News: Apple in talks to launch iPhone in Japan

According to a new report, Apple is in talks (Subscription req.) with Japan's NTT DoCoMo and Softbank concerning the launch of the iPhone in the country. The Wall Street Journal reports that people familiar with the situation say Apple CEO Steve Jobs recently met with NTT DoCoMo's president, Masao Nakamura, to discuss a deal to offer the iPhone in Japan. NTT DoCoMo is Japan's largest cellular provider, and it has been suggested that…

According to a new report, Apple is in talks (Subscription req.) with Japan's NTT DoCoMo and Softbank concerning the launch of the iPhone in the country. The Wall Street Journal reports that people familiar with the situation say Apple CEO Steve Jobs recently met with NTT DoCoMo's president, Masao Nakamura, to discuss a deal to offer the iPhone in Japan. NTT DoCoMo is Japan's largest cellular provider, and it has been suggested that…

  • iPhone coming to Japan's NTT DoCoMo?

    According to the Wall Street Journal Asia, Jobs and Co are in Japan working out the details for a domestic iPhone launch. It's no surprise then that Jobs was rumored to have just met with NTT DoCoMo's president, Masao Nakamur, to discuss the deal with the largest carrier in the world's second-largest economy. As usual, Apple seems to be playing the carriers off one another with rumors that The Steve is courting Softbank as well. However, "people familiar with the situation" say that DoCoMo is the first choice. While the revenue sharing is a sticking point as usual, WSJA says that Apple doesn't expect to have any difficulty closing the deal. Funny, that's what everyone was saying about Vodafone in Europe.P.S. For what it's worth, NTT DoCoMo does not run a GSM/EDGE network. Any iPhone released on DoCoMo's FOMA service will be HSDPA -- right, the 3G iPhone. Read | Permalink | Email this | CommentsOffice Depot Featured Gadget: Xbox 360 Platinum System Packs the power to bring games to life!

  • Asian Tech Stock Weekly Summary (July 13 - 19)

    JapanHardwareKonica Minolta Holdings Inc. would start output at its new factory in Japan that makes high-tech film used in LCD panels by autumn 2010 due to a strong recovery in panel and TV demand. Konica Minolta had planned to begin production at the new plant in autumn 2009, but the company late last year decided to delay the start-up as the global downturn forced panel makers to cut output. Konica Minolta dominates the global market for triacetyl cellulose (TAC) film, which protects the polarisation plates used in LCD panels, with bigger rival Fujifilm Holdings Corp. Konica Minolta, which also competes with Canon and Ricoh in producing copiers and printers, plans to spend 18 billion yen (US$194 million) to build the new factory, which will be capable of making 50 million square metres of TAC film a year.TelecommunicationsNTT DoCoMo (DCM) president Ryuji Yamada said the Japanese operator is on track for launching its new Long Term Evolution (LTE) mobile network in 2010, reports the Financial Times. The adoption of LTE will see DoCoMo's handsets become compatible with other operators' 3G networks for the first time since the 2001 launch of its FOMA service, which used a WCDMA standard that was slightly different to the one rolled out by the majority of the rest of the world. DoCoMo has learned a hard lesson from being the first operator in the world to launch 3G services. DoCoMo plans to launch LTE handsets in 2011 that are also compatible with its current 3G network, so customers can still access services if they're outside an LTE coverage area. DoCoMo will use its high-speed LTE network to offer mobile content services in a bid to drive new revenue in the saturated Japanese market.Softbank Corp. (SFTBF.PK), Japan's third biggest mobile telecommunications provider, raised 30 billion yen (US$320 million) from the first BBB rated bonds sold to institutions in Japan by a non-utility borrower since Lehman Brothers Holdings Inc.'s collapse in September. The Tokyo-based company, priced three-year, 4.72 percent notes to yield 4 percentage points more than the yen swap rate, according to data compiled by Bloomberg. Softbank, rated the second-lowest investment grade of BBB by Japan Credit Rating Agency, becomes the first non-utility company with that rating to sell bonds to institutional investors in Japan for 10 months. Softbank will use money raised from the securities to repay debt, it said in a filing with Japan's finance ministry today. The company sold 60 billion yen in 5.1 percent fixed-rate bonds to individual investors in May, Bloomberg data show.Softbank casts its eyes on the Greater China Region and inked a strategic cooperation agreement with Shanghai Media Group (SMG) on June 29, 2009. Softbank Founder Masayoshi Son and SMG President Li Ruigang signed on the agreement. The two parties will jointly to develop new media digital content business. Softbank is reported to cooperate with Far Eastone Telecommunications Co., Ltd. in August to launch mobile phone cartoon services. Far Eastone is in talks with Softbank subsidiaries in an attempt to introduce Japan's well-known cartoon works into Taiwan as soon as possible.Semiconductor Japan's Ushio Inc. announced its subsidiary Ushio America Inc. has acquired a 49 percent stake in U.S. firm Necsel Intellectual Property Inc. Necsel has technology for low-cost mass production of visible-laser light sources, and Ushio plans to leverage this to boost its own competitiveness in the markets for light sources for data projectors and digital cinema display systems. Using the technology, Ushio will be able to broaden its lineup of light sources to include semiconductor lasers across the complete spectrum of visible wavelengths. The company plans to purchase the remaining 51 percent of Necsel over the next five years and turn the unit into a wholly owned subsidiaryMedia, Entertainment and GamingSquare Enix Holdings Co. (SQNXF.PK) has shipped three million units of its "Dragon Quest IX" video game software in Japan since its release. In total, global shipments of the "Dragon Quest" series have surpassed 50 million units since the popular franchise debuted in 1986. Sales of the highly anticipated latest installment are going strong, too, with some 2.5 million units flying off the shelves in its first three days on the market -- beating the roughly 2.4 million of "Dragon Quest VIII," which was released in 2004. For the first time in the series, "Dragon Quest IX" runs on the Nintendo DS hand-held system. And through Wi-Fi wireless technology, up to four nearby gamers can play together.KoreaTelecommunicationsSK Telecom Co. (SKM) is considering bidding for Kazakhstan's Mobile Telecom-Service, as part of its recent efforts to seek business opportunities overseas. Kazakhtelecom, Kazakhstan's incumbent telecommunications operator, said in late June that it plans to sell its 51 percent stake in Mobile Telecom-Service and that it would accept letters of intent from potential bidders by and final bids by Aug. 31. Mobile Telecom-Service, Kazakhstan's smallest GSM operator, was launched in 2007 and provides services under the brand Neo with 920,000 subscribers.Mobile/WirelessEricsson (ERIC) plans to invest US$1.5 billion in South Korea over the next five years. The company would set up a research centre in the Asian nation to develop environmentally friendly and fourth-generation wireless technologies. Ericsson also planned to increase the number of employees at its Korean unit to 1,000 from 80. The Korean government was determined to provide a level playing field for foreign businesses to compete with domestic rivals. The investment was expected to help boost Korea's competitiveness in the market for long-term evolution, or LTE, high-speed wireless technology, backed by Ericsson. AT&T and Verizon Communications are also choosing the standard. Verizon Wireless, the biggest U.S. mobile-telephone company, aims to begin offering a high-speed network in all U.S. regions by 2015 using LTE, which is scheduled to reach 30 markets by next year. LG Electronics, Asia's second-largest mobile-telephone maker, in December said it developed a faster wireless chip used in mobile telephones based on the technology.BiotechnologySamsung Electronics plans to invest about 500 billion won (US$389 million) in the biotech medicine business. Korea's economy minister Lee Youn-ho said that Samsung, the world's top maker of memory chips and flat-screen TVs, would spend the amount over the next five years on the biosimilar business. Biosimilars are versions of biopharmaceuticals whose patents have expired. Samsung declined to confirm the size of the investment but said biosimilars presented a new growth opportunity for the technology giant. Lee signed a letter of intent with several domestic firms, including Samsung Electronics and LG Life Science, on their investment in a government biosimilar industry development initiative, with Korea Development Bank and a state-led fund already committed to providing financial support.ChinaInternetChina's Ministry of Commerce (MOC) has not ruled against the proposed merger between Sina (SINA) and Focus Media (FMCN); documents for the merger have not yet been put on MOC records. Focus Media CEO Jason Jiang is "quite anxious" about the merger, and said recently that the MOC has continuously asked for more documentation. The companies first submitted an application for their merger in late December 2008.As of the end of 2008, China saw a netizen base of 298 million, and an Internet penetration rate of 22.6 percent, outracing the global average level of 21.9 percent.Mobile/WirelessA total of 13.21 million mobile phones were sold in China in May 2009, up 9.6 percent from the previous month. The number of GSM mobile phones sold in May increased by 12.5 percent month-on-month to 11.06 million units, while only 2.15 million CDMA handsets, which included 39,800 3G CDMA 1xEVDO handsets, were sold in May, down 3.4 percent from April. The dip in CDMA mobile phone sales is the result of China Telecom's shift in focus from 2G to 3G. In addition, both China Mobile and China Unicom implemented subsidies within their 3G service plans in 2009 to attract more users. Five foreign brands, Nokia, Samsung, Motorola, Sony Ericsson and LG, accounted for a 65.6 percent share of China's mobile phone market in May. Nokia had the largest market share of 31.9 percent last month. Domestic mobile phone manufacturer ZTE was the sixth-largest brand in May with a 3.8 percent market share.Z-Obee Holdings, which provides design services for mobile-telephone manufacturers on the mainland, has launched its own handset brand to meet the country's growing demand for stylish wireless devices. The Singapore-listed company's new "Vim" brand for the mainland mobile-telephone market will cater to price-conscious consumers keen on using fashionable, easy-to-operate handsets. The firm's production road map includes launching a new model every 45 days, which would enable it to introduce at least eight models in Hong Kong and on the mainland each year. The initial batch of Vim handsets being introduced on the mainland includes a his and hers model designed for couples that has a text message authentication function. This allows text correspondence between the pair to be decoded with a specific password for privacy. Each Vim handset has a voice diary function, allowing users to record appointments on the phone and be automatically reminded by the device at the designated time.TelecommunicationsChina Mobile Ltd. (CHL) will invest 70 billion yuan (US$10.2 billion) in building and upgrading its telecommunications networks, and promoting the use of its 3G services in the country's vast rural areas over the next three years. The ministry will help it promote the adoption of 3G-enabled applications in rural areas.China's three telecoms carriers, China Mobile, China Unicom (CHU) and China Telecom (CHA), injected more than 100 million yuan (US$14.6 million) in online advertising for two consecutive months of May and June. Their online ads expenses amounted to 198 billion yuan in May, when it welcomed the World Telecommunications Day on May 17, and China Unicom started trial operation of WCDMA. China Unicom's online ads input reached 78.79 million yuan on that month. In the same period, the carriers paid large amount of money in TV advertising as well, shouldering into prime time of CCTV, China's leading television station. Their expenses on online advertising fell, but still stayed above 100 million yuan to 115 million.ZTE Corp. (ZTCOF.PK) has captured 34 percent of the latest 8.6 billion yuan (US$1.3 billion) 3G network expansion tender by China Mobile Communications Corp. Huawei Technologies won 22 percent while partner Nokia Siemens Networks claimed 7 percent. Datang Mobile Communications Equipment and domestic partner FibreHome Technologies ranked third with a 21 percent share. The rest went to China Putian, New Postcom and Ericsson, each winning five to six percent. ZTE and Huawei were helped by their offers of a free upgrade in China Mobile's existing TD-SCDMA equipment, which was installed in the previous two phases of network construction. Industry watchers said China Mobile's preference for supporting domestic vendors and homegrown technologies also enabled ZTE, Huawei and Datang to take a bigger share. As a result, foreign vendors' share was shrinking. The latest tender was the third by China Mobile for a network covering 200 cities or 70 percent of the areas on the mainland. The original contract size was about 8.6 billion yuan for the installation of 39,000 base stations.China Unicom aims to go up against market leader China Mobile for high-end users as early as October, thanks to its exclusive sales agreement for the popular Apple (AAPL) iPhone handset. Unicom and Apple are expected to announce a schedule for the iPhone's introduction soon. Meanwhile, industry sources have confirmed that Apple has already submitted the device to a Ministry of Industry and Information Technology laboratory for official approval. Unicom and Apple could not be reached for comment on the deal, but telecommunications sources said Unicom would launch the handset in the fourth quarter when its 3G mobile network will cover 284 cities across the country, up from 55 cities at the end of last month. The full commercial launch of its 3G network plus the exclusive deal with iPhone is expected to put pressure on China Mobile to defend its high-end users.HardwareGreater China is expected to see an almost fourfold increase in demand this year for mini-notebooks, commonly known as netbooks, as computer makers aggressively market the low-cost devices amid the economic downturn. That growth spurt is likely to boost sales for the market's leading notebook personal computer suppliers - including mainland Lenovo Group (LNVGY.PK), Hewlett-Packard (HPQ), Dell (DELL), Toshiba (TOSBF.PK), Acer and AsusTek Computer (AKCPF.PK) and operators of high-speed 3G mobile networks. Netbook shipments on the mainland, Hong Kong and Taiwan are forecast to hit 3.9 million units, up nearly 260 percent from 1.1 million units last year. The market research firm said total industry shipments would reach nearly 33 million units, up from its earlier estimate of 27 million units. That would result in a global netbook penetration of about 20 percent and flat year-on-year demand for pricier, full-featured laptops. Many buyers were adjusting their discretionary spending and were buying netbooks as lower-priced alternatives to traditional laptops. Netbooks are smaller than typical laptops, carry few software applications and are mainly used for wireless internet access.Lenovo Group plans to expand its sales network coverage from more than 100 Indian cities to more than 300 within 2009. The company is currently restructuring to divide its global business into mature and emerging markets. Lenovo previously will open 30 retail locations in India to bring its store total to 150 and expand its service centers from 130 to 250.Shenzhen-based Coship Electronics Co., Ltd. has won an order worth US$21 million from EMB, an old customer in South America to supply digital TV set-top boxes. The order from EMB represents about 6.79 percent of Coship's total operating revenue in the entire 2008 and is the first overseas contract that Coship makes public this year. In November 2008, Coship got a set-top box order valued at US$12.21 million from the South American company. Coship had sold set-top boxes worth 120 million yuan (US$17.5 million) to EMB as of June 30, 2009, eight months after it secured the first order from the latter. The Shenzhen company, engaged in the production and sales of digital TV equipment and electronics, saw its digital TV set-top box software and hardware sales revenue account for 93.94 percent, 96.83 percent, and 95.94 percent of its revenue from major business in 2003, 2004, and 2005, respectively.TCL Corp. said that its net profit may plunge 80 percent from a year earlier to 85 million yuan (US$12.4 million) during the first half of this year. TCL Communication Technology Holdings Ltd, one of TCL's subsidiaries, saw sales of handsets and accessories slide 12.32 percent year on year to 1.02 million units last month, while its first-half sales declined 24.69 percent from a year earlier to 5.06 million units. TCL Multimedia Technology Holdings Ltd, another subsidiary of TCL Corp, sold 616,898 LCD TVs in June, up 60.3 percent from a year earlier, and 342,353 CRT TVs, down 56.1 percent year on year. TCL sold more than 2.31 million LCD TVs in the first five months of this year, representing a year-on-year increase of 103.7 percent. The sales volume of LCD TVs in the first five months accounts for nearly 60 percent of the company's sales in 2008.Alternative EnergySuntech Power Holdings (STP) plans to invest 30 billion yuan (US$4.4 billion) in the four projects with a combined capacity of 1.8GW that it signed up to in recent weeks. The money represents just the initial investment. China's long term plan for the PV industry is 70 percent of projects will be on-grid and 25 percent building integrated PV.LDK Solar Co. (LDK) has purchased a 70 percent stake in Italian systems integrator Solar Green Technology for an undisclosed sum. The move is expected to enhance LDK Solar's presence in the Italian photovoltaic sector. In addition, the deal will help Solar Green Technology grow further through its partnership with LDK Solar for several projects in Italy and Europe.ReneSola Ltd. (SOL) has successfully commenced trial production on the first batch of polysilicon from Phase 1 of its two-phase, 3,000 metric ton annualized capacity polysilicon manufacturing facility located in China's Sichuan province. ReneSola's two-phase, 3,000 MT annualized capacity polysilicon manufacturing facility utilizes the Siemens process and a closed loop system to produce polysilicon. Phase 2 of the facility, representing approximately 1,500 MT annualized capacity, is scheduled to reach mechanical completion in September 2009.

  • Wall Street Breakfast: Must-Know News

    AIG bonus uproar continues. According to a letter New York Attorney General Andrew Cuomo sent to Congress, among the recipients of a so-called retention bonus paid to AIG employees, eleven people no longer work for the insurer and 73 employees received bonuses of $1M or more. As public outcry over the payments continues, Geithner told congressional leaders that the U.S. will recoup executive bonuses paid by AIG (AIG) by deducting the amount from the next $30B aid installment. He also said the government will accelerate the 'wind down' process of restructuring AIG. A bipartisan group of Senators has proposed taxes totalling 70% on bonuses at AIG and other firms receiving emergency federal funds. (Read Geithner's letter to Congress (.pdf))(Read Cuomo's letter to Congress (.pdf)) China cans Coke bid. China has rejected Coca-Cola's (KO) $2.3B bid for China Huiyuan Juice Group (CYUNF.PK), arguing the biggest foreign takeover of a Chinese company would have been 'negative for competition.' The Ministry of Commerce was concerned Coca-Cola might have used its 'dominant position' in the carbonated drinks market to raise prices and limit choices for Chinese consumers while making it more difficult for smaller rivals to survive. The decision will block Coca-Cola, which already controls more than 50% of China's soda market, from expanding its share of China's fast-growing juice market. Sun shines on potential IBM deal. IBM (IBM) is reportedly in talks to buy Sun Microsystems (JAVA) in a deal that would boost IBM's presence in software, on the internet and in finance and telecommunications markets. Both firms make computer systems that aren't reliant on Microsoft's (MSFT) Windows software and their product lines are less dependent than rivals' on Intel's (INTC) microprocessor technologies. If a deal goes through, IBM will likely pay at least $6.5B in cash for the acquisition, a premium of over 100% on Sun's closing price yesterday. Sources say talks could still fall apart, but a deal could go through as early as this week. Premarket: IBM -2.1%, JAVA +62.4% (7:00 ET). NJ sues Lehman execs. New Jersey Attorney General Anne Milgram has filed a lawsuit against 18 Lehman Brothers executives, saying the firm's misrepresentations resulted in $118M in losses for the state. Among the executives named are CEO Dick Fuld, former CFO Christopher M. O'Meara and former president Joseph M. Gregory. The state is also suing Ernst & Young, Lehman's longtime accountants, for allowing Lehman to improperly account for and disclose its true financial condition. Wagoner wavers on bankruptcy view. General Motors (GM) CEO Rick Wagoner has softened his stance on the possibility of bankruptcy, suggesting the company could possibly emerge from a Chapter 11 filing. While Wagoner maintains that '99%' of GM's problems can be solved without a bankruptcy that would be expensive and difficult, he conceded the possibility that bankruptcy could work. GM is currently in talks with the United Auto Workers union over labor costs and with bondholders about reducing debt; signaling that bankruptcy isn't completely off the table could strengthen GM's bargaining power in both of those negotiations. Patent kindles dispute. Discovery Communications (DISCA) has filed a lawsuit against Amazon (AMZN), claiming the Kindle e-book reader violates a patent Discovery registered in 2007. The company is suing for damages and future royalties, but will not try to halt sales of the popular device. Tax break for Madoff victims. The IRS announced unprecedented tax relief for victims of Ponzi schemes, allowing many of those affected to deduct up to 95% of their losses immediately. The move is a significant relaxation of longstanding limits on how much tax relief can be claimed by victims of investment scams. In broad terms, Ponzi scheme victims who aren't suing to recover their losses can deduct up to 95% of their losses less any recoveries from the SIPC. Individuals pursuing third-party recoveries can deduct 75% of relevant investments. Victims will also be able to make deductions for phantom income accrued over the years in addition to their principal investments. Sony slashes dividend. Sony (SNE) cut its dividend payment by 15% to „42.5 ($0.43) per share vs. the „50 it had previously projected. The reduced payment will help Sony conserve cash as it tries to cope with "the deterioration of the global business environment." Sony has projected a record „260B operating loss for this fiscal year. iPhone software update. Apple (AAPL) updated its iPhone software, providing developers with a range of new tools to make programs for the company's App Store, and giving developers more flexibility in how they can charge users for content. The update also includes several features phone users said were long overdue, including the ability to copy and paste text. The updates underscore how software has become an increasingly important way for Apple to continue profiting from the iPhone and adds to speculation that Apple plans to launch a new iPhone model this year. Nokia knocks down job count. Trying to save money as demand slumps, Nokia (NOK) announced plans to cut 1,700 jobs, or around 3% of its workforce. The company will also stop designing phones for the Japanese market. The moves are part of Nokia's efforts to trim its annual operating expenses by €700M ($907M) by the end of 2010. More layoffs at Caterpillar. Caterpillar (CAT) plans to fire 89 people, lay off 2,365 workers and close a plant in Georgia as demand for its construction equipment tumbles. Most of the layoffs are in addition to the 22,100 cuts Caterpillar announced in January. The company has said it may post a quarterly loss, its first in 16 years, and sales could drop 22% in 2009 to $40B. Retail sales dip. Retail chain store sales decreased 0.1% from a week ago, ICSC reported, and declined 1.4% Y/Y. ICSC chief economist Michael P. Niemira noted "the sales pace weakened over the last week as colder temperatures and wetter conditions around the nation slowed customer traffic." According to Redbook, national chain store sales were flat in the first two weeks of March as "sales picked up modestly in the second week, but remained below plan for the week and month to date." Sales fell 1.1% Y/Y. Housing starts jump. Housing Starts climbed 22.2% in February to 583K from January's 477K (revised) vs. 450K consensus. Building permits +3% to 547K vs. 500K consensus. Completions +2.3% to 767K. It's unclear whether the jump is a sign of healing, or a troublesome indication of the failure to prune inventories. However, considering housing starts hit record low levels (the worst since 1960) just last month, Barry Ritholtz said it's hardly a sign of a turnaround. He noted that gains were mainly in multi-family units; single-family starts were little changed. Mortgage apps rise. Mortgage applications rose 21.2% from a week ago, MBA reported, on a seasonally adjusted basis. The average interest rate on 30-year fixed-rate mortgages decreased to 4.89% from 4.96%. PPI inches up. Producer Price Index +0.1% in February from the month before vs. consensus of +0.4%. Core PPI +0.2% vs. +0.1%. Year-over-year PPI -1.3% vs. +0.1%, and core +4.0% vs. +3.8%. Led by higher energy prices, this marked the second month in a row of inflation at the wholesale level. BoJ holds rates steady. Bank of Japan kept its interest rates unchanged at 0.1% and will purchase more government bonds to ease financing conditions. Earnings: Wednesday Before Open General Mills (GIS): FQ3 EPS of $0.79 misses by $0.09. Revenue of $3.5B (+3.9%) in-line. (PR) Earnings: Tuesday After Close Adobe (ADBE): FQ1 EPS of $0.45 beats by $0.01. Revenue of $786M (-11.7%) vs. $784M. "We believe the major market trends driving our business remain intact, and we will continue to focus on innovation and investing in new growth businesses to increase the strategic value we provide our customers." (PR) Darden Restaurants (DRI): FQ3 EPS of $0.80 beats by $0.12. Revenue of $1.8B (-0.7%) in-line. Sees full-year EPS of $2.66-$2.74 vs. $2.52. (PR) Guess? (GES): Q4 EPS of $0.67 beats by $0.16. Revenue of $561M (+9%) vs. $529M. Sees Q1 EPS of $0.26-0.30 vs. $0.34 and revenue of $425-445M vs. $481M. (PR) Today's Markets Asia markets closed with another day of solid gains, despite correcting after a bullish open. Nikkei +0.29% to 7,972. Hang Seng +1.86% to 13,117. Shanghai +0.24% to 2,224. BSE +1.27% to 8,977. Stocks are higher in Europe, with the exception of the U.K. which was spooked by worse than expected joblessness and talk the IMF will revise its U.K. growth forecast lower. London -0.3%. Paris +0.7%. Frankfurt +1.2%. Stock futures are lower after an unremarkable overnight session. Dow -0.6% to 7309. S&P -0.6% at 771. Nasdaq -0.3%. Crude -1.4% to $8.40. Gold -0.6% to $911. Wednesday's Economic Calendar 7:00 MBA Mortgage Applications 8:30 Consumer Price Index 10:00 AIG's Liddy testifies before Congress 10:30 EIA Petroleum Status 2:15 PM FOMC Decision Notable earnings before Wednesday's open: GIS Notable earnings after Wednesday's close: CTAS, NKE, ORCL Seeking Alpha editor Eli Hoffmann contributed to this post.

  • Will Google's Android Play DOS to Apple's iPhone?

    Daniel Eran Dilger Today's broad array of smartphone operating system contenders are offering lots of potential answers to a problem that only requires one. It appears the market has two options ahead: either pool generic hardware makers behind a single operating system and deliver a smartphone marketplace that resembles the Windows PC market, or watch them fall to a dominant leader and have a smartphone market that resembles Apple's iPod ecosystem. This decision isn't going to be made by a class of intellectual elite, or by government mandate. it's going to be made by the market itself. Here are the factors that will influence the outcome, either marginalizing Apple's iPhone into a niche as the company has twice experienced previously at the hands of DOS in 1981 and Windows in 1991, or positioning it as the dominant leader as Apple has achieved for itself with the iPod since 2001. The third segment in this series looks at Google's Android and the Open Handset Alliance as a possible “DOS-attack” against Apple's iPhone. Subsequent segments will look at Nokia's newly opened Symbian and other mobile contenders challenging the iPhone. Will the iPhone Meet its Match from a Modern Day DOS? Will Windows Mobile Play DOS to Apple’s iPhone? Will Google's Android Play DOS to Apple's iPhone? Will Symbian Play DOS to Apple's iPhone? Google Acquires Android. In 2005, Google purchased a startup named Android, which had been in business for nearly two years. The secretive startup was known only to be working on software for mobile phones. It was being run by a who's who of mobile industry veterans, including Andy Rubin, the founder of Danger. Rubin had earlier worked at WebTV along with Chris White and Andy McFadden, both of whom had also joined Android. Richard Miner of Orange and Nick Sears of Tmobile also brought their mobile provider experience to Android. At the time of the acquisition, Google didn't announce any plans for Android and instead only told BusinessWeek, “We acquired Android because of the talented engineers and great technology. We're thrilled to have them here.” It appeared that Google was only going to be expanding its search services for mobile phone users, along the lines of the Google SMS answer system it had recently released. Google Buys Android for Its Mobile Arsenal - BusinessWeek Windows XP Media Center Edition vs Apple TV: The Fall of WebTV The GPhone Myth. As reports began to leak out about talks between Google and hardware makers throughout 2007, rumors began to fly about “the GPhone,” a competitive offering that was supposed to take on the iPhone. Some phone enthusiasts hoped Google would jump in to rescue the struggling OpenMoko project and turn it into a viable project that could attack Apple's new smartphone. In October 2007, I printed the Great Google GPhone Myth, taking apart the idea that Google would be directly competing against the iPhone, and describing that Google was really working on a free alternative to Windows Mobile as a conduit for getting its search and related services on a broader variety of mobiles. Google's services were already on the iPhone. In November, Google played its hand: it had organized a consortium of companies called the Open Handset Alliance to develop open standards for mobiles. The first product from the group would be Android, a mobile operating system built on the Linux kernel. Google wasn't getting into the phone handset business at all; it was only making sure that its mobile search products would not risk being marginalized by the threat of Windows Mobile on phones in the same way Microsoft had been working to leverage its PC monopoly to push Google search off the Windows desktop. The Great Google gPhone Myth Introducing Android: Leader of Linux. Two weeks later, Google released an early version of the Android software. On top of a Linux kernel, Android uses a specialized version of a Java Virtual Machine that takes Java language code and turns it into what Google calls “Dalvik bytecode” rather than Java bytecode as a standard JVM would. This allows Google to leverage existing and familiar Java language tools without paying Sun for a Java license. Like Mac OS X and its fraternal iPhone OS, Android includes a variety of open source libraries, including SQLite and WebKit. On top of that, Google developed a series of frameworks that handle the tasks Cocoa Touch does on the iPhone. Android also bundles a set of applications. While Apple adapted its existing Mac OS X to work in a mobile environment to create the iPhone OS, Android is more like a customized Java environment running on a specialized mobile Linux variant: elements of maturity in an otherwise experimental new platform. What is Android? -Google Android was by no means the first mobile OS using Linux. Both Palm and its amputated ACCESS software arm have Linux-based mobile platforms. Nokia has Maemo, which it uses in its Internet Tablets, and also recently acquired Trolltech and its Qtopia mobile Linux platform. Motorola has teamed up with MontaVista Software to use its Mobilinux. Intel created the Moblin project for mobile Linux, aimed at Internet devices. Google's OHA also isn't the first consortium to attempt to standardize a mobile Linux platform. The OSDL started the Mobile Linux Initiative to define requirements for hardware; the Consumer Electronics Linux Forum (CELF) then worked to define various phone profiles aimed at the Japanese market; the Linux Phone Standard (LiPS) Forum tried to do the same thing in Europe. In 2007, LiPS was folded into the new LiMo Foundation, along with the OSDL. All of these committees have had some overlap and some complementary features. Several of Google's OHA partners are also LiMo members, including NTT DoCoMo, Wind River, and Motorola. So why didn't Google just join LiMo? “LiMo, very candidly, wasn't moving fast enough,” OHA board member John Bruggeman told CNET. Google hopes to herd the Linux cats into a progressive, structured platform that can battle against Symbian and Windows Mobile to succeed as the new DOS of smartphones. Will Google fracture or unify mobile Linux? The Presumption of the Necessity of DOS. The previous segment examining Windows Mobile pointed out how the PC industry as a whole assumed that Microsoft's desktop Windows monopoly would easily take over dominance in the MP3 player market, pushing Apple into a niche position. This was expected because DOS had pushed Apple's early computers into a reduced role starting in 1981, and Microsoft had repeated this again in 1991 when the DOS world migrated to Windows, effectively pruning Apple's Macintosh into a Bonsai platform. The inability of one company to dominate any product category has been frequently repeated by PC industry pundits as a given, despite the fact that history is full of examples of this happening. Sony dominated personal music players for two decades under the Walkman brand even while equally large competitors tried to push it from this position; Nintendo has similarly owned handheld gaming despite ill-fated efforts to grab a piece of its pie by products running a generic platform such as Microsoft's WinCE (Gizmondo), Linux (GP32), and Symbian (N-Gage). In fact, outside of the Windows/DOS PC, there are actually few examples of a generic platform taking over an industry. Nearly every other consumer-facing product uses proprietary platforms: car makers, stereo equipment, appliances and so on typically all use designs custom to their maker. The paradox of the Windows PC market has been that Microsoft's broadly licensed software supposedly saves hardware makers from investing in software development while ensuring compatibility, when in reality it adds significant costs to PC makers while limiting their ability to differentiate themselves. That explains why PC makers have been perpetually merging together and going out of business while Microosft has rolled in money over the last two decades. Parallel efforts to copy Microsoft in broadly licensing an operating system have regularly failed: IBM's OS/2, Apple's Mac OS, Palm's PDA OS, even Microsoft's own efforts to duplicate Windows dominance in other markets, from copy machines to PDAs to smartphones to SPOT watches to music players. The closest copy may be Symbian, but its customers are partners, not simply consumers of a generic third party's operating system as Windows licensees are. That indicates it is not necessary to duplicate the dominance exercised by Microsoft over the PC industry in the smartphone market. Google's Android and Symbian exist more as technology sharing pacts among manufacturers, but both aspire to take Microsoft's DOS role among smartphones. However, the idea that Apple's iPhone must be dethroned by a modern-day DOS, whether Windows Mobile, Android, or Symbian, is not just debatable, but does not sync with the reality of more recent events. Apple's recent history of the iPod further refutes the idea that a software analog to Microsoft is needed. The iPod Emergence: Apple & Pixo vs IBM & Microsoft. Apple's iPod in 2001 made no effort to clone the DOS business model; it actually did the opposite. When Apple entered the market, there were a number of existing MP3 devices using custom software, hardware designs, and DRM codecs. The iPod used off the shelf components to deliver a custom MP3 player using third party software, but Apple also added its own technologies: easy to use sync with iTunes, a fast Firewire interface that made uploading music far faster than the prevailing USB 1.0, and an attractive industrial design. With the iPod, Apple played the role of IBM in 1981, using Pixo's embedded operating system to enter the market quickly, just as IBM had used DOS. The difference was that Apple didn't direct any market attention toward Pixo and added a lot of value on top of that core embedded OS. A modern day Compaq couldn't simply clone the hardware and license Pixo to run on it in order to compete against the iPod, because the iPod was much more than just generic hardware running Pixo software. As the iPod developed, Pixo's role diminished and was eventually displaced. Just like IBM, Apple jumped into a new market just as demand was beginning to explode. Apple made MP3 players far more attractive to a general audience by delivering greater playback capacity than most entry level devices offered, along with an ease of use that encouraged buyers to jump in at the higher end of the market. That left Apple with not only the lion's share of the market, but also by far the most profitable segments of the market. Two decades prior, IBM badly fumbled its play with the early PC and ended up irrelevant in the PC world by the late 80s, sideswiped by Microsoft's DOS and the cloners who were licensing it in parallel, notably Compaq and later HP and Dell. Steve Jobs had witnessed that happen, and was determined to not let it happen again to Apple. Rather than being manipulated by a software middleware vendor as IBM had, Apple worked to incrementally develop the iPod market itself. After consuming the hard drive-based player market, Apple took on the Flash RAM-based market with a tiny hard drive system used in the iPod Mini, and followed up with Flash-based devices of its own in the Nano and Shuffle. This allowed Apple to progressively serve an increasingly wider market, incrementally growing upon an established foundation. With the iPod, Apple became, in effect, an IBM with its own internal Microsoft. Microsoft's Failure Despite Features. In contrast, Microsoft entered the music player market by promoting music player hardware reference designs around WinCE. However, it was unable to ship a finished design until the iPod had become firmly established around 2005. Later branded as PlaysForSure, the devices were sold by various hardware makers and all purported to support the same DRM and the same music subscription services while also offering a broader array of hardware that presented video before the iPod did, supported wireless before the iPod, and so on. Despite these unique features, all of those PFS designs still failed. Microsoft blamed the failure of PFS upon its music store and hardware partners and decided to take Apple on itself in 2006. It relaunched a Toshiba PFS player as its own device under the Zune brand, adding WiFi music sharing features and a larger display than the current Pods had. It failed dramatically as well. Did Microsoft's attempts to float a new DOS among music players fail because of Apple's success, or due to Microsoft's own problems? The failure of the Zune, which followed the iPod model rather than the DOS model, seems to suggest that Microsoft itself was to blame. Consider too that Microsoft's Windows Mobile phones, which use the same underlying operating system as its failed PlaysForSure music players and the Zune, had similarly flopped even before Apple could release a charismatic phone equivalent to the iPod. Of course, when the iPhone was released, it hit Windows Mobile hardest. The iPhone made Windows Mobile Smartphones look ridiculous and underpowered, and made Windows Mobile Pocket PC phones look clumsy and awkward, despite the fact that they both supported a variety of features the iPhone didn't, including the ability to edit documents, capture video, send MMS, and so on. Simply adding on features did not enable Microsoft to compete against Apple. The only conclusion that can be drawn from all this is that competing against Apple requires more than just having a feature arsenal. Microsoft's failures in themselves do not necessarily mean that Google's Android will fail in its attempts to float its own smartphone platform. Why Microsoft’s Zune is Still Failing Microsoft’s Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone Will Google Succeed where Microsoft Failed? Microsoft's demonstrated inability to successfully enter consumer markets for MP3 players and smartphones has given observers little faith that the company will somehow turn things around in late 2009 when its next generation of devices are expected to be released. However, prior to that the first fruits of Google's efforts to build its own smartphone operating environment will arrive. Will Google's Android take over Microsoft's crown as the “DOS vendor” among smartphones? Supporters of Google's Android project point to some parallels between Android for smartphones and Windows on the PC: Android will allow hardware makers to differentiate in ways that can offer features Apple can't (or doesn't want to); it should allow software developers to offer features Apple does not allow on the iPhone; it embraces open, hobbyist experimentation in ways that Apple currently isn't; and it opens the potential for content providers that Apple is not interested in allowing. Openness is Android's key competitive feature. Will all this openness allow Google to unseat the iPhone to become the primary platform developers want to participate in, and subsequently soak up the market for third party hardware makers that Windows Mobile serves? While Google currently has no market share due to the fact that no Android phones have yet shipped, it does have broad vocal support from a variety of the same kinds of hardware manufacturers that supported DOS and Windows and helped to make those platforms successful in the desktop PC market. HTC and Android. The first Android phone is expected to be the HTC Dream; Taiwan's HTC (High Tech Computer) also manufactures Palm's Treo Pro phone as well as many of the most visible Windows Mobile devices. In addition to models produced under its own name, HTC also sells Windows Mobile devices under the Dopod brand, as well as no-name phones branded by providers, such as AT&T, Orange, Sprint, T-Mobile, Verizon Wireless, Vodafone, and others. HTC will also be building the XPERIA X1 Windows Mobile phone for Sony Ericsson. HTC was quick to throw its support behind Android despite its long term alliance with Windows Mobile. Why would it so enthusiastically support an unproven platform from a company that has no experience in consumer hardware platforms? One can only assume that HTC is not happy with the current state of Windows Mobile, and desperately wants another “DOS” to succeed where Microsoft's has so spectacularly failed. As an Original Design Manufacturer for Palm, HTC watched as Palm adopted Windows Mobile in place of the Palm OS and subsequently fell even deeper into crisis. Palm's only successful phone since has been its Palm OS-based Centro. HTC undoubtedly sees Android as its ticket to becoming the next Dell, but without a similar dependance upon Microsoft. Android for mobile phones is essentially playing the role of Linux for PCs, except that it has the backing of a major company behind it. Can Android Take on the iPhone with Openness as its Feature? As great as this sounds, it's important to consider that Linux on the desktop has made no significant progress in eating into Windows dominance after a decade of trying. Being open, free, flexible, and decentralized hasn't been enough of an advantage to get consumers to migrate from Windows to Linux in any fraction of significance. Similarly, in the music business, Linux-based MP3 players have had no impact on the iPod, despite offering more features, flexibility, support for additional codecs, and so on. In the mobile phone area, Linux enjoys a sizable portion of the smartphone market, but this is almost entirely due to phones sold by Motorola in China, where the advantages of Linux' openness are void. Motorola's Linux phones offer nothing to users in terms of openness or flexibility, and are really no different in terms of features than other appliance 'feature phones' based upon closed operating systems. And again, a key problem with assaulting Apple in a feature war is that neither the iPod nor the iPhone became popular by being “highly featured.” They both delivered perhaps 80% of the functionality found in all other devices in the market. Rather than trying to match every feature and cater to every niche as Microsoft had with Windows Mobile, Apple's devices did a few things very well at launch, and incrementally developed into full featured devices that still lack some of the more unique features of their competitors. Further, in terms of openness, the demographic that embraces Linux' characteristic freedoms is not the same as the demographic that buys smartphones in quantity and then pays for data service. This is a critical fact to consider because a big part of the iPhone's success stems from the fact that it is being pushed by mobile providers who want to capture the cream of the market willing to pay a premium for data services. The Frankenphone. Combining the fractured aesthetic of HTC's Windows Mobile phone hardware with Android's software, based upon Linux' perpetually unfinished DIY openness and Google's Java-like development platform, will not result in a product similar to the iPhone. Instead, it will look a lot like phones that have already failed in the market. Apple's advantage comes from slick hardware designs with a close attention to detail, combined with software that purposely does less so that it can do what it does better. Even Apple's own conservative attempts to broaden its software capabilities with iPhone 2.0 have resulted in instability problems that can be blamed upon both Apple's early releases of its phone operating system and software from inexperienced third party developers new to the platform. Would the current frustrations with iPhone 2.0 be somehow mitigated by additional openness that also embraced all kinds of variables from different hardware makers with less quality control than Apple, a loose committee of additional cooks working to serve up operating system features targeted at every possible conceived need, and a wider third party software group with fewer constraints on illegal behaviors? The Failure of Open. While it is politically unpopular to criticize the well meaning efforts of open source contributors, the failure of Linux on the desktop, the failure of the vaporware Indrema game console, and the failure of the OpenMoko project to deliver a workable phone within a year of its deadline all underline the serious problems open development faces in the world of consumer oriented devices. Open has simply failed to deliver on its promises in the world of consumer hardware. OpenMoko was supposed to release its first mobile phone to consumers for $250 several months in advance of the iPhone. When the iPhone shipped, the group then announced new plans to get its phone out by the end of 2007. Instead, this spring the group announced new plans to move to an entirely different development platform, and ship its phone mid year for $400 with limited functionality and incomplete software outside of basic GSM phone features. Linux's notable successes, from Motorola's Linux phones to the Tivo DVR to Linksys Routers, have often come without any associated openness or freedom, and were instead delivered simply to provide their manufacturer with a free kernel to build upon. This indicates that while Linux may find its way into an increasing number of smartphones, it will likely not be accompanied by the glorious freedom of an open development environment Google has said it would offer with Android. Apple iPhone vs the FIC Neo1973 OpenMoko Linux Smartphone Can Google Succeed Where Open Has Previously Failed? Despite “openness” being Android's strongest competitive feature compared to Apple's iPhone, Google recently revealed that its wide-open development model is intentionally gravitating towards a closed association of top tier partners due to practical considerations. In July, Google accidentally sent out a notice that revealed that it had been seeding private SDK updates to only a subset of its contributors, angering those who believed that Android would be as open as Linux on the desktop or the OpenMoko project. Further, Google has restricted initial development to higher level APIs just as Apple did, further indicating that Google itself realizes that being wildly open to impress a minority of hobbyists will not result in the commercial success of its new platform. That serves to neuter Android's primary advantage over the iPhone. Without delivering on the premise of being wide open, Android is really just a less mature set of Java libraries used to create a specialized binary that runs on a Linux foundation. Unlike Apple's iPhone, Android phones won't have a slick user interface developed by professional artists, nor the iPhone's legacy of mature software development frameworks crafted over the last thirty years, nor the iPhone's tightly integrated hardware with award winning industrial design, nor its marketing power tied into the iPod and Apple's retail stores. Android won't be an open iPhone, it will only be a Windows Mobile phone with a better kernel that runs specialized Java software instead of Win32 or .NET code. Don't expect consumers to be impressed by that. The Biggest Missing Feature. There is one remaining factor that strangles to death any last remaining hope that Android might assassinate the iPhone and assume the crown of the “DOS of smartphones.” That is: Android delivers zero price advantage to consumers. In 1981 and 1991, consumers who wanted Apple computers faced the sticker shock of a somewhat arrogant price tag. Apple sold its computers, as it still does, at the higher end of the market, but there was simply far more range in prices available. In 1981, that meant the Apple II was $2600 and the new Apple III was $3500, even before you added a monitor. On the low end, Commodore sold its far less powerful, but “still a computer” Vic-20 for $300, while IBM entered the market with the IBM PC at $3000. Over the next few years, Apple focused on delivering additional sophistication at the same price, releasing the $10,000 Lisa and then the $2,500 Macintosh. IBM continued selling PCs in the same $3,000 to $10,000 range, but other DOS PC vendors began selling machines at prices that ranged as low as $1500. That left Apple with a roughly $1000 price premium over low end PCs. The products weren't really comparable, but consumers only saw the huge price difference. In 1991, Apple was still selling moderate to high-end Macintoshes for $3,800 to $10,000; the crippled Mac LC was $2500, and obsolete-at-birth Mac Classic ranged from $999 to $1500. Windows allowed PC makers to ship a functional $1500 PC and claim a rough approximation to Apple's $2500 entry level system, maintaining that apparent $1000 price premium. Today, pundits are lucky to find a Dell or HP system that is even a couple hundred dollars less than a comparable Mac. However, in the smartphone business, the iPhone 3G is now the same price, if not less, than generic competing phones on the market. Even more significant is the fact that the price of the phone hardware is nearly nothing compared to the cost of the service plan. This fact simply eases any price premium that could cause buyers to flock to a smartphone running a generic operating system over buying the iPhone 3G, regardless of whether it runs Windows Mobile or Android. 1990-1995: Planting Software Seeds Android Partners Have Already Failed. That same pricing principle similarly prevented buyers from considering many of the alternatives to the iPod. While Apple's original iPod models were more expensive than many of the first MP3 players on the market, they were price competitive with models offering similar features. By 2004, it was Apple who was undercutting MP3 competitors on price. Microsoft offered zero price advantage when it began selling the Zune, a major factor in its failure, but Microsoft simply couldn't out-price the iPod; it was already losing money offering the Zune at the same price as the iPod. Apple now has tremendous market power in buying RAM and other components that will prevent any competitors from being able to offer a huge discount over the iPhone's $199 price tag. Even if competitors were to give their phones away, they would only offer a $200 discount to users who would then still need to pay the same mobile fees to use the phone. Android's other partners, including Samsung and LG, have already failed to capture any significant market share in the music player market. Are they going to maintain their position as smartphone makers now that they face similar competition from Apple, its iPod ecosystem, its iTunes Music and Apps Store, Apple's retail store experience, and other factors that are pushing the iPhone? If they can, it is not obvious how partnering with Android will help. Other Problems for Android. Android was announced in early November 2007 and was followed with an early preview SDK within a couple weeks, a month ahead of Apple's initial announcement of the iPhone 2.0 SDK. However, between March and July 2008, Apple delivered nine progressive releases of its SDK, opened its App Store, and sold 60 million apps, raising $30 million to support iPhone software development in just the first month. It has since released three more SDK updates to developers related to iPhone 2.1, which is expected next month. Android just published its first open SDK beta update earlier this week, warning developers that “applications developed with it may not quite be compatible with devices running the final Android 1.0.” Additionally, Android still has no phones available. By the time the HTC Dream is expected to launch, Apple will have an installed base of around ten million iPhone (and iPod touch) users supporting software development through iTunes. The business model for selling Android apps is no better than that for selling jailbreak iPhone apps: there is no iTunes Apps Store to promote them, so users will have to track them down on their own. Android developers also have no real freedom that jailbreak iPhone developers lack. The only difference is that there are ten million iPhones to sell jailbreak apps to, and currently zero Android phones. If selling a jailbreak iPhone app sounds like more trouble than its worth, imagine trying to sell Android apps to a non-existant audience. Now add the official iPhone App Store into the mix, where publicity, promotion and profits are booming. What platform is going to have the most applications? How many users will flock to a smartphone platform with no apps? The wisdom of releasing a desirable phone and achieving a significant installed base before releasing an SDK makes a lot more sense in retrospect. Additionally, while Apple has a decade of experience in shipping regular updates to Mac OS X and its Xcode developer tools, Google has only shipped a random assortment of web-oriented SDKs (a number of which have been abandoned) as a tangent to its core business of selling advertisements. When the Android SDK 1.0 is finished later this year, developers will not only lack an installed base to sell their apps to, but will also have no high profile market for selling their apps in, and subsequently no financial incentive to develop applications that add value to the Android platform, just like Linux on the PC desktop. Around the same time, possibly within the next month, Apple will be shipping its second major OS release: iPhone 2.1. Apple will also be upgrading its entire user base to the new software so that developers will have a cohesive platform to target. This mirrors the efforts Apple has taken to upgrade its Mac OS X users to the same reference release. Mobile developers will be seeing money pouring in via iTunes while crickets chirp in the Android section of various mobile online stores. Apple’s iPhone Vs. Other Mobile Hardware Makers: 5 Revenue Engines Same Same, But Different: DOS Model Problems. Android developers will also have a series of other problems to manage. Like Windows Mobile, Android is intended to support everything, from BlackBerry-style keypad phones with a small touchscreen to the simple Windows Mobile Smartphone form factor lacking a touch screen to iPhone-like full size touch screens. Also like Windows Mobile, Android phone makers will have the option to leave off Bluetooth, WiFi, GPS location services, graphics hardware acceleration, and so on. Each Android phone will also have unique camera hardware, support for different video and audio codecs, and varied support for other differentiating proprietary services demanded by mobile operators. This will force developers to to make complex decisions regarding the lowest common denominator they choose to support. So while the iPhone will have a cohesive feature set, a managed software environment, and a functional market, Android will be a loose federation of hardware makers selling the same random features found on Windows Mobile today, with a chaotic development environment that lacks any central market for users or developers. And it will be run as an experiment by a company with no experience in consumer hardware or platform development. The Missing Tap. One specific example of the “DOS model problem” is that Android currently does not support multitouch. It's not touched on in the API, and Google quietly tap dances around its omission. Why no multitouch? Because multitouch screens are expensive, and most OHA hardware members are more interested in making a profit in a competitive phone market rather than impressing consumers as Apple did with the iPhone. Most existing smartphones, even those trying to directly rival the iPhone, use a stylus driven, pressure sensitive tap screen or a simpler, cheaper touch technology that lacks support for sensing multitouch. The iPhone's screen can actually sense up to five fingers at once, but the primary feature multitouch offers on the iPhone is the two fingered tapping and the pinching effects everyone associates with it. Android could certainly support multitouch if there were a demand for it, but that's the point: Google knows that its hardware partners are cheap and unlikely to put out hardware that actually competes with the iPhone. Instead of using expensive technologies that deliver clever yet largely invisible functionality, OHA members, just like PC makers, are far more likely to add flashy, impractical gadgety fluff that's cheap to tack on, such as slide out keyboards, neon tubes, and scratch and sniff stickers. That's how you impress gullible nerds on the cheap. Google itself is blowing smoke and erecting mirrors to distract from the reality that it being a “DOS vendor” means supporting bargain basement hardware from penny pinching duplicators. Android has been demonstrating some “wow” features such as a Street Maps app that pans around based on an internal compass in the demonstration phone. The problem is that that kind of thing only makes for a fun demo. Nobody needs to twirl around their phone in the air to see a view of the other side of the street, but everyone who has used an iPhone will wonder why they can't pinch to zoom out. Even worse, most Android phones aren't going to have a compass built into them, so Google is demonstrating features most Android users won't be able to use. That Sounds Like Microsoft… Google's design decisions are beginning to look a lot like Windows Vista; rather than actually working to make laptops boot faster, Microsoft came up with the idea of adding a small screen to the back of Vista laptops so users could check their email without having to wake the system up. But this was a stupid idea for a number of reasons, the most obvious being that most users just want a laptop that boots up quickly. Few laptops got the mini screen, but every user who tries Vista on their laptop will wonder why it doesn't boot up as fast as Mac OS X Leopard. In the same way, Google is advertising features for Android that most users won't ever see in their actual phones while ignoring things people will expect based on their exposure to the iPhone. Android is simply selecting the wrong features. Android will offer the advantages of supporting MMS, recording video, and the list of other features Windows Mobile already supplies. Those features didn't stop Apple from firing past Microsoft in the smartphone arena however, just as the Zune's highly touted WiFi and screen didn't phase iPod buyers. Incidentally, just months after the Zune, Apple had not only demonstrated a larger display but a higher definition multitouch screen, and not only WiFi, but functional WiFi that could be used to browse the web or check email. This suggests that Apple, with its faster release schedule, won't stay behind any of the leading features potentially offered by Android for very long. Android partners, however, will find it as difficult to catch up with Apple's unique features, just as Microsoft has been stymied to keep up with Mac OS X, the iPod, and the iPhone. The underlying reason: both Google and Microosft are tasked with maintaing support for a huge variety of hardware options demanded by all their partners. Apple has the unique circumstances to do only what it needs to do itself. Android in Windows Mobile's Shoes. Like Windows Mobile, Android faces a difficult market. In the US, it competes against the popular BlackBerry in corporate markets and the iPhone among consumers. Worldwide, it competes against entrenched market leader Nokia. The difference is that Google, unlike Microsoft, has no in. Windows Mobile was adopted by Windows-bound IT shops despite its weaknesses. Nobody has any preexisting reason to try an Android phone apart from hobbyists and open software enthusiasts, a demographic that has done little to move Linux on the PC desktop. Google also lacks Microsoft's installed base; it's starting from zero. The smartphone industry initially doubted Apple's chances of making much progress with the iPhone, despite the company having the Mac platform, the iPod, retail stores, platform development experience, marketing savvy, industrial design prowess, and so on. Google doesn't have any of those things. Mobile Providers vs Android. Apple also started with an exclusive partnership with AT&T, a three legged race that demanded effort from both. Google is hoping that hardware makers handle the hardware details and that mobile providers will be excited to sell its Android phones. While hardware makers such as HTC clearly appreciate having found a free alternative to Windows Mobile, it's not obvious why providers would be excited about Android, as it promises an openness that most mobile providers strongly oppose. AT&T took a big risk in getting behind the iPhone, as the phone encouraged users to use email rather than fee-based SMS and MMS, it supported WiFi for data access, and it bypassed AT&T's MEdia Net services to plug into iTunes instead. Verizon refused to parter with Apple and grant it those kinds of concessions. Is AT&T going to take a similar risk to partner with a phone that is not exclusive to it, and is Verizon now going to open its arms to support phones that do not exclusively support BREW, VCast and its other proprietary services? While Android may well eat into Microsoft's Windows Mobile business by stealing away its hardware makers, it seems unlikely that Android will ever serve as more than free alternative to Windows Mobile in a market where Windows Mobile is increasingly irrelevant. Android may have the dubious distinction of swallowing Microsoft's mobile business the same way Microsoft ate up the Palm OS, but even if it accomplishes that goal, Google will likely find itself unsustainably hungry immediately afterward. It will also find itself swimming in a shark tank of hungry rivals, including Nokia's Symbian, RIM's BlackBerry, and Apple's iPhone. Symbian is the final generic platform vying for the opportunity to play DOS in the smartphone market. The next article will examine Nokia's chances in its bid to match Microsoft's PC dominance in the mobile market while setting out in a new venture to copy Android's open software model. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!

  • Wall Street Breakfast: Must-Know News

    BP: Asset sales, exec departures and more. BP (BP) is moving forward quickly with asset sales, announcing a $7B deal to sell Apache (APA) upstream assets in the U.S., Canada and Egypt. The company also plans to sell its gas fields and pipeline in Vietnam plus assets and exploration licenses in Pakistan; the two countries comprise only about 2% of BP's total natural-gas output, but could raise $1.7B through a sale. The sales, all on land, reflect BP's desire to get more, not less, involved in risky but lucrative deepwater drilling. Reports have been circulating that embattled CEO Tony Hayward could resign as soon as next month, which could also lift the stock, though the company denied Hayward is leaving. Meanwhile, a government probe on the causes of the rig disaster has begun to focus on Transocean (RIG) employees onboard at the time. Premarket: BP +3.9%, RIG +0.9% (7:00 ET). Icahn launches new hostile bid for Lions Gate. Carl Icahn launched a new hostile bid for Lions Gate (LGF), offering $6.50/share this time rather than his previous offer of $7.00/share. Icahn has already built his stake up to 37.9% and is still hoping to replace the Lions Gate board with his own slate of nominees. Lions Gate responded that it will review the bid before making a recommendation to shareholders, but also announced it had completed a deal to convert $100M worth of debt to equity, effectively reducing Icahn's stake to 33.5%. Sara Lee may trade bread for dough. Sara Lee (SLE) is thinking about selling its struggling North American bakery business and has selectively reached out to potential buyers, said sources. A sale of the unit could bring in at least $1B. A Sara Lee spokesman declined to comment, other than to say the company sees "tremendous potential" in its bakery business and is focused on running it; however, the bakery business hasn't had a permanent head for a few months, and a sale could be slowed by volatile commodity costs and wariness over competition from local bakeries and in-house supermarket offerings. MUFG hungry for U.S. buys. Mitsubishi UFJ Financial Group (MTU), Japan's largest bank by assets, confirmed it's looking for new acquisitions in the U.S. as it faces weakening growth prospects domestically. MUFG said a midsize bank on the West Coast or in Texas or Arizona would be an ideal target, though purchasing several small banks is an option as well. Taxpayers sink another $700B of aid into financial system. Taxpayer support for the financial system increased by $700B over the past year, bringing the total to around $3.7T, said TARP inspector general Neil Barofsky in a quarterly report to Congress. Most of the increase was due to government pledges to supply capital to Fannie Mae (FNM) and Freddie Mac (FRE) and to guarantee more mortgages to support the housing market. Barofsky also criticized the Treasury's housing relief efforts, pointing to "anemic" participation numbers that have failed to "put an appreciable dent in foreclosure filings." Separately, the Treasury said it plans to end a long-delayed and never-used $30B TARP program designed to boost small-business lending. (Closer look: What to Do With Fannie and Freddie?) Judge approves Goldman-SEC settlement. A federal judge approved Goldman Sachs' (GS) $550M settlement with the SEC, in a ruling that was widely expected but still closely watched. For its part, the SEC said the Goldman case was just the tip of the iceberg, and many more crisis-related probes are being pursued. Apple's phenomenal quarter. Handily beating earnings estimates (see below), Apple (AAPL) said it had experienced "a phenomenal quarter," with "the most successful product launch in Apple's history with iPhone 4." Among its other highlights: Mac unit sales +33%; iPhone unit sales +61% over the year-ago quarter; 3.27M iPads sold in its first quarter on the market. Apple also forecast higher-than-expected Q4 sales. As AllThingsD noted, "you can almost see concerns over antenna-gate sublimating before your very eyes." (Closer look: One stock only? It's gotta be Apple.) Earnings: Wednesday Before Open Check Point Software (CHKP): Q2 EPS of $0.58 beats by $0.02. Revenue of $261.1M (+16.8%) vs. $253.6M. (PR) Comerica (CMA): Q2 EPS of $0.39 beats by $0.16. (PR) EnCana (ECA): Q2 EPS of $0.11 misses by $0.11. Revenue of $1.5B (-40%) vs. $1.8B. (PR) Host Hotels & Resorts, Inc. (HST): Q2 EPS of $0.23 beats by $0.01. Revenue of $1.11B (+6%) vs. $1.07B. (PR) Textron (TXT): Q2 EPS of $0.29 beats by $0.20. Revenue of $2.7B (+3.7%) vs. $2.5B. (PR) Earnings: Tuesday After Close Allscripts-Misys Healthcare Solutions (MDRX): FQ4 EPS of $0.18 beats by $0.01. Revenue of $191M (+13.9%) vs. $185M. Shares -1.7% AH. (PR, earnings call transcript) Altera (ALTR): Q2 EPS of $0.58 beats by $0.05. Revenue of $469M (+68.1%) vs. $447M. Shares -0.1% AH. (PR, earnings call transcript) Apple (AAPL): FQ3 EPS of $3.51 beats by $0.40. Revenue of $15.7B (+61.3%) vs. $14.8B. Shares +3.4% AH. (PR, earnings call transcript) Boston Scientific (BSX): Q2 EPS of $0.12 may not be comparable to consensus of $0.03. Revenue of $1.9B (-7%) in-line. Shares +1.3% AH. (PR) Cintas (CTAS): FQ4 EPS of $0.35 beats by $0.02. Revenue of $909M (+3.5%) vs. $884M. (PR, earnings call transcript) Fidelity National Information Services (FIS): Q2 EPS of $0.46 in-line. Revenue of $1.3B (+2.1%) in-line. Shares -1.4% AH. (PR, earnings call transcript) Fulton Financial (FULT): Q2 EPS of $0.14 misses by $0.01. (PR) Gilead Sciences (GILD): Q2 EPS of $0.85 misses by $0.02. Revenue of $1.9B (+17%) vs. $2B. Shares -1.8% AH. (PR, earnings call transcript) Juniper Networks (JNPR): Q2 EPS of $0.30 beats by $0.01. Revenue of $978M (+24.4%) vs. $954M. Shares -2.6% AH. (PR) Linear Technology (LLTC): Q2 EPS of $0.52 may not be comparable to consensus of $0.51. Revenue of $366M (+17.6%) vs. $339M. Shares +0.1% AH. (PR) Seagate Technology (STX): FQ4 EPS of $0.71 misses by $0.06. Revenue of $2.7B (+12.9%) vs. $2.9B. Shares -2.9% AH. (PR, earnings call transcript) SLM (SLM): Q2 EPS of $0.39 beats by $0.10. Shares +5.9% AH. (PR) Stryker (SYK): Q2 EPS of $0.80 in-line. Revenue of $1.8B (+7.6%) in-line. Shares -2.5% AH. (PR) Tempur-pedic International (TPX): Q2 EPS of $0.46 beats by $0.04. Revenue of $263M (+42.1%) vs. $248M. Shares +2.4% AH. (PR, earnings call transcript) VMware (VMW): Q2 EPS of $0.34 beats by $0.02. Revenue of $674M (+47.9%) vs. $656M. Shares +5.3% AH. (PR, earnings call transcript) Yahoo (YHOO): Q2 EPS of $0.15 beats by $0.01. Revenue of $1.1B (-0.07%) vs. $1.2B. Shares -6.1% AH. (PR, earnings call transcript) Today's Markets In Asia, Japan -0.2% to 9279. Hong Kong +1.1% to 20487. China +0.3% to 2535. India +0.6% to 17977. In Europe, at midday, London +1.6%. Paris +1.6%. Frankfurt +1.0%. Futures: Dow +0.1%. S&P +0.2%. Nasdaq +0.5%. Crude +0.5% to $77.94. Gold -0.1% to $1191. Wednesday's Economic Calendar 7:00 MBA Mortgage Applications 10:00 Hearing: 'Economy and Monetary Policy' 10:30 Hearing: TARP Update (SIGTARP Barofsky, COP's Warren) 10:30 EIA Petroleum Inventories 2:00 PM Bernanke: Semiannual Monetary Policy Report to Congress Notable earnings before Wednesday's open: ABT, AMB, APH, CHKP, CMA, CPX, DGX, ECA, EMC, ETN, FCX, GENZ, HCBK, HST, KO, LCC, MAN, MO, MS, MTB, NTRS, SWK, TXT, USB, UTX, WFC Notable earnings after Wednesday's close: ADS, AMLN, BIDU, CA, DOX, EBAY, FFIV, FNF, ISIL, NFLX, QCOM, RHI, SBUX, TEX, TSS, WDC, XLNX Seeking Alpha's Market Currents team contributed to this post.

  • Wall Street Breakfast: Must-Know News

    Celgene buys Abraxis. Celgene (CELG) agreed to buy Abraxis BioScience (ABII) in a cash-and-stock deal that values the firm at $2.9B. For Celgene, the purchase will provide access to Abraxis' oncology treatments, including Abraxane, for breast cancer patients. The deal is a 17% premium to Abraxis' closing price yesterday. Sanofi-Aventis picks up TargeGen. In another acquisition related to oncology treatments, Sanofi-Aventis (SNY) will buy closely-held TargeGen to add treatments for certain forms of leukemia and blood disorders. Sanofi will pay $75M at the deal's close, and additional payments at different stages of drug development. All told, Sanofi's payments could reach as much as $560M. Lawmakers scrap bank fee. Congressional Democrats abandoned a controversial proposal in the financial reform bill that would have levied a $19B tax on the country's largest banks and hedge funds. Several Republicans who are crucial to the bill's passage were uncomfortable with the tax, which was added to the bill at the last minute. Instead, lawmakers will offset the bill's costs by winding down TARP early and assessing a $5.7B fee on banks through the FDIC. Telefonica ups Vivo bid. Telefonica (TEF) raised its bid for Vivo (VIV) for the second time, ahead of Portugal Telecom's (PT) shareholder meeting today. The offer is now €7.15B ($8.7B) for PT's share of their Vivo joint venture, a 10% increase from Telefonica's earlier bid. It's unclear whether the sweetener will be enough to convince PT's core shareholders, who have opposed a deal thus far. Premarket: TEF +2.4%, PT +6.4% (7:00 ET). ECB tender demand lower than expected. The ECB's tender was met with low demand today, a positive reflection on banks' abilities to raise money from capital markets. A total of €131.93B ($160.92B) in funds were allotted with a 91-day maturity, at a fixed rate of 1%, well shy of forecasts that had run as high as €250B. The news helped lift European markets and the euro: London +0.8%, Paris +1%, Frankfurt +0.5%, Spain +2.1%, euro +0.8% vs. the dollar (6:00 ET). In the banking sector, premarket: UBS +2%, STD +4.5%, LYG +1.5%, CS +1.9%, BCS +4.8%, HBC +1.4%. AstraZeneca rises on court ruling. A U.S. District Judge ruled that a patent on the active ingredient in AstraZeneca's (AZN) Crestor cholesterol drug is valid and enforceable, and will remain in effect until 2016. Companies including Teva Pharmaceutical (TEVA) had challenged the patent as they sought to market copies of the medicine. Crestor was AstraZeneca's third-biggest seller last year, and the ruling helped AstraZeneca's shares gain nearly 9% in the closing minutes of yesterday's trading session. Anadarko approved BP well designs. Anadarko (APC), a minority partner on the leaking Gulf well, has largely tried to stay out of the spotlight, but media reports show that Anadarko approved several key aspects of BP's (BP) well designs, aspects that have been sharply criticized by lawmakers. Anadarko also signed off on significant operational decisions made by BP that could have been a factor in the explosion at the well. An Anadarko spokesman acknowledged that the company knew the "long string" design was being used and was aware of the number of centralizers, but said they "all met industry standards if executed correctly. The problems were caused by BP's execution of each of these.” Premarket: BP +6.3% (7:00 ET). AT&T loses iPhone exclusivity. Verizon Wireless (VZ) will start selling the iPhone (AAPL) in January, sources said, bringing an end to AT&T's exclusive hold on the smartphone in the U.S. Apple and Verizon declined to comment, but the media reports were enough to push AT&T's shares down nearly 2% yesterday. Research in Motion (RIMM) closed -4.4% yesterday as broader iPhone availability could hurt BlackBerry sales. Analysts suggest Verizon customers could buy as many as 3M iPhones per quarter. Qatar may take Greek bank stake. The Qatar Investment Authority is reportedly in talks to take a strategic stake in National Bank of Greece, Greece's largest lender. The sovereign wealth fund would likely buy a 5-7% stake, in line with its policy of buying less than 10% stakes in financial institutions. The purchase would be worth around €250M ($304M). Lehman creditors object to Ch. 11 plan. A group of Lehman Brothers (LEHMQ.PK) creditors, including pension fund Calpers and John Paulson's hedge fund, objected to the investment bank's bankruptcy plan. The group said the current plan will create conflicts among creditors, and treat some large bank creditors better than smaller, non-bank creditors. As a result, they claimed, there could be years of needless lawsuits. The group is asking for a July 14 hearing to consider its objections. Citi shares trigger circuit breaker. Citigroup (C) became the second stock to trigger the NYSE's new circuit breakers, after 8,820 of Citi's shares went through at $3.3174 at 1:03:51 p.m. - a 12.7% drop from the previous trade. After the halt, Citi's shares resumed trading normally, and closed -6.75% to $3.73. Foreclosures were one-third of Q1 home sales. Foreclosed properties accounted for 31% of the U.S. home sales in Q1, according to a new report by RealtyTrac, and the average price for foreclosed properties was 27% below that of regular sales. "In a normal market, only 1 to 2 percent of home sales are foreclosures," explained Rick Sharga, senior vice president at RealtyTrac, "so this is certainly a significant level." SEC settles with fired lawyer. The SEC agreed to pay $755,000 to an enforcement lawyer who claimed he was wrongfully terminated for aggressively pursuing an insider-trading case involving the hedge fund Pequot Capital Management. The lawyer, Gary Aguirre, had been at the agency for 11 months before he was fired. As part of the settlement, which is the equivalent of four years and 10 months' pay, Aguirre will drop two related claims against the SEC. Earnings: Tuesday After Close General Mills (GIS): FQ4 EPS of $0.41 in-line, guides FY11 EPS below consensus. Revenue of $3.57B (-2.1%) vs. $3.55B. Shares -3.8% AH. (PR, earnings call transcript) Today's Markets In Asia, Japan -2.0% to 9383. Hong Kong -0.6% to 20129. China -1.2% to 2398. India +0.9% to 17701. In Europe, at midday, London +0.7%. Paris +0.8%. Frankfurt +0.6%. Futures: Dow +0.5%. S&P +0.7%. Nasdaq +0.55%. Crude +0.8% to $76.54. Gold +0.1% to $1244.10. Wednesday's Economic Calendar 7:00 MBA Mortgage Applications 8:15 ADP Jobs Report 8:30 ISM New York Business Index 9:00 Fed's Duke: Credit Availability 9:00 Hearing: The Role of Derivatives in the Financial Crisis 9:45 Chicago PMI 10:30 EIA Petroleum Inventories 12:30 PM Fed's Lockhart: Economic Outlook Notable earnings before Wednesday's open: MON Notable earnings after Wednesday's close: APOL Seeking Alpha's Market Currents team contributed to this post.

  • Wall Street Breakfast: Must-Know News

    TARP watchdog to probe NY Fed over AIG. According to prepared testimony, TARP Special Inspector Neil Barofsky launched two new investigations into the New York Federal Reserve's actions during AIG's (AIG) bailout. Barofsky will look at whether there was any misconduct related to the public disclosure of the $62.1B paid to counterparties, and will also investigate the NY Fed's level of cooperation with a previous audit of the counterparty payments. In a further development, Geithner, who was head of the NY Fed at the time of AIG's bailout, has said counterparties weren't a consideration in structuring AIG's rescue. However, emails have subsequently shown that counterparties were indeed discussed, and buying out banks' AIG contracts was deemed better "from a financial-stability perspective" than other AIG rescue options being considered. AIG holds onto ILFC unit. AIG (AIG) has decided not to sell its aircraft-leasing unit, International Lease Finance Corp., after concluding the potential profit wouldn't justify the sale of such a key asset. AIG will now have to continue funding the unit's large balance sheet either through cash or new debt-financing while it also works to repay billions of dollars in federal bailout funds. It's unclear whether AIG's decision is connected to reports that Steven Udvar-Hazy, a founder and CEO of ILFC, is planning on leaving the company this week. Merger approved for Live Nation, Ticketmaster. The Justice Department approved the merger of Live Nation (LYV) and Ticketmaster (TKTM), on the condition that Ticketmaster sells its Paciolan unit to a unit of Comcast (CMCSA), that the combined company licenses its primary ticketing software and that it doesn't retaliate against venues that use another provider. The new Live Nation Entertainment will own more than 140 concert venues across the world, and will sell roughly 140M tickets per year to 22,000 concerts. The news sent shares climbing yesterday, with LYV closing up 14.7% and TKTM +15.8%. U.K. exits recession. The U.K. emerged from recession, barely, reporting GDP growth (.pdf) of 0.1% in Q4 2009 vs. the previous quarter. However, the growth rate was far less than the +0.4% expected and has raised concerns that the economy could fall back into contraction. Japan outlook turns negative. Earlier this morning, S&P revised its outlook on Japan to "negative" from "stable," potentially putting at risk Japan's AA long-term rating. The ratings firm cited concerns over "the Japanese government's diminishing economic policy flexibility" and over growing "fiscal and deflationary pressures." Japan's government debt is already among the highest for rated sovereigns, and S&P thinks the debt burden will continue to rise, peaking at 115% of GDP over the next few years. Moody's and Fitch Ratings kept their grades unchanged today, calling Japan's debt burden 'relatively moderate' and expressing confidence that "the market will finance this without putting big upward pressure on yields." Deal will create massive printer firm. Privately held Quad/Graphics Inc. is expected to buy Canadian rival World Color Press for $1.3-1.4B, creating the second-largest commercial printer in North America and posing a threat to industry giant R.R. Donnelley & Sons (RRD). Sources said the firms hope to close the deal this summer, and estimate combined 2010 earnings would be around $875M. Fed mulls new benchmark rate. Federal Reserve officials begin a two-day FOMC meeting today, and one of the items on the agenda is whether to adopt a new benchmark interest rate to replace the one that's been used for the last two decades. Instead of the federal funds rate, officials may choose to use the interest paid on excess bank reserves. Porsche sued by VW short sellers. Porsche is being sued by short sellers of Volkswagen (VLKAY.PK) stock. The group of short sellers claim that Porsche misled investors by denying it planned to acquire Volkswagen and by using manipulative trades to hide its stock positions, and then sent the stock rocketing as short sellers tried to cover their positions. The plaintiffs are seeking to recover more than $1B in damages. White House aims for stimulus, and reduced spending. Gearing up for the State of the Union address tomorrow, the White House released details on a series of initiatives meant to help middle-class families, including a set of tax credits and an automated-IRA system for workplaces. Obama also proposed a three-year freeze on domestic spending accounting for one-sixth of the federal budget. The freeze would save $250B by 2020. In addition, Democratic lawmakers are considering an $80B jobs-stimulus package that would provide tax credits to small and medium-sized businesses that hire workers. Apple's healthy earnings beat. Apple (AAPL) posted better-than-expected quarterly results (see details below), buoyed by strong sales across most of its product lines. However, Apple's results were also helped by new accounting rules allowing the firm to recognize all the revenue for iPhone sales at the time the devices are sold, rather than having to defer that revenue over 24 months. (Read Apple's earnings call transcript) GM's Whitacre chooses himself for CEO. Edward Whitacre, chairman and interim CEO of General Motors, said he will assume the position of permanent chief executive. Whitacre said staying on as CEO hadn't been his original intention but that the firm needs stability and he felt increasingly comfortable in the job. Separately, GM acknowledged it held advanced talks with Spyker Cars, but said it's still moving forward with plans to wind down its Saab unit. China raises select reserve ratios. Asian markets traded heavily down (see details below) following reports that China moved forward today with a planned increase in required reserves for some of its banks. Some banks were also told to suspend new lending for the rest of the month. In another move that surprised markets, the central bank left yields unchanged in its closely watched one-year bill sale, though analysts think this is just a pause in tightening policy and not a reversal. More cyber-attacks. A Chinese human-rights group said it and four other advocacy and news organizations were targeted in cyber-attacks over the weekend. The group said that the hackers were "of unknown origin" but hinted the Chinese government might be to blame. Goldman caps U.K. pay. Goldman Sachs (GS) is capping compensation at Ł1M ($1.6M) for the company's partners in London, in response to the one-time 50% bonus tax announced by U.K. Prime Minister Gordon Brown last month. Most other firms subject to the tax are spreading the penalty out across a wider swathe of employees, sometimes across their entire workforces. Home sales drop. Existing Home Sales fell 16.7% to 5.45M in December, vs. expectations of 5.78M. The supply of homes rose to 7.2 months. NAR chief economist Lawrence Yun said there were no surprises in the data, but noted that although "sales are on track to rise again in 2010," the labor market "remains a concern and could dampen the housing recovery – job creation is key to a continued recovery in the second half of the year.” Earnings: Tuesday Before Open Baker Hughes (BHI): Q4 EPS of $0.43 beats by $0.08. Revenue of $2.4B (-24%) vs. $2.3B. (PR) Corning (GLW): Q4 EPS of $0.44 beats by $0.02. Revenue of $1.5B (+41%) vs. $1.4B. (PR) DuPont (DD): Q4 EPS of $0.44 beats by $0.03. Revenue of $6.4B (+10%) vs. $6.1B. (PR) MGIC Investment (MTG): Q4 EPS of -$2.25 beats by $1.1. Revenue of $406M (-2%) vs. $394M. (PR) Regions Financial (RF): Q4 EPS of -$0.51 misses by $0.17. (PR) Tellabs (TLAB): Q4 EPS of $0.09 beats by $0.02. Revenue of $389M (-5%) in-line. (PR) Travellers (TRV): Q4 EPS of $2.12 beats by $0.63. Revenue of $6.4B (+11%) vs. $5.2B. (PR) Weatherford International (WFT): Q4 EPS of $0.02 misses by $0.09. Revenue of $2.4B (-8%) vs. $2.3B. (PR) Earnings: Monday After Close Amgen (AMGN): Q4 EPS of $1.05 misses by $0.08. Revenue of $3.8B (+2%) vs. $3.85B. Expects fiscal 2010 capex of about $600M. (PR) Apple (AAPL): FQ1 EPS of $3.67 beats by $1.60. The company elected to adopt required accounting standards changes related to revenue recognition, retrospectively. Revenue of $15.7B (+32%) vs. $12B. Sees Q2 EPS of $2.06-2.18 vs. $1.77, on sales of $11B-11.4B vs. $10.4B. Gross margin of 40.9% vs. year-ago 37.9%. Sold 3.36M Macintosh computers, up 33% from year ago. Sold 8.7M iPhones, up 100% from year prior. Sold 21M iPods, an 8% decline. (10-Q, PR) Atheros Communications (ATHR): Q4 EPS of $0.62 beats by $0.09. Revenue of $186M (+89%) vs. $175M. (PR) Olin (OLN): Q4 EPS of $0.28 may not be comparable to estimates of -$0.05. Net income of $21.8M incorporates $37M of pretax recoveries of environmental costs expensed in prior periods and $1.2M pretax gain from sale of a manufacturing facility. Revenue of $351M (-19%) vs. $330M. (PR) Packaging Corp. of America (PKG): Q4 EPS of $0.16 beats by $0.03. Revenue of $532M (-3%) vs. $510M. Sees Q1 EPS of $0.12 vs. $0.17. (PR) SL Green Realty (SLG): Q4 FFO of $0.87 misses by $0.01. Revenue of $247M (-8%) vs. $239M. (PR) Texas Instruments (TXN): Q4 EPS of $0.52 beats by $0.03. Revenue of $3B (+21%) in-line. Expects Q1 EPS of $0.44-0.52 vs. $0.43, on revenues of $2.95B-3.19B vs. $2.83B. (PR) VMware (VMW): Q4 EPS of $0.31 beats by $0.05. Revenue of $608M (+18%) vs. $554M. Sees Q1 revenue of $580M-600M vs. $530M. (PR) Zions Bancorp (ZION): Q4 EPS of -$1.26 beats by $0.38. Net interest income of $457M (-10%). Net loan charge-offs of $292.1M vs. $381.3M in Q3. (PR) Today's Markets In Asia, Nikkei -1.8% to 10,325. Hang Seng -2.4% to 20,109. Shanghai -2.4% to 3,019. BSE closed. In Europe at midday, London -0.5%. Paris -0.6%. Frankfurt -0.4%. Futures: Dow -0.4%. S&P -0.55%. Nasdaq -0.2%. Crude -1% to $74.49. Gold flat at $1,095.20. Tuesday's Economic Calendar FOMC Meeting, Day 17:45 ICSC Retail Store Sales8:55 Redbook Chain Store Sales9:00 S&P Case-Shiller Home Price Index10:00 Consumer Confidence10:00 FHFA Housing Price Index10:00 State Street Investor Confidence Index10:00 Richmond Fed Mfg.5:00 PM ABC Consumer Confidence Index Notable earnings before Tuesday's open: ABC, BHI, CVG, CBE, GLW, DAL, DD, EMC, FPL, JNJ, MHP, MTG, NVS, NUE, BTU, RF, SHW, TLAB, TRV, X, VZ, WFT Notable earnings after Tuesday's close: ALTR, BXP, CNI, ELY, GILD, IDTI, MCK, MOLX, PTV, QLGC, RFMD, STLD, STM, SYK, TSFG, YHOO Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

  • ★ Regarding the WSJ’s Report That Steve Jobs Had a Liver Transplant

    [This piece combines into a single narrative and expands upon three shorter pieces I posted immediately after this news broke Friday night.] Friday night around midnight, The Wall Street Journal published a report headlined “Jobs Had Liver Transplant”1 by Yukari Iwatani Kane and Joann S. Lublin. It stated: Steve Jobs, who has been on medical leave from Apple Inc. since January to treat an undisclosed medical condition, received a liver transplant in Tennessee about two months ago. The chief executive has been recovering well and is expected to return to work on schedule later this month, though he may work part-time initially. What’s intriguing about this story is not the question of whether Jobs actually had a liver transplant. I do not doubt that (although I’d like to see better sources for it). What is intriguing is the question of who leaked this information to the Journal and why. The WSJ’s Unusual Lack of Sourcing There are several highly unusual aspects to the Journal’s story. First is that they offer no source for the information — not even an “according to sources familiar the matter”. But yet they state it flatly as certain fact that Steve Jobs had a secret liver transplant in Tennessee. Blockbuster news with no sourcing whatsoever. To call that curious is an understatement. And, coming in the opening paragraph of a page one story, it could not be a careless omission. The basic tenets of journalism are simple. One reports facts and how one knows them. The principal is much like that of publishing scientific papers, where one describes not just the results, but also exactly how the results were obtained, so that others can reproduce them. This is why named sources are so much more valuable than anonymous sources; with a named source, other reporters can contact the source to verify the information. But there’s an apt journalism adage from Lord Northcliffe: “News is what somebody somewhere wants to suppress; all the rest is advertising.” And so sometimes the only sources for certain information are those who cannot or will not allow their names to be used. Most publications, and certainly all publications of the stature of The Wall Street Journal, have strict guidelines covering the use of anonymous sources. My friend Matt Deatherage (publisher of the estimable MacJournals) quoted the following from the Journal’s own Wall Street Journal Guide to Business Style and Usage in a post to the MacJournals-Talk mailing list: ANONYMOUS SOURCES: Accepting a source’s request for anonymity sometimes is the only practical way to obtain important information, but we must be circumspect. On-the-record sources are always preferable because they may be held personally accountable for what they say and are therefore generally more certain to be scrupulously accurate. Also, readers are able to made judgments about the reliability of those whose identities are provided. In cases where the person’s identity is to be protected, take pains to indicate where his or her biases might lie: “an executive working for a competitor 
 an executive who left the company in a management shakeup 
 a laid-off employee 
” or “a close relative of the plaintiff.” Their story on Jobs’s purported liver transplant offers no sourcing for the reader to judge. It entirely hinges on the (admittedly significant) credibility of The Wall Street Journal itself. Again, I point all this out not to say that I don’t believe their report. I’m as big a cynic regarding anonymous sourcing as anyone, but I believe that Jobs indeed had a liver transplant in Tennessee simply because The Wall Street Journal has placed its credibility behind the story. There is no hedging or fudging in their report. If it’s not true, it would amount to one of the biggest mistakes in their esteemed history. But reputable news publications do not ordinarily report utterly unsourced news. (I cannot find another example of the Journal reporting completely unsourced page one news.) So: Why? Most major news publications have picked up the story, but only by sourcing the information to Journal itself. For example: Bloomberg, The San Jose Mercury News, ABC News, and The BBC. Bloomberg’s report is indicative of this second-hand reporting: Steve Jobs, co-founder and chief executive officer of Apple Inc., underwent a liver transplant two months ago, the Wall Street Journal reported, without disclosing the source of the information. Even The New York Times has published a piece (“Apple Chief Reportedly Had Liver Transplant”) but they too have no source for the news other than the report in the Journal. (Surely the Times has reporters digging into this story; the aforelinked piece crediting only the Journal ran almost 24 hours after the Journal’s story, and as of this writing, four hours later, has not hit the front page of nytimes.com.) The only publication claiming independent verification is CNBC, late Saturday night: Two sources confirmed to CNBC that Jobs had the surgery and another confirmed that his plane flew from San Jose to Memphis in late March. Further curiosity: whoever the Journal’s source, they didn’t give the WSJ any publishable information regarding why Jobs needed a new liver — that part of the article is pure speculation, quoting doctors who have never treated Jobs personally. Is it because the Journal’s source doesn’t know, or because the source wouldn’t tell? There’s a big difference. Why Tennessee? There have been rumors circulating for months that Steve Jobs had moved to Tennessee for some sort of medical treatment. Here’s a rumor Barron’s Tech Trader Daily published on April 15, which in turn cites a report by Alexander Haislip of the PEHub Blog (which does not have publicly available archives). Haislip wrote: I spoke with a well-connected business person in Memphis this morning who says that there is a house in a swank neighborhood there that has been bought for a princely sum and is undergoing minor renovations in preparation for its new resident. He says he has reason to believe Apple CEO Steve Jobs is moving to the city to treat his pancreatic cancer. Several readers sent me this Barron’s link back when it was new, but I decided against linking to it because it was just so sketchily sourced. (And even now, if the WSJ report turns out to be completely accurate, the Barron’s rumor was wrong with regard to the treatment for which Jobs went to Tennessee.) I’ve ignored a slew of Jobs-related rumors over the past year because of the sourcing. One thing that struck me as wrong at the outset regarding these “Jobs-in-Tennessee” rumors is the question of why he’d bother going to Tennessee in the first place. Tennessee may be a lovely state, but, well, it doesn’t sound like Steve Jobs country. You don’t need to leave the Bay area to get world-class medical treatment. The Journal’s report has a good answer:2 The specifics of Mr. Jobs’s surgery couldn’t be established, but according to the United Network for Organ Sharing, which manages the transplant network in the U.S., there are no residency requirements for transplants. Having the procedure done in Tennessee makes sense because its list of patients waiting for transplants is shorter than in many other states. According to data provided by UNOS, in 2006, the median number of days from joining the liver waiting list to transplant was 306 nationally. In Tennessee, it was 48 days. But if the Journal knows that Jobs had a transplant, and knows that it was performed in Tennessee, why don’t they know which hospital? Again from their report: Three hospitals in Tennessee — Le Bonheur Children’s Medical Center in Memphis, Vanderbilt University Medical Center in Nashville and Methodist University Hospital in Memphis — are designated as liver-transplant centers, according to UNOS. A spokeswoman for Le Bonheur said the hospital doesn’t perform liver transplants in adults. A Vanderbilt spokesman said it didn’t treat Mr. Jobs. A spokeswoman for Methodist University said Mr. Jobs isn’t listed as a patient there. Reading between the lines, if Jobs had a liver transplant in Tennessee, it must have been at one of these three hospitals. Two flatly deny it, but the third, Methodist University, simply stated Jobs “isn’t listed as a patient” — present tense, not past tense. So it must have been performed there. But why can’t the Journal state that as fact as well? Regarding the Timing and Source of the Leak That this news broke months after the purported transplant, at midnight on the Friday of what appears to be the most successful new product launch in Apple history, strikes me as beyond coincidence. My first thought was that it must be a deliberate, timed leak from Apple. Assuming the story is true and that Apple felt the need to eventually release the news, when better to release it than on the very day when it most appears that Apple has continued to thrive while Jobs was on medical leave? MG Siegler at TechCrunch speculates similarly: We’d be remiss if we didn’t note that the timing of this story appears favorable for Apple. This news breaks late on a Friday, after Apple has just held a successful launch of a very high profile new product, the iPhone 3G S, that sent the stock soaring today. Obviously, the market won’t be open again until Monday. I don’t see how the leak could have came from someone with a competitive interest against Apple. The timing is completely favorable to Apple; if the leak had came from someone wishing ill against Apple, it would have come at some time, any time, other than in the wake of the extremely successful iPhone 3G S launch. Plus, other than the surprise that Jobs had a liver transplant in the first place, the gist of the article is largely favorable to Apple. It emphasizes that Jobs is recovering, is still set to return to work this month, and has already been seen on Apple’s campus recently. It is also the case that it would be unconscionable for the information to come from someone with a position against Apple and for the Journal not to describe the source as such. Thus I see only three possible sources for the leak. Theory 1: That the information came without Jobs’s permission or knowledge, from a healthcare provider with knowledge of Jobs’s medical situation. Presumably, given the Journal’s report, from someone at Methodist University Hospital in Memphis. Such a leak would clearly be a violation of HIPAA privacy laws. This might explain the utter lack of sourcing and the certainty as to the veracity of the information, but it would not explain the perfect-for-Apple timing of the leak, which timing I firmly believe is simply too convenient to be coincidence. It would also raise serious questions regarding the ethics of the Wall Street Journal. I therefore discount this possibility. Theory 2: That the leak was authorized by Jobs himself. I doubt Jobs personally spoke to the Journal reporters (see below), but it could have been someone close to him (if so, I’d guess Katie Cotton or someone else high up in Apple Communications) doing it with his permission. The thinking behind this theory would be that if the information was going to become public eventually, why not control it and have it come out at the most advantageous time possible. This scenario would explain the certainty of the information, but not the odd lack of sourcing. My thoughts then ran to the possibility that perhaps Jobs himself is the source — he has occasionally called reporters personally. And if he offered the information only on the condition that it not be sourced to him by name, perhaps the Journal couldn’t bring themselves to describe Jobs himself as merely “a source familiar with the situation” or somesuch. But the second paragraph in the Journal story seems to preclude Jobs personally as the source: Mr. Jobs didn’t respond to an email requesting comment. “Steve continues to look forward to returning at the end of June, and there’s nothing further to say,” said Apple spokeswoman Katie Cotton. That language leaves the clear impression that Jobs did not personally contribute to the report, and it implies that Katie Cotton did not either. It’s one thing for reporters to omit information; it is something else entirely to purposefully mislead readers. There are also certain implications in the Journal’s story that cast Jobs in an unflattering light. William Hawkins, a doctor specializing in pancreatic and gastrointestinal surgery at Washington University in St. Louis, Mo., said that the type of slow-growing pancreatic tumor Mr. Jobs had will commonly metastasize in another organ during a patient’s lifetime, and that the organ is usually the liver. “All total, 75% of patients are going to have the disease spread over the course of their life,” said Dr. Hawkins, who has not treated Mr. Jobs. Getting a liver transplant to treat a metastasized neuroendocrine tumor is controversial because livers are scarce and the surgery’s efficacy as a cure hasn’t been proved, Dr. Hawkins added. He said that patients whose tumors have metastasized can live for as many as 10 years without any treatment so it is hard to determine how successful a transplant has been in curing the disease. This is ugly business. They’re quoting a doctor who specializes in pancreatic and gastrointestinal surgery as saying (1) that it’s common for someone who had the cancer Jobs had to subsequently get cancer in their liver; (2) that liver transplants are not proven to help in such cases; and (3) obtaining a liver transplant in such cases is therefore controversial because it’s taking a liver that could otherwise have been put to better use by someone with some other type of liver ailment. There is no other way to read this than as an implication that Steve Jobs may have gotten a liver that should have gone to someone else. Keep in mind that this entire ugly implication is not stated as fact and is attributed as speculation from a doctor who admittedly has not treated Steve Jobs. But the fact that it is in the story at all makes me question whether any of the information in the story came with Steve Jobs’s permission, tacit or otherwise. Theory 3: That a member of Apple’s board of directors leaked the information to the Journal without Jobs’s permission or knowledge, or perhaps, if the matter of public disclosure had been posed to and dismissed by Jobs at a board meeting, expressly against Jobs’s wishes. The scenario I am imagining here is that Jobs does not wish to reveal anything regarding his medical situation, but that a member (or contingent) of Apple’s board believes it is in the company’s interest to release the basic gist of the story, regardless of Jobs’s wishes. This scenario would explain the timing, the certainty, and perhaps even the lack of sourcing. (Although if this scenario is the case, certainly Jobs himself must suspect the source of the leak is from the board.) Note also that some portions of Kane and Lublin’s WSJ report must have been sourced from someone on, or very close to, Apple’s board of directors: When he does return, Mr. Jobs may be encouraged by his physicians to initially “work part-time for a month or two,” a person familiar with the thinking at Apple said. That may lead Tim Cook, Apple’s chief operating officer, to take “a more encompassing role,” this person said. The person added that Mr. Cook may be appointed to Apple’s board in the not-too-distant future. […] At least some Apple directors were aware of the CEO’s surgery. As part of an agreement with Mr. Jobs in place before he went on leave, some board members have been briefed weekly on the CEO’s condition by his physician. Who else other than a source on Apple’s board would know that Tim Cook may soon join the board, or that some board members were briefed weekly?3 This third scenario is my best guess as to the Journal’s source. It sounds sensational to speculate that there is conflict in this regard between Jobs and at least some contingent of Apple’s board of directors, but sensational or not, it makes more sense to me than any other scenario. It also fits with my belief that Steve Jobs does not want to disclose anything about his health whatsoever. As usual, I’m linking to a Google redirection to the WSJ story. If I link directly to the WSJ web site, only paid WSJ subscribers will be able to read the story. The WSJ allows referrals from Google to see full article content. ↩ Apple board member and Jobs confidant Al Gore is from Tennessee. But his home is in Nashville, not Memphis, so I can’t think of any reason Gore would have played a role in Jobs’s decision to go there. ↩ In theory the Journal’s source could be Tim Cook, but that goes against everything I have ever heard about Cook. I believe him to be loyal, honest, and to have deservedly earned Steve Jobs’s full trust. I truly believe that Cook would much prefer to continue in his current role in an Apple with Jobs as CEO than to be CEO of a Jobs-less Apple. Plus, Cook doesn’t need to angle through the press for anything. If Jobs steps down as CEO any time in the foreseeable future, the CEO job goes to Cook. No one whose opinion I value doubts this. It’s simply a question of whether Cook runs operations as “COO” with Steve Jobs overseeing product development, or as “CEO” without Steve Jobs overseeing product development. ↩

  • Wall Street Breakfast: Must-Know News

    Aon buys Hewitt Associates. Insurance broker Aon (AON) agreed to buy human-resource consulting and outsourcing company Hewitt Associates (HEW) in a cash-and-stock deal valued at $4.9B. The deal, which will nearly triple the size of Aon's consulting operations, marks a 41% premium over Hewitt's closing price on Friday. BP in asset sale talks as oil flows freely. Over the weekend, BP (BP) removed its containment cap from the leaking Gulf well, allowing oil to flow freely, as it prepares to place a tighter-fitting dome that could potentially stem the leak in its entirety if all goes well. In the meantime, the company is said to be in talks to sell up to $10B worth of assets, including its stake in Alaska's Prudhoe Bay oil field, to Apache (APA). PetroChina (PTR) said it has offered BP assistance and would welcome the opportunity to work more closely together; PetroChina may be referring to a possible asset purchase, or joining BP in a joint venture. According to a media report, Exxon Mobil (XOM) and possibly Chevron (CVX) have both approached the White House to get unofficial approval for potential bids for BP. Premarket: BP +2.8% (7:00 ET). Santander buys German banking unit. Banco Santander (STD) continued its recent acquisition spree with the purchase of a 173-branch German retail banking network from Sweden's Skandinaviska Enskilda Banken. The €555M ($699M) deal will nearly double Santander's branches in the country and add around 1M customers. Premarket: STD -3.4% (7:00 ET). Apple, AT&T face class action suit. A federal judge ruled that a monopoly-abuse lawsuit against Apple (AAPL) and AT&T (T) can move forward with class-action status. The lawsuit claims that consumers agreed to a two-year contract with AT&T as the exclusive iPhone carrier, but ended up locked in a five-year relationship. It also claims that Apple's actions, including "locking" its iPhones, controlling which apps can be installed and relying on an exclusive partner, have hurt competition and driven up prices. Premarket: AAPL -0.5% (7:00 ET). Staples to buy Corporate Express Australia. Staples (SPLS) will complete a proposed deal to buy the shares it doesn't already own of Corporate Express Australia. Staples, which holds a 58.6% stake in the company, said the move will help it "more effectively address the Australian market, an important part of our future growth internationally." The deal is expected to close on July 26. BofA retreats on property fund. Blackstone (BX) will take over the management of a $2B portfolio of Asian property investments from Bank of America-Merrill Lynch (BAC). The move will boost Blackstone's real estate investments in the region, and highlights the retreat of banks from the business of running real estate and corporate private equity funds. BofA will "continue to be the general partner of the fund and an investor in it." Premarket: BAC -0.7% (7:00 ET). Japan's election results could hurt debt reduction. Prime Minister Naoto Kan's party lost control of Japan's upper house of parliament, creating uncertainty about the country's efforts to rein in the world's largest public debt. Kan, who took office a month ago, has lost voter support by calling for a debate on whether to raise the sales tax and drawing attention to a national debt that amounts to $80,000 per person. No slowdown for Chinese exports. China's exports jumped 44% in June compared to the year before, leading to a June trade surplus of $20B. The jump in exports defied widespread fears about a new global slowdown, but will likely increase pressure on China to allow a further appreciation of the yuan. Friday's failures. Four more banks were closed on Friday, bringing this year's failures to 90 so far. The closures in Maryland (I, II), Oklahoma and New York are expected to cost the FDIC's insurance fund $160M. Today's Markets In Asia, Japan -0.4% to 9548. Hong Kong +0.4% to 20467. China +0.8% to 2491. India +0.6% to 17937. In Europe, at midday, London +0.6%. Paris flat. Frankfurt +0.1%. Futures: Dow -0.3%. S&P -0.4%. Nasdaq -0.3%. Crude -0.8% to $75.47. Gold -0.5% to $1204.20. Monday's Economic Calendar 9:00 Fed's Lacker: "The Fed Experience"10:00 Fed Conference: Addressing Small Business Financing [Bernanke, Duke]1:00 PM $35B, 3-Year Note Auction Notable earnings after Monday's close: AA, CSX, NVLS Seeking Alpha's Market Currents team contributed to this post.

  • Wall Street Breakfast: Must-Know News

    Kraft seals Cadbury deal. This morning Kraft (KFT) announced a recommended deal to buy Cadbury (CBY) for Ł11.9B ($19.4B), or 840 pence per share, in addition to a 10 pence dividend. The new terms followed friendly talks late last night between the two companies, and Cadbury board members have unanimously recommended to shareholders to accept the offer. Premarket: KFT -1%, CBY +5.7% (7:00 ET). Tyco on the brink of U.S. expansion. Tyco International (TYC) announced it will buy Brink's Home Security Holdings (CFL) for around $2B in cash and stock, approximately a 35% premium over Brink's Friday closing price. The deal is the latest in the sector's gradual consolidation, and combines two of the top companies in the North American security industry. Premarket: TYC +1.2%, CFL +32.1% (7:00 ET). Berkshire heads for share split. Berkshire Hathaway (BRK.A, BRK.B) is widely expected to approve a 50-to-1 share split of its Class B shares tomorrow, in one of the biggest structural shakeups the company has seen in years. The move will bring the share price down to around $65 from Friday's $3,247, making it likely that trading volume will increase and potentially opening up the stock for inclusion in the S&P 500. Separately, Berkshire announced a 1.3B Swiss franc ($1.26B) deal on Monday to buy a block of life insurance business from Swiss Re (SWCEY.PK). JAL falls to bankruptcy. As expected, Japan Airlines filed for the country's fourth-largest bankruptcy today. The airline will be delisted, wiping out shareholders. As part of its „900B ($10B) turnaround plan, JAL will slash 15,700 jobs, cut unprofitable routes and retire older planes. E-book talks for Apple's tablet. Publisher HarperCollins (NWS) is reportedly negotiating with Apple (AAPL) to make e-books available for an Apple tablet. Details are still up in the air, but HarperCollins would likely set the price of the books, which would come with bonus features, and Apple would take a cut of the sales. Apple is widely expected to unveil a tablet device at its Jan. 27 media event. Sinopec, BP talk about tie-up. Sinopec (SNP) said it's in talks with BP (BP) over a potential collaboration in the exploration and development of shale gas. The discussions, which Sinopec said were going "smoothly," reflect the growing international interest in China's shale gas fields. European countries warn against MSFT browser. German and French agencies made the unusual move of warning users against Microsoft's (MSFT) Internet Explorer browser, suggesting users switch to alternatives. The warning stemmed from the security hole in IE that hackers recently exploited to attack Google (GOOG) and other companies. Microsoft challenged the recommendations, and said users should instead upgrade to the latest version of its browser. China blamed for Indian hack attack. Indian officials said there was an attempted cyber-attack on Indian government computers, and that Chinese hackers are likely to blame. Chinese officials said such claims "are entirely without basis," and noted that China itself is one of the biggest victims of cyber-attacks. Google delays China phone launch. Google (GOOG) postponed the planned launch of its mobile phone in China today, without specifying why the launch was delayed or when it might be rescheduled. The move comes as Google and China face off over internet censorship and a recent cyber-attack. Williams Cos. creates major nat-gas partnership. Williams Cos. (WMB) is reportedly planning to restructure by merging Williams Partners and Williams Pipeline Partners, creating in the process one of the largest natural-gas partnerships in the country. Williams Cos. will receive 80% ownership in the combined entity, valuing its stake at $6.2B, and will receive $3.5B in cash to pay down debt. A merger announcement is expected today. Unisys sells health unit. Unisys (UIS) agreed to sell its health information management business to Molina Healthcare (MOH) for $135M in cash. U.K. faces rating risk. The U.K.'s triple-A rating is "extremely vulnerable" and the economic and political situation is "highly toxic," warned Standard Life, one of the U.K.'s largest money-management firms. Earlier this month, Pimco said there's an 80% chance of a U.K. downgrade unless the government changes its deficit reduction plans. Separately, data released this morning showed U.K. prices rose a higher-than-expected 0.6% in December, bringing the annual rate up to 2.9% and raising speculation that interest rates may be increased faster than expected. The news sent the pound to a four-month high against the euro. Earnings: Tuesday Before Open New Oriental Education & Tech. Group (EDU): FQ2 EPS of $0.03 misses by $0.02. Revenue of $61.2M (+24%) vs. $61.8M. (PR) Today's Markets In Asia, Nikkei -0.8% to 10,765. Hang Seng +1% to 21,678. Shanghai +0.3% to 3,247. BSE -0.9% to 17,486. In Europe at midday, London -1%. Paris -0.9%. Frankfurt -1%. Futures: Dow -0.2%. S&P flat. Nasdaq flat. Crude +0.2% to $78.15. Gold +0.7% to $1,138.40. Tuesday's Economic Calendar 9:00 Bank of Canada Announcement 9:00 International Capital Flow 10:00 State Street Investor Confidence Index 1:00 PM NAHB Housing Market Index 5:00 PM ABC Consumer Confidence Index Notable earnings before Tuesday's open: AMTD, C, EDU, FAST, FHN, FRX, MMR, PH Notable earnings after Tuesday's close: CREE, CSX, FULT, IBM, WIT Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

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