primary job as a manager is to leave this company in the hands of somebody that is better than you are,” Babbio said. “I don’t think Ivan’s ashamed to say that he’s going to leave the company in the hands of someone better than he is.”

Thursday, September 23, 2010

Thailand's Bid for High-Speed Internet Stalled

Associated Press

Thailand's bid to catch up with neighboring countries on advanced telecommunications technology has stalled after a court Thursday ruled to suspend a bidding process for 3G licenses.

The ruling means more delays for bringing the fastest Internet technology to Thailand, which is one of the only countries in Southeast Asia without third-generation capabilities. Poorer neighbors such as Cambodia and Laos already have 3G, which allows faster upload and download speeds.

The Supreme Administrative Court upheld a lower court's injunction against a much-awaited 3G mobile license auction organized by the National Telecommunications Commission, saying the agency did not have the authority to put the licenses up for bidding.

The court also dismissed an argument from the commission, which said the absence of 3G network would hinder the performance of state agencies and other public service providers.

The auction must now wait until the Constitutional Court determines if the National Telecommunications Commission has the authority to hold the sale - or until Parliament moves to set up a new regulator. The auction was originally scheduled for Monday.

State-run CAT Telecoms Plc. had initially appealed to the Central Administrative Court to block the auction, saying its interests would be damaged and the country's telecoms regulator had no authority to offer the licenses. CAT Telecoms objects to the sale of the licenses to private firms because it says 3G customers will be able to use the 2G network the company currently provides to its customers but wouldn't be paying for it - their fees would be going to their 3G provider, instead.

CAT Telecom argued the National Telecommunications Commission cannot sell the licenses because it was formed under Thailand's 1997 constitution, which was replaced after the 2006 coup. The new Constitution, approved in 2007, requires a new independent body to regulate the mobile phone network frequency.

"The NTC must put on hold the 3G license auction until this court case is over," said the judge. Should the auction go on, it would "lead to more damage and would be difficult to solve afterward."

Until the new auction takes place, the court ordered the commission to return the auction deposits, of 1.28 billion baht ($41.6 million) each, to the three bidders, Advanced Info Service Pcl., Total Access Communication Pcl., and True Corp Pcl.

Prime Minister Abhisit Vejjajiva said Wednesday his government wanted to see 3G services available in Thailand as soon as possible.

Dell CEO flashes 7-inch Android Tablet Computer

Associated Press

Dell is working on a 7-inch tablet that runs Google's Inc.'s Android operating software.

Not much else is publicly known about the computer. Dell Inc. CEO Michael Dell flashed it briefly Wednesday at Oracle's annual conference in San Francisco, but offered no hard details. Dell Inc. spokesman Matthew Parretta declined to say when the prototype would go on sale.

Dell is just one of many consumer electronics companies scrambling to crack the computer industry's most compelling new niche. Apple Inc.'s iPad proved consumers are interested and willing to pay - the company sold 3.3 million in the first quarter iPads were available. Some analysts say iPads have already started eating away at laptop sales.

Just as Apple's iPhone set the bar for the smart phone industry, the iPad, with its 9.7-inch screen, is now the reference point for future tablets, making it harder for companies with a different vision to compete.

Dell's first move in the modern tablet space was a much smaller gadget called the Streak, which went on sale in August. It has a 5-inch screen and runs a version of Android; it can also make phone calls on AT&T's network.

The Streak got a chilly reception, with critics saying the device was too awkward to use as a giant phone and too small to use as a computer. The response highlights another of the industry's biggest challenges: resolving the identity crises that crop up when devices try to do too many things at once.

Wednesday, September 22, 2010

Sony Enhances PlayStation to Take On Nintendo's Wii

The Wall Street Journal

If you're still just pressing buttons to play video games, now you have another reason to get up off the couch and really get into the action of a video game.

This week, Sony's PlayStation 3 continues the motion sensor video-gaming trend with its PlayStation Move ( Move comes in a $100 bundle for people who already own the PlayStation 3, or $400 for the system and the bundle.

Nintendo helped spark this trend in 2006 with its Wii, a video-game console, which is played using remotes with built-in motion sensors. The Wii inspired all sorts of people to play video games—including some who never played one before—because its remotes weren't intimidating and worked with gestures familiar to people, like swinging a tennis racket or rolling a bowling ball.

Sony's PlayStation move takes this concept a step further. Its Move motion controller remote has three built-in sensors and a sphere on one end, making it look a bit like a microphone. The sphere's position can be tracked in 3-D space by a camera called the PlayStation Eye, which plugs into the PlayStation 3 and sits atop your TV. This camera lets the PlayStation know how you're moving the controller and where you're holding it. Instead of a camera, the Wii uses a sensor bar that emits infrared signals detected by the Wii remote.

Sony claims these enhancements give PlayStation Move precision and accuracy, and for the most part, I found this to be true. I especially liked when virtual images of the equipment I was "using" appeared on the TV screen, which made it seem like I was actually holding a bat, sword or tennis racket. I was so engaged with the on-screen images, I almost forgot I had a controller in my hand.

My experiences with the Nintendo Wii, which costs $200 less than the PlayStation Move and PlayStation 3 combined, have always been enjoyable. I've found many of the Wii's games to be approachable for almost anyone. Nintendo helped its cause a year ago when it brought out the Wii MotionPlus—a small accessory that plugs into the Wii remote to give its gestures added sensitivity; in my tests, it worked well. The Wii's action will be enough for some not-so-serious video-game players not willing to pay more for another console.

The PlayStation Move will get some competition in November when Microsoft releases Kinect for the Xbox 360. This video-game console tracks body movements but doesn't require a remote control. Instead, gestures like hand waves work to control games, making one's entire body a sort of remote control.

I'm not a serious gamer. As always, this column is written for mainstream consumers and I tested PlayStation Move with those people in mind. I played games like table tennis and disc golf from the Sports Champions game that comes with the PlayStation Move bundle, as well as downloadable titles like a precision block-building game called Tumble.

I also played EyePet, a game that involves taking care of a creature by washing it, dressing it in stylish costumes and playing with it.

In games like Tumble, I found that the PlayStation Move motion-control remote generated precise movements such as the ability to tilt a cube exactly the way I wanted to get it to stand on a stack of five blocks—or in one case, accidentally cause the stack to crash to the ground. Likewise, while I played table tennis, I quickly figured out how a slight flick of my wrist could generate more spin on the ball in a way that felt more realistic than with the Nintendo Wii.

I was impressed by the detailed animation and scenes in the PlayStation Move games that I played. In disc golf, for example, I played against three opponents who each had their own set of unique celebration flips or dances. And the golf courses in the game showed trees and water hazards that looked pretty realistic. A special bird's eye view followed my disc's trajectory from the second I flicked the wrist holding my motion controller until it landed.

EyePet is especially fun—and not just for kids. I named my EyePet "Domino" and taught it to jump through a hoop that virtually appeared on-screen at the end of my remote. I gave Domino a "checkup" by turning the motion controller into an X-ray-like device. This told me his brain needed a boost of creativity but his heart was happy.

There are currently 15 games that will work with PlayStation Move and a spokesman for Sony says 15 additional games will be available by the holiday season. The average price for these games is $40, though downloadable games cost less, including the $10 Tumble.

The $100 PlayStation Move bundle has the motion controller, PlayStation Eye camera and a game called Sports Champions, which includes disc golf, gladiator dual, archery, beach volleyball, bocce and table tennis.

The PlayStation Eye camera can track four controllers at once, though some games—like Start the Party—are designed to let people pass their controllers from one person to the next. Other webcams can't be substituted for the PlayStation Eye to use with the PlayStation 3.

A $20 shooting attachment fits over the controller and makes it look and act like a handgun. This can be used in first-person shooter games like Killzone 3, due out in February, as well as in arcade shooter types of games like The Shoot, available in October. (I didn't get these games in time to test them.)

If you already own a PlayStation 3, you'll enjoy the added precision and fun that the $100 PlayStation Move bundle offers. But for casual gamers who don't want to spend so much, the less expensive Nintendo's Wii will probably suffice.

Oracle, HP, Intel, IBM Foresee a Boom in Tech Spending

USA Today

Acquisition fever at Oracle, Hewlett-Packard, Intel and IBM probably won't cool down anytime soon; not with corporations, big government and large organizations — the so-called enterprise sector — poised to spend trillions on the next generation of digital systems.

Tech research firm Gartner this week forecast that enterprises worldwide will spend $232 billon on software alone this year, up 4.5% from 2009.

Meanwhile, overall spending for hardware, software and IT services should hit $3.4 trillion this year and $3.5 trillion in 2011.

The tech giants are anticipating that enterprises will build out new, cutting-edge networks tuned to extract valuable insights from the massive caches of data they've amassed.

Growth will come to those organizations that productively use this new intelligence in near-real-time, on PCs, smartphones and mobile devices.

Intel CEO Paul Otellini used a descriptor for this movement at Intel's Developers Forum in San Francisco two weeks ago.

He called it "pervasive computing."

Otellini described a world where enterprises routinely access not just raw data, but valuable business intelligence applied to that data, "anywhere, any time and in any way," says Charles King, principal analyst at Pund-IT.

Oracle, Intel, IBM and HP are in the race to assemble lower-cost, more streamlined hardware and software components that mesh well and can deliver business intelligence in near-real-time.

The tech rivals are striving to "integrate and control the correct pieces" and be the most successful at "providing functionalities that work in concert, so that it's like a symphony," says Mike Workman, CEO of data storage company Pillar Data Systems.

The projected beneficiaries: airlines, utilities, health care companies, retailers or any business in possession of lots of data.

IBM on Monday announced that it is buying business intelligence software and hardware maker Netezza for $1.7 billion.

That follows HP's acquisition of storage company 3Par and tech-security firm ArcSight; Intel's acquisition of anti-virus supplier McAfee and the wireless division of German tech company Infineon; and Oracle's six acquisitions this year, including swallowing up Sun Microsystems.

"IBM's acquisition of Netezza is yet another validation of just how important advanced analytics is in the business world right now," says Barry Zane, chief technical officer of business intelligence software maker ParAccel. "There is no question the industry is hot right now."

More buyouts of smaller tech companies developing cutting-edge storage and security systems and innovative business-intelligence applications seem likely as the tech giants pursue the winning blueprint, says Jack Gold, principal analyst at J. Gold Associates.

"The ability to store all business applications and data centrally and to make it all available to users is a very powerful paradigm shift," Gold says. "It requires cheap and fast networks."

Workman gives database giant Oracle, and its new Exadata line of storage servers, the early lead.

Oracle juiced up Exadata by integrating its flagship database software into Sun's high-end computer servers, he says.

IBM's acquisition of Netezza, supplier of technology that competes directly against Exadata, came as no surprise to Workman.

Intel and HP likewise remain in shopping mode as they try to "integrate various systems to arrive at a solution that will kick the other guy's butt," Workman says.

Monday, September 20, 2010

BlackBerry Gets Squeezed by Rivals

The Wall Street Journal

BlackBerry maker Research In Motion Ltd. posted a surge in quarterly profit and revenue, though it added fewer new subscribers than it had expected amid intensifying competition in the U.S.

RIM said it shipped 12.1 million devices to wireless carriers and stores in its fiscal second quarter, up 45% from a year ago. But the company added 4.5 million net new BlackBerry subscribers in the quarter, down from 4.9 million in the preceding quarter. It had expected to add between 4.9 million to 5.2 million accounts in the period.

Co-CEO Jim Balsillie said subscriber growth initially was hurt by competing products entering the market during the summer and by weakness in Middle East markets due to concerns local service could be interrupted due to disputes with governments over security issues.

Mr. Balsillie said RIM remains in discussions with India and the United Arab Emirates to resolve concerns about their inability to monitor encrypted communication over BlackBerrys and is optimistic about a positive resolution.

The Canadian company has long held sway over the corporate market for smartphones. But it is falling behind Apple Inc. and makers of devices based on Google Inc. software in the race to sell high-end phones to consumers. Apple launched its iPhone 4 on June 24, and Verizon Wireless rolled out updates to its Droid line this summer.

RIM launched the Torch, which has a touchsreen and slide-out keypad, with just over two weeks remaining in the quarter, which ended Aug. 28. Mr. Balsillie said the launch was the most successful in the company's history, but he didn't disclose how many units sold.

Analysts have warned that initial sales have been weak. RIM said it expects stronger sales and subscriber gains in the third quarter, when the Torch, which launched exclusively with AT&T Inc., will hit more markets.

Mr. Balsillie said subscriber additions were particularly soft early in the second quarter but strengthened following the release of the Torch and remained stronger in the current quarter.

RIM, however, said it will stop forecasting subscriber additions or disclosing its average selling prices after December—two closely watched gauges of its business.

RIM's failure to keep up with the iPhone and Android devices in the consumer market is starting to erode its hold on business customers, as employees press their companies to let them use their personal devices at work. Over the past year, Apple and Google have been upgrading their software to attract corporate clients.

Research firm IDC expects BlackBerry to lose business market share for the first time this year. IDC forecasts that BlackBerry world-wide will drop to 36.4% from 39.9% last year. Meanwhile, Apple's iPhone is expected to rise to 8.7% from 8%, Android is expected to increase to 1.1% from 0.4%, and Microsoft Corp.'s Windows will jump to 27.8% from 25.6%.

"RIM is under a significant threat, and we now expect the contribution to earnings of the corporate segment to shrink going foward," wrote Sanford Bernstein analyst Pierre Ferragu, which surveyed companies and found nearly three-quarters are preparing to support non-BlackBerry devices.

Staying competitive may require price cuts. In February, RIM released a free version of its enterprise server for small and medium sized businesses. The software only works with Microsoft email software and supports up to 2,000 users with a separate computer server and limited ability to monitor and control phone usage.

Alex Yanez, telecommunications engineer at retailer Patagonia Inc., said RIM has also been cutting its prices of the standard BlackBerry server and software. "The server license and the seat license has come down quite a bit," said Mr. Yanez. Prices "have come down very much."

A RIM spokeswoman wouldn't comment on price cuts.

Opera Gets Sales Boost as Carriers Target Apple, Nokia Services


Opera Software ASA sees operators such as Vodafone Group Plc bringing in more revenue as carriers seek to wrest a piece of the $226 billion market for mobile services away from Apple Inc., Google Inc. and Nokia Oyj.

The Norwegian maker of desktop and mobile-phone Web browsers is building service platforms with 12 of the world’s 30 biggest carriers, including AT&T Inc. and Vodafone, Chief Executive Officer Lars Boilesen, 43, said in an interview.

“There’s a battle going on between the brand manufacturers and the operators, and we may be betting a little more on the operators,” Boilesen said. “We’re going for all of them.”

Apple, Google and Nokia have built software and media download shops to capture customers’ cash and loyalty, frustrating operators who want to expand services beyond ringtones and screen wallpapers. Some operators are using Opera’s software to fight back as new mobile broadband networks in countries such as Russia and India make it easier for customers to load their phones with extras.

Phone companies use the Opera Mini browser to present content and applications on cheaper handsets, paying the Oslo- based company between 1 euro ($1.31) and 3 euros per active user a year, Boilesen said. Operators generated more than 30 percent of Opera’s 168.9 million kroner ($27.7 million) in sales in the second quarter and are set to increase.

The Opera Mini versions developed with carriers have grown from almost no users at the start of the year to 5.2 million revenue-generating users at midyear, according to the company.

‘Cup of Tea’

Vodafone turned to Opera to get customers in Egypt, South Africa and Turkey to use e-mail and look at job advertisements. Compression technology lets the browsers run fast on older devices and 2G networks.

“Opera provides full Internet access to a customer whose mobile phone may be his only access to the Internet,” said Jonathan Bill, head of markets for Vodafone Internet Services. The cost is “typically the price of a cup of tea in whatever market we’re in.”

The global mobile value-added service market is set to grow to $340 billion in 2014 from $200 billion last year and $226 billion this year, led by China, India and Indonesia, according to a July report from researcher Informa Telecoms & Media. The figures include revenue to handset vendors and other content providers for services accessed over mobile networks.

Convincing Operators

“The operator needs to be convinced the incremental revenue will be more than they’re paying Opera,” said Peder Strand, an Oslo-based analyst at SEB Enskilda Bank, who has a “buy” recommendation on Opera.

Spun off in 1994 from Telenor ASA, the Nordic region’s largest phone company, Opera sold shares in 2004. The stock has risen 36 percent this year, giving the company a market value of 3.26 billion kroner.

The biggest markets for Opera Mini are Russia, where it works with Mobile Telesystems OJSC, OAO MegaFon and Tele2 AB; India, where it partners with Virgin Mobile, Vodafone and Tata Communications Ltd.; and Indonesia, where it works with Telekomunikasi Selular PT. It’s also working with Millicom International Cellular SA’s Tigo brand in Latin America.

Taiwan’s MediaTek Inc., maker of one of the fastest-growing low-end phone platforms, has begun loading Opera onto its chipsets, which gets it onto handsets from new vendors such as India’s Micromax Informatics Ltd.

Opera’s Edge

Although Opera browsers can be used with higher-end smartphones, its edge comes from working on basic phones, which account for a majority of emerging markets devices. As bandwidth increases and more smartphones are sold, Opera may see its opportunities shrink.

“They seem to be the best choice for low-bandwidth countries,” said Andre Adolfsen, an Oslo-based analyst at Nordea Markets. “When improved bandwidth and smartphones penetrate these markets as well I believe Opera will struggle to compete with major original equipment makers such as Google, Apple, Microsoft and maybe Nokia.”

Nokia, which still works with Opera, is equipping its own mobile phone browser with compression technology from Novarra, which it acquired earlier this year. It’s also got joint applications stores with China Mobile and with Orange in the U.K. and France.

Enskilda’s Strand sees license revenue from phone companies as a better bet than customizing software for handset makers. “We expect significant pickup in profits over the next year,” he said.

U.S. Tech Probe Nears End

The Wall Street Journal

Several of the U.S.'s largest technology companies are in advanced talks with the Justice Department to avoid a court battle over whether they colluded to hold down wages by agreeing not to poach each other's employees.

The companies, which include Google Inc., Apple Inc., Intel Corp., Adobe Systems Inc., Intuit Inc. and Walt Disney Co. unit Pixar Animation, are in the final stages of negotiations with the government, according to people familiar with the matter.

The talks are still fluid, these people said, with some companies more willing to settle to avoid an antitrust case than others. If negotiations falter, both sides could be headed for a defining court battle that could help decide the legality of such arrangements throughout the U.S. economy.

Still, there are powerful incentives for both sides to settle the potential civil case before it reaches that stage.

The Justice Department would have to convince a court not just that such accords existed, but that workers had suffered significant harm as a result.

The companies may not want to take a chance in court. If the government wins, it could open the floodgates for private claimants, even a class action by employees. A settlement would allow the Justice Department to halt the practice, without the companies having to admit to any legal violations.

Spokespeople for Google, Apple, Intel, Adobe and Intuit all declined to comment. Pixar had no immediate comment. A Justice Department spokeswoman also declined to comment.

The Justice Department's probe of hiring practices could reach beyond Silicon Valley.

During the course of its more than year-long investigation, the agency has uncovered evidence of such agreements in other sectors, according to the people familiar with the matter.

A settlement with tech companies—or a court fight—could therefore help determine what kinds of agreements are acceptable in other industries as well.

At stake are dueling visions of how far companies should be able to go in agreeing to limit the kind of headhunting that can help valuable employees increase their compensation.

The companies have argued to the government that there's nothing anticompetitive about the no-poaching agreements. They say they must be able to offer each other assurances that they won't lure away each others' star employees if they are to collaborate on key innovations that ultimately benefit the consumer such as improved Google SEO.

Some economists believe that banning such agreements could harm Silicon Valley's open, collaborative model.

"The effect of the lawsuit would be to reduce innovation because companies would worry about exposing their employees to each other," said Paul Rubin, an economics professor at Emory University, who isn't involved in the case.

For the Justice Department, such agreements amount to an effort by companies to limit competition for talent, harming employees' ability to get the best jobs and wages and reducing the incentives for people to enter professions in high demand, according to people familiar with the matter.

The government could argue that the agreements constitute an effort by companies to fix the price of labor, and are therefore just as harmful as price-fixing or bid-rigging—automatic violations of antitrust law.

"In a free market economy, you want the best people getting the best positions, and presumably all the rewards that come with that," said Spencer Waller, a law professor at Loyola University Chicago, who has no connection to the case. "This agreement, if the government has the facts, suggests that market for talent is being depressed by collusion."

The agreements under investigation varied in their scope and details, according to the people familiar with the matter. In conversations with the Justice Department, some companies have maintained they didn't have agreements not to hire each others' employees, only agreements not to "cold-call" partners' employees.

However, people familiar with the matter say the Justice Department believes that cold-calling is an important way in which people are hired in the sector. Even if the employees don't end up moving, their employer often has to sweeten their pay and conditions to make sure they stay.

After more than a year of investigation, the Justice Department antitrust division has concluded that many of these agreements have harmed people's ability to get better jobs or improve their conditions.

But proving that in court may be tricky, some antitrust lawyers said.

During the course of the investigation, more than a dozen tech companies have been questioned by the Justice Department, people familiar with the matter said. Those include Yahoo Inc., Genentech Inc. and IAC/InterActiveCorp.

However, some companies said they are no longer in the government's cross-hairs. "After a thorough investigation, the [Justice Department] antitrust division has advised IBM that it will not pursue a case against IBM," an International Business Machines Corp. spokesman said.

Microsoft Corp. also said it is no longer a target of the investigation. A Genentech spokeswoman said the Justice Deparment had relieved the biotech firm of the obligation to hold on to relevant information.

A Yahoo spokeswoman said the company fully cooperated in the investigation and believed its responses were sufficient. IAC didn't respond to requests for comment.

The agency has decided not to pursue charges against companies that had what it believes were legitimate reasons for agreeing not to poach each other's employees, said people familiar with the matter. Instead, it's focusing on cases in which it believes the non-solicit agreement extended well beyond the scope of any collaboration.

Sunday, September 19, 2010

RIM Short Interest Doubles as BlackBerry Loses Ground to IPhone


Bets against shares of Research In Motion Ltd. have doubled since April as investors wager the BlackBerry maker’s stock will continue to decline in the face of competition from Apple Inc. and Google Inc.

Short interest in RIM climbed to 31.1 million shares as of Aug. 31, more than double the level on Apr. 15 and the most since June 2007, according to data compiled by Bloomberg. Investors taking short positions borrow and sell a stock, aiming to profit by repaying the borrowed shares at a lower price.

“Everybody is so negative, the short positions continue to grow,” said Buzzy Geduld, chief executive officer of New York hedge fund Cougar Trading. He said he may short or buy the stock after the company’s earnings report today and doesn’t own shares at the moment.

Best known for handsets equipped with a full keyboard, RIM has struggled to create touch-screen devices that can compete with Apple’s iPhone and phones like Motorola Inc.’s Droid that use Google’s Android software. The BlackBerry Torch, a touch- screen model that went on sale last month, has received mixed reviews and generated what analysts say are lukewarm sales.

At the same time, the Waterloo, Ontario-based company faces challenges as it expands in overseas markets and the potential loss of business in its traditional corporate base. Countries such as India and the United Arab Emirates have threatened to ban BlackBerry services over security concerns.

Revenue, Profit Growing

Of 200 companies polled in the U.S. and U.K., 74 percent now let employees use devices other than BlackBerrys, according to an August survey by Sanford C. Bernstein & Co. JPMorgan Chase & Co., the second-largest U.S. bank by assets, may soon let employees use iPhones or Android phones for corporate e-mail, in place of the BlackBerry, for the first time, two people familiar with the situation said last week.

The stock has dropped 31 percent this year on the Nasdaq Stock Market as Apple has climbed by that percentage. RIM rose 97 cents to $46.49 at 4 p.m. New York time.

Marisa Conway, a spokeswoman for RIM, didn’t respond to messages seeking comment.

RIM is still boosting revenue and profit as mobile-phone buyers increasingly shift to smartphones that can surf the Web and play videos and music. When the company reports results for the latest quarter today after the close of regular trading, revenue is likely to jump 27 percent to $4.49 billion while net income surges 58 percent to $753 million, according to average estimates from analysts surveyed by Bloomberg.

‘Losing Mind Share’

Growth in the U.S. is slowing and the company is losing market share globally. RIM’s portion of the worldwide smartphone market slid to 18.2 percent in the second quarter from 19 percent a year earlier as customers opted for devices with larger screens and more applications, according to researcher IDC. Apple’s share rose to 14.2 percent from 13 percent, while Android surged to 17.2 percent from 1.8 percent.

“It feels like RIM is not in touch with what demanding, tech-savvy customers want,” said Nirav Parikh, senior vice president at Los Angeles-based TCW Inc., which manages $110 billion and sold all of its remaining 866,749 RIM shares as of June 30, according to a securities filing.

“They are losing mind share,” he said. “Their international growth is great, however those markets in the next couple of years may follow trends in the U.S., which don’t bode as well for RIM,” said Parikh.

Analyst Downgrades

While 31 of 54 RIM analysts recommend buying the shares, five analysts have downgraded the stock over the past quarter and nine now recommend selling. Among the RIM bears is Goldman Sachs Group Inc.’s Simona Jankowski, who cut her rating on the stock to “sell” in April and says the Torch didn’t do enough to change her mind.

“They really needed a very high-profile, very successful launch that was a really big hit,” Jankowski said. “That’s how high the bar was and they just didn’t clear it.”

Cougar Trading’s Geduld said he’s waiting to hear the company’s earnings news before deciding how to invest.

“I don’t think it’s quite a short and I don’t think it’s yet a long,” he said. “The real question is what are they going to say about the future.”

Friday, September 17, 2010

Motorola's Tablet will Miss the Holidays

The Wall Street Journal

Motorola Inc. aims to deliver a tablet computer early next year, a move that will extend its products beyond cellphones but after the key holiday selling season.

"We want to make sure that any tablet that we deliver is competitive in the marketplace, and I think all of us will make sure that we will only deliver that when that occurs," Co-Chief Executive Sanjay Jha said late Wednesday at an investor conference. "Hopefully, that's early next year."

Apple Inc.'s success with its new iPad have made tablets a must-have offering for gadget makers. Samsung Electronics Co. is expected to unveil its seven-inch Galaxy Tab to the U.S. market at an event Thursday in New York City. Dell Inc. has recently launched a tablet in the U.S., and others are expected ahead of the holidays.

Mr. Jha has tried to turn around Motorola's troubled cellphone business by refocusing it on smartphones powered by Google Inc.'s Android operating system.

Google has made clear it doesn't think the latest version of Android, called Froyo, is appropriate for tablet devices, Mr. Jha said Wednesday, adding that he wouldn't roll out a tablet until the technology is ready.

Mr. Jha said he's eager to get into the tablet business, but also indicated he is thinking more broadly about new forms of mobile computing, hinting that he is interested in models that are "even more smartphone-centric."

Tuesday, September 14, 2010

H-P to Buy ArcSight for $1.5 Billion

The Wall Street Journal

Hewlett-Packard Co. agreed to buy security-software maker ArcSight Inc. for about $1.5 billion, continuing the company's spending spree that began after Chief Executive Mark Hurd resigned last month.

The deal also represents the latest purchase of a smaller security firm by a huge technology company, a trend some see continuing as big tech considers the importance of adding security to their product portfolio. ArcSight makes software that monitors corporate networks for unusual activity, such as a hacker's attempt to break into a system.

ArcSight shares ended Monday trading up 25.1% at $43.91 on the Nasdaq, above H-P's offer price of $43.50 a share, suggesting some traders may be expecting or hoping for a higher bid, similar to what happened with storage maker 3PAR Inc. last month. ArcSight, of Cupertino, Calif., had been quietly shopping itself to a handful of big technology companies, and the agreed-upon deal provides a 24% premium to ArcSight's closing price Friday and a 70% premium to where it was trading a month ago.

On a conference call with investors, H-P executives declined to comment about the bidding process for ArcSight. They also wouldn't speculate about what would have happened if Mr. Hurd remained CEO.

H-P expects the acquisition to close by the end of the calendar year and doesn't see any material earnings dilution in its next fiscal year. The company is in the fourth quarter of its fiscal 2010 year. H-P shares, down 26% so far this year, added 2 cents to reach $38.22 in recent trading.

"The combination of H-P and ArcSight will provide clients with the ability to fortify their applications, proactively monitor events and respond to threats," said Bill Veghte, H-P's executive vice president of software and solutions.

The ArcSight deal continues H-P's push into software and other areas outside of its core computer-hardware businesses that began under Mr. Hurd. Software, networking, storage and services—all areas in which H-P has expanded recently—have higher margins than the company's core personal-computer and server-system businesses. H-P executives have said repeatedly that the company will continue the expansion strategy.

Mr. Veghte reiterated that sentiment Monday, saying H-P has "a very clear and good M&A strategy" that's unchanged since Mr. Hurd's departure.

"The company continues to make acquisitions where they make strategic operational and financial sense," Mr. Veghte said.

The deal for ArcSight is the latest episode in a month-long drama starring H-P. Last month, Mr. Hurd resigned following violations of the Palo Alto, Calif., company's code of business conduct, and he later joined H-P rival Oracle Corp. as co-president. Shortly following Mr. Hurd's departure, H-P launched a bidding war with Dell Inc. for 3PAR, eventually winning with a bid of $2.35 billion, almost double the amount Dell had initially agreed to pay.

Investors have been concerned about H-P's strategy—including the high premiums it's paying for acquisitions—since Mr. Hurd left the company.

"While such an acquisition would fit into the company's overall enterprise strategy, we believe Street sentiment would likely rather see the company get a new CEO announcement behind them and look to digest some of the acquisitions it has recently or will be completing (i.e., 3Com, Palm, 3PAR)," Stifel Nicolaus analyst Aaron C. Rakers said in a research note Monday.

Others noted the deal continues a wave of consolidation in the information technology sector. Last month, chip maker Intel Corp. offered to buy security specialist McAfee Inc. for $7.7 billion.

Security companies have attracted interest from larger information-technology providers lately as the industry's biggest companies look to offer a wider variety of products and give customers an end-to-end solution. Software that helps companies manage data securely is especially in demand.

H-P's Mr. Veghte said on a conference call that customers are not only looking for software products but also for services and hardware around the software to "deliver coherent solutions." He said H-P's acquisition of ArcSight will allow it to provide its enterprise clients with "holistic and proactive" solutions to manage their security risks and stay compliant with regulations at lower costs.

Meanwhile, Jefferies analyst Katherine Egbert noted seven other security companies that could attract interest from larger tech companies. They were: Sourcefire Inc., Fortinet Inc., Vasco Data Security International Inc., Symantec Corp., Check Point Software Technologies Ltd., Blue Coat Systems Inc. and Websense Inc.

The analyst added, though, "we do not believe any of these vendors are an active target right now."

Vasco and Check Point declined to comment, while representatives from Sourcefire, Fortinet, Blue Coat and Websense weren't immediately available to comment.

Monday, September 13, 2010

AT&T, Sprint, Verizon Said to Plan Samsung Tablet to Rival IPad


AT&T Inc., Sprint Nextel Corp. and Verizon Wireless plan to sell a tablet computer from Samsung Electronics Co. to rival the iPad, said three people familiar with the matter.

AT&T and Sprint plan to offer the device, called the Galaxy Tab, for less than Samsung’s wholesale price by bundling it with monthly wireless service contracts, two people said. Samsung, the world’s second-largest maker of mobile phones, is scheduled to announce the carriers’ support at a Sept. 16 event in New York, said the people said, who asked not to be named because the plans aren’t public.

Subsidies may help tablets such as the Galaxy stand out against Apple Inc.’s iPad, which starts at $499. Verizon Wireless hasn’t yet decided on such subsidies, said one person.

“The carrier-subsidized model would be very interesting,” said Ashok Kumar, an analyst at Rodman & Renshaw. “The market is going to be very crowded.”

Several companies including Hewlett-Packard Co. and LG Electronics Inc. are introducing tablet computers following the success of the iPad, a 9.7-inch touch-screen that acts as an e- reader, media player, word processor and calendar. The PCs access the Web through data plan contracts that represent the fastest-growing source of sales for the carriers.

Ashley Zandy, an AT&T spokeswoman; Cristi Allen, a Sprint spokeswoman; Jeffrey Nelson, a Verizon Wireless spokesman, and Ashley Lane, spokeswoman for Suwon, South Korea-based Samsung, declined to comment.

First in Europe

The Galaxy tablet goes on sale in Europe in October, before the U.S., and the company has plans for more of the devices next year, WP Hong, Samsung’s head of global planning, said at a electronics conference in Berlin this month.

The device, based on Google Inc.’s Android operating system, has a 7-inch screen and is able to play high-definition videos. The Galaxy has a global-positioning system, cameras on each side for video calling and acts as a mobile phone.

Research In Motion Ltd., the maker of BlackBerry smartphones, plans to introduce a tablet in November, people familiar with the plans have said. Motorola Inc., which makes Android-based smartphones, is also planning a tablet device for the holiday season, people familiar with the matter had said.

“I don’t think any of them are going to seriously challenge Apple for the lead over the holiday season at this point,” said Rhoda Alexander, an analyst at researcher iSuppli. “From a manufacturing standpoint, it would be a huge hurdle unless they’re going to start out of the gate at the volume that Apple is doing -- which would be risky at best.”

Apple, based in Cupertino, California, sold more than 3 million iPads in the first 80 days after it went on sale. To compete, tablet makers will have to offer something unique that the iPad doesn’t have, or cut their prices, Alexander said in an interview.