Fake Google Certificate Puts Gmail at Risk

PCmag.com
by Damon Poeter
Aug 30, 2011

A forged Web certificate for Google.com that provides the means to impersonate Gmail and other Google properties has been published online, according to media reports on Monday.

The counterfeit certificate is "valid for *.google.com, giving its unknown holders the means to mount transparent attacks on a wide range of Google users who access pages on networks controlled by the counterfeiters," according to The Register.

The encryption keys were apparently pilfered from an SSL certificate issued on July 10 by DigiNotar, a legitimate certification authority (CA) based in The Netherlands and owned by secure token vendor VASCO Data Security, according to reports. Such certificates are issued for websites and used in conjunction with the secure sockets layer, or SSL cryptographic protocol that secures communications across the Internet.

The SSL and Transport Layer Security (TLS) protocols allow client/server applications to communicate across networks while preventing third parties, including the network owners, from tapping into and eavesdropping on that communication. The use of a legitimate-looking certificate could be used to trick Internet users into revealing personal information like usernames and passwords, or even for intercepting and tampering with communications.

DigiNotar and other CAs issue digital certificates that validate the link between a public key and the CA-vouched identity of the individual, company, server or other entity named in the certificate. Critics of the SSL system say it has too many vulnerabilities, particularly in its reliance on CAs of varying track records to validate that certificate seekers are really who they say they are.

Internet users in Iran have reportedly encountered the forged certificate, with one Iranian user who first drew attention to its existence claiming that the certificate turned up while logging into Gmail from Google's Chrome browser.

Google said Monday it would block sites with certificates signed by DigiNotar pending the results of an investigation. The search giant claimed a new security feature included in its Chrome browser was what identified the bogus cert and alerted the Iranian user to its existence.

Mozilla said in a statement that DigiNotar had revoked the fraudulent certificate, "which should protect most users," but that it would still issue updates to its Firefox browsers. The company also posted instructions for manually disabling the DigiNotar root in Firefox.

It wasn't clear what damage, if any, had been caused by the counterfeit digital certificate to date.

Half of US adults now use social networks

Associated Press
Aug 26, 2011

SAN FRANCISCO (AP) - Half of all American adults are now on social networks, slightly more than a year ago, and use among Baby Boomers is growing, according to a new study.

A report released Friday by the Pew Internet & American Life Project found that, of the U.S. adults who use the Internet, nearly two-thirds use social networks such as Facebook or Twitter.

Among Baby Boomers aged 50 to 64, 32 percent said they use a social networking site on a typical day. That's up sharply from 20 percent a year ago.

Seniors also are testing the waters of social networking, said Mary Madden, co-author of the report.

"The graying of social networking sites continues, but the oldest users are still far less likely to be making regular use of these tools," she said.

Online social networks are most popular with young adults and women, and the "power users" of the social Web are women aged 18 to 29, the report found. Of this group, 89 percent use social networks and 69 percent do so on an average day.

The report found "no significant differences" in use of social networks based on race, ethnicity, household income, education level or whether people live in urban, rural or suburban areas.

Pew also asked respondents to describe their social networking experience in one word. The most common word, by far, was "good."

The survey was conducted April 26 to May 22 among 2,277 adults. The margin of error is plus or minus 3.7 percentage points.

Google's Page Knew of Illegal Pharmacy Ads

Eweek Mobile
by Clint Boulton
Aug 28, 2011

Google CEO Larry Page knew the company was allowing Canadian pharmacies to advertise their prescription drugs in the U.S. on the AdWords platform, said the DOJ.

Google CEO Larry Page for years knew about the ads his company served on behalf of Canadian online pharmacies illegally targeting U.S. consumers, according to a U.S. attorney who led the probe against the search giant.

The company Aug. 24 agreed to pay an unprecedented $500 million fine to the U.S. Justice Department to settle the allegations. Shipping prescription drugs to U.S. customers from outside the country is a violation of the Federal Food, Drug and Cosmetic Act and perhaps even the Controlled Substances Act.

Google admitted doing this from 2003 to 2009, after which it banned the practice. "It's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place," Google told eWEEK. The company declined to comment further on the matter.

The DOJ said in statement the fine equals both the sales Google made from the placement of those ads through its AdWords platform, as well as the sales the pharmacies earned from U.S. customers.

Now the lead investigator in this probe has come forward to say that it learned Page was aware of the ads.

"Larry Page knew what was going on," Peter Neronha, the Rhode Island U.S. Attorney who led the probe, told The Wall Street Journal. "We know it from the investigation. We simply know it from the documents we reviewed, witnesses that we interviewed, that Larry Page knew what was going on."

Neronha, who said he would not prosecute the company further, helped pore over 4 million-plus documents and discovered emails and other information that indicate Page knew of the illegal ads.

He concluded that it was not a matter of a few rogue customer service workers enabling the ads, but a corporate decision to allow them. This documentation will be sealed as a result of the settlement between Google and the DOJ.

Google declined to comment on whether Page and other top executives knew of the illicit ad sales, which Google sought to combat by filing a federal lawsuit to block individuals running illegitimate pharmacies from advertising on its search engine.

The accusation is something of a small powder keg for Google, which has worn its "Don't Be Evil" mantle proudly for several years. Google watchers, journalists and pundits suggest the credo is aimed at doing the right thing only for Google's consumers.

The company has been unabashedly cutthroat toward the likes of Apple, Microsoft and smaller rivals that play where Google wants to command business online. Now the definition of "evil" may well find itself stretched to include enabling businesses to use its search engine to profit by breaking U.S. laws.

The fact that Page knew about this practice, which leveraged the search ad platform responsible for some 97 percent of the company's sales, and looked the other way, suggests a brazen arrogance in the face of the U.S. government.

This finding is certainly something the Federal Trade Commission may pay close attention to as it scrutinizes the company for antitrust issues regarding its search ad business. In fact, the FTC may use it as an excuse to investigate the company more aggressively going forward.

Apple's Steve Jobs abruptly resigns as CEO

USA Today
by Jon Swartz and Scott Martin
Aug 25, 2011

Jobs, the iconic tech visionary who co-founded Apple and recently made it the most valued U.S. corporation, abruptly resigned as chief executive Wednesday night.

Jobs, 56, who has battled pancreatic cancer the past few years and looked noticeably weaker recently, told Apple's board of directors in a brief note that he "could no longer meet my duties and expectations" as CEO.

The company in recent days overtook Exxon for the title of most-valued corporation but is now a close No. 2.

"I hereby resign as CEO of Apple," he wrote. "I would like to serve, if the board sees fit, as chairman of the board, director and Apple employee. As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple."

Apple's board quickly named Cook, a 13-year Apple veteran, as CEO and elected Jobs chairman. "The board has complete confidence that Tim is the right person to be our next CEO," Art Levinson, chairman of Genentech, said in a statement on behalf of the Apple board.

But Jobs' passing of the CEO mantle is a seminal moment in corporate history.

Jobs' decision to step down is the latest jaw-dropping news to rock Silicon Valley. Last week, Hewlett-Packard said it was exploring options to sell or spin off its multibillion-dollar PC division — just as the PC industry was celebrating its 30th anniversary. Jobs played a key role in the formation, and maturation, of that industry.

"Hewlett-Packard has given up because of what Apple has done," says Jay Elliot, a former Apple senior vice president who worked closely with Jobs from 1980 to 1985. "The reality is this guy was so committed to making the best products in the world."

Perhaps no tech figure in recent history — or U.S. executive, for that matter — carries as much sway as or has made more of an imprint on his company than Jobs. Since returning to the PC pioneer in late 1997, he almost single-handedly has resurrected the company from near-extinction to a company worth more than $330 billion.

Apple is widely expected to unveil the iPhone 5 this fall and a successor to its popular iPad 2 tablet shortly thereafter. Apple stock is expected to take a blow this morning, and many in the past have openly wondered whether Apple can maintain its mojo and innovative streak without Jobs at the helm.

Shares closed Wednesday at $376.18, up $2.58. But in after-hours trading, after Jobs' resignation, the stock dipped 5% to $358.50.

"Steve Jobs is the greatest leader our industry has ever known. It's the end of an era," Salesforce.com CEO Marc Benioff said in a tweet. Added Aaron Levie, CEO of Box.net, "It's no stretch to say he is the most important figure in tech, now or ever."

Taipei-based Foxconn Technology Group, which makes Apple iPhones and iPads, said in a statement that despite Jobs' resignation as CEO, it has "every confidence in Apple's leadership and its ability to continue to innovate and to drive much of the global technology industry's growth."

Analysts also expect a smooth transition. Cook, 50, has earned kudos for his steady stewardship of Apple, filling in as temporary CEO, while Jobs was on medical leave. Apple is also renowned for its deep roster of engineers, marketers and other executives.

Gartner's Michael Gartenberg says that despite Jobs being considered by consumers as Apple incarnate, "No individual does it alone."

"Is this the end of an era? Absolutely," Gartenberg says. "Is his departure at a time when Apple is at its peak, in terms of market value and creativity? Yes. But transitions happen all the time."

The tech market has been one of the few industries largely immune to the prolonged downturn in the U.S. economy, and Apple had a lot to do with that by churning out eye-catching, popular products such as the iPad and iPhone.

Jobs' run of smash hits has been unprecedented in modern times, says Richard Doherty, an analyst at The Envisioneering Group. "It's the power to say, 'No,'" Doherty says. "A lot of products could have gotten to market earlier, but he wanted it better. So many products fail because they're not ready," he said, referring to HP's decision last week to ditch its TouchPad tablet computer less than two months after its debut.

Apple's DNA

Jobs' departure from the CEO role won't bruise Apple in the near term, though, experts say.

"The next wave of Apple products are well into the product-development cycle," says Charles Golvin, analyst at Forrester Research. "The next iPhone is certainly done. The next iPad is certainly along the way."

Financial analysts who cover Apple have repeatedly cited the unknown status of Jobs' health among risk factors to the company. That's because Jobs is viewed as a unique category of leader with a hands-on approach tied to much of the company's success. "I think he'll continue to be involved," says Golvin. "They have great people running operations that have proven their worth. Apple is a really well-oiled machine."

Jobs has installed a focused and pervasive culture at the company, with people who share his passions. Nonetheless, three senior executives who reported to Jobs have left the company in the past six months. Just last week, vice president Andy Miller stepped down as mobile ad chief to join Highland Capital Partners.

In June, J.C. Penney poached Apple retail chief Ron Johnson, who will become its CEO Nov. 1. And in March, Bertrand Serlet, a senior vice president responsible for development of the Mac operating system, bolted.

What many industry experts express, however, is uncertainty about how Apple will fare without Jobs as CEO in the long term. "We aren't going to see the impact of this for the next year and a half," says Golvin. "It will take that long for us to see what Apple is like without him as CEO."

Though he brought simple, elegant technology to the masses, the reclusive Jobs — even before his illness — rarely spoke publicly, except at Apple events.

But in one interview, in his Pixar office in 1998, he offered a rare insight into who he is. Jobs said he identified with Flik, the idealistic ant in ABug's Life, the animated movie from his Pixar Animation Studios. Flik saves his colony from an army of grasshoppers that bears an eerie resemblance to Microsoft.

Jobs discovered he had a form of pancreatic cancer in October 2003, informed Apple employees in 2004 and acknowledged the cancer during a commencement speech at Stanford University in 2005. In 2009, Jobs took a medical leave. Cook took over day-to-day operations in Jobs' absence then. Jobs later returned to the helm but then in January this year took an indefinite medical leave.

The beginning

At age 21, Jobs co-founded Apple Computer with Steve Wozniak. By 25, Jobs was a millionaire, and he made the cover of Time magazine at 26. But by 30, the prickly Jobs was unceremoniously booted from Apple, in 1985.

During the ensuing dozen "wilderness years," as they were called by Jobs followers, Jobs bought what became Pixar Animation Studios for $10 million from director and producer George Lucas in 1986 and started NeXT Computer in 1988. NeXT struggled to sell its high-priced machines, but Apple acquired it for more than $400 million in 1996, setting the stage for Jobs' return to Apple. Disney bought Pixar in 2006 for $7.4 billion.

Still, there was controversy. Later that same year, Apple — whose stock would soar past $200 per share in 2007 — appointed a special committee that discovered irregularities with roughly one in seven stock grants that Apple issued from 1996 to 2004. Apple was forced to restate earnings and took a pretax charge for unreported compensation expenses of $105 million. Disney also investigated and found backdating at Pixar during Jobs' stint as CEO. Yet the events at the two companies did not cost Jobs his job, as it did dozens of executives at other tech firms. Jobs did not directly benefit from backdated options.

Google May Consider Acquisitions to Expand in Southeast Asia

Bloomberg News
Aug 24, 2011

Google Inc. may pursue technology assets to expand in Southeast Asia after Internet operators including Tencent Holdings Ltd. and LivingSocial acquired companies to add services and users in the region.

“We’ll continue to innovate ourselves, but where it makes sense, we will look out for opportunities,” Julian Persaud, managing director for Google in Southeast Asia, said in a video conference from Bangkok today, without elaborating. He couldn’t immediately confirm if the U.S. company previously made an acquisition in Southeast Asia.

Google, owner of the world’s most-popular search engine, is stepping up expansion in countries including Thailand, Malaysia and Indonesia, where companies allocate a smaller proportion of their advertising spending online compared with the U.S. and Europe. Tencent, China’s biggest Internet company by revenue, and LivingSocial, the second-biggest coupon site, have unveiled investments in Southeast Asian Web firms in the past two years.

Internet advertising accounts for 1 percent to 2 percent of the marketing spending of companies in Southeast Asia, excluding Singapore, Persaud said. That compares with 27 percent in the U.K., and about 20 percent in Australia and the U.S., he said.

“We have proven recently as a company, that we are prepared to make acquisitions, wherever it makes sense,” Persaud said. “It wouldn’t make sense to exclude a part of the world, and say we wouldn’t look there.”

Earlier this month, Google agreed to buy Motorola Mobility Holdings Inc. for $12.5 billion in its largest acquisition.

Google+

The Mountain View, California-based company will focus its efforts on Google+, rather than Orkut, in Southeast Asia’s social-networking market, Persaud said. Google is working on developing local versions of products including mapping and the Chrome Web browser, he said.

“A lot of our activity will be based around the Google+, rather than Orkut, in this region,” Persaud said. “It’s still a project.”

In June, Google unveiled its new Google+ social-networking service with streaming updates of photos, messages and other content from selected groups of friends, in a fresh attempt to compete with Facebook Inc.

Orkut, a social network started by Google in 2004, is popular in markets such as India and Brazil.

Google today said it would open an office in Bangkok, after setting up operations in Malaysia earlier this year.

Tencent last year bought a 49.9 percent stake in Thailand’s Sanook. LivingSocial this month said it will buy TicketMonster Inc., a South Korean company that also offers services in Malaysia.

China official tells Web firms to control content

Associated Press
by JOE McDONALD
Aug 24, 2011

BEIJING (AP) - A Communist Party leader has told China's Internet companies to tighten control over material online as Beijing cracks down on dissent and tries to block the rise of Middle East-style protests.

The party secretary for Beijing, Liu Qi, issued the warning following a visit this week to Sina Corp., which operates a popular microblogging site, according to the party-published newspaper Beijing Daily.

Internet companies should "strengthen management and firmly prevent the spread of fake and harmful information," Liu was quoted as saying after the visit Monday to Sina. He said companies should "resist fake and negative information."

Communist authorities encourage Internet use for education and business but are uneasy about its potential to spread dissent, especially after social networking and other websites played a key role in protests that brought down governments in Egypt and Tunisia.

Beijing is in the midst of one of its most sweeping crackdowns on dissent in years and has detained or questioned hundreds of activists, lawyers and others.

The government tries to block access to foreign websites deemed subversive and Chinese operators of websites where the public can post comments are required to watch the material and remove any that violates censorship rules.

The government's censorship rules prompted Google Inc. to close its China search engine last year. Mainland users can see Google's Chinese-language search site in Hong Kong but access is slower and the company's China market share has shrunk.

The report on Liu's warning gave no details of how Internet companies were expected to change their management.

Employees who answered the phone at Sina referred questions to a spokeswoman who did not answer her phone.

With Liu during the visit were Sina CEO Charles Chao and Kai-fu Lee, a former boss of Google's China unit who runs a technology investment company, according to the Beijing Daily.

Chao told Forbes magazine in March that Sina's microblogging site, Weibo, has at least 100 employees monitoring content 24 hours a day. The company said in May that the number of Weibo users had passed 140 million.

Also this week, the Beijing Internet Media Association, a government-sanctioned industry group, called on its 104 member companies to police Internet content, possibly prompted by Liu's order.

"Propaganda guidance to the public should be led toward a correct direction," the appeal said, according to the Beijing Daily. "Online news should be trustworthy and should not spread rumors or vulgar contents."

Liu, the party secretary, also visited the headquarters of Youku.com Inc., a video portal, and talked with CEO Victor Koo, the report said.

China has the world's biggest online population, with 485 million Internet users as of June 30, according to the government-sanctioned China National Internet Information Center.

Meanwhile, a major Chinese Internet commerce platform, Taobao, has told merchants that use its service to stop selling virtual private network and other software that allows Web surfers to avoid government filters.

Taobao, part of Alibaba Group, said it acted after finding VPNs were being used to visit foreign websites illegally. A company spokesman said Tuesday it took the action on its own without receiving government orders.

Facebook to let users pre-approve photo tags

Associated Press
by BARBARA ORTUTAY
Aug 23, 2011

SAN FRANCISCO (AP) - Drunken revelers rejoice: Facebook will now let you decide whether your friends can attach your name to a photo before it is circulated.

Currently, your friends can add your name to a photo on Facebook without your consent or knowledge. You can remove it later, but only after lots of others may have seen the embarrassing shots. Now, you can insist on pre-approval.

This won't affect whether your friends can add a photo of you, only whether your name is attached to it. Still, not having the name, known as a tag, can make it more difficult for people to find a potentially embarrassing photo in a search.

Facebook said on Tuesday that the change is in response to user requests. Pre-approving photo tags has been the most requested change, said Kate O'Neill, product manager for Facebook. The pre-approval process will also apply to written posts that others tag you in. In addition, you have the option of pre-approving what others tag on your own photos and posts.

The company is making other changes to its privacy controls, too. These changes won't affect what information will be made public or private. Rather, they will affect how users can control what they are sharing in an effort to make the process simpler.

"We are making it easier for people to share what they want, every time (they) post," O'Neill said.

The changes will be rolled out starting Thursday.

Facebook has long been trying to simplify its privacy settings, which have many moving parts and have confused a lot of users. That confusion partly results from Facebook's efforts to let users apply different privacy settings to different parts of their profile on the site. But the company has also come under fire for pushing users toward disclosing more about their interests to the public.

Among the latest changes:

• Instead of going to a separate settings page, privacy controls will be on users' profile pages, next to the information they share, such as the music they like or the schools they went to. Previously, most these controls were located several clicks away on an "account settings" page.


• Instead of calling public posts visible to "everyone," Facebook will now simply call these "public."


• Facebook is also making a feature called "view profile as" more prominent. This lets you type in the name of another Facebook user and see how your profile looks to that person. For example, if you hide your photos and favorite music from some of your Facebook friends, this content won't show up if you view your profile as one of them.


• In a nod to Google Plus, the online search leader's fledgling social network, Facebook is making it easier to share posts with specific groups of people. A dropdown menu next to each post you make will let you select "public," ''friends" or a "custom" audience. Over time, Facebook said this menu will expand to include smaller groups of people.


• You will now be able to tag anyone on Facebook, even if you are not friends with them. They will have to approve your request to tag, though, before the photo or post shows up on their profile.

For Bargain Stocks, Check the Patent Office

The Wall Street Journal
by Jack Hough
Aug 20, 2011

Anyone can spot a low price/earnings ratio. But figuring out which companies hold undervalued patents can provide a real investing edge.

Just this past week, Google agreed to pay $12.5 billion for Motorola Mobility, a struggling cellphone maker with a vast patent stash. Google had earlier been outbid by Microsoft, Apple and others on thousands of patents held by Nortel Networks, which is in bankruptcy.

These patent grabs suggest tomorrow's dominant smartphone or tablet is a three-legged stool built from software, hardware and communications—and companies are in a race to add rights to whichever legs they are missing. More broadly, big patent portfolios are increasingly being used as financial weapons.

A recent boom in patent sales is lifting patent values in general, says Nir Kossovsky, executive secretary at the Intangible Asset Finance Society, a Pittsburgh research group. And that is an opportunity for investors.

Figuring out which companies own which patents is easy. The U.S. Patent and Trademark Office digitized its records more than a decade ago. Putting a price on each patent is the hard part. You have got to project a patent's royalty streams, find similar patents that were sold recently or determine what it would cost to produce a similar patent.

Valuing just one patent can take weeks and cost tens of thousands of dollars, says Michael Friedman, a managing director at Ocean Tomo, a Chicago provider of patent services.

The Patent Board, a research group in Westmont, N.J., has an automated way of guessing which patents are most valuable: citation analysis. The more an existing patent is referred to in future patent applications, the more valuable it is presumed to be.

The research group doesn't publish patent values but rather ranks companies on "technology strength," which it bases in part on patent quality. WSJ.com publishes a Patent Scorecard for one industry each week based on these numbers. Cooper Industries, based in Dublin, ranked first among industrial components makers on a recent list.

"You can't know the exact value of a portfolio of patents, but you can make broad judgments," says Patent Board President Karl Wilhelm. "Eastman Kodak's patents are probably worth more than the company's recent value of a half-billion dollars. I can't imagine Apple's patents are worth more than $5 billion, and its value is more than $300 billion."

Of course, Apple's profits and pizzazz have a bigger influence on its stock performance than its patents, and making a patent-based bet on a company like Kodak is risky.

Mr. Friedman cites InterDigital, based in King of Prussia, Pa., as having the lowest market value among companies that can provide the third leg of Google's smartphone stool: high-speed communications patents. That is a tempting tip, but InterDigital's share price already has jumped more than 50% since mid-July to about $63, or 31 times projected 2011 per-share earnings—plenty pricey compared with most stocks.

A diversified basket of patent bets seems safer. The Guggenheim Ocean Tomo Patent exchange-traded fund is down 6.3% since its December 2006 inception, a better showing than the broad-market iShares S&P 500 ETF, which has lost 12.9%. The Guggenheim ETF is based on an Ocean Tomo index selected using a 56-ingredient recipe that helps computers guess which patents are most valuable.

With the stock market looking wobbly—or worse—and the threat of a double-dip recession looming, another tactic is to skim lists of patent-rich companies for ones with modest valuations, solid balance sheets and the ability to deliver handsome dividends, with or without a jump in the value of their patents.

Johnson & Johnson, Intel and Pfizer are among companies ranked top in their industries for technology strength by the Patent Board. The Ocean Tomo 300 Patent Index currently counts Microsoft, Royal Dutch Shell and IBM as its largest members. These six companies are on average one-quarter cheaper than the broad market based on earnings, and they yield an average of 3.6%.

For do-it-yourselfers, there is a patent-search tool at www.uspto.gov.

One more factor bodes well for patent values: the recent rise of "nonoperating entities," or, less politely, "patent trolls." They grab patent portfolios for the purpose of suing other companies for violations and securing cash settlements.

That is forcing tech firms to scoop up idle patents defensively, creating a seller's market, says Jorge Torres, an intellectual-property lawyer in New York. So patent-stuffed companies might be richer than they look.

As PCs Wane, Companies Look to Tablets

The New York Times
by VERNE G. KOPYTOFF and IAN AUSTEN
Aug 19, 2011

Although the world is dependent on personal computers, making them has not been a great business for most American companies for almost a decade.

The announcement on Thursday by Hewlett-Packard that it was considering offloading its PC business, even though it is the undisputed worldwide market leader, was a clear sign of the difficulties.

If H.P. goes through with the idea, it would follow I.B.M., an early PC maker, which was one of the first to recognize the long-term problems and, in 2005, sold its business to Lenovo, a Chinese company. Other American makers like Compaq (acquired by H.P.), Gateway and Packard Bell were absorbed by others or just faded away. Depending on how H.P. sheds the unit - it could sell or spin it off as a separate company - only two American PC makers would remain.

One of them, Dell, struggles for every percentage point of market share.

The other, Apple, prospers. And the reason it does highlights the shift from a PC-centric era to one dominated by smartphones and tablets. H.P., Dell and, indeed, every PC maker worldwide, has been unable to make a tablet consumers feel they must have. At the same time H.P. said that it might spin off PCs, it killed off its tablet, the TouchPad, after just a few weeks on store shelves.

Computer makers are expected to ship only about 4 percent more PCs this year than last year, according to IDC, a research firm. Tablets, in contrast, are flying off store shelves. Global sales are expected to more than double this year to 24.1 million, according to Forrester Research. More than two-thirds of those tablets, however, are sold by Apple. Sales of its iPad pulled in $9 billion in just the first half of the year, or 30 percent more than all of Dell's consumer PC business in the same period. The joke in Silicon Valley is that there is no tablet market, only an iPad market. (That was also true of Apple and the iPod market.)

The other observation that is no joke: Apple is the only maker with strong PC growth. Spending on desktops and laptops grew 16 percent in the latest quarter, while Dell's consumer product sales increased 1 percent.

"It's definitely weighing on the computer makers, and it is something that will weigh on them for some time," said Louis Miscioscia, an analyst with Collins Stewart.

"The tablet effect is real," said Leo Apotheker, H.P.'s chief executive, in an interview on Thursday, acknowledging that the TouchPad had failed to live up to expectations and that it would have cost too much to compete. "It's very different from where the business was going 10 years ago," Mr. Apotheker said.

On Friday, H.P.'s shares fell 20 percent in reaction to his plans.

Michael S. Dell, Dell's chief executive, took the opportunity to poke fun at the prospect of H.P. unloading its PC unit by saying in a message on Twitter that "they're calling it a separation, but it feels like a divorce." Following up with more sarcasm, he said, "If HP spins off its computer business ... maybe they will call it Compaq."

Mr. Dell was clearly enjoying the moment, but his company faces the same market forces as H.P. Its overall PC business has been flat. Recently, Dell has pared back some of its consumer products, including a 5-inch Streak tablet, while keeping a 7-inch tablet. Together, they eked out barely 1 percent of the market, according to ABI Research.

Like H.P., Dell is pushing its enterprise business, which has higher margins. But David Johnson, Dell's senior vice president of corporate strategy, said his company had no plans to follow in H.P.'s footsteps and split off its PC business. "We have no plans to change our strategy," he said.

Tablets remain the hope of other PC makers and phone makers. By next year, tablet sales in the United States will outpace those of netbooks, the mini-laptops people use to surf the Web, according to Forrester Research. Netbooks were considered a salvation for the PC industry when they were introduced a few years ago, but they have since fallen out of favor with consumers.

But buyers see little need to buy any tablet other than iPad, even if it is slightly more expensive than some of its rivals, analysts said.

"The performance still isn't there for a lot of them," said Richard Doherty, research director for the Envisioneering Group, a market research and consulting firm. "And it's not just the product, it's the ecosystem behind it."

For that matter, selling tablets is no easier for the smartphone makers. Motorola Mobility, which Google said this week that it would buy, got nowhere with its Xoom. Research in Motion entered the tablet market this spring with a long history of building mobile devices. Still, the company has struggled to get consumers to buy its tablet, the PlayBook, which it introduced earlier this year.

RIM says it shipped 500,000 PlayBooks during its last fiscal quarter. Kevin Burden, a vice president at ABI Research, estimated that only 40 to 50 percent of those tablets found buyers.

Shoppers were not charmed by the PlayBook's inability to directly check corporate e-mail - they have to connect wirelessly to BlackBerry phones - and lack of applications.

RIM's strength was selling to institutions, not individuals, but even here the changing market buffeted the maker. Most corporations have no idea if their employees need to use tablets at work. But even before the I.T. departments work that one out, employees decide that tablets are like phones and buy them at their own expense. So RIM's insider status has become somewhat meaningless since the purchasing decision effectively becomes a consumer choice.

"RIM was hoping that its relationships with I.T. departments was going to open the door to the PlayBook," Mr. Burden said. "But the tablet decision has gone back to the users instead."

Alan Panezic, RIM's vice president for enterprise product management and marketing, acknowledged that many companies make employees choose, and pay for, their tablets.

"This is an area that's still developing, to be honest," Mr. Panezic said. "There's obviously a wonderful benefit for businesses if workers are going to supply their own computers."

But that may change if corporations decide that tablets are an important work tool, he said. While most employees are now willing to spend $50 to $200 to buy smartphones, which are subsidized by carriers, many of them may balk at spending $500 or more for a tablet.

Given RIM's close association with e-mail, the initial inability of the PlayBook to handle it without a BlackBerry surprised many industry observers. Mr. Panezic said that some would-be corporate customers had effectively told RIM to come back once the feature was added.

Over the next couple of months, Apple will face yet another wave of competition. Sony says it will introduce tablets, while Amazon.com is expected to sell a tablet this fall that builds on the success of its Kindle e-book reader. Google continues to hone its Android operating system for tablets. Future generations of tablets running Android could help myriad PC and phone makers challenge Apple's domination in tablets as Android phone makers challenge Apple's iPhone.

Of all Apple's existing rivals, Samsung has made the most inroads with its Galaxy Tab. However, the company, which also makes PCs and other electronics, remains a distant second in the tablet race with a 12.5 percent market share.

Gavin Kim, a vice president for Samsung Mobile, said Samsung would continue trying to make its tablet better and fill gaps in the market. Tablets are a critical part of the company's overall strategy, he said.

"Nothing from our perspective says we need to be letting off the gas," Mr. Kim said.

Google's $12.5 Billion Gamble

Wall Street Journal
by AMIR EFRATI And SPENCER E. ANTE
Aug 16, 2011

Google Inc. forged a $12.5 billion deal to buy Motorola's cellphone business, a move that could reshape the Internet giant's fortunes in the mobile world while also giving it an arsenal of patents for legal warfare with Apple Inc. and others.

The purchase of Motorola Mobility Holdings Inc., by far the largest in Google's history, thrusts the Internet company into the cutthroat business of making smartphones, tablet computers and cable set-top boxes. It will nearly double Google's work force and test the company's young alliance with other cellphone makers.

The Motorola deal also gives the search giant a trove of more than 17,000 patents to defend itself against a rash of lawsuits against its Android software—which powers more than 150 million devices world-wide, including Motorola's line of Droid smartphones.

But the deal, which must pass a review by the Justice Department's antitrust division, carries enormous risks as Google steps out of its comfort zone as a software maker. It will have to run manufacturing plants, manage inventory and nurture relations with carriers and retailers.

People close to the deal said one of Google's motivations, in addition to the patent trove, was its desire to design not just the way gadgets work, but also how they look, giving it the sort of control over software and hardware that archrival Apple enjoys with its iPhone. Talks between Google and Motorola heated up only in recent months, the people said.

Google Chief Executive Larry Page, in an interview, said Google will continue to promote its software to phone makers that compete with Motorola. "The strength of Android has been its diversity, and we have 39 handset makers" that use the software, he said.

Industry-watchers still see the potential for conflict. "Google is in the business of supplying software to hardware makers, and buying one of those hardware makers isn't going to endear them to the rest of their customers," said Charles Golvin, a Forrester Research analyst.

He added that companies such as HTC Corp. and Samsung Electronics Co., which all flocked to Android as a way to compete with Apple, will likely "hedge their bets" by creating more devices using Microsoft Corp.'s mobile-operating system.

Mr. Page, a Google co-founder who took over as CEO earlier this year, said Motorola Mobility would continue to operate as a separate business and be given no advantages over other makers of Android-powered handsets.

Inside Google, the deal was a tightly guarded secret involving only top management, said a person familiar with the matter. Some senior members of Google's Android team first learned of the deal Monday morning, this person said.

The deal underscores a long-term shift in the power balance in technology from old-line manufacturing companies to younger, nimbler standard-setters that came of age during the Internet era.

In January, Motorola Inc. split itself into two companies; the second company, Motorola Solutions Inc., focused on sales of wireless technology to companies and governments. Motorola Mobility is the more prominent half of the 82-year-old radio pioneer that first commercialized the cellphone but managed to lose $4.3 billion between 2007 and 2009, thanks to a disastrous decline of its phone business.

Since then, Motorola Mobility Chief Executive Sanjay Jha has turned around the cellphone business by betting on Google's software and Verizon Wireless's need for a competitor to the iPhone, over which AT&T Inc. had an exclusive hold until this year. But his company now is a small player going up against bigger and diversified rivals.

Mr. Jha said in an interview that under Google he would run Motorola "the way I've been doing things for the past three years." The two businesses "will coexist and will have different objectives, different ways to be judged," he said.

If he leaves the company in the next two years, Mr. Jha could gain more than $62 million, according to calculations by The Wall Street Journal and the Hay Group, a management-consulting firm.

Google, meanwhile, built a technology giant by becoming the dominant player in Internet advertising. That was largely a business built on the back of the personal computer as people used Google's search engine to find information and products.

But as phones and other devices become the central point of computing for consumers and businesses, Google is trying to position itself to provide services that help consumers navigate and search for places to eat and shop while on the go—areas in which it is lagging rivals such as Apple and others.

For consumers, the deal could usher in new advances by letting Google integrate its Android software more tightly with Motorola devices, taking a page from Apple. For example, Apple was able to pave the way for its video-calling software, FaceTime, by including a front-facing camera on its iPhone 4. Once Motorola is owned by Google, for example, the handset maker could more aggressively incorporate a technology called NFC, for near field communications, that is used for mobile payments and is supported by a version of Google's Android called Gingerbread.

In the same way that Apple has created hit devices by integrating software and hardware into a single experience, the deal for Motorola gives Google a way to create a consistent experience across devices, including phones, tablets and TVs.

"The best way to put itself in a position to win is to be able to influence and control how" Google services end up in hardware, said Matt Murphy, a venture capitalist at Kleiner, Perkins, Caufield & Byers.

Since Google's 2005 deal to buy Android—a small company led by Andy Rubin, who now heads its mobile software efforts—the company has worked to ensure that its search engine becomes a mainstay in the age of smartphones and tablets. Google was once a partner with Apple, providing it with applications such as the search engine and Google Map. But now the two are competitors.

Motorola's patent trove could become an important factor in that battle. Google has fewer patents in mobile technology than some major competitors, and the company has lost out on two recent deals to buy patents.

Besides countersuing in the event it is attacked, Google could use the Motorola patents to lend a legal hand to Android partners such as HTC Corp., which is entangled in litigation with Apple over Android. Motorola last fall filed patent claims against Apple, which responded with a countersuit of its own.

When he was asked if handset makers had demanded Google do more to protect them from patent suits, Mr. Page said Motorola has "tremendous expertise in intellectual property" and pointed to supportive statements by HTC, Samsung and others that implied the deal would give them protection.

Besides smartphones, the Motorola deal gives Google a clearer path into cable set-top boxes that can connect TVs to the Web; Google has already used Android to create a system called Google TV, which has sold slowly to date but could benefit from Motorola Mobility's strong position in living room devices.

Google expects to complete the transaction by early 2012, and is on the hook for a breakup fee of $2.5 billion in cash, according to a person familiar with the matter. The hefty amount may indicate some nervousness about the deal's regulatory prospects as Google is undergoing an antitrust probe by the Federal Trade Commission, which includes an examination of whether Google prevents smartphone manufacturers that use its Android operating system from using competitors' services, people familiar with the matter have said.

Mr. Page said he was "confident this deal will be approved" by regulators. He added, "I believe it's tremendously beneficial to consumers," in part because the deal will act as a defense against "anticompetitive attacks on Android that try to limit competition"—a reference to lawsuits against Android handset makers.

The $40-a-share offer is a 63% premium to the price Friday of Motorola Mobility's shares. It is also a way to quickly appease activist investor Carl Icahn, who recently argued the company's patent portfolio was an undervalued asset.

Shares of Motorola Mobility jumped 56% to $38.12 in 4 p.m. trading Monday, while Google slipped 1% to $557.23.

"Google got a pretty good deal," Mr. Icahn said in an interview. "They are really buying a lot of good stuff. They are getting the patent portfolio relatively cheaply."

Lazard Ltd. and Cleary Gottlieb Steen & Hamilton LLP advised Google. Boutique investment banks Qatalyst Partners and Centerview Partners, and law firm Wachtell, Lipton, Rosen & Katz advised Motorola Mobility.

Google adds games in its latest move on Facebook

Associated Press
by MICHAEL LIEDTKE
Aug 11, 2011

SAN FRANCISCO (AP) - Internet search leader Google Inc. is bringing a little more gamesmanship to its duel with Facebook.

Just like they have been doing for years on Facebook's website, Web surfers will now be able to play games with their friends and family on Google's blossoming social networking service.

Google's expansion into games, announced Thursday, had been expected since the company unveiled its "Plus" networking service in late June. The service is being groomed to be an alternative to Facebook's popular hangout.

By adding games to Plus, Google hopes to give its fledging network's more than 25 million users a reason to come to the service more frequently and stay longer once they're there.

The strategy has worked well at Facebook, where games requiring players to fill the roles of farmers, mob bosses and card sharks have attracted obsessive followings among its more than 750 million users.

Determined to protect its turf, Facebook unveiled its latest game features just a few hours after Google issued its challenge. The new tools will make it easier for Facebook users to bookmark their favorite games and keep track of what their friends are playing. Players will also be given the option of filling their entire computer screen with some of the games designed for Facebook.

Facebook's top games are provided by Zynga Inc., a 4-year-old company hoping to sell its stock in an initial public offering this fall. Google is one of Zynga's investors, according to IPO documents filed with the Securities and Exchange Commission. The papers don't specify the size Google's stake in Zynga, which is based in San Francisco.

The investment evidently wasn't enough to buy Google access to Zynga's best-known games. The initial games on Plus include a poker game made by Zynga. Plus also will feature the "Angry Birds" game that so far has been played mostly on phones. The gaming option will gradually start appearing within the accounts of Plus' users.

But people who want to play other Zynga titles such as FarmVille, CityVille and Empires & Allies will still have go to Facebook.

Zynga and Facebook are already financially wedded to each other. Zynga gets most of its revenue from Facebook, which requires games on its site to use its payment system to sell the various items that can be used to playing more fun. Facebook keeps 30 percent of the revenue from Zynga's games.

Although the games may seem frivolous, they are emerging as a serious business. Zynga earned more than $90 million on revenue of nearly $600 million last year and the company is growing even faster this year as the number of people playing its games surpassed 230 million. In March, Zynga estimated its market value at $11 billion after hiring an expert to appraise its business, according to documents filed Thursday.

Google's expansion into Web games could cause headaches for Zynga. In its IPO documents, Zynga says it could be hurt if Google or other larger companies such as Microsoft Corp. and Amazon.com Inc. get into the Web game market.

Google mainly wants to undercut Facebook with Plus. The reason: As people spend more time and share more insights about themselves on its website, Facebook becomes an increasingly attractive advertising option. The trend poses a threat to Google because its search engine can't index most of the information on Facebook and its own revenue growth could slow if more online advertising shifts to Facebook.

Yahoo On Takeover List

Bloomberg News
Aug 11, 2011

Yahoo! Inc. has cost its shareholders so much money that a buyer would now be able take over the most- visited U.S. Web portal for less than the value of its stakes in Alibaba Group Holding Ltd. and Yahoo Japan Corp.

Yahoo has plummeted 91 percent over the past decade as it failed to keep Google Inc. and Facebook Inc. from siphoning off Internet users and advertising revenue. Sunnyvale, California- based Yahoo, which rejected an offer from Microsoft Corp. for as much as $47.5 billion three years ago, is now valued at $14 billion, according to data compiled by Bloomberg.

Putting Yahoo up for sale may help Carol Bartz recoup the losses its owners have suffered since she became chief executive officer in January 2009. While the company's revenue has fallen in the past two years, its investments in Alibaba Group and Yahoo Japan may be worth 44 percent more than Yahoo itself, Thornburg Investment Management said. Traders in the options market are also betting Yahoo will increase in value, ramping up bullish wagers to the highest level in almost two years.

"What you get is the core U.S. business for free," Di Zhou, Santa Fe, New Mexico-based analyst at Thornburg Investment, which oversees about $80 billion, including Yahoo shares, said in a telephone interview. Yahoo Japan and Alibaba are "more than enough to explain the current stock price. That was our initial investment thesis," she said.

Dana Lengkeek, a spokeswoman for Yahoo, declined to comment on rumors or speculation.

Advertising Revenue

Yahoo, a pioneer in providing information and services over the Internet, was founded in 1994 by Jerry Yang and David Filo at Stanford University.

Its home page aggregates news, offers free e-mail and provides services that help users do everything from finding a new house to getting a date. Yahoo, using technology provided by Redmond, Washington-based Microsoft, also competes with Google for users searching the Internet for information.

Once an $80 billion company, Yahoo's share of the U.S. online ad market will drop to 9.7 percent next year from 16 percent in 2009, according to New York-based firm EMarketer Inc. Google's will increase to 45 percent, while Facebook will more than triple its portion of the online ad market to 7.8 percent.

Last month, Yahoo reported second-quarter revenue that fell short of estimates as Bartz's overhaul of the U.S. sales force made it harder to close deals and slowed growth in advertising for banner ads and video clips.

Comparative Returns

Bartz said at the time that sales were held back as more employees left during the overhaul than the company anticipated.

"Now, we're intensely focused on monetizing those sites with the right solutions," Bartz said in a conference call with analysts last month. "The changes we're making will bear fruit later this year and into 2012."

Yahoo still forecast sales this quarter of $1.05 billion to $1.1 billion, short of the $1.12 billion analysts projected.

The setbacks, along with a global rout in equities in the past week as the U.S. had its AAA credit rating cut by Standard & Poor's for the first time, erased all the gains since Bartz was named Yahoo's CEO in January 2009.

Since Bartz started, Yahoo has declined 8.4 percent through yesterday. In the same span, Mountain View, California-based Google, owner of the largest Internet-search engine, rose 74 percent, while the S&P 500, the benchmark index for American equity, gained 28 percent.

"The stock is trading probably where it should given the growth prospects," said Scott Billeadeau, who helps oversee $17 billion at Fifth Third Asset Management in Minneapolis. "Yahoo is a brand. It just doesn't seem like they've been able to increase the value of that brand."

Relative Value

With Yahoo closing at $11.09 a share yesterday, the company sells for less relative to its per-share earnings than at any time since at least 1997, data compiled by Bloomberg show.

Today, Yahoo rose 9 percent to $12.09, the biggest advance since December 2008 and almost double the S&P 500's gain.

Thornburg estimates that Yahoo's Asian assets alone may be worth almost $16 a share. Yahoo has a 43 percent holding in Alibaba Group, China's biggest e-commerce company. Through that investment, Yahoo owns stakes in Taobao.com, China's largest Internet shopping site, and Alibaba.com, which offers e-commerce services for businesses.

Yahoo will also get compensation for Alipay, China's most popular online-payment service, which Alibaba transferred to a company controlled by Chairman Jack Ma last year.

The assets give Yahoo a foothold in China, the world's largest Internet market with 485 million users at the end of June, according to data from the government-sponsored China Internet Network Information Center.

Sum of Parts

Using revenue and earnings estimates for 2012, Thornburg's Zhou said Yahoo's stakes in each of the Alibaba businesses are worth a combined $11.45 a share, while Yahoo's 35 percent stake in Yahoo Japan, the Tokyo-based operator of Japan's most-visited web portal, is valued at $4.50 a share.

Add Yahoo's $2.55 billion in cash and the company may be worth about $18 a share -- without accounting for its U.S. operations, based on Zhou's sum-of-the-parts analysis, which adjusts for the value of potential taxes and stakes that aren't immediately transferable.

The discount may entice private equity firms, which can buy Yahoo's U.S. earnings virtually for free, according to Herman Leung, an analyst at Susquehanna Investment Group in San Francisco.

Yahoo! Finance, which streams business news and displays real-time stock prices, is still the most popular finance-news website with 40 million users in June, according to ComScore Inc. in Reston, Virginia. That's almost double that of AOL Money & Finance, the second-most visited site.

'Zero Credit'

Google Finance had fewer than 2 million users in June and wasn't ranked in the top 20, data compiled by ComScore showed.

Leung also said Yahoo would be attractive in a buyout because of the cash it generates from its U.S. business.

Based on an analysis from Evercore Partners Inc., Yahoo's Asian investments amount to $8.10 a share, about half the value of Thornburg's estimates. Using the lower projection, Yahoo's U.S. unit has an implied value of $2.99 based on yesterday's closing price, or 7.3 times the company's free cash flow per share in the past 12 months, data compiled by Bloomberg show.

Google sells for about 22 times its cash from operations after capital expenses, according to the data.

"Yahoo can take a break from the public markets," Leung said in a telephone interview. "Especially if the market is going to give you zero credit for your core business. Yahoo shareholders will go for anything at this point."

'Right Off the Bat'

A Yahoo purchase may make sense for Providence Equity Partners in Providence, Rhode Island, and San Francisco-based Hellman & Friedman, which agreed to sell DoubleClick Inc. to Google for $3.1 billion in 2007, according to Leung.

Andrew Cole, a spokesman for Providence Equity, declined to comment on whether the firm is interested in buying Yahoo, as did Kelly Smith, a spokeswoman for Hellman & Friedman.

Microsoft, which can now buy Yahoo at less than half what it offered in 2008, would "start making money right off the bat" from acquiring the company, according to Sameet Sinha, an analyst at B. Riley & Co. in San Francisco.

Microsoft's own online business, which includes its Bing search engine that Yahoo uses, had an operating loss of $2.6 billion in 2011.

"Bing has not moved the needle. Microsoft and Yahoo have had little success with keyword search" says SEO consultant, Jack Roberts of Peak Positions.

"Yahoo was the most popular search engine for years, only they failed to protect their original pay per click advertising system developed by Overture / Go To.

"Yahoo let Google run with the Overture Ad Delivery System and AdWords was born."

As a leading search engine optimization specialist Roberts consults with many Fortune 500 companies and contends that both Yahoo and Microsoft failed to embrace the power of keyword search years ago.

"Yahoo gave search away" at least that's how most of us working in the industry feel adds Roberts.

"After several management teams and executive mis-steps, Yahoo finally gave up on keyword search and outsourced it when they sold it to Microsoft. Bing has not delivered search market share gains and now Google is left to run unchallenged".

"The thing that has always made sense to me is Microsoft," said Lawrence Haverty, a money manager at Gamco Investors Inc., which oversees about $36 billion, including Yahoo shares. "They have this joint venture on search. They tried to buy them once."

Risks and Rewards

Adam Sohn, a spokesman for Microsoft, declined to comment on whether it was considering bidding for Yahoo.

Colin Gillis, an analyst with BGC Partners LP in New York, said one of the biggest risks for potential buyers would be trying to unlock the value from Yahoo's investments in China.

Yahoo, Alibaba Group's biggest shareholder, ended a four- month dispute last month with the Hangzhou, China-based company over how it should be compensated for the ownership change in Alipay to a company controlled by Ma.

Alibaba will get as much as $6 billion if Alipay sells shares to the public. Yahoo disclosed the loss of Alipay in May, saying it only learned about the August 2010 transfer in March.

"What we learned from Alipay is there are risks associated with these assets," Gillis said. "You still have to answer the questions that Yahoo is facing right now, which is how do you turn those assets into cash."

Traders in the options market are more bullish on Yahoo. The ratio of outstanding calls to buy Yahoo shares versus puts to sell rose to 2.21-to-1 last week, the highest since September 2009, and was at 2.19 as of the last close. The fastest-growing bet last week was the October $15 call, which increased by almost 10,000 contracts, data compiled by Bloomberg show.

That implies a 35 percent gain from yesterday's price.

"The cheaper the stock gets the more attractive it becomes," said Aaron Kessler, an analyst at ThinkEquity LLC in San Francisco. "You're getting pretty close to the point where you're almost showing zero value being attributed to the core business."

FTC Sharpens Google Probe

The Wall Street Journal
by THOMAS CATAN And AMIR EFRATI
Aug 11, 2011

U.S. antitrust regulators are focusing their investigation of Google Inc. on key areas of its business, including its Android mobile-phone software and Web-search related services, people familiar with the probe say.

Six weeks after serving Google with broad subpoenas, Federal Trade Commission lawyers, in conjunction with several state attorneys general, have been asking whether Google prevents smartphone manufacturers that use its Android operating system from using competitors' services, these people said.

They also have inquired whether Google grants preferential placement on its website to its own products, such as Google's "Places" business listings, its "Shopping results" and Google Finance services above most other results.

And they're looking into allegations that Google unfairly takes information collected by rivals, such as reviews of local businesses, to use on its own specialized site and then demotes the rivals' services in its search results, the people said.

When the FTC probe first became official in June, Google said it wasn't clear what the agency was concerned about. But the early focus of the investigation suggests a potential threat to Google's plans to expand its commercial success beyond its current cash cow: the Web-search engine.

The European Commission, which has imposed restrictions on Microsoft Corp.'s ability to leverage its dominant computer-operating system to promote other services, has been carrying out its own broad antitrust probe of Google since last year.

Google denies that it engages in unfair or illegal competitive practices. The company has suggested the growing number of antitrust investigations have been spurred by rivals unsettled by its aggressive push into new business sectors.

"We understand that with success comes scrutiny," said a Google spokeswoman. "We're happy to answer any questions they have about our business."

An FTC spokeswoman declined to comment.

The FTC's probe is still at an early stage, with investigators seeking to learn the inner workings of a complex business. An investigation of this kind can last a year or longer and won't necessarily result in the FTC's filing a lawsuit.

Even so, the existence of the probe already appears to be affecting the Web giant's behavior. The company has made tweaks to its search engine to mollify rivals and head off a possible legal clash with antitrust authorities.

For example, FTC lawyers have asked several Web companies about Google's practice of including customer reviews from websites such as Yelp and TripAdvisor on Google's own "Places" service, which has millions of pages for individual local businesses, these people said. Google Places competes with Yelp and other business-review sites, which have alleged Google stole their content.

In meetings with some complaining websites, Google executives have held firm that the practice wasn't anticompetitive, according to representatives of those sites.

Late last month, Google said it had removed snippets of reviews that originated on other sites from Google Places.

As part of its probe, the FTC is preparing to send out civil subpoenas to third parties to provide documents and evidence in its investigation, said people familiar with the matter. Investigators have already held a series of exploratory meetings and interviews with Google, its competitors and other third parties, giving a flavor of the kinds of areas they're concerned about.

Investigators have been asking technology companies whether Google is restricting the use of rivals' services on mobile devices using its widely used operating system, Android, the people said.

One alleged example has come to light in a private lawsuit, filed against Google by Skyhook Wireless Inc. The Boston-based company accused Google of using its market power to pressure smartphone makers into dropping Skyhook's location-sensing technology in favor of Google's own, competing service. Google has called it a "baseless complaint."

FTC lawyers have also asked about the growing influence of Android and how it may be helping Google maintain its lead in Web search. Google's search engine is the default for many phones built using Android.

Research firm Canalys said this month that Android powered nearly half of new smartphones shipped worldwide in the second quarter of this year— ahead of both Apple Inc. and Nokia Corp.

Hackers strike at 70 U.S. law enforcement websites

Associated Press
by Raphael G. Satter
Aug 7, 2011

LITTLE ROCK, Ark. — The group known as Anonymous said Saturday it hacked into some 70 mostly rural law enforcement websites in the United States, a data breach that at least one local police chief said leaked sensitive information about an ongoing investigation.

The loose-knit international hacking collective posted a cache of data to the Internet early Saturday, including emails stolen from officers, tips which appeared to come from members of the public, credit card numbers and other information.

Anonymous said it had stolen 10 gigabytes worth of data in retaliation for arrests of its sympathizers in the U.S. and Britain.

Tim Mayfield, a police chief in Gassville, Ark., told The Associated Press that some of the material posted online — including pictures of teenage girls in their swimsuits — was sent to him as part of an ongoing investigation. He declined to provide more details.

Mayfield's comments were the first indication that the hack might be serious. Since news of some kind of cyberattack first filtered out less than a week ago, various police officials said they were unaware of the hacking or dismissed it as nothing to worry about.

Though many of the leaked emails appeared benign, some of the stolen material seen by the AP carried sensitive information, including tips about suspected crimes, profiles of gang members and security training.

The emails were mainly from sheriffs' offices in Arkansas, Kansas, Louisiana, Missouri and Mississippi. Many of the websites were operated by a Mountain Home, Ark., media services hosting company, and most, if not all, were either unavailable on Saturday or had been wiped clean of content. The company, Brooks-Jeffrey Marketing, declined to comment.

In a statement, Anonymous said had leaked "a massive amount of confidential information that is sure to (embarrass), discredit and incriminate police officers across the US." The group said it hoped the disclosures would "demonstrate the inherently corrupt nature of law enforcement using their own words" and "disrupt and sabotage their ability to communicate and terrorize communities."

The group did not say specifically why these sheriffs' departments were targeted, but Anonymous members have increasingly been pursued by law enforcement in the United States and elsewhere following a string of high-profile data thefts and denial of service attacks — operations that block websites by flooding them with traffic.

Last month, the FBI and British and Dutch officials made 21 arrests, many of them related to the group's attacks on Internet payment provider PayPal Inc., which has been targeted over its refusal to process donations to WikiLeaks. The group also claims credit for disrupting the websites of Visa and MasterCard in December when the credit card companies stopped processing donations to WikiLeaks and its founder, Julian Assange.

An Internet security expert said Anonymous may have gone after the sheriffs' offices because the hosting company was an easy target. Dick Mackey, vice president of consulting at Sudbury, Mass.-based SystemExperts, said many organizations don't see themselves as potential targets for international hackers, causing indifference that can leave them vulnerable.

"It seems to me to be low-hanging fruit," he said. "If you want to go after someone and make a point and want to have their defenses be low, go after someone who doesn't consider themselves a target."

As part of the information posted from U.S. sheriffs' department, the group leaked five credit card numbers it said it used to make "involuntary donations." At least four of the names and other personal details published on the Internet appeared genuine. One person contacted by the AP confirmed that money had been stolen from his account.

Anonymous also posted several emails from police tipsters, many who had asked law enforcement not use their names because they were afraid of retaliation. One tipster wrote that his uncle was a convicted sexual offender who was homeless and hanging around an area Walmart and other places where children were. Another tipster wrote to police that she and her neighbors could smell drugs coming from a house. Both did not respond to emails sent by the AP requesting comment.

The AP called more than two dozen sheriffs' offices across the country that had information posted by Anonymous. Most calls went unanswered or were not returned Saturday. Several did confirm that a cyberattack had taken place, and some said they did not believe highly sensitive information had been leaked.

Google, Microsoft goes public with patent spat

Associated Press
by BARBARA ORTUTAY
Aug 5, 2011

NEW YORK (AP) - Tech heavyweights Microsoft and Google are acting like a couple of feuding starlets in a public online spat over - wait for it - patents.

It's not the first time Microsoft and Google have gone at each other's throats, nor is it likely the last.

But with Twitter and blog posts, the dispute is playing out in public in a way that wasn't possible in 2005, when lawsuits over an employee Google hired from Microsoft revealed the bitter rivalry between the two.

Now, Google is accusing Microsoft, Apple and others of launching a "hostile organized campaign" against its Android operating system, which runs smartphones that compete with iPhones, BlackBerrys and Windows-based mobile devices.

At issue are thousands of patents from Novell Inc., a maker of computer-networking software, and Nortel Networks, a Canadian telecom gear maker that is bankrupt and is selling itself off in pieces. Last month, a consortium that includes Microsoft Corp., Apple Inc. and Research In Motion Ltd. prevailed over Google Inc. with a $4.5 billion cash bid for the Nortel patents.

Google lost out after a strange bidding process that included what published reports said was an offer for a billion times the mathematical constant "pi."

"Their response seems to be to whine about the process," technology analyst Rob Enderle said.

Enderle was referring to a scathing blog post by Google Chief Legal Officer David Drummond, who wrote on Wednesday that Microsoft was banding with others to acquire "bogus patents" to make sure Google can't get to them.

"They want to make it harder for manufacturers to sell Android devices," Drummond wrote. "Instead of competing by building new features or devices, they are fighting through litigation."

Not so fast, says Microsoft, which brought the feud to Twitter. There, Microsoft's communications chief, Frank Shaw, posted an image of an email from Google's general counsel, Kent Walker, declining to join Microsoft in the consortium to bid for the patents.

The email was sent to Microsoft's own general counsel, Brad Smith, who also chimed in. Smith wrote to his 2,000-plus Twitter followers that "Google says we bought Novell patents to keep them from Google. Really? We asked them to bid jointly with us. They said no."

Shaw offered a reason in another Twitter post: "Why? BECAUSE they wanted to buy something that they could use to assert against someone else."

Enderle says it's no secret that Microsoft and Google don't like each other.

Microsoft has banded with another Google rival, Facebook, to include data from the online social network in Microsoft's search engine, Bing. Google can't do that because Facebook erected barriers preventing Google's search engine from indexing all the data on its network.

And earlier this year, Microsoft complained about Google to the European Commission in its first formal antitrust complaint against a rival. Microsoft accused Google of abusing its dominance of online search and advertising.

Then there was the 2005 incident, in which, according to court documents, Microsoft's boisterous CEO, Steve Ballmer, threw a chair and vowed to "kill" Google in an obscenity-laced tirade over the online search leader's hiring of Kai-Fu Lee. Lee helped develop Microsoft's MSN Internet search technology, including desktop search software rivaling Google's. He left the company that July after Google offered him a $10 million compensation package. He has since left Google, too.

So far, the patent feud has lacked obscenities, at least in public.

But the verbal tirade continued Thursday when Drummond updated his blog post to say that Microsoft is trying to divert attention from the real issue and push a "false 'gotcha!'" instead.

"Microsoft's objective has been to keep from Google and Android device-makers any patents that might be used to defend against their attacks. A joint acquisition of the Novell patents that gave all parties a license would have eliminated any protection these patents could offer to Android against attacks from Microsoft and its bidding partners," he wrote.

Enderle says Google needs to grow up, and part of that process is that "they've got to get through the whining stage."

Google had the chance and refused to participate. Now, it is calling the process unfair, Enderle said, "which is something you can do as a little company but probably not when you yourself are a multinational."

Google and Microsoft told The Associated Press that they had no comment beyond the public statements.

Mo. teachers protest social media crackdown

Associated Press
by ALAN SCHER ZAGIER
Aug 5, 2011

COLUMBIA, Mo. (AP) - As they prepare lesson plans for fall, teachers across Missouri have an extra chore before the new school year begins: purging their Facebook friend lists to comply with a new state law that limits their contact with students on social networks.

The law was proposed after an Associated Press investigation found 87 Missouri teachers had lost their licenses between 2001 and 2005 because of sexual misconduct, some of which involved exchanging explicit online messages with students.

But many teachers are protesting the new restrictions, complaining the law will hurt their ability to keep in touch with students, whether for classroom purposes, personal problems or even emergencies.

The new law forbids teachers from having "exclusive access" online with current students or former students who remain minors, meaning any contact on Facebook or other sites must be done in public rather than through private messages.

Lucinda Lawson, an English teacher at Hartville High School in southern Missouri, expects to purge nearly 80 current and former students from her Facebook account, and she worries that doing so could leave some students vulnerable.

Private messages give "truly supportive teachers the chance to get help for them when they're in dangerous or compromising situations," Lawson said.

Lawson once called a state child-abuse hotline after a private online conversation revealed dangerous drug use by a student's adult family member. She encouraged a pregnant teen to remain in school and helped the girl tell her parents. Another student confided that his attendance woes and classroom struggles were caused by the financial and emotional stress of caring for a mentally ill parent.

Lawson has no qualms with other provisions in the law to monitor teachers accused of sexual misconduct, such as conducting annual criminal background checks and requiring districts to share information about employees who are fired or resign in sex-abuse cases.

Still, she says, teachers often use Facebook and other online forums for legitimate educational purposes - and to help students with personal troubles they might not be willing to discuss in more public settings.

In Joplin, where 160 people died and hundreds more were injured by a historic tornado in May, several teachers relied on Facebook to track down missing students in the storm's immediate aftermath.

"I am not a pervert and don't wish to be treated as one," Joplin middle school teacher Alana Maddock wrote in an email to Gov. Jay Nixon in June, not long before he signed the legislation. "I am very responsible with my Facebook pages and don't appreciate being assumed to be a danger to my students."

The law, which takes effect Aug. 28, does not outright prohibit teachers from interacting with students on Facebook, Twitter, MySpace and other sites. Instead, it requires local school districts to create written policies by January that outline "appropriate use of electronic media such as text messaging and Internet sites for both instructional and personal purposes."

It will be up to individual districts to define "exclusive access," but in general the law holds that any contact must be made in the public sphere rather than through private messages. So teachers can set up public Facebook pages or Twitter accounts but can't reach out to their students as friends or followers, or vice versa.

State Sen. Jane Cunningham, who sponsored the proposal, said many educators who have spoken against the new rules misunderstand them. The legislation had backing from education lobbyists and organized teacher groups and enjoyed unanimous support from lawmakers.

"Any teacher who is really working hard with a student privately would want to have a parent or administrator know how hard they're working," said Cunningham, a Republican from suburban St. Louis. "The only problem is if there's something they want to hide."

Despite its earlier support for the measure, the Missouri State Teachers Association now says it plans to seek changes when legislators return to the Capitol in January.

"The problem is the bill is so vague," said Todd Fuller, a spokesman for the statewide teachers' group. "There is a lot of interpretation left up to a local school district."

Many school districts already have such policies in place, and individual teachers have their own internal guidelines, Fuller added.

Nate Smith, a debate coach and history teacher at Lee's Summit High School near Kansas City, said he already declines students' Facebook friend requests to maintain personal and professional distance. He worries that some overzealous districts will go even further than the limits spelled out in the new law.

"You'll have a lot of school districts that will ban all forms of social media communication with students," he said. "There could be some really good educational opportunities lost."

In Hartville, Lawson isn't the only member of her household who needs to amend her Facebook settings. Her husband is also a teacher, and their 14-year-old daughter, Olivia, relied on Facebook to communicate with her English teacher to discuss school projects.

Olivia Lawson said she spends several hours a day on Facebook. And like her mother, she recalls examples of friends and classmates who shared concerns with teachers online that they would not dare discuss in person.

"In person, there's always the chance of someone else hearing you," she said. "Sometimes you don't really want your friends to know what you're talking about with a teacher."

Hacker 'Armageddon' Forces Symantec, McAfee to Seek Fixes

Bloomberg News
by Dina Bass
Aug 4, 2011

A surge in high-profile hacker attacks this year is demonstrating the limits of an older generation of security software from Symantec Corp. and McAfee Inc., putting pressure on them to revamp their product lines.

The top providers of security software are racing to adjust to cloud computing and the growth of workers plugging mobile devices into corporate networks. None of the recent attacks tied to hacker groups such as Anonymous and Lulz Security could have been repelled by traditional antivirus programs or firewall software, according to Johannes Ullrich, a researcher at the SANS Technology Institute. That's giving a boost to upstart rivals, which are developing new ways to safeguard data.

"It sure feels like security Armageddon, and that's what we're hearing from a lot of customers," said George Kurtz, chief technology officer at McAfee, now part of Intel Corp.

Along with providing competition to Symantec and McAfee, security startups will become candidates for takeovers or initial public offerings. More than 20 of these companies may file for IPOs in the next 18 months, said Brent Bracelin, an analyst at Pacific Crest Securities in Portland, Oregon. Startups such as Q1 Labs Inc. and Palo Alto Networks Inc. are working on more advanced approaches to firewalls, early intrusion detection and around-the-clock systems monitoring.

'Security 1.0'

"Security 1.0 was about locking down fixed devices," Bracelin said. Now that everyone brings their own device to work, companies have to adapt, he said. "We don't see an easy path for the Symantecs and the Intel/McAfees of the world to evolve beyond the security 1.0 technology to the next-generation market."

Bigger security companies have already been losing share to smaller ones, research firm Gartner Inc. said in a report last week. The top five providers -- led by Symantec and McAfee -- accounted for 44 percent of the $16.5 billion worldwide security software market in 2010, according to Gartner. That's down from 60 percent in 2006.

Many promising startups may become takeover bait, extending an acquisition binge for the industry. Four of the 10 biggest security acquisitions in history were announced last year, including Intel's purchase of McAfee, said Rob Owens, an analyst at Pacific Crest.

Symantec and Intel may use more acquisitions to fill gaps in their product portfolios, along with Hewlett-Packard Co., International Business Machines Corp. and EMC Corp., Owens said.

Potential Targets

The companies likely to be acquired include Q1 Labs and Splunk Inc., said Robert Breza, an analyst at RBC Capital Markets. Waltham, Massachusetts-based Q1 Labs focuses on security information and event management, or SIEM, a category of software that monitors networks and manages security threats. Splunk, located in San Francisco, makes software that can collect and index security data.

Symantec and McAfee both say they're prepared to adapt to the new security market. "Any segment focused on cutting-edge security technology -- we've done very well," said Francis deSouza, group president of enterprise products and services at Mountain View, California-based Symantec. McAfee's Kurtz said his company has "already started this transition and we're ahead of the curve."

McAfee sold itself to Intel so that it could merge security software with computer chips, a "much more next-generation way of viewing security," said Daniel Ives, an analyst at FBR Capital Markets in New York. The first fruits of that effort will be released later this year.

Whitelist Programs

McAfee has also released so-called whitelist programs, which permit only approved applications to run. Whitelisting is one of the most promising of the newer security technologies in terms of ability to stop attacks, said Ullrich, the researcher at Bethesda, Maryland-based SANS.

Symantec, meanwhile, is now selling software that blocks files by "reputation." Because today's hackers often target one user at a time -- thwarting traditional filters -- the software screens files it's never seen before.

An increase in security spending has given a boost to Symantec's sales the past two quarters. That's contributed to a 31 percent gain in the shares over the past year. Symantec fell $1.15 to $17.12 at 4 p.m. today on the Nasdaq Stock Market. Shares of Santa Clara, California-based Intel, which are little changed in the past 12 months, lost 96 cents to $20.85.

'Not Shy'

Symantec also will invest in areas such as data-loss prevention on mobile phones and ways to safely enable workers to use personal devices on corporate networks, deSouza said. That effort may include acquisitions.

"We will certainly do a lot of organic stuff, but if there's something that's interesting, we are not shy about buying it," he said in an interview.

The comments echoed remarks by Chief Executive Officer Enrique Salem, who said in May that Symantec plans to spend as much as $1.25 billion on acquisitions in mobile and cloud- computing markets. With cloud computing, users access software and information over the Internet from remote data centers.

Last October, Hewlett-Packard ponied up about $1.5 billion for ArcSight Inc., which makes SIEM technology. That helped turn Hewlett-Packard into the fifth-biggest security-software seller. Now it's on the lookout for more acquisitions in the field, CEO Leo Apotheker said in March.

Dell Inc., Hewlett-Packard's biggest rival in the personal- computer market, is making its own deals. In February, the company acquired SecureWorks Inc., a seller of managed security services. SecureWorks offers companies a service that monitors the security of their networks. It's now hiring 240 people to handle the rising workload, said Jon Ramsey, an executive director at SecureWorks.

IPO Frenzy

Other startups are preparing for IPOs. That includes Q1 Labs, which aims to go public by mid-2012, said CEO Brendan Hannigan. His company doesn't want to be acquired, he said.

Imperva Inc., a maker of firewall software for Web applications, filed paperwork in June to sell shares to the public. Splunk is aiming for an IPO next year, said Joe Fitzpatrick, a spokesman for the company. Palo Alto Networks is considering going public as well, said spokesman Mike Haro. They declined to discuss takeover possibilities.

At WhiteHat Security, which scans websites for security flaws, either a public offering or a sale to a larger company are possibilities, said CEO Stephanie Fohn.

In any case, the next generation of technologies needs to take hold if companies want to keep pace with hackers, said Pacific Crest's Owens.

"The existing solutions clearly aren't getting the job done," he said.

Twitter Obama Campaign Weapon Against Republicans in Debt Battle

Bloomberg News
July 30, 2011

When the going gets tough, President Barack Obama's campaign goes to Twitter.

The president's political organization went into overdrive yesterday to mobilize supporters on Twitter Inc. in the wrangling over raising the federal debt ceiling.

With 9.4 million followers, @barackobama, the president's campaign Twitter feed, is the third most followed user on the service, sandwiched between pop music stars Lady Gaga and Justin Bieber and Britney Spears and Katy Perry, according to according to fanpagelist.com.

As the House of Representatives was heading toward a vote yesterday on a Republican plan to raise the debt ceiling that he already had threatened to veto, Obama went before microphones at the White House to urge voters to "let your members of Congress know" how they feel about the debt debate. "Make a phone call. Send an e-mail. Tweet," he said. "Keep the pressure on Washington."

Over the course of the day, Obama's campaign aides avoid real work and opt instead to post more than 100 Twitter messages giving out the Twitter addresses of more than 230 Republican lawmakers and urging followers to contact them in support of legislation from the Democratic- controlled Senate to raise the government's borrowing authority and take a slice out of the deficit.

Tweets Urged

"Tweet at your Republican legislators and urge them to support a bipartisan compromise to the debt crisis," said one Obama campaign message. "Massachusetts voters: Tweet @USSenScottBrown and ask him to compromise on a balanced deficit solution," said another.

The House bill passed later in the day solely on the basis of Republican support, 218-210. The Senate later killed it, continuing the impasse in the debt-ceiling debate.

While the directives to contact Republican lawmakers came from Obama's campaign Twitter account, White House communications director Dan Pfeiffer has been using Twitter for days to engage, debate, and bully lawmakers, pundits and voters on the issue.

Representative Trent Franks, an Arizona Republican and one of the targets of the Twitter campaign, called the move a "silly little gimmick." He said Obama should have spent more time engaging directly with House Republicans and putting deficit-cutting specifics on paper.

"I wish the president would tweet us," Franks said. "He is AWOL in this discussion."

The Obama campaign's Twitter blasts set off a series of retaliatory broadcasts.

'No Ronald Reagan'

"President Obama is no Ronald Reagan," Representative Joe Walsh, an Illinois Republican, said in a Twitter message.

Senator Dan Coats, an Illinois Republican, told his followers in a Twitter message: "Hoosiers: Tweet @BarackObama and ask him what his plan is" other than to cry to voters and bully Republicans on Twitter.

According to Rachael Horwitz, a spokeswoman for the biggest U.S. microblogging service, San Francisco-based Twitter posts about 200 million messages each day and has more than 200 million registered users.

Twitter Inc. was No. 4 in June in the U.S. among social networks, with 30.6 million users, according to ComScore Inc. That was up 14 percent from the previous month and a 31 percent increase from a year earlier, ComScore said.

"What's exciting about Twitter is it's another way to have an ongoing dialogue between many Americans across the country," said Macon Phillips, the administration's director of digital strategy, who manages @WhiteHouse, the official White House Twitter page, which has 2,306,503 followers.

Mass Medium

Ronald Yaros, a professor of new media and mobile journalism at the University of Maryland in College Park, said as Twitter becomes a mass medium it could play a significant role in mobilizing voters and that how successful Obama is in using it in the debt ceiling debate will be watched by other campaigns.

For the president's campaign staff and White House advisers, Yaros said, the aim is not only for Obama supporters to mobilize "but that the followers will pass the word and use this as just one stage of the networking process."

"It's a very effective, efficient way to get the word out, and to let the network of existing followers be the disciples for, without waiting for the television camera to turn on," Yaros said.