Insight Technologies and Their Impact on the Society

China Unicom Adds Record 3G Customers Undercutting IPhone: Tech

January 19, 2012, 11:22 AM EST By Bloomberg News

Jan. 20 (Bloomberg) -- China Unicom Hong Kong Ltd., the nation’s No. 2 carrier, is adding a record number of high-speed wireless subscribers and gaining market share by pushing smartphones that cost 80 percent less than Apple Inc.’s iPhone.

China Unicom started winning customers from market leader China Mobile Ltd. after it switched focus from high-end users of the iPhone to those who can’t afford the device. China Unicom started selling handsets from local manufacturers Huawei Technologies Co. and ZTE Corp. that cost less than 1,000 yuan ($158), or about half a month’s salary for an urban worker.

The strategy helped make China Unicom the best-performing stock on the benchmark Hang Seng Index last year with a 47 percent increase. It also accelerated the shift to high-speed networks in China, putting the nation on course to surpass the U.S. in smartphone users and enabling Huawei and ZTE to compete against Apple in their home market.

“People aspire to own an iPhone, but they can’t afford it,” said Teck Zhung Wong, a Beijing-based analyst at IDC China. “If a vendor offers a phone that can do most of the things a high-end device can do, there’s no reason people won’t bite.”

IPhones continue to be popular among those who have the money. China Unicom, the only carrier offering the device with a service contract, is down 11 percent this year after customers frustrated by not being able to buy the new iPhone 4S pelted Apple’s main Beijing store with eggs, prompting the handset maker to pull all phones from its store shelves.

Two Months’ Wages

Apple also said its application for a phone to work on China Telecom’s network was moving through the approval process.

China introduced third-generation wireless networks in 2009, six years after the U.S. Adoption of the high-speed service was hampered by handset prices in a nation where monthly urban disposable income was 1,811 yuan per capita through the first nine months of last year, according to the national statistics bureau.

A 16-gigabyte iPhone 4S costs 4,988 yuan at Apple’s online store, or more than two months’ wages.

Last year’s introduction of cheaper models from Huawei and ZTE spurred a 44 percent jump in monthly 3G subscriber sign-ups in June compared with January. The top three carriers -- China Mobile, China Unicom and China Telecom Corp., respectively -- added a record 8.34 million subscribers in September.

Apple Focus

China Unicom initially was on target to miss its forecast for adding 25 million 3G subscribers last year, signing up between 1.21 million and 1.86 million users a month through May, according to government statistics. That’s because the carrier focused on high-end users with the Apple device, said Tucker Grinnan, a Hong Kong-based analyst at HSBC Securities Asia Ltd.

The carrier started selling 1,000-yuan smartphones in May, said Sophia Tso, a Hong Kong-based spokeswoman. By August, it was adding more than 2 million 3G subscribers a month, culminating in a record 3.49 million in December.

China Unicom added 26 million 3G users last year, according to data it released yesterday.

“Low-cost smartphones will enter a period of rapid development as a decisive factor in the popularity of 3G,” Zhou Youmeng, president of sales, said in a statement on the carrier’s website.

China Unicom subscribers can still get a free iPhone 4S by signing a three-year contract for as little as 286 yuan a month.

Taking Share

The number of subscribers to 3G mobile networks in China will almost double to 229 million this year, according to the median estimate of 11 analysts surveyed by Bloomberg News. That compares with 200 million in the U.S., according to the median estimate of five analysts surveyed.

“People are underestimating the growth,” said Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai who doesn’t cover the U.S. market. “The number is going to be huge.”

As the market expands, more subscribers are going to China Unicom and China Telecom at the expense of China Mobile. China Unicom’s market share will rise to 32 percent this year from 30 percent at the end of 2010, and China Telecom will boost its share to 28 percent from 26 percent, according to the median of four analysts surveyed by Bloomberg News.

China Mobile’s share will drop to 38 percent from 44 percent in 2010, according to the survey. Rainie Lei, a Hong Kong-based spokeswoman for China Mobile, declined to comment on the company’s 3G strategy.

‘Like Hotcakes’

Investors back China Unicom because its 3G customers use an average of about twice as much data as China Mobile’s, said Paul Wuh, an analyst at Samsung Securities Co. in Hong Kong. China Mobile shares are down 3.4 percent in Hong Kong in the past 12 months.

“Unicom’s subscribers are going there with the specific purpose of buying smartphones and using data,” Wuh said. “That’s why people are more excited about Unicom versus China Mobile.”

Between the first and third quarters last year, ZTE’s sales in China almost quintupled and Huawei’s almost tripled, according to data compiled by research company Gartner Inc. Huawei sold 4.47 million handsets there through the first nine months, and ZTE sold 3.03 million.

Cupertino, California-based Apple sold 5.6 million iPhones during the same period as its market share dropped to 10.4 percent in the third quarter from 13.3 percent the quarter before, according to Stamford, Connecticut-based Gartner.

Closely held Huawei passed Apple in smartphone market share with 11 percent. ZTE more than doubled its share to 8.4 percent, cutting Apple’s lead to 2 percentage points from almost 7 in the first quarter, according to Gartner.

Huawei’s best-selling smartphone in the 1,000-yuan category is the C8650, Huawei spokesman Ross Gan said in an e-mail. The Android-based smartphone sold 1 million units within two months of its introduction in July.

ZTE’s top handset is the 1,000-yuan Blade, with 6 million sold, said Rena Qin, a spokeswoman for the Shenzhen-based company. ZTE since has introduced four more smartphones in that price range, she said.

“Low-end smartphones are selling like hotcakes, and there is nothing in the market trends that suggests this is not going to continue,” Wuh said.

--Edmond Lococo. Editors: Michael Tighe, Bret Okeson

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Facebook Expands Service for Users to Share Online Activities

January 19, 2012, 11:44 AM EST By Brian Womack and Douglas MacMillan

Jan. 19 (Bloomberg) -- Facebook Inc. is adding more than 60 partners to a service that lets users tell friends what they’re currently doing online, from listening to music to reading news.

The company is working with Pinterest, Ticketmaster, Rotten Tomatoes and other applications to let users publish their activities on their Facebook pages, Carl Sjogreen, director of platform products, said yesterday at an event in San Francisco. For instance, if someone is researching a travel spot on TripAdvisor, they could post the details to Facebook.

Facebook, the most popular social-networking service, wants to open up new opportunities for advertising and get people to spend more time using its features. The new partnerships also help make Facebook more of a media hub, ramping up competition with Google Inc. and Apple Inc.

“We believe this is the beginning of a new wave of apps,” Sjogreen said. “We’re really excited about the potential.”

With the so-called open-graph system, which was updated last year, users have already been able to use Spotify Ltd.’s service to show the songs they’re playing and Washington Post Co.’s sites to share news items.

The platform is now being opened up to all developers, Sjogreen said. The activities can be seen on three parts of Facebook’s site: the Ticker, News Feed and Timeline. Other partners include Foodspotting, the Kobo electronic-book service and the Gogobot travel site.

‘Evolution of Facebook’

The service lets Facebook developers create applications that are better customized to their users, said Andrew Dreskin, chief executive officer of San Francisco startup Ticketfly Inc., another partner.

“They are looking to make the platform more flexible and have it all make more sense in terms of the actions consumers are taking and how they describe those actions,” Dreskin said. “It’s the evolution of Facebook.”

Ticketfly, which sells tickets to music concerts and other events, has added new buttons to its website to let users “Like” specific artists on Facebook after they purchase tickets. Visitors to the site also can click on new buttons to indicate “I’m Seeing” a band to their friends on Facebook, Dreskin said.

--Editors: Nick Turner, Stephen West

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Ramping Up iPad 3 Production

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Apple's Supplier Secrets Revealed

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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History of Multi-Touch Technology

EBay Sales Exceed Analyst Estimates on PayPal, Holiday Shopping

January 19, 2012, 11:26 AM EST By Danielle Kucera

(Updates share prices in fifth paragraph.)

Jan. 19 (Bloomberg) -- EBay Inc., the largest Internet marketplace, reported sales and profit that topped analysts’ estimates, buoyed by a campaign to promote its expanded retail offerings and broader use of the PayPal online-payments service.

Fourth-quarter revenue rose 35 percent to $3.38 billion, EBay said yesterday in a statement. That compares with the average analyst estimate of $3.32 billion, according to data compiled by Bloomberg. Profit excluding certain items was 60 cents a share, compared with the average prediction of 57 cents.

Chief Executive Officer John Donahoe, eager to propel a stock price that’s little changed since he took over in 2008, boosted marketing spending 25 percent last year and upgraded EBay’s technology to lure back users who defected to rivals such as Amazon.com Inc. EBay is also getting a lift as PayPal challenges traditional payment systems by persuading a larger pool of shoppers to use it more often and for bigger purchases.

“EBay right now has very consistent results,” Colin Gillis, an analyst at BGC Partners LP in New York, said in an interview. “PayPal is still adding over a million users a month, marketplaces is doing fine, and they continue to position well for mobile.”

EBay rose 4.4 percent to $31.66 at 10:58 a.m. in New York. Shares of the San Jose, California-based company had gained 3 percent in the 12 months before today.

The company benefited from a 15 percent gain in total holiday e-commerce spending, which rose to a record $37.2 billion, according to research firm ComScore Inc., based in Reston, Virginia.

Fastest-Growing Division

At PayPal, EBay’s fastest-growing division last quarter, revenue rose 28 percent and registered users jumped to 106.3 million. The unit is expanding its roster of merchant partners, taking aim at Visa Inc. and MasterCard Inc.’s credit card- swiping customers. swiping customers. PayPal’s mobile payment volume will rise to $7 billion this year from $4 billion last year, EBay executives said on a conference call.

PayPal is working with Home Depot Inc. to let shoppers use the payment system at checkout, and the companies this week will extend a trial of the service to 51 stores, primarily in the San Francisco area, Donahoe said on a conference call yesterday.

Retailer Ties

EBay has been bolstering ties with big retailers, seeking to offer goods from more stores through its June acquisition of GSI Commerce Inc. for $1.9 billion.

“The experience that EBay and PayPal have in the virtual world with online payments and the addition of GSI Commerce --it gives them a line of logic and a set of disciplines that are easy to carry into an in-store experience,” said Bill Smead, who holds EBay shares as part of $175 million in assets at Smead Capital Management Inc., said in an interview.

Payment volume from in-store terminals will be “immaterial” to the company’s 2013 projections, Chief Financial Officer Bob Swan said on the call. EBay expects to profit from in-store payments over the next three to five years, said Donahoe, who is serving as interim president of the PayPal unit after Scott Thompson left earlier this month to become CEO of Yahoo! Inc.

“What we’re doing with PayPal point-of-sale, it’s very analogous to what we did with the merchant-services business five years ago,” Donahoe said in an interview. “Year one was planning and building the product. Year two, which is this year for point-of-sale, is trial and learn. Year three is scale it.”

Net Income

Fourth-quarter net income was $1.98 billion, or $1.51 a share, compared with $559.2 million, or 42 cents, a year earlier, EBay said. The recent period’s results included a gain from the sale of the company’s investment in Skype Technologies SA. Microsoft Corp. acquired Skype last year for $8.5 billion.

Revenue in the first quarter will be $3.05 billion to $3.15 billion, EBay said. Excluding some costs, profit will be 50 cents to 51 cents a share. Analysts on average had projected sales of $3.16 billion and profit of 54 cents, according to data compiled by Bloomberg.

EBay is reaping the benefit of money spent to begin overhauling its brand, which consumers have historically associated with online auctions, BGC’s Gillis said. A portion of that investment has been used to spur purchases on its website through mobile applications. The retailer projects it will reach $8 billion in sales volume through mobile apps this year, compared with $5 billion in 2011.

Marketing Expenses

“They’ve put a lot of technology investment into the marketplaces platform,” Gillis said. “They’ve got to get users to re-engage. They need to do a brand makeover. It’s not your collectible site.”

Operating margin narrowed to 22.3 percent in the fourth quarter, compared with 23.7 percent in the same period last year. The decrease came primarily because of four acquisitions the company completed in 2011, EBay said. Marketing expenses rose to $2.44 billion in 2011.

EBay is touting itself as a buy-it-now retailer akin to Amazon, whose stock has more than doubled since March 2008, dwarfing EBay’s growth since Donahoe became CEO. Still, the market could benefit from two e-commerce giants, Gillis said.

“If you want something that’s last season or something that has been refurbished or used, EBay gives you that range of pricing options,” he said. “It’s the difference between the mall and the outlet mall. Is there room for both? Of course.”

--Editors: Jillian Ward, Nick Turner

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Introduces iBook 2 to Help Boost IPad in Schools

January 19, 2012, 11:34 AM EST By Adam Satariano

Jan. 19 (Bloomberg) -- Apple Inc., the world’s largest technology company, introduced a new product to make digital versions of textbooks available on the iPad.

The new service is called “iBooks 2” and is intended to help make textbooks more interactive and searchable, Phil Schiller, Apple’s senior vice president of product marketing, said today at an announcement in New York. More than 1.5 million iPads are being used for educational purposes, he said.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Cecile Daurat at cdaurat@bloomberg.net

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Osborne Mulls Shinkansen Technology for U.K. High-Speed Line

January 19, 2012, 9:30 AM EST By Gonzalo Vina

(Adds use of Hitachi Javelin trains in U.K. in fifth paragraph.)

Jan. 19 (Bloomberg) -- Chancellor of the Exchequer George Osborne said Britain may adopt technology used by Japan’s Shinkansen trains on new high-speed rail lines running from London to northern England.

“I want Britain to set the standard for the next generation of high-speed rail -- for level of technology, quality of travel and value for money,” Osborne said during a visit to Tokyo today, according to remarks released by his office in London. “Japan is the home of high-speed rail. So we will look at all the options, including using bullet-train technology in Britain.”

The U.K. government this month approved a plan to build a high-speed rail link from London to Birmingham and on to northern England. The London-Birmingham route will open in 2026 with lines to Manchester and Leeds in 2032-33. The government is seeking private-sector and European Union funding to help meet the 32.7 billion-pound ($50.4 billion) cost of the project.

Prime Minister David Cameron’s coalition government says the high-speed line will boost the capacity of the U.K.’s rail network, slash journey times and ease overcrowding on existing lines, as well as allow northern cities better access to London’s economy.

Hitachi Ltd. has already supplied trains using Shinkansen technology to Britain. The Tokyo-based company’s Javelin units provide an express commuter service to London along the High Speed 1 line to the Channel Tunnel.

--With assistance from Christopher Jasper in London. Editors: Andrew Atkinson, Eddie Buckle

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Yang Resignation `Positive' for Yahoo Stock

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Google Rallies Opposition to Anti-Piracy Bill

January 18, 2012, 11:00 PM EST By Eric Engleman

(Updates with Google protest in fifth paragraph.)

Jan. 18 (Bloomberg) -- Internet companies led by Google Inc. are using their online clout to stoke opposition to Hollywood-backed anti-piracy measures in the U.S. Congress that they say will encourage censorship and chill innovation.

Google, owner of the world’s most popular search engine, placed a link on its home page today opposing the House and Senate bills, joining protests by Wikipedia and other websites. Google had about 400 million daily U.S. searches in December, according to Internet measurement firm comScore Inc., dwarfing the 111 million viewers of last year’s Super Bowl game.

Public criticism led by Google, Facebook Inc. and Twitter Inc. slowed an initial “smooth glide to passage” for the anti- piracy measures supported by the entertainment industry, Rogan Kersh, an associate dean at New York University’s Wagner School who conducts research on lobbying, said in an interview.

“Google and Facebook and Twitter are part of our daily lives in a way that most of us find very appealing,” Kersh said. “These are sexy brands. If you’re a member of Congress, you don’t want to be on the wrong side of the social media and new media darlings of America.”

Google typically devotes its home page to displaying its own services, not taking stands on legislation, and the “Google” icon is often used to commemorate historical events. Today, the icon is covered by a black rectangle, and the home page links to a website that asks visitors to sign an online petition urging Congress to reject the legislation.

Wikipedia Shutdown

Wikipedia, the online encyclopedia run by a nonprofit organization where users contribute entries, is shutting the English version of its website for 24 hours to protest the measures. Today, that page is blacked out and carries a message saying that the bills “could fatally damage the free and open Internet.”

Microsoft Corp., the world’s largest software maker, said in a statement yesterday that it opposes the House measure as currently drafted. The company said it doesn’t plan to shut down its online services in protest.

The Stop Online Piracy Act in the House and the Protect IP Act in the Senate are backed by the movie and music industries as a means to crack down on the sale of counterfeit goods by non-U.S. websites. Hollywood studios want lawmakers to ensure that Internet companies such as Google share responsibility for curbing the distribution of pirated material.

The so-called blackout day to protest anti-piracy legislation is “abuse of power given the freedoms these companies enjoy in the marketplace today,” Christopher Dodd, chairman of the Motion Picture Association of America, said in an e-mailed statement yesterday.

‘Incite Their Users’

“It’s a dangerous and troubling development when the platforms that serve as gateways to information intentionally skew the facts to incite their users in order to further their corporate interests,” said Dodd, a Connecticut Democrat who served three decades in the Senate.

News Corp. Chairman Rupert Murdoch called Google a “piracy leader” in a Jan. 14 post on Twitter, saying that it streams movies for free and sells advertisements around them. A day later he wrote in his Twitter account that Google is a “great company doing many exciting things. Only one complaint, and it’s important.”

Miranda Higham, a News Corp. spokeswoman, declined to comment.

Samantha Smith, a Google spokeswoman, said the company respects copyright. “Last year we took down 5 million infringing Web pages from our search results,” she said in an e-mail yesterday.

‘Radioactive Brand’

Murdoch represents a “radioactive” brand and his comments are “terrible timing” for supporters of the anti-piracy legislation, Kersh of New York University said.

“As supervisor of a media empire that is best known at present for hacking into people’s personal phone accounts, this is not someone you want arguing for more government involvement in the lives of the public,” Kersh said.

The Senate is scheduled to hold a procedural vote Jan. 24 to see whether there is enough support to begin debate on its version of the legislation bill.

Representative Lamar Smith, who heads the House Judiciary Committee, said he expects his panel to resume consideration of the House bill in February. The panel began debating the measure in a December session and members offered about 60 amendments.

Smith called the protest by Wikipedia and others a “publicity stunt” that “does a disservice to its users by promoting fear instead of facts,” according to an e-mailed statement yesterday.

‘Oppressive Regimes’

David Drummond, Google’s chief legal officer, said the bills “would grant new powers to law enforcement to filter the Internet.”

“We know from experience that these powers are on the wish list of oppressive regimes throughout the world,” David Drummond said in a blog post today.

Facebook’s Washington page has a tab today that says the anti-piracy legislation could “create very real problems for Internet companies like ours that are a primary driver of innovation, growth, and job creation in the 21st century economy.” Facebook is encouraging users to share the tab with friends and provides a way to write members of Congress.

Matt Graves, a Twitter spokesman, didn’t respond to an e- mail seeking comment.

Administration Objections

The administration of President Barack Obama cast some doubt over the legislation’s prospects on Jan. 14, saying in a blog post that it wouldn’t support measures that encourage censorship or disrupt the structure of the Internet.

The blog post, signed by three White House technology officials, marked the administration’s most significant foray into a fight between content creators and Web companies that has been playing out in Congress.

Obama, who draws support from both Hollywood and the Internet industry, is trying to “steer a line” between the competing interests, Kersh said.

The president received $1.34 million in campaign donations from employees of the computer and Internet industries since January 2011, according to the Center for Responsive Politics, a Washington-based group that tracks political giving. Obama received $1.02 million from workers in the television, movie and music industries during the same period.

Smith, the Judiciary Committee chairman, said Jan. 13 that he would remove a provision from his bill that would require Internet-service providers, when ordered by a court, to block access to non-U.S. websites offering pirated content.

Senator Patrick Leahy , a Vermont Democrat who leads the Senate Judiciary Committee, said Jan. 12 that he’s willing to consider dropping a similar provision from the bill he sponsored. Opponents say such website-blocking may harm the stability of the Internet’s domain-name system.

The Senate measure, S. 968, cleared Leahy’s committee in May. The House bill is H.R. 3261.

--With assistance from Richard Rubin and Greg Giroux in Washington and Chiara Remondini in Milan. Editors: Steve Walsh, Michael Shepard

To contact the reporter on this story: Eric Engleman in Washington at eengleman1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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Kodak Files for Bankruptcy as Digital Era Spells End to Film

January 19, 2012, 12:23 PM EST By Dawn McCarty and Beth Jinks

(Updates with bonds in 13th paragraph.)

Jan. 19 (Bloomberg) -- Eastman Kodak Co., the photography pioneer that introduced the Brownie Camera more than a century ago, filed for bankruptcy after consumers embraced digital cameras, a technology Kodak invented and failed to commercialize.

The Rochester, New York-based company, which traces its roots to 1880, listed assets of $5.1 billion and debt of $6.8 billion in Chapter 11 documents filed in U.S. Bankruptcy Court in Manhattan.

“They were a company stuck in time,” said Robert Burley, an associate professor at Toronto’s Ryerson University who has photographed shuttered Kodak facilities in the U.S., Canada and France since 2005. “Their history was so important to them, this rich century-old history when they made a lot of amazing things and a lot of money along the way. Now their history has become a liability.”

The company’s credit deteriorated as revenue tumbled from traditional film, and the inventor of the Instamatic cameras was slow during the past decade to compete with Canon Inc. and Hewlett-Packard Co. in digital cameras and printers.

Moody’s Investors Service on Jan. 5 cut ratings on about $1 billion of Kodak debt with a negative outlook, citing “a heightened probability of a bankruptcy over the near-term.”

NYSE Regulation Inc. today said it would suspend trading of Kodak stock after determining the company is “no longer suitable for listing,” according to a statement.

Citigroup Loan

Citigroup Inc. agreed to provide a $950 million debtor-in- possession loan to help Kodak operate during bankruptcy, the photo company said today in a statement. The loan must be approved by a bankruptcy judge.

“Kodak is taking a significant step toward enabling our enterprise to complete its transformation,” Antonio M. Perez, chief executive officer, said in the statement.

The company plans to sell “significant assets” during the bankruptcy, Chief Financial Officer Antoinette McCorvey said in a court filing. She didn’t elaborate.

“The announcement that Kodak is filing for bankruptcy is difficult and disappointing news for the city and people of Rochester,” New York Governor Andrew Cuomo said in a statement. “This is a time for all of us at all levels of government to come together and work with the private sector to support Rochester’s growth,” Cuomo said.

Annual Loss

Kodak, headed for its sixth annual loss in the past seven years, tried to sell more than 1,100 digital-imaging patents and pursued royalties to fund a shift to modern commercial and consumer digital printers.

Kodak’s cash and equivalents fell to $862 million at the end of its third quarter from $1.4 billion a year earlier. The company is scheduled to report fourth-quarter results Jan. 26.

Kodak’s revenue has fallen by half since 2005 to $7.2 billion last year, with further declines predicted this year and next after film and photofinishing unit sales sank by 14 percent in the second quarter. The company’s losses since 2008 exceeded $1.76 billion.

Kodak’s $250 million of 7.25 percent senior unsecured notes due in November 2013 fell 3.5 cents to 29.5 cents on the dollar as of 10:06 a.m. In New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The notes fell as low as 27 cents today and have plunged from 100 cents on the dollar, or face value, in April and 48.5 cents in November.

Creditors

The Bank of New York Mellon Corp. is listed as Kodak’s biggest unsecured creditor as trustee for about $670 million of unsecured notes. Other unsecured creditors include Sony Studios, which is owed $16.7 million, Warner Brothers, with $14.2 million, and Alcoa Inc., with $2.8 million.

Bank of New York Mellon is also listed as the biggest secured creditor with a claim of $776 million, backed by all of Kodak’s U.S. assets except for those exempted in a 1988 agreement, according to the filing.

Perez, a former Hewlett-Packard executive who took charge at Kodak in 2005, tried to rescue the brand by cutting costs and winning shelf space for inkjet printers at Wal-Mart Stores Inc. and Staples Inc. He pushed its commercial digital printers into publishing and packaging, touting their flexibility over old- school printing plates.

Too Late

Kodak was five years too late to accelerate its shift to the digital age, Perez, 65, said in an interview in August.

Kodak hasn’t sold enough printers and presses to create sufficient demand for replacement ink and supplies and service contracts to end losses in those units. In February, it projected operating profits in consumer and commercial inkjet printing by the end of 2013.

“Essentially they’re moving away from a very profitable model that generated multiple sales -- most everyone got double prints -- to one that’s awfully difficult to make a profit in,” said John Ward, a 20-year Kodak veteran who is now a lecturer in Rochester Institute of Technology’s college of business.

“Perez had a clear understanding that change had to happen and it had to happen quickly,” said Ward, 49, who met Perez shortly after he joined Kodak as president and chief operating officer in 2003. “Clearly they could have made some changes faster, but there just weren’t a lot of options to replace the film business.”

George Eastman

Kodak was founded by George Eastman, who developed a method for dry-plate photography before introducing the Kodak camera in 1888, according to the company’s website. It went on to invent film, enabling Thomas Edison to develop the motion picture camera, Brownie cameras selling for $1 and Kodachrome film.

Paul Simon immortalized the film in his 1973 song “Kodachrome.” The single, which praised Kodachrome’s “nice bright colors,” peaked at No. 2 on the Billboard Hot 100 chart. Kodak stopped producing the film in 2009.

“Everyone in the 20th century has been familiar with the Kodak name and its products,” said Burley of Ryerson’s School of Image Arts. “We’ve not only used them to memorialize our families and their histories, but also for diagnostics in hospitals, producing books and newspapers and police investigative work. And then the whole world of Hollywood is based around Kodak products.”

First Digital Camera

The company also invented the first digital camera in 1975, which it shelved because it would threaten its lucrative film business, Perez said in an interview in March.

“Like many other companies on the East Coast, Kodak has been phenomenal in research and patents and not so good commercializing things, actually terrible commercializing things,” Perez said.

The company said Jan. 10 it had adjusted its management structure and created a chief operating office to reduce costs. The new commercial and consumer segments replace a previous business structure of three divisions: graphic communications; consumer digital imaging; and film, photofinishing and entertainment.

The digital business has accounted for about 75 percent, or $4.5 billion, of Kodak’s revenue last year, McCorvey said in her filing today.

The company employs about 17,000 people, 9,100 of whom are in the U.S., compared with the 63,900 that it employed in 2003, she said.

Chief Operating Office

The chief operating office will be led by Philip Faraci and Laura Quatela. Faraci, president and chief operating officer since 2007, will focus on the commercial segment and sales and regional operations, and Quatela, the company’s former general counsel who was named as a second president in December, will focus on the consumer segment and certain corporate functions, Kodak said.

Three directors resigned from Kodak’s board in December, two of them from KKR & Co., two years after the private-equity firm helped the company refinance debt.

Adam H. Clammer and Herald Y. Chen quit Dec. 21. Both were elected in September 2009 after a refinancing deal that included KKR investing in $300 million of senior bonds and warrants for 40 million shares with an exercise price of $5.50. Kodak refinanced KKR’s bonds in March 2010 via a private placement to other investors.

By agreeing to hold the warrants for at least two years, among other conditions, the private-equity firm run by Henry Kravis and George Roberts was entitled to nominate the two board members.

Laura D. Tyson was the third director to leave. Tyson, 64, a director since 1997, notified the board of her resignation Dec. 29, according to a Dec. 30 regulatory filing. Tyson is a professor at University of California, Berkeley’s Haas School of Business, has been an adviser to the Obama and Clinton administrations and sits on the boards of at least five companies, including Morgan Stanley and AT&T Inc.

The bankruptcy case is In re Eastman Kodak Co., 12-10202, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Phil Milford in Wilmington, Delaware, Victoria Batchelor in Sydney, Pierre Paulden in New York, Susan Decker in Washington and Chris Burritt in Greensboro, North Carolina. Editors: Joe Schneider, John Pickering

To contact the reporters on this story: Dawn McCarty in Wilmington at dmccarty@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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Basic Technology We Cannot Live Without

Why Companies Should Consider Leasing Computers and Technology

Infosys Profit Beats Estimates as Outsourcing, Rupee Lift Sales

January 11, 2012, 11:28 PM EST By Ketaki Gokhale

(Updates with sales forecast cut in third paragraph.)

Jan. 12 (Bloomberg) -- Infosys Ltd., India’s second-largest software exporter, reported third-quarter profit that beat analysts’ estimates as customers outsourced more work and the rupee’s decline boosted the value of repatriated earnings.

Net income rose 33 percent to 23.7 billion rupees ($458 million) in the three months ended Dec. 31, from 17.8 billion rupees a year earlier, Bangalore-based Infosys said today. That compares with the 22.8 billion-rupee median of 44 analyst estimates compiled by Bloomberg.

Infosys shares fell after the company cut its full-year forecast for sales in dollar terms, citing weaker growth in developed economies including Europe, which together with North America accounts for more than 80 percent of revenue. The company joins Accenture Plc in posting better-than-expected quarterly earnings as clients outsource information-technology services to reduce costs.

“They beat some estimates because of forex, not because of improvements in their core business,” said Pralay Kumar Das, an analyst at Elara Securities Ltd. in Mumbai. “What the market looks at though is the future.”

Infosys dropped as much as 7.7 percent, the largest intraday decline since Nov. 11, and traded 7.4 percent lower at 2,618.50 rupees as of 9:16 a.m. in Mumbai. The stock was the biggest contributor to the the benchmark Sensitive index’s 0.6 percent decline.

Dollar Sales Outlook

The company, which designs software programs, maintains computers and provides IT and outsourcing services for clients including BT Group Plc, said sales in the year ending March 31 will range from $7.029 billion to $7.033 billion, down from the $7.08 billion to $7.2 billion it forecast in October.

“The global economy, driven by slower growth in developed markets coupled with the European crisis, could impact the growth of the IT industry,” Chief Executive Officer S.D. Shibulal said in the earnings release.

Sales in the fourth quarter may range between $1.806 billion and $1.810 billion, Infosys said today.

The company raised its outlook for sales in rupee terms. Full-year revenue will range from 342.7 billion rupees to 342.9 billion rupees, higher than the October projection of 335 billion rupees to 340.9 billion rupees.

The rupee’s 7.7 percent decline against the dollar in the three months ended Dec. 31 would have boosted margins at India’s software exporters, Pratik Gandhi, an analyst at IDBI Capital Markets Services Ltd. in Mumbai, said before the earnings were released.

Third-quarter revenue rose 31 percent to 93 billion rupees, exceeding the 91.7 billion-rupee median of 48 analyst estimates.

--Editors: Suresh Seshadri, Lena Lee

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Microsoft Says PC Sales May Have Missed Fourth-Quarter Estimates

January 11, 2012, 5:38 AM EST By Dina Bass

(Updates with analyst’s comment in fifth paragraph.)

Jan. 10 (Bloomberg) -- Microsoft Corp. said industrywide sales of personal computers will probably be lower than analysts had projected in the fourth quarter because supply was hurt by flooding in Thailand.

Analysts have estimated that total PC shipments fell about 1 percent in the quarter, Tami Reller, chief financial officer of Microsoft’s Windows unit, said an investment conference. The actual number is probably lower, she said. Bill Koefoed, Microsoft’s general manager of investor relations, echoed those remarks at a separate event.

“As the numbers come out, you’ll likely see that number decline further as the impact has been felt faster than people had anticipated,” Koefoed said at a JPMorgan Chase & Co. conference. Reller told the audience at a Nomura Holdings Inc. event that there could potentially be more downward adjustments. Both conferences were held in Las Vegas, where the Consumer Electronics Show is under way.

Last year’s flooding in Thailand, which knocked disk-drive factories off line, took a toll on a PC market that was already suffering from competition with smartphones and Apple Inc.’s iPad. Microsoft’s Windows sales have missed estimates in three of the past four quarters. The comments today probably mean they will fall short again, said Brendan Barnicle, an analyst at Pacific Crest Securities.

‘Under Siege’

“The Windows business is under siege,” said Barnicle, who had estimated that PC shipments dropped 1 percent in the quarter. He rates Microsoft shares “sector perform.” “Windows is their most profitable business. If that’s not stable for whatever reason -- Thailand, Apple -- it just becomes difficult for the stock to gain momentum.”

Shares of Microsoft, the world’s largest software maker, slipped 1.8 percent in extended trading after the comments were reported. The stock had closed at $27.84 earlier today.

Microsoft is working to release a new operating system, Windows 8, that’s designed to work on iPad-like tablets, helping it compete with Apple. A public test version is set for February, and Reller gave a preview last night during Chief Executive Officer Steve Ballmer’s keynote address at the Consumer Electronics Show.

The executives today declined to comment on when the final version will go on sale. Analysts expect it later this year.

Intel Corp., the world’s biggest computer-chip maker, cut its fourth-quarter revenue forecast by $1 billion last month, citing the disk-drive shortages.

While drive manufactures are still working to recover, some have bounced back faster than they had expected. Western Digital Corp., one of the harder-hit companies, has resumed production and raised its quarterly revenue forecast.

Still, these types of shortages take time to go away, Microsoft’s Reller said.

“It tends to take a few quarters to work its way through the system,” she said. “It would be naive to believe otherwise.”

--Editors: Jillian Ward, Nick Turner

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net;

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Said to Acquire Israel’s Anobit for About $390 Million

January 11, 2012, 10:05 PM EST By Shoshanna Solomon and Jonathan Ferziger

Jan. 12 (Bloomberg) -- Apple Inc. acquired Anobit Technologies Ltd. for about $390 million, paying below the price sought by the Israeli maker of a flash-memory drive part for the iPhone, people familiar with the purchase said.

Negotiations continued for more than two weeks after Israel’s Calcalist newspaper reported Dec. 20 that Apple bought Herzliya-based Anobit for as much as $500 million. Apple finally signed the agreement Jan. 6 to buy the Israeli company, according to two Anobit shareholders, who spoke on condition of anonymity because Apple didn’t want details disclosed.

An Apple spokesman confirmed the acquisition Jan. 10 while declining to comment on the price. “Apple buys smaller technology companies from time to time and we generally do not discuss our purpose or plans,” Steve Dowling, a spokesman for Cupertino, California-based Apple said. Anobit Chief Executive Officer Ehud Weinstein didn’t immediately return a call seeking comment that was answered by a receptionist.

The deal helps Apple secure supplies of a key component for its top-selling devices. Anobit makes high-performance controllers used to optimize the memory capabilities inside products such as the iPhone and iPad. Apple is the world’s largest buyer of NAND flash memory, accounting for about 23 percent of consumption last quarter, according to a Jan. 6 report from Sanford C. Bernstein & Co.

The Anobit deal is the company’s first acquisition in Israel, where Intel Corp., Hewlett-Packard Co. and Microsoft Corp. have established operations.

Microsoft Center

Apple doesn’t typically make multi-billion-dollar acquisitions like rivals such as Hewlett Packard, Microsoft or Google. The company has made a series of small acquisitions of privately-held companies that can bring in new employees or technology to be integrated into Apple’s products.

Earlier acquisitions include Siri Inc., whose technology was used for the new voice-control software in the iPhone 4S; Quattro Wireless Inc., which became Apple’s mobile advertising platform iAd; music service La La Media Inc.; Poly9, a maker of mapping technology; and chip companies PA Semi Inc. and Intrinsity Inc.

Israel, with a population similar in size to Switzerland’s at 7.7 million, has about 60 companies traded on the Nasdaq Stock Market, the most of any nation outside North America after China. Israel is also home to the largest number of startups per capita in the world.

Microsoft opened a research and development center in Israel in April 2006, according to the Redmond, Washington-based software maker’s website. Intel, which began operations in Israel in 1974 with five employees, has 6,600 workers in the country, according to the chip manufacturer’s website.

Israel Acquisitions

“The acquisition is further proof that Israel’s innovation overcomes boundaries and that the semiconductors industry is an innovative and leading field in Israel,” Koby Simana, head of the Israel Venture Capital Research Center in Tel Aviv said by phone. “In 2012 we will continue to see mergers and acquisitions as a central cash flow channel for technology investors and hope that also IPO opportunities will arise when international markets will allow.”

CSR Plc, the U.K. maker of chips used in Nokia Oyj mobile phones, completed the acquisition of the Israeli developer Zoran Corp. on Sept. 1, according to Bloomberg data. Citi Venture Capital International, a private equity investor and investment adviser focused on developing markets, paid $307 million in cash last year for Tel Aviv-based Ness Technologies Inc., an information technology company.

Anobit had raised $76 million from investors, including Battery Ventures and Pitango Venture Capital, before Jan. 10, according to an online fact sheet. The Israeli company says its memory signal processing technology uses proprietary signal- processing algorithms to improve the performance of flash-memory chips.

While Apple didn’t acknowledge buying Anobit until Jan. 10, Israel’s prime minister’s office welcomed the company to the country in a Dec. 20 post on Twitter.

--With assistance from Adam Satariano in San Francisco. Editors: Robert Valpuesta, Simon Thiel, Jeffrey Tannenbaum

To contact the reporters on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net; Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net

To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net; Claudia Maedler at cmaedler@bloomberg.net

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Nexen $3.3 Billion Windfall Signaled With CEO Exiting: Real M&A

January 12, 2012, 12:27 AM EST By Tara Lachapelle and Bradley Olson

Jan. 12 (Bloomberg) -- The departure of Nexen Inc.’s chief executive officer is leaving the door open for a takeover that may reward shareholders with a $3.3 billion windfall.

The Canadian oil and natural-gas producer that failed to find a buyer last year climbed the most in three months with this week’s announcement that CEO Marvin Romanow was exiting immediately. Once worth as much as C$22.8 billion ($22.4 billion), Nexen declined 20 percent during Romanow’s three-year tenure and last month fell to 0.92 times book value, the lowest in at least 16 years, according to data compiled by Bloomberg.

While Calgary-based Nexen has faced setbacks with oil-sands projects such as its Long Lake operation in Alberta, it’s now cheaper relative to earnings than 96 percent of North American oil exploration and production companies with market values greater than $1 billion, data compiled by Bloomberg show. The $9.4 billion company with oil and gas operations from West Africa to the North Sea may fetch at least a 35 percent premium in a takeover, said Edward Jones & Co.

“You’ve removed one more stumbling block with the CEO leaving,” said Timothy Parker, a Baltimore-based portfolio manager who oversees about $4.5 billion in natural-resource stocks for T. Rowe Price Group Inc., Nexen’s largest shareholder. “It’s cheaper than average and so there is appeal there for an acquirer because you could likely buy it at an accretive price. You could pay a good premium and it could still be accretive.”

Davis Sheremata, a spokesman for Nexen, declined to comment on takeover speculation.

CEO’s Exit

Romanow, who had worked at Nexen for 13 years and had been CEO since January 2009, was replaced by Chief Financial Officer Kevin Reinhart on an interim basis, the company said in a statement Jan. 9, without providing a reason for the exit. Gary Nieuwenburg, vice president overseeing Canadian operations at Nexen, also left. The shares gained 7.8 percent the next day, the most since Oct. 5.

Nexen, which was formed when Occidental Petroleum Corp. combined its Canadian units into one company in 1971, lost about $2.1 billion in market value during Ronamow’s tenure, data compiled by Bloomberg show.

Profit slumped in the third quarter as production fell below the company’s expectations and it took a longer time to start a platform at its Buzzard facility in the U.K.’s North Sea. The Long Lake oil-sands project has lagged initial output estimates since it started operating in January 2009. Also, the oil producer’s contract with Yemen expired last month after negotiations for an extension with the war-torn nation failed.

‘Ton of Problems’

“They’ve stepped on the sharp end of the rake every chance they got,” John Stephenson, who helps manage $2.7 billion, including Nexen shares, for First Asset Investment Management Inc. in Toronto, said in a phone interview. “They’ve had a ton of problems. So this was a decisive move, a bold move, and it certainly opens the door for a buyer.”

Nexen’s combined equity and net debt is valued at 3.5 times its earnings before interest, taxes, depreciation and amortization in the last 12 months, making it cheaper than 77 of the 80 other North American exploration and production companies with market capitalizations higher than $1 billion, data compiled by Bloomberg show. The industry trades at a median of 8.7 times Ebitda.

Shares of Nexen also slipped to a three-year low of C$14.63 on Dec. 14, the equivalent of an 8 percent discount to its book value, or the value of its assets minus liabilities. At 1.1 times book value as of yesterday’s close, it’s still cheaper than 91 percent of the industry, data compiled by Bloomberg show.

‘Substantial Value’

“There is substantial value to be unlocked,” Lanny Pendill, an analyst with Edward Jones in St. Louis, said in a phone interview. “It’s a company that has a pretty poor operational track record. If you think about what the assets are worth versus where the stock is trading, there’s a very large gap.”

Nexen would demand a minimum of a 35 percent premium in an acquisition “because of how depressed the stock price is,” Pendill said. That would equate to C$24.45 a share, or about C$12.9 billion -- C$3.35 billion ($3.29 billion) more than the company’s current market value. A buyer would also have to assume C$3.45 billion in net debt.

T. Rowe Price’s Parker said stockholders would want a bid “in the C$20s” and would be “shocked” if investors turned down an offer higher than C$25 a share.

While a slumping stock price led Nexen to consider options such as a sale last year, the company decided it wouldn’t get a high enough premium and instead should focus on fixing problems at its Long Lake oil-sands facility, Romanow said at the company’s investor day on Dec. 1.

Exploring a Sale

“We looked at selling the company,” Romanow said. “We looked at selling major assets. We looked at setting up separate companies. We looked at every financial re-engineering that was done in our industry and in other industries to see if there was a way to generate some value for you sooner.”

Nexen shares had climbed on takeover speculation in December 2008 when the FT Alphaville website reported that Total SA, Europe’s third-largest oil company, was preparing a C$38-a-share bid. A day later, the Times of London reported that Total had abandoned the plans.

While Nexen’s discount relative to peers may draw takeover interest, buyers may be wary because of its diverse assets and locations and operational setbacks in recent years, particularly in the oil sands, Sam La Bell, an energy and special situations analyst at Veritas Investment Research Corp. in Toronto, said in a phone interview.

“People who are looking for bargains have been looking at Nexen because it is so cheap,” La Bell said. “But the operational performance would pose a real challenge.”

Nexen’s Assets

Still, Nexen would give a buyer access to Canada’s vast oil deposits, offshore production in the U.K.’s North Sea, West Africa and the Gulf of Mexico and drilling opportunities in shale rock formations. Nexen produced the equivalent of 164,000 barrels a day of oil in the third quarter and had reserves of 919 million barrels of oil at the end of 2010, according to data compiled by Bloomberg.

ConocoPhillips, the third-largest U.S. oil company, may be interested in Nexen as it plans to spin off its refining business this year, Ted Harper, who helps manage about $6.8 billion in assets for Frost Investment Advisors LLC in Houston, said in a phone interview. The Houston-based company has about $6 billion in cash and near-cash items, data compiled by Bloomberg show. A phone call to the ConocoPhillips media line wasn’t returned.

Chinese Buyers

Additional potential acquirers may include other cash-rich oil companies from Exxon Mobil Corp. to Royal Dutch Shell Plc, as well as companies in China, according to T. Rowe Price’s Parker. Exxon had $11 billion in cash at the end of the third quarter while Shell had $19 billion, the data show.

Kimberly Brasington, a spokeswoman for Irving, Texas-based Exxon, and Kayla Macke, a spokeswoman for The Hague-based Shell, declined to comment on market speculation.

“As far as who could buy it, it could be any number of people,” Parker said in a phone interview. “You’ve got a lot of big, major oils with a bunch of cash and balance sheets to handle a deal of this size, and you’ve got a lot of Chinese companies that might be interested.”

Companies in China announced about $12.9 billion worth of bids last year for overseas oil and gas explorers and producers, excluding terminated deals, according to data compiled by Bloomberg.

“I absolutely think the CEO leaving opens the door for a lot of possibilities” for Nexen, said Stephenson of First Asset. “The long and short of it is that the company lacks strategic direction, it didn’t deal with its problems early and so a buyer might be interested because of valuation.”

--Editors: Sarah Rabil, Daniel Hauck.

To contact the reporters on this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net; Bradley Olson in Houston at bradleyolson@bloomberg.net.

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Katherine Snyder at ksnyder@bloomberg.net; Susan Warren at susanwarren@bloomberg.net.

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Microsoft Says Fourth-Quarter PC Shipments May Have Fallen Short

January 11, 2012, 11:47 PM EST By Dina Bass

Jan. 11 (Bloomberg) -- Microsoft Corp., the world’s largest software maker, said industrywide sales of personal computers will probably be lower than analysts projected in the fourth quarter because supply was hurt by flooding in Thailand.

Analysts have estimated that total PC shipments fell about 1 percent in the period, Tami Reller, chief financial officer of Microsoft’s Windows unit, said at an investment conference yesterday. The actual number is probably lower, she said. Bill Koefoed, Microsoft’s general manager of investor relations, echoed those remarks at a separate event.

“As the numbers come out, you’ll likely see that number decline further as the impact has been felt faster than people had anticipated,” Koefoed said at a JPMorgan Chase & Co. conference. Reller told the audience at a Nomura Holdings Inc. event that there could potentially be more downward adjustments. Both conferences were held in Las Vegas, where the Consumer Electronics Show is under way.

Last year’s flooding in Thailand, which knocked disk-drive factories off line, took a toll on a PC market that was already suffering from competition with smartphones and Apple Inc.’s iPad. Sales in Microsoft’s Windows unit, which makes the operating system software that runs most PCs, have missed estimates in three of the past four quarters. The comments probably mean they will fall short again, said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon.

‘Under Siege’

“The Windows business is under siege,” said Barnicle, who had estimated that PC shipments dropped 1 percent in the quarter. He rates Microsoft shares “sector perform.” “Windows is their most profitable business. If that’s not stable for whatever reason -- Thailand, Apple -- it just becomes difficult for the stock to gain momentum.”

Shares of Redmond, Washington-based Microsoft slipped 1.8 percent in extended trading after the comments were reported. The stock had closed at $27.84 at the close in New York.

Analysts on average predict the company’s total sales in the fiscal second quarter, which ended in December, will rise 5.3 percent to $21 billion, according to data compiled by Bloomberg.

Microsoft is working to release a new operating system, Windows 8, that’s designed to work on iPad-like tablets, helping it compete with Apple. A public test version is set for February, and Reller gave a preview last night during Chief Executive Officer Steve Ballmer’s keynote address at the Consumer Electronics Show.

The executives declined to comment yesterday on when the final version will go on sale. Analysts expect it later this year.

PC Makers, Intel

PC shipments rose 3.6 percent in the third quarter, according to market researcher IDC, less than the 4.5 percent growth the firm had predicted. Hewlett-Packard Co. was the world’s biggest PC seller in the quarter, according to IDC, followed by Lenovo Group Ltd. and Dell Inc.

Intel Corp., the world’s biggest computer-chip maker, cut its fourth-quarter revenue forecast by $1 billion last month, citing the disk-drive shortages.

The floodwaters engulfed much of the industrial heartland north of Bangkok, sidelining production of disk drives and components. The affected area produces about a quarter of the world’s drives, IDC estimated in November.

Drive manufacturers are still working to recover, though some have bounced back faster than they had expected. Western Digital Corp., one of the harder-hit companies, has resumed production and raised its quarterly revenue forecast.

Still, these types of shortages take time to go away, Microsoft’s Reller said.

“It tends to take a few quarters to work its way through the system,” she said. “It would be naive to believe otherwise.”

--Editors: Jillian Ward, Nick Turner

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net;

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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RIM Seen Too Late with E-Mail PlayBook Dominated by IPad

January 11, 2012, 1:57 AM EST By Hugo Miller

Jan. 11 (Bloomberg) -- Research In Motion Ltd. may need more than the souped-up software unveiled yesterday in Las Vegas to turn its BlackBerry PlayBook tablet into a challenger to Apple Inc.’s iPad.

At the Cosmopolitan hotel last night, RIM executives showed off devices with the new PlayBook OS 2.0 software, which includes built-in e-mail and calendar programs missing from the original version of the device. A nine-month delay in getting e- mail onto the PlayBook hurt the tablet’s chances of mainstream success, said Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago.

“It’s too little, too late,” said Fritzsche. “I would call this a working version of what should’ve come last year -- things that should’ve been there out of the box.”

The fate of the PlayBook, RIM’s initial foray beyond smartphones, is critical because it’s the first device to be built using new software on which the company is betting its future. After postponing the introduction of PlayBook OS 2.0 to February, RIM said in December that the first BlackBerrys based on the new operating system, called BB10, won’t be available until the “latter part” of this year.

Fritzsche says the PlayBook’s appeal is now largely limited to corporate BlackBerry customers who were willing to wait for the software upgrade. She rates RIM “market perform” and expects the company to ship 100,000 PlayBook devices this fiscal quarter. RIM shipped 150,000 last quarter, while Apple sold 11.1 million iPads in its most recently reported period, outpacing the PlayBook 74 to 1.

Nuclear Plants

Fritzsche is less optimistic than some other analysts, who on average project RIM will ship 177,000 PlayBooks this quarter and 186,000 in the three months ending in May, according to a survey compiled by Bloomberg. The company shipped 200,000 in the period that ended in August.

BB10 is based on QNX, sophisticated software also used to run nuclear power plants and unmanned aerial drones. RIM acquired the software when it bought Ottawa-based QNX Software Systems in 2010. Difficulties in melding QNX to the PlayBook and marketing missteps have left PlayBook shipments at a little more than 1 percent of those for the market-leading iPad.

“The most frustrating thing about the last 12 months is that PlayBook itself has had so much potential,” RIM Vice President Alec Saunders said in an interview at the event. “We’re finally starting to see that potential in the PlayBook 2.”

Amazon Swoops In

By not getting e-mail into the PlayBook from the outset, RIM lost an opportunity to gain market share in a period when some other tablets based on Google Inc.’s Android software failed to catch on, said Fritzsche and Tavis McCourt, an analyst at Morgan Keegan & Co. That prospect is now largely gone -- nabbed instead by Amazon.com Inc.’s two-month-old Kindle Fire tablet, which is smaller than the iPad and similar in size to the PlayBook, McCourt said.

“It’s an iPad market,” said McCourt, who is based in Nashville, Tennessee, and rates RIM “market perform.” He expects RIM to ship 300,000 PlayBooks this quarter, with a drop to 150,000 next quarter. “Every vendor has failed, with the exception of Amazon.”

Amazon said in December that the Kindle Fire tablet had been the top-selling product on Amazon.com since its September unveiling and that the company was selling more than 1 million of the tablets and Kindle e-readers a week.

Amazon’s newest device hit store shelves on Nov. 14 and quickly surpassed more-established tablets from Samsung Electronics Co. and Barnes & Noble Inc. Last month, research firm IHS Inc. estimated Amazon would ship 3.9 million Kindle Fires in the last three months of 2011, making it the No. 2 tablet. Apple was projected to ship 18.6 million iPads.

Better Year?

One bit of good news for RIM is that after repeatedly missing sales and profit targets and deadlines for new software, PlayBook OS 2.0 is still scheduled for February, McCourt said. RIM said on Jan. 9 that the free software upgrade “is expected to be available” in February, without giving a more specific time frame.

“That’s a positive,” McCourt said.

And RIM has added other tools to PlayBook OS 2.0 to entice consumers attracted to the iPad. One new feature turns a BlackBerry smartphone into a remote control for PlayBook users to play movies on a connected big-screen TV. RIM says the upgrade also includes BlackBerry Video Storefront, which will offer “thousands of movies and TV shows” for rent the day they appear on DVD.

New Features

To appeal to corporate customers, RIM said it has improved the PlayBook’s ability to create and edit presentations and transfer files from a laptop or desktop computer. Those improvements may provide some additional incentive to enterprise buyers that have held out for the e-mail upgrade, but guessing the size of that potential market “is very hard to gauge” as RIM’s grip on the corporate computing world loosens, said Alkesh Shah, an analyst at Evercore Partners Inc. in New York. He rates RIM “equalweight.”

“We should have done it earlier. But we’re doing it now,” Saunders said last night. “It’s a great product. There are going to be a lot of very happy people in February.”

RIM has had a better start to 2012 in the stock markets as well. After falling 75 percent last year to below its book value, or the value of the company’s assets minus its liabilities, the stock has climbed 7 percent this year, compared with a 3.7 percent gain for the Nasdaq Composite Index. RIM rose less than 1 percent yesterday to $15.51 at the close in New York.

Still, making any money from the PlayBook will be tough, said Matt Thornton, an analyst at Avian Securities LLC in Boston. RIM has cut the price of the PlayBook by as much as $400 to spur sales, wiping out any profit margin, he said.

The PlayBook with 64 gigabytes of memory now costs $300, down from $700, on Best Buy’s website. The basic 16-gigabyte version is $300, down from $500.

“You can continue to bring out buyers with fire sales, but RIM can’t make money at those prices,” said Thornton, who rates RIM “neutral.”

“Volumes are going to be hard to come by, and margins are less than smartphones,” he said. “When you roll that up, it doesn’t amount to much.”

--With assistance from Douglas MacMillan in Las Vegas. Editors: Jillian Ward, Tom Giles

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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Brocade Poised to Rise 40% in Takeover Seen for Oracle: Real M&A

January 11, 2012, 1:33 AM EST By Charles Mead

Jan. 11 (Bloomberg) -- Brocade Communications Systems Inc. is throwing off so much cash it may be worth 40 percent more in a sale to Oracle Corp. or private equity firms.

The maker of switches for data-storage networks, which had been trying to find a buyer with the help of Frank Quattrone for two years, is valued at 7.7 times its free cash flow, according to data compiled by Bloomberg. That’s the cheapest among its closest competitors and less than half the median of 17 times for comparable companies -- even after surging almost 80 percent from its low in August to $5.77 a share.

While Brocade was passed over when Dell Inc. agreed to buy Force10 Networks Inc. in July, the company could give Oracle a networking product it currently doesn’t offer to businesses and enable it to better compete with Cisco Systems Inc., according to ThinkEquity LLC and Avian Securities LLC. Brocade, which has more than doubled its free cash flow in the past five years, also makes sense for buyout firms and could command about $8 a share in a takeover, ThinkEquity said.

“The cash flow is pretty healthy,” Rajesh Ghai, a San Francisco-based analyst at ThinkEquity, said in a telephone interview. “It could be private equity or a large strategic buyer. It fills a hole that Oracle has.”

Pavel Radda, a spokesman for San Jose, California-based Brocade, declined to comment on whether it is currently seeking to sell the company. Deborah Hellinger, a spokeswoman at Oracle, declined to comment on whether the Redwood City, California- based company is interested in buying Brocade.

Relative Value

Founded in 1995, Brocade sells the hardware that connects information stored in servers. It controls 38 percent of the market for switches used in so-called storage area networks, a larger proportion than any of its competitors, according to Redwood City-based research company Dell’Oro Group.

Brocade also acquired Foundry Networks Inc. in December 2008 to enter the market for so-called ethernet switches that are gaining popularity in data centers.

The company has thus far been unsuccessful in selling itself, even after hiring Quattrone’s Qatalyst Partners to drum up interest, a person with knowledge of the matter, who wasn’t authorized to speak publicly, said in July. First-round bids in the latest auction for Brocade were due last month, according to people with knowledge of the situation, who declined to be identified because the process was private.

Sally Palmer at San Francisco-based Qatalyst didn’t return telephone or e-mail messages seeking comment.

Oracle, IBM

At yesterday’s price, Brocade traded at 7.7 times its cash from operations of about 75 cents a share after deducting capital expenses, according to data compiled by Bloomberg.

QLogic Corp. and NetApp Inc., the two cheapest competitors among comparable companies cited by JMP Securities and Mizuho Securities USA Inc., are valued at 9 times and 11.2 times.

Less than a year ago, Brocade sold for 27.8 times its free cash flow, more than three times its current value.

Oracle could acquire Brocade to bolster its enterprise software and server businesses by adding networking products, which it currently lacks, according to Matt Bryson, a Boston- based analyst at Avian Securities.

Brocade may also make sense for Armonk, New York-based International Business Machines Corp. as it competes with Hewlett-Packard Co. and Dell for customers that want services from a single provider, according to Jitendra Waral, a technology hardware analyst for Bloomberg Industries.

Doug Fraim, a spokesman for IBM, didn’t return telephone and e-mail messages seeking comment.

Aging Technology

“Everybody’s trying to stick to one vendor that can provide everything, rather than disparate systems,” Waral said in a telephone interview from Las Vegas. “IBM and Oracle both have these missing networking plugs.”

Brocade’s client partnerships could make a takeover less attractive, said Brian Marshall, a San Francisco-based analyst at ISI Group. One reason is that 60 percent of Brocade’s data- storage products, which account for more than half of its sales, are sold through agreements with Oracle, IBM and Hewlett- Packard, he said. If Oracle or IBM bought Brocade, the deals with the other two would probably end.

“They’d be selling products to a competitor, which could create problems,” he said in a telephone interview.

The technology that Brocade uses for most of its data- storage products is also aging, which may also deter some potential buyers, according to Erik Suppiger, a San Francisco- based analyst at JMP Securities.

Hot Option

Brocade could still attract interest from private equity buyers, according to Joanna Makris, an analyst at Mizuho Securities USA in New York. The amount of free cash it generated last fiscal year climbed to a record $352 million, versus $136 million five years ago, data compiled by Bloomberg show.

The company’s operating margin of 8.9 percent was a third less than the median for comparable companies.

“Brocade is not getting a lot of love from investors,” she said in a telephone interview. “Private equity is usually the type of place where they take on stories like this.”

Based on ThinkEquity’s projected takeover price of $8 a share, Brocade would be worth $3.64 billion. That’s a windfall of about a billion dollars, data compiled by Bloomberg show. The price could rise even more if Brocade attracts multiple bidders, Penn Capital Management’s Eric Green said.

Traders in the options market are also getting more bullish on Brocade. The ratio of calls to buy Brocade shares versus puts to sell rose 46 percent to 1.11-to-1 on Jan. 9, the highest level since June, data compiled by Bloomberg show.

“This is one where you could have a bidding war,” Green, a Philadelphia-based manager at Penn Capital, which oversees $6 billion and owned shares of Brocade as of Sept. 30, said in a telephone interview. “It’s a stock that makes sense as an acquisition candidate and a lot of people would be interested.”

--With assistance from Joanna Ossinger and Serena Saitto in New York and Peter Burrows in San Francisco. Editors: Michael Tsang, Daniel Hauck.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net.

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Katherine Snyder at ksnyder@bloomberg.net.

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Drone With HD Camera, Unusual Products at 2012 CES

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Apple Attempting to Market to Businesses

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Lenovo CEO: Tablets Make Up Niche Market

January 11, 2012, 12:25 AM EST By Douglas MacMillan

Jan. 11 (Bloomberg) -- Lenovo Group Ltd. Chief Executive Officer Yang Yuanqing said there’s scant room for growth in the tablet market, and that devices running Google Inc. software -- including his company’s machines -- will keep trailing the iPad.

“Tablets will not replace the traditional” personal computer, Yang said in an interview yesterday at the Consumer Electronics Show in Las Vegas. “The traditional PC is changing to adapt to the customer requirements. The tablet is an extra market for some niche customers.”

While Lenovo makes tablets, it’s also an early entrant into the market for so-called ultrabooks, a term coined by Intel Corp. to describe light, thin laptops. A year after tablets dominated much of the talk at CES, computer makers used press briefings and erected elaborate booths to focus showgoers’ attention on the newer category of slim PCs.

“This will become a trend to replace part of the notebook market,” Yang said of ultrabooks.

Ultrabooks will account for more than 40 percent of all notebooks by 2015, researcher IHS said in November. Lenovo’s Yang said he expects the category to make up 30 percent to 40 percent of notebooks in the next 18 months.

Apple’s iPad controls more than 65 percent of the worldwide market for tablets, according to Framingham, Massachusetts-based researcher IDC. Google’s Android tablets, including Lenovo’s IdeaPad A1, represent 32 percent of all tablet sales.

“Apple is the leader,” Yang said. “For the Android ecosystem, we still need to learn something, we still need to improve something.”

Lenovo on Jan. 9 touted a hybrid device called the IdeaPad YOGA, a laptop that uses a swiveling screen to function both as a touch-screen tablet and as a more full-featured ultrabook. Products like this, which combine features of smartphones and PCs, will win out over tablets in the long run, Yang said.

--With assistance from Rich Jaroslovsky and Ian King in San Francisco. Editors: Tom Giles, Frank Longid

To contact the reporter on this story: Douglas Macmillan in New York at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Ten Products Printed in 3D

Designers are turning to 3D printing to create complex objects that are too difficult or expensive to produce using conventional manufacturing techniques.

Adding to 3D’s appeal is the wider range of materials the printers can now use, including glass, silver, and different types of plastics.

Read on to see the objects—some are prototypes, others are finished products—created by 3D printers.

Image Courtesy of Freedom of Creation

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Kodak’s Latest Apple, HTC Lawsuits May Goose Value of Patents

January 11, 2012, 1:49 AM EST By Susan Decker

Jan. 11 (Bloomberg) -- Eastman Kodak Co., seeking to sell or license a portfolio of more than 1,100 patents, sued Apple Inc. and HTC Corp. in an expansion of a legal strategy that may help boost the value of its inventions to fund a turnaround.

Two infringement lawsuits filed yesterday in federal court in Rochester, New York, accuse the smartphone makers of using without permission Kodak technology for image transmission, including a way for users to share images directly from cameras. Kodak also claims HTC is infringing an additional patent for a preview feature, which is at the center of a U.S. International Trade Commission case against Apple and Research In Motion Ltd.

“They’re trying to generate value for their patent portfolio,” said Ron Epstein, chief executive officer of patent brokerage Epicenter IP Group LLC in Redwood City, California.

Kodak, which is predicted by analysts to report its fourth straight annual net loss, has put the Rochester-based company’s digital-imaging patents up for sale to help fund changes to its business. CEO Antonio Perez, who is now betting on digital printers for publishers, packagers, advertisers and households to lift Kodak, has said that the Apple-RIM trade commission case could generate $1 billion in new revenue from settlements.

Kodak, which didn’t say how much the new Apple and HTC cases could be worth, also filed companion complaints at the trade commission yesterday in Washington, seeking to block imports of products including Apple’s iPad and iPhone, and HTC’s Flyer tablet and Wildfire S phone.

Bankruptcy Risk

“This is an important part of ongoing operations to get them through the transition,” said Erin-Michael Gill, chief intellectual property officer for MDB Capital Group LLC, a Santa Monica, California-based investment bank. “A bad sign would be them sitting on their hands and waiting for these to sell.”

Kodak said last year it hired Lazard Ltd. to help it sell the patents and retained Jones Day among advisers helping on strategic options.

The Apple-RIM trade commission case filed in 2010, involving the single image-preview patent, has met with delays including the retirement of the judge handling the case, and a final decision isn’t scheduled until September.

Moody’s Investors Service on Jan. 5 cut ratings on about $1 billion of Kodak debt with a negative outlook, citing “a heightened probability of a bankruptcy over the near-term” as liquidity deteriorates, making a patent sale more challenging.

Portfolio Perceptions

Adding four new patents into the mix “helps, even without litigating any of the issues, to counteract the impression that there’s only one good patent” in the portfolio, said Ron Laurie, managing director of Inflexion Point Strategy LLC in Palo Alto, California, which counsels companies on intellectual property purchases. Kodak “wanted to defuse that impression.”

The four patents asserted against Apple and HTC have as co- inventor Kodak researcher Kenneth Parulski, who has more than 190 patents and is “recognized as a pioneer in numerous digital camera technologies,” according to the complaints.

Kodak claims infringement by Apple’s iPad 2, iPhone and iPod Touch, and by HTC’s tablets and phones, including the Flyer, EVO View 4G, Jetstream, Vivid, Amaze 4g, Desire, Hero S, Rezound, Rhyme, Sensation 4G and Wildfire S.

“We’ve had numerous discussions with both companies in an attempt to resolve this issue, and we have not been able to reach a satisfactory agreement,” Laura Quatela, Kodak’s chief operating officer, said in a statement. “Our primary interest is not to disrupt the availability of any product but to obtain fair compensation for the unauthorized use of our technology.”

HTC, based in Taoyuan, Taiwan, had no comment on the complaints. Officials with Cupertino, California-based Apple didn’t reply to a request for comment.

Stock Market Value

Selling patents and debt will help determine “the company’s ability to continue its operations” in the next 12 months, Kodak said in a quarterly regulatory filing in November. Kodak said then it would pursue licensing opportunities for the patents if unable to sell them at “an appropriate price.”

Kodak, which lost 88 percent of its stock market value last year, has struggled since demand for photographic film began evaporating as the world embraced digital cameras. Kodak’s cash and equivalents fell to $862 million at the end of its third quarter from $1.4 billion a year earlier. The company is scheduled to report fourth-quarter results Jan. 26.

Management Changes

Kodak rose 50 percent yesterday, to 60 cents, after saying it was adjusting its management structure and creating a chief operating office to reduce costs as its sales decline and cash reserves dwindle. The chief operating office will be led by Quatela and Philip Faraci, both presidents at Kodak. Faraci will focus on the commercial segment and sales and regional operations, and Quatela will lead the consumer segment and certain corporate functions, Kodak said.

The company’s $162 million market value “is lower than the potential damages” the company could generate from litigation, Epstein said.

“They’re looking at the mobile device companies and saying, ‘The brilliance of your user interface and product integration does not detract from the fact that you have integrated my innovation into your product and you owe me something for it,’” Epstein said.

The new case against Apple is Eastman Kodak Co. v. Apple Inc., 12cv6020, and the case against HTC is Eastman Kodak Co. v. HTC, 12cv6021, both U.S. District Court for the Western District of New York (Rochester).

--With assistance from Beth Jinks in New York. Editors: Romaine Bostick, Andrea Snyder

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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Apple Acquires Israel-Based Flash-Memory Part Maker Anobit

January 11, 2012, 1:40 AM EST By Adam Satariano and Shoshanna Solomon

(Updates with supplier information in third paragraph.)

Jan. 10 (Bloomberg) -- Apple Inc. said it acquired Anobit Technologies Ltd., an Israeli company that makes a flash-memory drive part for the iPhone and iPad, confirming a press report from last month.

The deal helps Apple secure supplies of a key component for its top-selling devices. Anobit makes high-performance controllers used to optimize the memory capabilities inside products such as the iPhone and iPad. Apple is the world’s largest buyer of NAND flash memory, accounting for about 23 percent of consumption last quarter, according to a Jan. 6 report from Sanford C. Bernstein & Co.

Steve Dowling, a spokesman for Cupertino, California-based Apple, said today that the purchase had been made, while declining to elaborate. The statement confirmed a December report from in the Israeli newspaper Cacalist.

“Apple buys smaller technology companies from time to time and we generally do not discuss our purpose or plans,” Dowling said in a telephone interview.

The Anobit deal, whose cost Apple wouldn’t disclose, is the company’s first acquisition in Israel, where Intel Corp., Hewlett-Packard Co. and Microsoft Corp. have established operations.

Israel, with a population similar in size to Switzerland’s at 7.7 million, has about 60 companies traded on the Nasdaq Stock Market, the most of any nation outside North America after China. Israel is also home to the largest number of startups per capita in the world.

Research Center

Microsoft opened a research and development center in Israel in April 2006, according to the Redmond, Washington-based software maker’s website. Intel, which began operations in Israel in 1974 with five employees, has 6,600 workers in the country, according to the chip manufacturer’s website.

Anobit had raised $76 million from investors, including Battery Ventures and Pitango Venture Capital, before today’s announcement, according to an online fact sheet. The Israeli company says its memory signal processing technology uses proprietary signal-processing algorithms to improve the performance of flash-memory chips.

While Apple didn’t acknowledge buying Anobit until today, Israel’s prime minister’s office welcomed the company to the country in a Dec. 20 post on Twitter.

--Editors: Jeffrey Tannenbaum, John Lear

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Qualcomm Shows Tablet, TV That Run Its Chips

January 10, 2012, 1:22 PM EST By Ian King and Danielle Kucera

Jan. 10 (Bloomberg) -- Qualcomm Inc., the largest maker of semiconductors for mobile phones, demonstrated a tablet computer and a Lenovo Group Ltd. television that run its chips, part of an effort to expand into a broader range of products.

The Lenovo TV using the Snapdragon chip is aimed at the Chinese market, Qualcomm Chief Executive Officer Paul Jacobs said at the Consumer Electronics Show in Las Vegas. Jacobs also demonstrated a Snapdragon-based tablet that runs Microsoft Corp.’s Windows 8 operating system.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Microsoft Says PC Sales May Have Missed Fourth-Quarter Estimates

January 10, 2012, 10:14 PM EST By Dina Bass

Jan. 10 (Bloomberg) -- Microsoft Corp. executives said industrywide sales of personal computers will probably be lower than analysts projected for the quarter that ended in December as supply was hurt by flooding in Thailand.

Wall Street and industry analysts had estimated that total PC shipments fell about 1 percent in the fourth quarter, said Tami Reller, chief financial officer of the company’s Windows unit, and Bill Koefoed, general manager of investor relations. The actual number is probably lower, Reller and Koefoed said in separate speeches at two investor conferences in Las Vegas.

“As the numbers come out, you’ll likely see that number decline further as the impact has been felt faster than people had anticipated,” Koefoed said in a speech at a JP Morgan Chase & Co. conference. Reller told a Nomura Holdings Inc. audience that there could “potentially” be more downward adjustments.

Microsoft shares slipped in extended trading after the comments were reported.

--Editors: Jillian Ward, Tom Giles

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net;

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Rice Says New Yahoo CEO Needs to Build Credibility

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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The Negative Effects of Technology on the Planet - Our Cultural Vision is Driving the Destruction

STMicro to Unveil Sensor Suit for Health Care, Sport at CES

January 11, 2012, 1:33 AM EST By Chiara Remondini

(Updates share price in fourth paragraph.)

Jan. 10 (Bloomberg) -- STMicroelectronics NV, Europe’s largest semiconductor maker, will unveil a smart-suit prototype with motion sensors that may help people with injuries to recover faster and enhance the performance of athletes.

The company will present the suit at the International Consumer Electronics Show, or CES, in Las Vegas this week. Sewn- in multisensor nodes can capture motion. Such technology is used to record the movements of actors to create animated characters in films and games, and STMicroelectronics is betting it will have wider applications in sports and in helping recuperation from injury and illness.

“This technology will improve the recovery of patients in rehabilitation after injuries and athletes’ performance as it can track, compare and address issues in their movements and posture,” Nunzio Abbate, marketing director for automation, robotics and transportation, said in an interview. “A tennis player will finally be able to compare his forehand with Nadal’s.”

STMicroelectronics rose as much as 1.8 percent to 4.9 euros in Paris trading today and was up 0.8 percent as of 9:40 a.m., giving the company a market value of 4.4 billion euros ($5.6 billion). The stock has dropped 41 percent in the last 12 months.

The Geneva-based company said in October it was “on track” to double revenue from such microelectromechanical systems, or MEMS, in 2011 after sales rose almost 130 percent in the first nine months. It didn’t give a total MEMS sales number. Smartphones are also generating demand for MEMS, including motion sensors, allowing consumers to turn, tilt and tap their gadgets for games, search and other functions.

Market Leader

Global MEMS revenue, which includes applications in medical electronics and automotive, is estimated to rise 11.6 percent to $8.74 billion in 2012, according to Jeremie Bouchaud, an analyst at market researcher IHS iSuppli. STMicroelectronics was the market leader in consumer and mobile MEMS in the first half, benefiting from growth in handsets and tablet devices, IHS iSuppli said in September.

Patients with illnesses such as Parkinson’s disease may benefit from treatments based on the repetition of simple movements through the technology, said Abbate.

Highest Growth

“MEMS is definitely one of the businesses within STMicro which has had the highest growth in recent years and which has one of the most promising outlooks in coming years,” said Janardan Menon, an analyst at Liberum Capital in London.

The chipmaker, led by Chief Executive Officer Carlo Bozotti, had a 64 percent decline in third-quarter net income as net revenue fell to $2.44 billion from $2.66 billion.

MEMS will continue to rise in consumer devices including smartphones, tablets and gaming consoles, Menon said. “We also expect MEMS to grow in other areas such as medical and industrial,” said Menon, who has a “hold” rating on STMicroelectronics shares.

“The price of suits and other applications will be slashed with our new technology,” Abbate said. He forecast the price of a suit may drop to a tenth of current levels of “several thousand euros,” opening up new markets. STMicroelectronics won’t produce the suits but will sell the technology to make such products, he said.

In the prototype suit, each node combines a microcontroller, nine sensors, including an accelerometer and a gyroscope, and software.

--Editors: Robert Valpuesta, Simon Thiel

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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What Happened to Window Technology?

CES Keeps on Getting Bigger

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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Samsung Profit Rises to Record on Galaxy Sales, Seagate Deal

January 08, 2012, 5:46 PM EST By Jun Yang

(Updates with analyst comment in fourth paragraph.)

Jan. 6 (Bloomberg) -- Samsung Electronics Co., Asia’s largest consumer-electronics company, reported a record quarterly profit on surging sales of Galaxy phones and proceeds from selling its hard-disk drive business.

Operating profit in the three months that ended in December was 5.2 trillion won ($4.5 billion), compared with 3.01 trillion won a year ago, the Suwon, South Korea-based company said in a statement today. That was higher than the 4.6 trillion-won average of 29 analyst estimates compiled by Bloomberg News. Sales rose 12 percent to 47 trillion won.

Mobile-phone sales surpassed a record 300 million units last year as Galaxy smartphones helped win consumers amid competition with Apple Inc.’s iPhone. Samsung, which sold its hard-disk drive business to Seagate Technology Plc, is introducing more mobile devices to offset slumping profits at the chip and flat-screen panel businesses.

“The mobile business is generating a huge chunk of profit now,” James Song, a Seoul-based analyst at Daewoo Securities Co., said by telephone. “It may be getting harder for Apple to catch up because they only have a limited number of models.”

Samsung shares fell 1.2 percent to 1,042,000 won as of 10:29 a.m., while the benchmark Kospi index declined 1.3 percent. The stock gained 11 percent in 2011.

Seagate Deal

While smartphone sales helped propelled Samsung’s revenue to a record last year, fourth-quarter operating profit was inflated by proceeds from the Seagate deal, James Chung, a Seoul-based spokesman for the Suwon, South Korea-based company, said by telephone after the announcement.

Samsung said in April it agreed to sell its mechanical- drive business to Dublin-based Seagate for $1.38 billion in cash and stock. Samsung said last month the sale was completed.

Operating profit may be 200 billion won higher or lower than today’s preliminary estimate when audited results are announced later this month, Samsung said. The company didn’t provide net income figures or a breakdown of divisional earnings.

Samsung’s full-year profit sales rose 6.5 percent to a record 164.7 trillion won, while operating profit declined 6.7 percent to 16.2 trillion won.

Galaxy Sales

Operating profit at the telecommunications unit jumped 81 percent to 2.6 trillion won, according to the median of six analyst estimates surveyed by Bloomberg News. Sales at the world’s second-largest handset vendor may have gained 36 percent to 16.45 trillion won.

Samsung overtook Apple in the third quarter to become the world’s largest smartphone seller after shipping 27.8 million units, market researcher Strategy Analytics said in October. Samsung’s smartphone sales more than tripled during the three- month period from a year ago, and its market share more than doubled, it said.

Samsung probably sold about 32 million smartphones in the fourth quarter, according to an estimate from Dongbu Securities Co., helped by the Galaxy range of devices. Galaxy S II sales, which began in May, surpassed 10 million units quicker than any other Samsung mobile device, the company said in a December statement, without providing a total sales figure for the model.

Chip Profit

Samsung sold more than 300 million handsets, including basic types, in 2011, according to the statement.

In October, Samsung and software partner Google Inc. unveiled the Galaxy Nexus, powered by the latest Android operating system that features facial-recognition functions. A month earlier, Samsung introduced the Galaxy Note equipped with a 5.3-inch screen and a stylus.

Profit at the semiconductor division probably fell 11 percent to 1.6 trillion won on sales of 9.65 trillion won, according to the survey.

The price of the benchmark DDR3 2-gigabit DRAM slumped by 51 percent last year amid slowing personal-computer sales, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors. Chip prices have fallen to as low as a ball of rice, according to Tokyo-based Elpida Memory Inc.

DRAM prices likely will remain at current levels through the first half of this year, with PC demand not picking up quickly, Shin Hyun Joon, a Seoul-based analyst at Dongbu Securities, said in a Dec. 21 report.

TV Shipments

Samsung is faring better than its rivals because of its diversification into specialty chips for mobile devices, Park Hyun, a Seoul-based analyst at Tong Yang Securities Inc., said by telephone before today’s announcement. Shipments of smartphone DRAM probably more than doubled last year from 2010, according to a forecast by researcher IHS iSuppli in October.

Samsung’s display division likely had an operating profit of 6.5 billion won, compared with 100 billion won a year earlier, according to the survey. Sales probably rose to 7.95 trillion won from 7.2 trillion won.

The average selling price of Samsung’s flat-screen panels dropped 21 percent in 2011 amid stagnating TV sales, according to an estimate from Dongbu Securities.

Global LCD TV shipments probably were 206 million units last year, falling short of an earlier projection of 211 million units, according to research company DisplaySearch.

Samsung bought Sony Corp.’s stake in their LCD-making venture, which was formed in 2004, for 1.08 trillion won in cash, the South Korean company said in December. Sony predicted an eighth consecutive year of losses from TVs.

Samsung’s TV-making unit likely had an operating profit of 170.5 billion won, compared with a loss of 170 billion won a year ago, helped by high-end models featuring 3-D functionality and Web-based services, according to the survey. Sales are estimated to have risen to 16.1 trillion won from 15.97 trillion won.

Samsung almost met its annual target to sell 45 million flat-screen TVs, Yoon Boo Keun, head of the consumer-electronics business, said in November.

--With assistance from Saeromi Shin in Seoul. Editors: Anand Krishnamoorthy, Michael Tighe

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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