Thursday, February 28, 2013

(BN) Victoria’s Secret Plans to Open First Stores in Hong Kong

(Bloomberg ) Limited Brands Inc.'s Victoria's Secret, the lingerie chain known for its supermodels called "Angels," is planning its first stores in Hong Kong, where surging demand from shoppers has sent retail rents to a record.

Limited Brands this year will open two 1,500-square-foot (139-square-meter) Victoria's Secret shops at the International Finance Centre in the Central business district and at New Town Plaza, a favored stop for mainland Chinese shoppers near the city's north, according to an e-mail from Robin Hoffman, a spokeswoman for Columbus, Ohio-based Limited Brands.

An influx of mainland Chinese visitors has fueled consumption of branded apparel and accessories in Hong Kong, which commands the world's highest occupancy costs in some of its areas. Abercrombie & Fitch Co. (ANF) and Gap Inc. are among international clothing labels that have opened flagship stores in the city in the past 18 months.

Both IFC and New Town Plaza malls are owned or part-owned by Sun Hung Kai Properties Ltd. (16), the world's biggest developer by value.

Brenda Wong, a spokeswoman for Hong Kong-based Sun Hung Kai, declined to comment on its tenants.

Limited Brands, while "very, very optimistic" about Victoria's Secret's potential outside of North America, has been measured in openings to ensure its stores run well, Chief Executive Officer Les Wexner said in an October presentation to investors.

"We're very aware that China will be the biggest market on the planet at some point," Martin Waters, president of international business at Limited Brands, said at the October investor meeting. "We just don't feel pressured by the time to go and do that immediately. We've got so many building blocks to put in place."

(BN) Wind Power to Compete With Fossil Fuels by 2015, Make Says

Onshore wind power will become competitive with traditional fossil fuels in Europe, the U.S. and Asia by 2015, Danish researcher Make Consulting said.

Worldwide, the technology is an average of about 10 percent above grid parity -- the level at which it's able to compete with other technologies if all are subsidy-free -- according to a paper e-mailed today by Make. Larger and more efficient machines will help wind become competitive within two years, and further drive down costs through 2020, Make said.

"Wind will be a very competitive power generation technology in 2020, cheaper than all the fossil fuel technologies" in the European Union, Robert Clover, research director at Aarhus, Denmark-based Make, wrote in the study. In the U.S., "in 2020 wind will be one of the most competitive power generation technologies, cheaper than coal and nuclear technologies and at least comparable to gas."

The forecast shows how renewables are moving from expensive carbon-cutting technologies to more mainstream forms of power generation. Investment in new renewable energy generating capacity in 2010 for the first time surpassed spending on new fossil fuel plants, according to Bloomberg New Energy Finance.

Global wind installations rose about 10 percent to a record 44,711 megawatts last year, according to the Global Wind Energy Council, a Brussels-based industry group.

Graphics in the report show the levelized cost for onshore wind at below 75 euros ($98) per megawatt-hour in Europe in 2020, a level comparable to nuclear -- without factoring the costs of decommissioning old atomic plants -- and above only hydro power and geothermal, which are "limited" in their use by geography and geology, according to Make.

Buying Fuel

Levelized costs factor in the lifetime costs of building plants and buying fuel for power generation. In the U.S., the 2020 estimated cost of onshore wind, at just below 60 euros per megawatt-hour, is greater only than combined cycle gas turbines and geothermal. In the Asia Pacific region, nuclear, gas and geothermal are all deemed cheaper than onshore wind in 2020.

London-based analyst Bloomberg New Energy Finance estimates onshore wind currently has a global average levelized cost of energy of about $85.11 per megawatt-hour, a level similar to coal and about 10 percent higher than gas. It puts the cost of offshore wind at $225.80.

Offshore wind power, with its more expensive infrastructure, is still likely to be close to grid parity in the Asia-Pacific region in 2020, according to Make. In Europe, it may reach that benchmark in 2023, and in the U.S., it'll take until 2026, Make said.

LinkedIn Amid User Growth Optimism

(Bloomberg ) While LinkedIn has characteristics of a consumer Web company -- offering a free service and selling ads -- it also has an expanding paid subscription business for corporate customers and premium users.

"The company's Recruiter product and broader Talent Solutions platform have become extremely valuable for recruiters," Harper wrote in a report today. "We view LinkedIn with a very large competitive moat around its platform given strong network effects, a highly visible revenue stream and the ability to rapidly innovate with new products."

Paid Subscribers

With its paid subscribers, LinkedIn's growth more closely resembles so-called software-as-service providers like like Inc. (CRM), Workday Inc. (WDAY) and ServiceNow Inc., Sena said.

Salesforce, which provides web-based customer relationship management software, traded at 12 times sales one year after its 2004 IPO, Sena wrote. LinkedIn trades at 10 times sales this year and seven times revenue for 2014, higher than consumer Internet companies, according to his analysis.

"While LinkedIn has a large consumer-facing audience component, its businesses are increasingly akin to software enterprise providers," Sena wrote. Those companies have "sticky subscription revenue streams, vast addressable markets" and high margins, he said.

(BN), NY Yankees, Marvell: Intellectual Propeperty

(Bloomberg ) Inc. (AMZN), the world's largest online retailer, received a U.S. patent on a method of improving employees' performance.

Patent 8,121,888, issued Feb. 21, covers techniques for "facilitating improvement of results of human performance of tasks."

Seattle-based Amazon said in the patent that those who perform a task in a fashion that is only partially satisfactory may be given only a partial payment rather than the full payment amount "associated with fully satisfactory performance of the task."

The "task requester" can also use this technology to give the person who is performing the task information and opportunity to improve the results, and then receive the full payment.

Amazon applied for this patent in December 2007, with the assistance of the Seed IP Law Group LLP of Seattle.

Source Vagabond Systems Gets Additional Patent Case Sanctions

Source Vagabond Systems Ltd., an Israeli fabric manufacturer, was hit with an additional $12,745.35 in sanctions in a patent-infringement case.

Tirat Carmel, Israel-based Source Vagabond filed suit in federal court in Manhattan in August 2011, accusing Oakland, California's Hydrapak Inc. of infringing patent 7,648,276. This 2010 patent covers a sealing device for a flexible container for liquid.

In a Feb. 21 court filing, U.S. District Judge Colleen McMahon added the sanction to the $187,308.65 in attorney fees for filing a frivolous suit. This brought the total award to $200,054. She said in her order that the additional sanction was for time and money Hydrapak and the court wasted on a motion to reconsideration of the verdict.

The case is Source Vagabond System Ltd. v. Hydrapak Inc., 1:11-cv-05379-CM-JLC, U.S. District Court, Southern District of New York (Manhattan).


Yankees Can Stop Others' Use of 'Baseball's Evil Empire' Phrase

The New York Yankees have the right to block others from using a phrase first uttered by the president of the rival Boston Red Sox.

An appeals board at the U.S. Patent office confirmed the Major League Baseball team's right to bar a sportswear company from using "Baseball's Evil Empire."

According to the board's opinion, Red Sox President Larry Lucchino said in 2002 that the Yankees' "evil empire extends its tentacles even into Latin America." Lucchino was referring to the Yankee's successful pursuit of Cuban pitcher Jose Contreras.

The team opposed a 2008 application by Evil Enterprises Inc. of Bridgehampton, New York, which sought to register "Baseball's Evil Empire" for use on clothing and hats.

According to the board's opinion, the Yankees brought in "hundreds of news articles, stories and blog entries demonstrating that 'Evil Empire' is used as a shorthand reference or nickname" for the Yankees. The team had also "implicitly embraced" the name by using music from "Star Wars" movies at games played in Yankee Stadium, the board said.

"Evil Empire" is a phrase most baseball fans would recognize as a nickname for the Yankees, the board said, thus entitling the term to a broad level of protection under U.S. trademark law.

The applicant's plans to sell similar merchandise to what the team sells also worked against the application because the two entities' goods would be marketed in similar ways, causing possible consumer confusion, the board said.


Chu, Coble Start New Congressional Caucus for Content Industry

A member of the U.S. Congress who has many of the major motion picture studios in her district started a new organization focused on the content industries.

U.S. Representative Judy Chu, a California Democrat, has joined with U.S. Representative Howard Coble, a North Carolina Republican, to start the Congressional Creative Rights Caucus, according to a statement from Chu's office.

The statement specifies that the purpose of the caucus is to educate congress and the public about "the importance of preserving and protecting the rights of the creative community in the U.S."

Chu acknowledged that the film industry has a "strong economic presence" in her district, producing 140,000 jobs in film and television in Los Angeles County, and the studio members of the Motion Picture Association of America paying $437 million to local businesses.

Coble, who is chairman of the House Subcommittee on Courts, Intellectual Property and the Internet, said the works created by the content industries "are among our most precious exports" that "cannot be duplicated anywhere else in the world."

Google Raises Censorship Risk in EU Court Fight on Data Control

Google Inc. (GOOG) shouldn't have to remove content from its search engine that was lawfully published elsewhere, the company argued in a case at the European Union's top court that will set boundaries between freedom of expression and data-protection rights.

The operator of the world's largest search engine isn't a data "controller," it is "a mere intermediary in terms of the data which it indexes," Google lawyer Francisco Enrique Gonzalez-Diaz told a panel of 15 judges at the EU Court of Justice hearing yesterday. Direct requests for personal information to be removed from a search engine -- even if it was put online by a newspaper -- would be "a fundamental shift of responsibility from the publisher to the search engine" and "would amount to censorship."

The dispute raises questions about the scope of EU privacy rules when it comes to personal data on the Internet; the rights of search engines to use any online data to remain commercially successful; and who ultimately is in charge of what happens with the data. The Luxembourg-based court's ruling will be binding on courts across the 27-nation bloc.

The case was triggered by about 200 instances of Spain's data-protection authority ordering Google to remove information on people. The information in yesterday's case concerned a Spanish man whose house was auctioned off for failing to pay taxes. Newspaper La Vanguardia published the information in 1998 and years later it could still be found via a Google search.

Mountain View, California-based Google is liable because it allows easy and quick access to information that wasn't easily found online before, he said.

"People shouldn't be prevented from learning that a politician was convicted of taking a bribe, or that a doctor was convicted of malpractice," Google said in a blog post.

Data protection is presently policed by separate regulators across the EU. The bloc's executive body wants to simplify the system so companies deal with only one.

The case is C-131/12, Google Spain, S.L., Google Inc. v. Agencia Espanola de Proteccion de Datos, Mario Costeja Gonzalez.

Trade Secrets/Industrial Espionage

Ex-Netgear Employee Gets Prison Sentence in Trade Secrets Case

A former employee of Netgear Inc. (NTGR) was given a prison sentence following his conviction for trade-secret theft.

Suibin Zhang was sentenced to three months in prison, a three-year term of supervised release, 200 hours of community service and he is required to pay $75,000 in restitution to Marvell Semiconductor Inc. by May 13.

In May 2012 Xhang was convicted of trade secret theft related to downloading of trade secrets from a secure database. According to a government statement released yesterday, Zhang used his position as a project engineer at San Jose, California's Netgear to get access to Marvell's secure database.

He used his Netgear account to download trade secret information and loaded it into a laptop issued by Broadcom Inc. (BRCM) of Irvine, California, a Marvell competitor for which he went to work after leaving Netgear, the government said.

Among the purloined trade secrets were hardware specifications, datasheets, application notes, board designs, and design guides, the government said.

Zhang received a less severe sentence than the government sought. According to a sentencing recommendation the government filed with the court, a 15-month prison term was sought, together with $150,000 in restitution and a $5,000 fine.

The case is U.S. v. Zhang, 5:05-cr-00812-RMW, U.S. District Court, Northern District of California (San Jose).

Obama Order Not Enough to Shield Networks From Hacks, Aide Says

Legislation beyond President Barack Obama's executive order is needed to protect critical U.S. networks from cyber-attack, said Michael Daniel, the White House's cybersecurity coordinator.

"An executive order is actually very limited in what it can do," Daniel said yesterday at a computer security conference in San Francisco. "We definitely need Congress to act and to update our laws and our statutes."

Daniel didn't elaborate and wasn't available for an interview after speaking.

Obama issued an executive order Feb. 12 outlining policies for greater sharing of government hacking data with companies, particularly operators of vital infrastructure such as power grids. The executive order directs the government to develop voluntary cybersecurity standards for those companies and instructs U.S. agencies to consider putting those standards into existing rules.

Cyber espionage targeting U.S. companies gained renewed attention last week when network security firm Mandiant Corp. reported China's army may be behind a hacking group that has attacked at least 141 companies worldwide since 2006.

Obama's order reflected provisions of a Senate bill blocked last year by Republicans after being opposed by the U.S. Chamber of Commerce, the nation's largest business lobby. Opponents said the bill's voluntary standards would amount to burdensome regulation and fail to keep pace with evolving threats in cyberspace.

Since the executive order was released, administration officials have said they support certain liability protections for companies that incorporate the voluntary standards and share cyber threat information with the government and each other.

House Intelligence Committee Chairman Mike Rogers, a Michigan Republican, and the panel's top Democrat, C.A. "Dutch" Ruppersberger of Maryland, reintroduced a proposal Feb. 13 to give legal protection for companies that share cyber threat information with each other. The bill passed the House last April and failed to advance in the Senate after Obama threatened a veto, saying the measure didn't go far enough to boost computer defenses and failed to protect privacy of consumer data.

The White House has declined to comment on the reintroduced Rogers-Ruppersberger bill while saying any cybersecurity measure must incorporate privacy and civil-liberties protections.

Administration officials including U.S. Intellectual Property Enforcement Coordinator Victoria Espinel pledged last week to put diplomatic pressure on countries implicated in thefts of trade secrets and seek stronger international enforcement of intellectual-property protections.

(BN) GSK, VirnetX, Tivo, LVMH, Kolon: Intellectual Property

(Bloomberg ) ViiV Healthcare Ltd., a joint venture of GlaxoSmithKline Plc (GSK) and two other drugmakers, plans to license pediatric versions of its HIV drug abacavir to a patent-sharing body backed by the United Nations to improve children's access to treatment.

ViiV will grant the voluntary license to the medicines patent pool for the drug in the 118 countries where 99 percent of children with HIV live, it said in a statement yesterday.

About 3.4 million children have HIV worldwide, and 72 percent of those in need of treatment don't have access to appropriate care because of a lack of affordable medicines, according to ViiV. ViiV and other drugmakers including Gilead Sciences Inc. also work with generic licensing partners in countries including India and South Africa to produce low-cost version of HIV therapies to sell in developing countries.

"This agreement with the medicines patent pool builds on the existing 13 licenses granted to our generics partners," Chief Executive Officer Dominique Limet said in a statement. "The overarching goal of our efforts is to improve the lives of children living with HIV."

ViiV is Glaxo's joint venture with New York-based Pfizer Inc. (PFE) and Japan's Shionogi & Co. (4507)

VirnetX $368 Million Jury Verdict Against Apple Upheld by Judge

VirnetX Holding Corp. (VHC)'s $368.2 million jury victory against Apple Inc. (AAPL) over patents for virtual-private-network technology was upheld by a federal judge.

U.S. District Judge Leonard Davis in Tyler, Texas, denied Apple's requests for a new trial or a reduction in the damage award. VirnetX lost its bid for an order that would have limited Apple's ability to provide virtual private networks on its products, and the judge ordered the two sides to confer within the next 45 days to work out a license for future use of the technology.

A federal jury in Tyler in November said Apple's VPN on Demand and FaceTime features, used on the iPhone, iPod Touch and iPad as well as Mac computers, infringed four VirnetX patents. There was "substantial evidence" to support both the finding of infringement and the damage award, Davis wrote yesterday.

"We are extremely pleased with the court's order in our suit against Apple," VirnetX Chief Executive Officer Kendall Larsen said in a statement. "We look forward to negotiating a license with Apple that includes an ongoing royalty agreement."

Officials with Cupertino, California-based Apple didn't immediately return e-mail messages seeking comment.

VirnetX, based in Zephyr Cove, Nevada, had asked for at least $708 million in the trial, while Apple argued the patents were worth no more than $9.1 million. VirnetX also said it would drop its U.S. International Trade Commission case against Apple over other patents and instead pursue further damages in the Texas court.

VirnetX had won a $200 million settlement from Microsoft Corp. in 2010 over the same technology and has claims pending against Cisco Systems Inc. (CSCO) A trial on the Cisco claims is scheduled to begin March 4.

The case at trial is VirnetX Inc. v. Cisco Systems Inc., 10-cv-00417, U.S. District Court, Eastern District of Texas (Tyler).

TiVo CEO Expects to Keep Virgin Media as Customer After Buyout

TiVo Inc. (TIVO), the developer of digital-video recorders, expects no change in its relationship with Virgin Media Inc. (VMED) after the U.K. cable operator is bought by a competitor that has introduced its own set-top box.

"Virgin is doing dramatically well with TiVo," adding about 1.4 million customers last year, TiVo Chief Executive Officer Tom Rogers said yesterday in an interview.

Rogers said he sees no disruption in the relationship with Virgin Media, the cable company that John Malone's Liberty Global Inc. (LBTYA) plans to buy for $16 billion in cash and stock in a deal announced on Feb. 6. TiVo has rapidly expanded business with pay-TV operators after favorable court rulings upheld key patents, Rogers said.

The digital-recording pioneer widened margins in 2012 by selling advanced set-top boxes with more storage and the ability to record several shows at once. TiVo is transforming itself from a video-recorder provider into one that can shift content around the home and on the go, Rogers said.

Liberty Global, based in Englewood, Colorado, and operating in European markets, introduced its own Web-enabled set-top box in 2012, Horizon TV. The company plans to expand the product, now in Holland and Switzerland, to Ireland and Germany, CEO Michael Fries said on a Feb. 14 conference call.

TiVo's net loss widened to $15.8 million, or 13 cents a share, in the period ended Jan. 31, from a loss of $7.2 million, or 6 cents, a year earlier, according to a statement yesterday. Analysts had projected a loss of 12 cents, the average of estimates compiled by Bloomberg.

Revenue grew 34 percent to $88.9 million. That exceeded analysts' projections of $84.4 million, the average of 11 estimates compiled by Bloomberg.

The company added 209,000 subscribers in the quarter, down 11 percent from 234,000 added a year ago, ending the year with more than 3.1 million. TiVo is pursuing patent infringement litigation against Google Inc. (GOOG)'s Motorola Mobility and Cisco Systems Inc. over use of recording technology in the set-top boxes they make. Time Warner Cable Inc. (TWC) is a defendant in both cases.


American Cruise Lines Says American Queen Violated Settlement

American Cruise Lines Inc., a Connecticut-based travel company, sued a competitor in a trademark dispute and is seeking at least $12 million in damages.

HMS American Queen Steamboat Co. LLC of Memphis, Tennessee, is accused of violating a settlement agreement of a previous trademark suit involving the use of the term "Great American Steamboat," according to the complaint filed in federal court in Delaware on Feb. 26.

American Cruise Lines said that as part of the settlement, it agreed to pay $125,000 to American Queen for the right to the term. Additionally, both parties would agree that neither would use "Great American Steamboat" in a "cooling off" period from Nov. 5, 2012, to Feb. 9.

Regardless of the agreement, American Queen has continued to use "Great American Steamboat" trademarks and related Internet domain names, American Cruise Lines claims. The Tennessee company is also causing its business telephone number to be associated with the mark, according to the complaint.

American Cruise Lines says its studies indicate that by the end of December 2012, 15 percent of the Internet searches for "Great American Steamboat Co." continued to be directed to American Queen's websites. The Connecticut company says it's harmed by these actions and that the public is confused and is likely to assume falsely that an affiliation exists between the disputed trademark and American Queen.

In addition to seeking a finding that American Queen has violated the settlement agreement, American Cruise Lines asked the court to order surrender of the offending domain names, and a transfer of all prospective customers names obtained after Nov. 2012 from Internet searches and telephone directory- assistance system inquiries involving its trademarks.

The Connecticut company also asked for a discontinuance of any Great American Steamboat ads that link to the "Great American Steamboat Co." trademark, and for awards of $12 million in damages, in addition to attorney fees and litigation costs.

American Queen didn't respond immediately to an e-mailed request for comment.

The case is American Cruise Lines Inc. v. HMS American Queen Steamboat Co. LLC, 1:13-cv-00324-UNA, U.S. District Court, District of Delaware (Wilmington). The earlier case is American Cruise Lines Inc. v. HMS American Queen Steamboat Co LLC, 1:11- cv-000889-JEI-KW, U.S. District Court, District of Delaware (Wilmington).


DKNY Says 'Sorry' to Photographer, Donates $25,000 to YMCA

LVMH Moet Hennessy Louis Vuitton SA (MC)'s DKNY label has apologized to a New York photographer whose photos were used in a DKNY window display in Bangkok without his permission, the BBC reported.

Photographer Brandon Stanton, whose images appear in his Humans of New York blog, rejected an offer from the clothing company to license the images for $15,000 according to the BBC.

He said the offer was too small and asked for more money, which DKNY refused to give him, the BBC reported.

DKNY then apologized, and, in response to Stanton's request, donated $25,000 to a YMCA in New York, with the photographer asking his fans to give the charity another $75,000 to help send underprivileged children to summer camp, according to the BBC.

Trade Secrets/Industrial Espionage

Government Told to Try Harder to Serve Kolon Industries

A criminal trade-secrets theft trial against South Korea's Kolon Industries Inc. (120110) was delayed after a federal judge ruled that the company hadn't been properly served with court papers.

U.S. District Judge Robert Payne in Richmond, Virginia, in a Feb. 22 order, said that the government is "directed to proceed expeditiously" to serve Kolon with the appropriate court documents.

In a 59-page opinion, Payne cited the deficiencies of each of the government's attempts to deliver the legal papers to Kolon. He directed the court officials to issue a summons, upon the request of the government, for Kolon to appear on June 7, or, if the summons isn't served by that date, then on the third Thursday following the delivery of the summons.

In October, an indictment was unsealed alleging the company and some of its employees engaged in what the Justice Department called "a multiyear campaign" to acquire trade secrets related to DuPont Co.'s Kevlar fiber and a second fiber made by Japan's Teijin Ltd. (3401)

The government accused Kolon of a scheme to use purloined trade secrets so it could bring its Heracron fiber to market quickly in order to compete with Kevlar. The company was charged with one count of conspiring to convert trade secrets, four counts of theft of grade secrets and one count of obstruction of justice.

Kolon allegedly targeted current and former employees from DuPont and Osaka-based Teijin and hired them to serve as consultants, then asked them to reveal their former employers' trade secrets.

In September 2011, in a civil case brought by DuPont, a jury in federal court in Virginia awarded DuPont $919.9 million for trade-secret theft. The Korean company said at the time that the case was "the result of a multiyear campaign by DuPont aimed at forcing Kolon out of the aramid fiber market," and it would appeal the verdict.

In the same case in 2012, also overseen by Payne, the court ordered Kolon to quit manufacturing Heracron for 20 years. Kolon filed an appeal and a federal appeals court granted a stay of the order.

The criminal case is U.S.A. v. Kolon Industries Inc., 3:12- cr-00138-REP, U.S. District Court, Eastern District of Virginia (Richmond). The civil case is E.I. du Pont de Nemours and Co. v. Kolon Industries Inc., 3:09-cv-00058-REP, U.S. District Court, Eastern District of Virginia (Richmond).

(Bloomberg ) Corning Sees 3-Year Wait on Flexible Glass

Corning Inc. (GLW), the maker of glass for Apple Inc. (AAPL) iPhones, said it will probably take at least three years before companies start making flexible displays using its new Willow material.

Companies are yet to come up with products that can take full advantage of Willow glass, which can be made in a roll similar to newsprint, James Clappin, president of Corning Glass Technologies, said in an interview in Beijing today. The product eventually will let companies make curved or flexible displays.

"People are not accustomed to glass you roll up," Clappin said after an event marking the opening an $800 million factory for liquid-crystal-display glass. "The ability of people to take it and use it to make a product is limited."

The Corning, New York-based company is producing the glass and making "a lot of effort" to teach "very big name" customers how to handle the spools, Clappin said, declining to elaborate. The introduction of the glass comes as companies including Google Inc. consider making wearable computing devices.

The Willow glass should be used in some simple products this year, Clappin said. Examples may include a flexible barrier for solar panels or as a thin film behind some touch panels, he said.

Corning sent out samples of the flexible glass to makers of phones, tablets and TVs in June. Chief Financial Officer James Flaws said at the time the company hoped it would be available in consumer products this year.

Computer Eyeglasses

Corning rose 1.1 percent to $12.73 at 10 a.m. in New York. The shares are little changed this year, compared with a 6.3 percent advance for the Standard & Poor's 500 Index.

Google (GOOG) has been working on eyeglass-embedded computers and plans to introduce them in 2014. Apple has a team of about 100 product designers working on a wristwatch-like device that may perform some of the tasks now handled by the iPhone and iPad, two people familiar with the company's plans said this month. Clappin declined to comment when asked whether Corning had any contact with Apple on this project.

Surging global sales of smartphones have helped boost earnings for 161-year-old Corning. Gorilla Glass, which was introduced in 2007, is used in more than 1 billion devices worldwide, according to the company. Corning has sold the glass to 33 electronics makers, including Samsung Electronics Co. and Sony Corp., for use in more than 900 models.

Sales of Gorilla Glass surged 44 percent to $1 billion last year. The product is the second-most profitable and the fastest growing in Corning's history, Chief Executive Officer Wendell Weeks said this month.

Gorilla Glass sales may also grow "dramatically" alongside a projected increase in demand for new touchscreen notebooks, Clappin said.

"We sell a lot of Gorilla Glass in cellphones, but a notebook is 10 times the size, 10 times the area," he said. "Glassmakers sell in square feet. We like area -- the bigger the area, the better."

Tuesday, February 26, 2013

(BN) Web Courses Fuel Falwell’s College

(Bloomberg ) Three times a week almost 13,000 students at Liberty University assemble for an hour of singing and speeches, evoking the spirit of a revival meeting that also attracts Republican politicians and Christian celebrities such as New York Jets quarterback Tim Tebow.

The collegians make up just 14 percent of the student body. The Lynchburg, Virginia-based school founded by Baptist minister Jerry Falwell in 1971 has an additional 82,500 online students, more than twice as many as three years ago, making Liberty the largest, private nonprofit university in the U.S.

"When I look at those numbers it still boggles my mind," said Jerry Falwell Jr., a soft-spoken lawyer who took over the institution after his father died in 2007.

Nonprofit private and state schools alike are discovering what for-profit colleges such as Apollo Group Inc. (APOL)'s University of Phoenix and Washington Post Co. (WPO)'s Kaplan University figured out more than a decade ago. Faced with a swelling number of overleveraged student borrowers, cuts in public subsidies and paltry endowment investment returns, they are embracing the Internet as a viable alternative to educating students.

Liberty stands out because it is growing like for-profit colleges did before competition and federal scrutiny of recruiting tactics and graduation rates crimped their business, according to David Clinefelter, chief academic officer at the Learning House. While Liberty is capitalizing on a niche in the evangelical community, which accounts for about a quarter of the U.S. population, it is also helping chart a course for other schools to expand online, he said.

Tech History

"There's a science to it and Liberty is applying it very well," said Clinefelter, whose Louisville, Kentucky-based company advises schools on setting up Internet-based operations. "The margins are bigger in these online programs if the institution can figure it out."

For Liberty, using technology to reach the masses is in its DNA. Falwell was one of the original televangelists, starting the Old Time Gospel Hour program shortly after founding the Thomas Road Baptist Church in Lynchburg in 1956. Liberty's Home Bible Institute began in 1976 and in 1985 the school started an external degree program using videotapes, which morphed into the online operations about five years ago.

When his father died, Falwell Jr., 50, reorganized the university, which teetered on the edge of bankruptcy in the early 1990s, while his brother Jonathan took over the church. He appointed administrators to all of Liberty's schools and colleges to coordinate and improve Web course offerings. Faculty members, which outside of the law school aren't offered tenure, were given incentives to teach the courses.

'Printing Money'

Liberty Online occupies about 40,000 square feet in the main administrative building on the Lynchburg campus and employs about 300 people who recruit, enroll and advise prospective and existing students. With most online students paying $325 a credit hour, Web-based revenue this academic year has surpassed the residential program, which costs about $27,000 for tuition, room and board.

"These stumblebums down here in this redneck town are plotting to provide volume education around the world," Ronald Godwin, 75, Liberty's provost and a former Washington Times Corp. executive, said half mockingly. "We are already printing money, but we are doing this because it is our mission."

Falwell Jr.'s father, who founded the Moral Majority and helped elect Ronald Reagan president in 1980, vowed to build a standard bearer for evangelicals akin to what the University of Notre Dame is to Catholics and Brigham Young University to Mormons.

Creation Studies

Amid the rapid growth, Liberty has stuck to its evangelical roots. In order to graduate, everyone must take creation studies, which balances the teaching of evolution with the view that God created the world, including fossils that only appear to be millions of years old. Residential students can be fined or expelled for drinking, smoking or having sex out of wedlock, among other infractions.

Faculty members are similarly held to standards and must be Christian. Led by its activist law school, Liberty is a litigant in one of the remaining lawsuits against President Barack Obama's Affordable Care Act, arguing that the law infringes on the free exercise of religion and its opposition to abortion.

"This dream of turning it into Notre Dame won't work for Liberty," said Adam Laats, an assistant professor in education and history at Binghamton University in Binghamton, New York. "Liberty University faculty will always be more constrained in the breadth of intellectual diversity they can welcome."

120 Programs

That isn't stopping the school from trying. While it was founded as a Bible college, it has been bolstering its liberal arts curriculum as its online operations expand, adding new programs of study such as cinematic arts. The law school, which opened in 2004, was fully accredited in 2010. There are about 160 programs online, from an associate degree in accounting to a doctorate in theology, according to the school website.

The interactive courses are typically offered over eight weeks and guide students through assignments, tests, papers and discussion groups. The call center in Lynchburg fields questions both over the Web and telephone.

Jasmine Lovelady, a 26-year-old online psychology major in Prairie Farm, Wisconsin, transferred from for-profit Ashford University, saying Liberty offered a higher quality education and better suited her values.

"It's more flexible," said Lovelady, who is married and works full time. "I don't have to commute somewhere to do it."

Liberty also dissects its competition, going so far as enrolling six employees from its online division at for-profit schools to monitor them.

Building Boom

As competition from other universities grows, Liberty has begun exploring whether it can offer classes in different languages with an eye on the overseas market, and is also forming a for-profit subsidiary to consult with other schools on setting up their own programs, Falwell Jr. said.

Liberty is also remaking its campus near the foothills of the Blue Ridge Mountains. It has broken ground on a $50 million library, $40 million medical school, dormitories, welcome center and a 2,500-seat baseball stadium next to its football field. There's a snowless, synthetic ski slope overlooking the college from a nearby mountain. In the past two years, the university has borrowed more than $200 million to finance construction.

Falwell Jr., whose mild manner contrasts with his father, who infamously blamed the Sept. 11 terrorist attacks on pagans, abortionists, gays and lesbians, said the university has taken another step to becoming the next Notre Dame by applying to have its football team be eligible to play in nationally televised bowl games.

"It doesn't matter what they say about you," said Falwell Jr., echoing his father. "It's that they're talking about you."

(BN) Google to Track Effectiveness of Ads of Ads

(Bloomberg ) Google Inc. (GOOG), seeking more customers for its marketing services, is unveiling a tool to collect feedback from consumers on the effectiveness of Web-advertising campaigns.

Marketers will be able to ask online users questions to measure data such as brand awareness, Susan Wojcicki, senior vice president of advertising, said in an interview. While marketers track performance based on which ads are clicked, the survey service aims to better measure whether users might later recall product names or consider purchases after viewing promotions, which can include videos, pictures or graphics.

Google is crafting new tools to help it expand beyond search-based advertising and fend off rivals such as Facebook Inc. (FB) and Yahoo! Inc. (YHOO) Google got 84 percent of its revenue from ads in the latest quarter, and is expected to grab 43 percent of the 2013 U.S. digital-ad market, which is projected to grow 14 percent to $42.5 billion, according to EMarketer Inc.

"There's a lot more work that we can do here," Wojcicki said in an interview prior to a presentation at the Internet Advertising Bureau meeting today in Phoenix. "We are investing a lot more in our brand advertising business. That's definitely a focus for us."

The new service builds on past efforts, including a feature called Brand Activate, which signals when an ad has been viewed.

The new tool borrows from a marketing research service called "Google Consumer Surveys," which gives people access to premium online content after they complete questionnaires. The new service will be initially available for customers buying video ads on YouTube, Google's video-sharing site.

The ad feature rollout is part of the company's broader push to provide marketers with more metrics on how advertising is performing online, Wojcicki said.

"We're basically in a really dynamic and important time," she said. "Because users are moving digitally so fast, advertisers have to move as fast as users."

(BN) Lexus Named Top Car Brand in Consumer Reports Rankings

(Bloomberg ) Japanese car brands, led by Toyota Motor Corp. (7203)'s Lexus, took the top seven spots in Consumer Reports magazine's annual quality rankings, as the top U.S. brand placed 14th out of 26 in the ratings.

Lexus received the most points based on the scores of its eight models, all of which the magazine recommends buying. Parent-company Toyota's namesake line tied for fourth place with Honda Motor Co.'s Acura brand. Subaru, a unit of Fuji Heavy Industries Ltd. (7270) that placed first among automakers last year, was second and Mazda Motor Corp. (7261)'s Mazda was third.

Consumer Reports changed its ranking system this year, breaking out brands instead of ranking automakers according to collective scores for all their lines.

"We feel this is more in line with how people shop," Rik Paul, the magazine's automotive editor, said in an interview before the rankings were released today at the National Press Club in Washington.

Consumer Reports, published by Consumers Union, tests and evaluates cars for how well they drive, interior-finish quality, fuel economy and reliability. The rankings influence car buyers and are published in the magazine's annual auto issue.

Japanese brands combined to account for 36.9 percent of vehicles sold last year in the U.S., according to Autodata Corp., a researcher based in Woodcliff Lake, New Jersey.

Reliability Issues

General Motors Co. (GM)'s Cadillac, boosted by the CTS, was the top U.S. brand, ranking 14th. The CTS was rated above-average for reliability and called "as capable as its German rivals."

The bottom six brands in the rankings were U.S.-based -- Chrysler Group LLC's Chrysler, Dodge and Jeep; Ford Motor Co. (F)'s Ford and Lincoln; and GM's Buick.

"The American automakers are getting better," Paul said. "As much as companies are improving, companies like Toyota and Honda are still raising the bar."

Chrysler accepted the criticism and said it's working to improve its vehicles.

"Although we are moving in the right direction, we'll be the first to acknowledge that we need to improve faster," Doug Betts, senior vice president for quality, said in an e-mail. "We're aggressively upgrading our product lineup. For example, we're already making significant investments to vehicles already recommended by Consumer Reports -- Jeep Grand Cherokee and Dodge Durango."

MyFord Touch

Ford said it's working on improvements to infotainment and transmissions.

"In North America at the moment, J.D. Power and other third-party results validate our own internal metrics showing isolated areas for improvement -- primarily with MyFord Touch and PowerShift automatic transmissions," Wes Sherwood, a Ford spokesman, said in an e-mail. "The good news is customers already are benefiting from the updates we made to both technologies."

"Ford has had problems with reliability," Paul said, because the company's infotainment system is difficult to use and repair-prone. That fault "hits them twice" in rankings on the road test and reliability, he said.

Cadillac's in-vehicle infotainment system is "following down the path of Ford and Lincoln," Jake Fisher, director of auto testing, told reporters today. "It takes a long time to do simple things."

'Good Track'

GM is making progress, Mike Hardie, the automaker's director of global quality strategy, said in an interview.

"There's certainly a lot of work to do, but I do believe we're on a good track and we really want to score better," Hardie said.

About 70 percent of GM's product portfolio is turning over in the next 12 months, Hardie said.

"We anticipate grand and glorious things in the future," he said.

Lexus earned praise for vehicles that are "generally quiet, plush and very reliable, though they're rarely sporty," the Yonkers, New York-based magazine said.

The ranking for Lexus "speaks to our renewed focus on quality, and listening to customers and giving them what they want," said Michael Kroll, a spokesman for the Toyota brand.

Toyota sold 2.08 million cars and light trucks in the U.S. last year, trailing only GM and Ford, as it expanded its Prius hybrid lineup and its Camry midsize sedan remained the nation's best-selling car model.

Audi, Volkswagen

Because redesigns of Chrysler's Dodge Ram and GM's Chevrolet Silverado haven't been tested, the magazine elected not to make a "best pick" among all types of pickups this year. In its place, Consumer Reports brought back the "budget car" category, choosing Hyundai Motor Co. (005380)'s Elantra as the best car for less than $20,000.

Honda's Accord won the best pick for the midsized sedan category, the top-selling vehicle class in the U.S. Volkswagen AG (VOW)'s Audi A6 was the best pick for luxury cars and Bayerische Motoren Werke (BMW) AG's 328i was the best pick for sports sedans, bringing German automakers back into the best picks list for the first time in a decade.

"Audi has come a long way," Fisher said. "Five years ago, I never thought I would be talking about Audi and reliability in the same sentence or even the same paragraph."

Volkswagen, Europe's largest carmaker, placed 16th in brand rankings. The manufacturer has a target of overtaking Toyota and GM to become the world's biggest carmaker by 2018. Its U.S. sales have been undeterred by poor reviews by Consumer Reports of its Jetta SE sedan, which placed last in its category of compact sedans.

Deliveries of Volkswagen brand cars and SUVs surged 35 percent in the U.S. last year to 438,133, the best since 1973. The division has more than doubled its market share since 2007, to 3 percent from 1.4 percent.

(BN) Failing to Beat Apple, Nokia Aims for BlackBerry

(Bloomberg ) As erstwhile smartphone leader Nokia Oyj fails to gain much headway on Apple Inc. and Samsung Electronics Co., the Finnish company is setting its sights on a weaker rival: BlackBerry.

Nokia is betting its partnership with corporate-computing giant Microsoft Corp. will help it win business users, targeting BlackBerry's stronghold. Nokia's newest Lumia smartphones, including two introduced this week at the Mobile World Congress in Barcelona, run on Microsoft's operating system and come with Excel, Word and PowerPoint.

Gaining a foothold in the business market is crucial for Nokia as it and BlackBerry fight for third place in smartphones, behind Samsung -- the leader in devices using Google Inc.'s Android -- and Apple. Shares of both Nokia and BlackBerry have lost 90 percent in the past five years as first consumers and then companies have turned to Android and Apple's iOS.

"The importance of winning the business audience on a scale of 1 to 10 is easily an 11," said Ramon Llamas, an analyst at research firm IDC in Boston. He expects Windows Phone handsets to surpass BlackBerry this year, with Nokia responsible for most of the gains.

BlackBerry, formerly known as Research In Motion Ltd., pioneered the corporate mobile-device market in North America and still has a strong following in Washington and on Wall Street. Nokia, the biggest seller of Windows handsets, may appeal to information-technology chiefs seeking easy synchronization between smartphones and company computers, which most often use Microsoft's operating system.

'Perfect Moment'

Nokia Chief Executive Officer Stephen Elop, who joined from Microsoft in 2010, started betting on his former employer's operating system after Nokia's homegrown Symbian software fell out of favor among consumers.

Lumia unit sales rose to 4.4 million in the fourth quarter, making up almost 75 percent of all Windows Phone sales. BlackBerry sold 7.4 million smartphones, for 3.2 percent of the global market. IPhones and Android devices together account for about 90 percent of smartphone sales.

Elop says he often gets asked whether he'd be interested in buying BlackBerry, even though the company hasn't said it's for sale. "When I get asked that question, my answer is 'I'm interested in their customers,'" he said in an interview in Barcelona this week. "It's a really perfect moment to go after that marketplace."

Cambodian Coke

Businesses are important to handset manufacturers because they carry a lot of clout when carriers decide which handsets to offer. A single corporate account can include thousands of individual users who tend to favor more expensive devices and have higher phone bills. Nokia says one European carrier it is negotiating with receives about a third of its revenue from companies.

Nokia has been touting its business-customer gains. The company says Coca-Cola salespeople in Cambodia and Vietnam use Lumia smartphones process orders while on the move. And it says London real-estate broker Foxtons Ltd. equipped more than 900 employees with Lumias, allowing them to synchronize calendars and work on spreadsheets and documents on the road.

Multitasking Whiz

BlackBerry delayed its new operating system, BlackBerry 10, several times. In March it plans to start U.S. sales of the $199 touch-screen Z10, which Bloomberg's Rich Jaroslovsky called "handsome, intuitive to use and a whiz at multitasking."

The company, based in Waterloo, Ontario, has more than 250,000 enterprise servers around the world, which help it ensure the security of corporate communications. It says more than 3,500 companies and government agencies in North America are considering its latest devices.

"It's not surprising that competitors are scrambling to get into the enterprise," said David J. Smith, BlackBerry's executive vice president for mobile computing. He said his company still offers the greatest security for corporate data.

With mobile devices evolving rapidly and the market growing, Nokia can win new customers as business users consider changing providers, according to Chris Weber, the company's global sales chief.

"We need to keep pushing," Weber said over coffee at Nokia's headquarters in Espoo, Finland. "It's a good opportunity now with people and companies trying to decide which way to go."

Simply defeating BlackBerry may not be enough for Nokia. Apple and Android manufacturers have almost squeezed other operating systems out of the consumer market, and there's no guarantee they won't do the same in the business world.

Third Ecosystem

Samsung, the world's biggest maker of smartphones, bought security software company Fixmo Inc. last month to improve its corporate credentials. Apple this month gained some Home Depot Inc. managers as customers. And in October, the U.S. Defense Department said it plans to open its network for the first time to Android devices and iPhones.

Nokia sales chief Weber acknowledges that Apple and Android are formidable foes. But he insists there can be what he calls a "third ecosystem" in the smartphone business.

"I am confident that the bet we have on Microsoft gives us the opportunity to be the third," Weber said. "I do think there's room and I think there is appetite."

No Singularity in sight. Ever.

The debate between proponents and opponents of strong Artificial Intelligence (AI) continues. A biologist specializing in the field calls Kurzweil's bluff:

(MTR 2/18/13) “The brain is not computable and no engineering can reproduce it,” says Nicolelis, author of several pioneering papers on brain-machine interfaces.

[F]uturist Ray Kurzweil, recently hired on at Google as a director of engineering, has been predicting that not only will machine intelligence exceed our own, but people will be able to download their thoughts and memories into computers.

Nicolelis calls that idea sheer bunk. “Downloads will never happen,” he said during remarks made at the annual meeting of the American Association for the Advancement of Science in Boston on Sunday. “There are a lot of people selling the idea that you can mimic the brain with a computer.”

Nicolelis thinks in the future humans with brain implants might be able to sense x-rays, operate distant machines, or navigate in virtual space with their thoughts, since the brain will accommodate foreign objects including computers as part of itself.

Recently, Nicolelis’s Duke lab has been looking to put an exclamation point on these ideas. In one recent experiment, they used a brain implant so that a monkey could control a full-body computer avatar, explore a virtual world, and even physically sense it.
 tags: control, brain, interface, computing, intelligence

Better life through brain stimulation

Synchronizing brain cells appears to do wonders for at least one mental disorder. Although researchers still wander in the dark, they are at least in the right house.
(MTR 02/25/2013)A brain-pacemaker helped put out-of-sync brain circuits back on track in patients with extreme forms of obsessive-compulsive disorder (OCD), reported researchers in yesterday’s Nature Neuroscience. The work could help improve treatment of severe OCD and even lead to other, less invasive new forms of treatment.

The next step, says Figee [, will be to see if he and his colleagues can use the brain activity measures to determine if a patient’s deep-brain stimulator is working properly. An implant has several electrodes, and it can take a lot of trial and error to learn which should be active and at which pulse settings for each patient. “We still don’t really know what we do; sometimes people respond, sometimes they don’t, sometimes it takes weeks or a year trying all kinds of settings,” he says. Using the brain scanning tools in the clinic may be years away, but it is possible, says Figee. “This may help us focus on the brain synchronization that we should aim for,” he says.

tags: control, brain, science, biology, health

Google Glass is the ultimate surveillance machine.

Google Glass has the potential to turn everybody into a surveillance camera. By capturing and analyzing video streams coming from multiple sources, Google would be able to cross-reference its image recognition algorithms with GPS data gathered by the target's Android or iOS device.

For example, when Bob's Google Glass device captures Alice on University Street in Palo Alto, Alice's mobile sends its location data to a Google Maps server. Although the two devices work independently, the information can be easily matched by timestamps and location data. Moreover, if Charlie sees Alice from a different angle, his Google Glass stream can be used to complement data received from Bob's and Alice's devices. If David — independently — tags Alice in his G+ post, the process of verification is complete. Unknowingly, Bob, Charlie, and David form a Google Glass spy network capable of tracking Alice's every move.

Although this scenario sounds a bit far fetched, Google has already implemented it in its web search engine. Because Google strives to download and index every available web page in the world, it knows which pages contain links to a particular page. Knowing the relationship helps Google assign high rank to pages that have a greater number of "incoming" links — the algorithm was Page's and Brin's research topic at Stanford. In short, if Alice, Bob, Charlie, and David are web pages, Google knows who sees whom. Similarly, Google has the ability to implement this logic for video streams, location data, and other bits and pieces of information collected from mobile devices.

tags: control, detection, social, network, packaged payload, google

(BN) Yahoo’s Mayer Risks Productivity by Work-at-Home Curbs

(Bloomberg ) Yahoo! Inc. (YHOO) Chief Executive Officer Marissa Mayer, by ordering staff to report to offices, risks losing the productivity gains that can come from flexible work arrangements and may jeopardize her ability to lure top talent.

Jackie Reses, Yahoo's executive vice president of people and development, sent a memo last week asking employees with work-from-home arrangements to make their way to the company's offices, starting June.

"To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side," according to the memo, whose contents were confirmed by a Yahoo employee who asked not to be identified because it's not a public document. "Speed and quality are often sacrificed when we work from home."

At a time when Mayer is under pressure to jump-start growth and create innovative products, the shift may compromise Yahoo's ability to attract employees seeking the freedom to work outside the office -- a perk offered by many of the company's competitors. Research suggests that working from home enhances productivity, said Jody Thompson, co-founder of workforce consultant CultureRx.

"Mayer has taken a giant leap backward," Thompson said in an e-mail. "Instead of keeping great talent, she is going to find herself with a workplace full of people who are good at showing up and putting in time."

Sara Gorman, a spokeswoman for Sunnyvale, California-based Yahoo, declined to comment on the memo or discuss the company's internal policies.

Less Stress

People who work from home tend to have less stress and are more productive, partly because they don't invest time and money in commuting, said Brad Harrington, executive director of the Boston College Center for Work & Family.

"When employees have family or other personal issues they need to take care of, the feeling is that by being able to work from home you can take care of those in a much shorter period of time than commuting," Harrington said.

The portion of U.S. workers who performed their job at least one day a week at home increased to 9.5 percent in 2010, from 7 percent in 1997, according to the U.S. Census Bureau.

In a study of call-center employees of a Chinese travel agency, researchers at Stanford University found a 13 percent performance increase for staff who worked from home.

Mayer, who last year became Yahoo's fifth CEO in four years, worked from her California home in October in the weeks following the birth of her first child.

'Backwards Step'

Richard Branson, founder of Virgin Group Ltd., said in a blog post yesterday that Mayer's decision ignores the advancements of mobile and video technology that have helped workers do their jobs whatever the location.

"This seems a backwards step in an age when remote working is easier and more effective than ever," Branson wrote in the post. "If you provide the right technology to keep in touch, maintain regular communication and get the right balance between remote and office working, people will be motivated to work responsibly, quickly and with high quality."

Mayer earned the support of some analysts and investors in January, after reporting the company's first annual sales increase in four years. Her changes will continue to be supported as long as she keeps delivering results, said Colin Gillis, an analyst at BGC Partners LP.

"She needs to rebuild the culture of this company, and she needs to drive revenue growth," Gillis said. "The whole notion of ending remote working, and whether it's right or wrong, it's her prerogative as CEO, and we'll see if that helps her with those first two goals."

(BN) Digital Dreams Languish in Europe Phone Carriers’ Plans

(Bloomberg ) "No more dumb pipes" has been European phone companies' mantra for years as they pursued digital projects such as payment systems and Internet application stores to rival Google Inc. (GOOG) Many of these ventures are now taking a backseat to more basic tasks.

After years of declining revenue from phone calls, Telefonica SA (TEF), Vodafone Group Plc (VOD) and Deutsche Telekom AG (DTE) have been hunting for new data sources ranging from cars to refrigerators to fill their networks, while trying to pry loose content providers' grip running high-margin programs over their infrastructure.

At the annual Mobile World Congress in Barcelona this week, carriers are still trying to show they're as much into software development as managing telephone networks. Yet as the networks themselves come under assault from cable providers and as cash for side projects gets harder to come by during the debt crisis, the real battle is to keep customers using their infrastructure in the first place.

"The various innovations haven't yet really made much of a difference to the top line," said Heinrich Ey, who helps manage more than 250 billion euros ($327 billion) at Allianz Global Investors in Frankfurt. "The need to come up with funds for network upgrades and the headwind on the revenue and cash flow doesn't leave much room to excel with new products and solutions."

'Engine Room'

Europe's telecommunications stocks were the worst performers last year, with the Stoxx 600 Telecommunications Index down 11 percent. The index is down 2.2 percent this year.

Telefonica fell 3 percent to 9.60 euros at 1:09 p.m. in Madrid. Vodafone slipped 0.9 percent to 162.70 pence in London, and Deutsche Telekom fell 1.3 percent to 8.17 euros on the Frankfurt exchange.

Deutsche Telekom cut its dividend last year to help finance network upgrades and has put the digital classifieds unit Scout24 Holding GmbH, home to the Bonn-based company's best- known digital brand, up for sale or an initial public offering. Chief Executive Officer Rene Obermann, one of the most vociferous proponents of non-infrastructure services, said in December he'll leave at the end of 2013 to go back into the "engine room" at a smaller company.

Partnership Focus

"If you're willing to devote the resources and work for years, eventually you may end up being competitive" in building own over-the-top solutions, Obermann told a conference in Barcelona today, referring to content and services offered on top of phone networks. "It's a long process."

Thomas Kiessling, Obermann's chief product and innovation officer, said yesterday Deutsche Telekom is increasingly focusing on partnerships with developers of content which makes the bandwidth it delivers more valuable.

In an example of partnership, Telefonica's digital division and Sprint Nextel Corp.'s Pinsight Media+ agreed last week to collaborate to help brands reach 370 million mobile customers in U.S., Europe, Latin America. The deal entails personalized direct messaging, display ads, location-based offers and in-app advertising.

'Long Shot'

Spain's biggest telephone company's digital division will generate annual sales of about 5 billion euros by 2015, Alierta said in July in London. "Investors are slowly becoming more aware of the importance of the digital assets," Alierta said in an interview in Barcelona.

Still, Telefonica has't managed to convince investors and analysts of any potential impact the digital strategy would have on earnings, said Andres Bolumburu, a Madrid-based analyst at Banco de Sabadell, calling the company's target "a bit of a long shot."

It's rare that phone operators manage to develop programs that really challenge "over-the-top" services, said Gyanee Dewnarain, an analyst at Gartner Inc. in London. Still, they may be successful if they differentiate themselves from their counterparts rather than copy them, she said.

SK Telecom Co. (017670), South Korea's largest wireless operator, set up an application sales platform that's more profitable than Apple Inc. (AAPL)'s App Store or Google Play by tailoring it to the local market and providing developers a faster approval process and more protection from copycats, Dewnarain said.

'Dinosaur Era'

"You should not try to diversify by keeping it within the core business; that's never going to work," she said. "You have some people from the dinosaur era who just don't get software."

Digital strategies also pose risks when it comes to managing innovation while seeking profit from the assets. After disagreements on the Telefonica digital board and fears of strangling the entrepreneurial spirit of some startups, some directors and managers, including the co-founder and CEO of its media unit Terra Fernando Madeira, decided to leave the company last summer, according to a person familiar with the matter.

As competing with software providers gets tougher, phone companies are working with over-the-top firms that give them a larger reach and the carriers a share of the revenue. TeliaSonera AB (TLSN) and Royal KPN NV (KPN) are among operators that have signed deals with music-streaming service Spotify Ltd., waiving restrictions on how much data users may transfer each month.

Near-Field Communication

Such partnerships, and innovations especially in so-called near-field communications or machine-to-machine products, have shown progress over the last decade. This week's convention is a chance to show them to the world, said Rafael Achaerandio, a research and consulting director at IDC in Madrid.

MWC "is a great store window to show off all digital strategies on a red carpet," Achaerandio said. "However, many of those don't live up to the expectations and have no impact on earnings. That's still the biggest challenge."

Sales from new technologies such as NFC or M2M will account for just 5 percent to 10 percent of telecommunications companies' total revenue, according to Andreas Mark, who helps manage about 191 billion euros at Union Investment in Frankfurt. That means they need to focus on their core business of supplying the best network, he said.

"It appears like they're returning to the basics --to position themselves as a quality provider of infrastructure," said Jochen Reichert, an analyst at Warburg Research in Hamburg.

(BN) Pentagon Will Open Networks to Apple, Google Devices in 2014

(Bloomberg ) The U.S. Defense Department said today it plans to open its networks by next February to about 100,000 mobile phones and tablet computers made by companies such as Apple Inc. (AAPL) and Google Inc. (GOOG)

The move may pose a threat to BlackBerry (BBRY), the Pentagon's biggest supplier of smart phones. The Waterloo, Ontario-based company has lost market share to competitors and aims to make a comeback with its new BlackBerry 10 phone. The device will go on sale in the U.S. next month.

The Pentagon said it wants employees to have the flexibility to use commercial products on classified and unclassified networks. It plans to create a military mobile applications store and hire a contractor to build a system that may eventually handle as many as 8 million devices.

"This is not simply about embracing the newest technology –- it is about keeping the department's workforce relevant in an era when information accessibility and cybersecurity play a critical role in mission success," Teri Takai, the department's chief information officer, said in a statement.

The Pentagon has more than 600,000 mobile devices, including 470,000 BlackBerrys, 41,000 Apple products and 8,700 platforms running Google's Android operating system, according to the statement.

The military has relied on BlackBerrys, and it has been testing the Apple and Google Android devices.

The networks will remain closed to personal wireless devices for now, according to the Defense Department.

The recent bring-your-own-device trend in the civilian workplace "presents many compelling benefits," though existing Pentagon policies and security vulnerabilities "prevent the adoption of devices that are unapproved and procured outside of official government acquisition," Takai said in an attachment to a memo dated Feb. 15 and released today.

(BN) Polypore, Sony, Google, Microsoft: Intellectual Property

(Bloomberg ) Polypore International Inc. (PPO)'s Celgard unit filed a patent-infringement suit against Sumitomo Chemical Co. (4005) over lithium-ion battery technology used in electronics and electric vehicles.

The complaint, filed Feb. 22 in federal court in Charlotte, North Carolina, claims Sumitomo is infringing patent 6,432,586, which was issued in 2002 and covers a separator in high-energy rechargeable batteries. The separators prevent short circuits that can reduce efficiency and limit safety problems from overheating.

Sumitomo Chemical makes the chemicals and materials for lithium ion batteries that use Celgard's invention without permission, according to the complaint. The separators are used in batteries made by Panasonic Corp. (6752) for laptop computers, Celgard said in the suit.

"Celgard has a long history of innovation in lithium-ion battery separators and is a world leader in this technology," Polypore Chief Executive Officer Robert Toth said in a statement. "We have a responsibility to our customers, partners, and shareholders to safeguard the investments we make in innovation."

Tokyo-based Sumitomo Chemical has filed a trademark application to use the name "Pervio" for its separators, according to the complaint.

Polypore is seeking a court ruling that prevents the future use of the invention, plus cash compensation.

Polypore, based in Charlotte, also makes Duralife automotive batteries, and separators for health-care products like hemodialysis machines and beverage filtration machines. Weakness in the end market for electronic devices and electric vehicles were blamed for a 4 percent drop in fourth-quarter sales to $180.2 million, Polypore said Feb. 20.

The case is Celgard LLC v. Sumitomo Chemical Co., 13cv122, U.S. District Court, Western District of North Carolina (Charlotte).

Reckitt Benckiser Faces Generic Threats After FDA Rejection [bn:WBTKR=RB/:LN]

Reckitt Benckiser Group Plc (RB/) [] faces competition in pharmaceuticals for the first time after the U.S. Food and Drug Administration approved two generic variants of its Suboxone heroin-dependency drug, thwarting the company's attempts to keep rivals away from its most profitable business.

The company said yesterday that two manufacturers have FDA approval to produce generic Suboxone tablets in the U.S. Competition could arrive within a month, according to Alex Howson, an analyst at Jefferies International in London.

Reckitt Benckiser was also hurt by the FDA's rejection in a Feb. 22 letter of the company's September petition asking that makers of similar medicines implement more safeguards. The FDA also asked the Federal Trade Commission to look into claims by generic drug makers of anti-competitive business practices on Reckitt Benckiser's part.

The shadow of competition to Suboxone has hung over the Slough, England-based company since it lost U.S. patent protection in 2009. The pharmaceuticals unit generated 21 percent of profit last year, and analysts yesterday reduced their 2013 profit estimates by as much as 4 percent.

Reckitt Benckiser, which said it was "disappointed" by the rejection of its petition, has said generics would eliminate as much as 90 percent of tablet sales and up to 20 percent of the newer film-strip version, which dissolves under the tongue and has captured a 64 percent volume share in the U.S.

One of the generics will come from Bridgewater, New Jersey- based Amneal Pharmaceuticals LLC, which said in a statement yesterday that is has received FDA approval for a generic version of Suboxone tablets, to be available in March. The other will be made by Actavis Inc. (ACT) of Parsippany, New Jersey, which said in a statement it intends to begin shipping its product immediately.

Reckitt Benckiser said it's sticking with its decision to stop producing Suboxone in tablet form next month as it weans patients onto the film-strip version, which it unveiled in 2010.

Sony Applies for Patent on Load Time-Based Anti-Piracy Measure

Sony Corp., maker of the PlayStation video game console, is seeking a patent on a technology aimed at detecting pirated games.

According to application 20130047267, published in the database of the U.S. Patent and Trademark Office Feb. 21, devices using this patented technology will be able to identify whether a game is legitimate based on the amount of time it takes to load into the device.

This will detect whether the game -- or other content -- is "illegally transferred or pirated to another, unauthorized media type." Sony said that despite the use of digital rights management software and tamper-resistant hardware, pirates are able to reverse-engineer such technology and circumvent the protections.

Using this technology, a device will have a threshold of load time for legitimate content. If the media doesn't pass the validation in terms of load time, the user would be unable to access the content, Sony said in its application.

Tokyo-based Sony filed the application in August 2011.


'Smart Ovens' Abound, as Do Applications to Register Trademark

Breville Group Ltd. (BRG) and Samsung Electronics Co. (005930) have both filed applications to register "Smart Oven" as a trademark in Australia, Appliance magazine reported.

Electrolux AB (ELUXB)'s Electrolux Australia had previously applied to register the term in Australia, according to the magazine.

Samsung has also filed a U.S. application for a "Smart Oven" trademark, Appliance Magazine reported.

South Korea's LG Electronics Inc. (066570) is also coming out with a "smart oven," according to the magazine.


Google's YouTube Tells Nascar It's Unblocking Fan's Crash Video

Following a copyright infringement claim from the National Association for Stock Car Auto Racing, Google Inc.'s YouTube video-sharing service blocked and then unblocked a race fan's video of the crash at the Feb. 23 Daytona 500 race, the Washington Post reported.

Nascar asked for the removal of the video "out of respect for those injured," the race company said in a statement, according to the Post report.

YouTube then put the video back up, saying "Our partners and users do not have the right to take down videos from YouTube unless they contain content which is copyright infringing, which is why we have reinstated the videos," according to the Post.

The fan's video shows a race-car wheel that ended up in the stands, with race viewers waving for help, the Post reported.

Trade Secrets/Industrial Espionage

Microsoft Says Its Computers Were Hit by Cyber Attack

Microsoft Corp. (MSFT), the world's largest software company, said in a statement that "a small number" of its computers were hacked in a recent cyber attack.

The computers were attacked by "malicious software" using techniques similar to those experienced and reported recently by Apple Inc. (AAPL) and Facebook Inc. (FB), the Redmond, Washington-based company said in its statement posted on the company website Feb. 22.

None of its customers' computers were affected in the attack, Microsoft claims. The company is in the middle of an investigation of the attacks and said that this type of attack "is no surprise" to the company.

Microsoft said it doesn't make any statements about such attacks during the initial information-gathering process.

'Major' German Companies Hit With Cyber Attacks, Official Says

Stefan Keller, the head of the German Interior Ministry's department in charge of cyber security, told the European Police Conference that 70 percent of all major Germany companies "are threatened or affected" by cyber attacks, Der Spiegel reported.

The "overwhelming number" of attacks targeting German government agencies are coming from China, mainly Beijing, Shanghai and Guangzhou, according to Der Spiegel.

Proposed German legislation may contain a requirement for companies that are targets of cyber attacks to report them to the government, the newspaper reported.

Presently, "it is a question of coincidence" that the government learns about attacks against German companies, Der Spiegel reported.

Monday, February 25, 2013

(BN) Silicon Valley Shifting to Power Grid After Solar Sours

(Bloomberg ) Silicon Valley investors that helped build the solar industry are shifting cash into electricity-grid technology and energy-storage developers after bets on panel manufacturers failed to pay off.

Companies including VantagePoint Capital Partners and Khosla Ventures are stepping up funding for systems to manage electricity, which are typically less capital intensive than solar-panel factories. Venture capital and private-equity financing for renewables dropped to its lowest in at least six years in 2012, according to data compiled by Bloomberg.

Competition for the best investments from Blackstone Group LP to Warren Buffett along with a plunge in profit from the solar and wind industries prompted the shift. It pushed Silicon Valley into taking smaller stakes in emerging technologies that help squeeze efficiency and flexibility from power supplies.

"We are going through a repositioning of cleantech," said Wal van Lierop, founder of Chrysalix Energy Venture Capital, which is based in Vancouver. "The big sectors -- solar, wind and LEDs -- are in the process of being consolidated. They're maturing, so they fall out of the cleantech opportunity basket. We now are trying to find the next hot spots."

Investment flowing from private equity and venture capital firms into renewable energy fell 34 percent to $5.75 billion last year, according to Bloomberg New Energy Finance, the lowest since at least 2006. That accounted for 2.2 percent of the $268.7 billion invested in the clean energy industry, down from as much as 6.5 percent in 2008.

Grid Technology

Chrysalix invested in the energy-management providers Enbala Power Networks and AlertMe Ltd. Khosla funded LightSail Energy Inc., which is developing energy storage devices.

"Our specialty is with large technology risk, where if the technology works there's a big economic breakthrough," Vinod Khosla, the billionaire founder of Khosla Ventures in Menlo Park, California, said in an interview. "That's what we keep looking for in all areas."

Alan Salzman, chief executive officer of VantagePoint Capital Partners, said systems that allow energy to be used more efficiently and help the grid cope with variable supplies from wind and solar plants represent the richest new areas.

Energy storage is "an essential component" for renewable energy to thrive, Salzman said. "That's an area that has been hugely underserved historically that we think remains hugely interesting," he said.

Energy Efficiency

VantagePoint, based in San Bruno, California, backed Next Step Living Inc. and Tendril Networks Inc., which developed energy-efficiency software to reduce power consumption.

"One of the disappointments in the U.S. is that our utility smart-grid deployments have really slowed," Salzman said. Deployments have "shifted overseas right now, away from the U.S., because of our regulatory environment," he said. "It doesn't mean that our archaic system -- see Hurricane Sandy -- isn't ripe for updating."

So-called energy smart technologies including efficiency products and equipment for the electricity grid amounted to $2.2 billion of the clean energy investment from venture capital and private equity tracked last year by New Energy Finance. The category accounted for 38 percent of VC/PE funding for clean energy last year, up from 15 percent in 2008.

Renewables Dwindling

Profits have drained away from renewable energy in the past three years as manufacturing capacity surged quicker than demand. Solar cell prices plunged 74 percent since the end of 2010 to 40 cents from $1.46 for each watt of capacity. The cost of installing wind turbines on land fell 15 percent to $81.44 per megawatt of capacity since mid-2009, according to Bloomberg New Energy Finance estimates.

That reduced the industry's attractiveness for venture capital companies. With solar, now that the technology is proven, the industry's biggest challenge is driving down costs, said Raj Prabhu, managing partner at Mercom Capital Group in Austin, Texas.

Solyndra LLC got more than $1.2 billion in venture capital funding. Then it liquidated after competition from Chinese manufacturers priced its tubular solar modules out of the market. Panel maker MiaSole Inc. was sold in January to Hanergy Holding Group Ltd. for about $30 million. That's a fraction of the $494.4 million poured into it by Kleiner, Vantage Point and Firelake Capital, according to Mercom Capital Group.

VC Misfires

Another misfire for the VC investors was A123 Systems Inc. (AONEQ), a provider of batteries for electric cars. It filed for bankruptcy in October as sales of the vehicles failed to meet expectations. It got at least $278 million from VC firms including North Bridge Venture Partners LP and CMEA Ventures.

"VCs are really good at finding new technologies but not so good at manufacturing," Prabhu said. "They've learned that they need to stick to picking technology winners, not building factories. The new money is going downstream to help build markets. The industry is now mainstream."

As venture capital moves away from traditional renewables, mainstream investors are starting to move in. Buffett's MidAmerican Energy Holdings Co. decided in January to spend as much as $2.5 billion on two large solar farms, after forming a unit dedicated to wind and solar holdings last year.

The private equity company Blackstone Group LP (BX) in September bought Vivint Inc. for $2 billion, giving it access to a home- security and energy-management provider with more than 670,000 North American customers. Vivint says the networks that manage these services complement its growing residential solar systems by smoothing the flow of solar power onto the electricity grid and into homes.

Solar's Gleam

A few parts of the solar industry remain attractive for investors, even after the slump in the costs of panels. Elon Musk's SolarCity Corp. (SCTY) has more than doubled since its initial public offering on Dec. 12. It develops rooftop solar systems, which are more economical to install since the price of cells plunged.

Technology to store and conserve energy also is gaining attention among VC investors. Utilities are taking more of their power from renewables. Wind turbines produce power when there's a breeze, and solar only when the sun is up. Integrating those power flows into distribution grids used to coping with steady supplies from coal and nuclear plants requires new systems that give engineers more flexibility.

Black Coral

In December, Next Step Living, a residential energy- efficiency company, raised $18.2 million from VantagePoint, Black Coral Capital and the Massachusetts Green Energy Fund LP.

The month before, billionaire Peter Thiel led a $37.3 million fundraising for LightSail Energy Inc. It's developing storage systems that compress air in tanks and generate power when the air is released, backed by Khosla and Microsoft Inc. founder Bill Gates.

Gates and Khosla also joined French oil company Total SA (FP) in May for a $15 million second round for Liquid Metal Battery Corp., now called Ambri Inc., which is building batteries for the power grid that were developed by Massachusetts Institute of Technology Professor Donal Sadoway.

(BN) Twitter Joins With Adobe, Salesforce to Sell Ads on Site

(Bloomberg ) Twitter Inc., seeking to boost revenue, said it will work with partners including Adobe Systems Inc. and Inc. to sell advertising that appears alongside the social site's 140-character status updates.

Using software that taps into Twitter's ad platform, other companies will be able to sell promotions on its behalf and improve the relevancy of ads, Twitter said in a blog posting today. No financial terms were disclosed.

Twitter is following the approach of Facebook Inc., which has also enlisted outside software makers to sell ads on its social network. The alliances are aimed at helping businesses use tools such as Adobe's Media Optimizer and Salesforce's Marketing Cloud to place promotions simultaneously on multiple social-media sites, including Twitter, said Clark Fredricksen, vice president at EMarketer Inc.

"It will make it easier for companies that already buy ads on Facebook and other properties to also make buys on Twitter," Fredricksen, who is based in New York, said in an interview.

The ad partnerships could help Twitter, which is preparing for an eventual initial public offering, reach its target of $1 billion in revenue in 2014. The site is projected to increase sales by 89 percent to $545.2 million this year, EMarketer estimated. Twitter has 200 million active users.

In addition to Adobe and Salesforce, the company will let marketers buy messages through Hootsuite Media Inc., TBG Digital Ltd. and GraphEffect Inc.

Ad Platform

Salesforce customers, which include ad agencies Omnicom Group Inc. and Razorfish Inc., will now be able to determine which promoted tweets, or sponsored messages, have the best chance of reaching a certain audience, said Michael Lazerow, chief marketing officer of Salesforce Marketing Cloud.

"When we can show our clients that these are the tweets you should buy as promoted tweets and we take the guesswork out of it, you have a significant increase in the results," Lazerow said.

Twitter will still collect the full price paid by advertisers, while Salesforce can charge clients for other services, such as improving the targeting of those ads, Lazerow said.

Partners will tap into Twitter's ad platform via an application programming interface, or API, that lets software programs exchange information and work with each other.

After Facebook opened its advertising API to outside developers, it spawned a cottage industry of startups like Buddy Media, the ad software company Lazerow co-founded and sold to Salesforce last year.

About 60 percent of Facebook's advertising revenue in 2012 was generated by promotions purchased via third-party software, EMarketer estimated.

(BN) Microsoft Joins Apple, Facebook as Target of Cyberattack

(Bloomberg ) Microsoft Corp. (MSFT), the largest software maker, said a small number of its computers were infected by malicious software in a cyberattack similar to those experienced by Facebook Inc. (FB) and Apple Inc. (AAPL)

There's no evidence that customers were affected, Microsoft said in a blog post yesterday. Some of the techniques were similar to those documented by others, and the investigation is ongoing, Microsoft said.

The incident follows recent attacks that hit more than 40 companies, including microblogging service Twitter Inc., and were linked to an Eastern European hacker gang trying to steal company secrets, Bloomberg News reported Feb. 20, citing two people familiar with the matter.

"This type of cyberattack is no surprise to Microsoft and other companies that must grapple with determined and persistent adversaries," the company said in the blog post.

In the Apple breach, some the company's internal Mac computers were infected by malware spread through an iPhone- developer website, according to the people familiar with law enforcement's investigations. Apple said it had no evidence that any data was stolen.

Facebook, operator of the largest social network with more than 1 billion members, said Feb. 16 that some of its employees' laptops were infected after visiting a mobile developer's site. Twitter, the microblogging site with more than 200 million active users, said Feb. 2 that hackers may have accessed information on 250,000 users.

Security professionals call the recent incidents "waterhole attacks," since the hackers were targeting a desirable class of victims -- in this case, software developers congregating at a communal gathering place, like a waterhole in the desert -- rather than specific companies.

(BN) Nvidia Hitches Ride to Future on Android Games After PS3

(Bloomberg ) When Sony Corp. releases the PlayStation 4, Nvidia Corp. (NVDA)'s signature graphics chips won't be on the parts list. Nvidia Chief Executive Officer Jen-Hsun Huang figures that players have already left the living room.

Huang has come up with a hand-held gaming device from Nvidia itself. The executive, who co-founded the chip maker in 1993, has pushed it toward smartphones and tablets as those products demand better graphics for games and videos. Now he's looking to seed a future centered on mobile-game platforms like Google Inc. (GOOG)'s Android, which is free to license, rather than consoles from Sony, Nintendo Co. or Microsoft Corp. (MSFT)

"This is going to be the best way to enjoy games in the future," Huang, 50, said in an interview. "We felt that there's an opportunity for someone to make the open ecosystem more enjoyable."

Nvidia's Shield, unveiled at the Consumer Electronics Show in January, resembles a console's controller with a pop-up screen, and works for games like "Angry Birds" made for portable devices. It can connect to a TV, projecting play onto a big screen without consoles like the Wii U, Xbox 360 or PlayStation 3. It can also link wirelessly to some PCs, giving players access to pricier titles like "Call of Duty."

The company, based in Santa Clara, California, was a pioneer of specialized chips that improved computing graphics and brought lifelike images to screens.

Graphics Wars

Over time, the market narrowed to a fight between Nvidia and ATI Technologies, now a part of Advanced Micro Devices Inc. (AMD) The rivals leapfrogged each other in performance and market share in both personal computers and game consoles. While Nvidia's current design is rated the best by reviewer sites, consoles coming to market this year had their technical specifications laid out as much as a year ago.

By latching onto the most widely used system in mobile phones, Nvidia is wooing gamers seeking more mobility and flexibility. The company is looking to spur development of more intensive Android games that require graphics power from chips like Nvidia's to create realistic environments.

Mobile Shift

It's a gamble for Nvidia, which gets more than 60 percent of sales from graphics processors it makes for other companies' PCs, consoles and tablets. The Shield, set to debut in the second quarter, will compete with a new generation of consoles from Nintendo, Sony and Microsoft. The PS4, Sony's next gaming console, was unveiled last week in New York.

U.S. sales data suggest players are embracing mobile platforms like Android at the expense of traditional gear. Revenue from games downloaded to computers and mobile devices rose 16 percent last year to $5.9 billion, according to researcher NPD Group. Revenue from packaged titles, most of which retail for about $60, fell 21 percent to $8.9 billion.

Huang sees opportunity for Nvidia, which has found a way to keep revenue growing as the markets for PCs and the graphics chips used in the machines decline. Nvidia sales grew 7.1 percent last year, in part because Huang branched out into mobile devices. The shares, which fell 12 percent in 2012, rose 1.9 percent to $12.52 on Feb. 22 in New York and are up 2.1 percent this year.

Shelling Out

At Sunnyvale, California-based AMD, which will have its products in all three new consoles, revenue declined 17 percent in 2012, while its shares dropped 56 percent.

"Nvidia gets that there's value to be derived from the ability to play games on the big-screen TV at home, on a PC and then on a mobile or portable device," said Lewis Ward, an analyst at researcher IDC. "The cross-platform approach to gaming is something that has potential."

One challenge is to convince Android gamers, who so far have stuck with smartphones, to shell out for a dedicated gaming device. Sales of Sony's $250 Vita and Nintendo's $170 3DS, for example, have missed estimates.

Handheld Crowd

While Nvidia hasn't set a price, a gaming tablet from Los Angeles start-up Wikipad will cost $249 when it hits the market in the next few months. Ouya, a Kickstarter-funded console that has generated buzz with gamers, will cost $99.99 in June. Both play Android titles and, like the Shield, use Nvidia's Tegra chips.

Another question is what resources game developers will dedicate to Android, which is dominated by $5-and-under casual titles. Showing off Shield's capabilities requires play to be tailored for controllers with triggers and joysticks.

Game creators typically limit development resources to platforms that have large built-in markets, said Ward, the IDC analyst. He estimated that fewer than 200 Android-based games can be played with a controller.

'Early' Move

Ultimately, Huang sees a world of cloud-based gaming networks that handle the heavy computing. The company has begun selling a line of custom-built server machines called Grid that are based on its graphics processors. Those products would allow broadband providers to stream games directly to TVs and handhelds, with no console. While similar services haven't attracted as many subscribers as were targeted, Nvidia is trying to make it easier to set them up.

"It's the right move, but it's early," said Doug Freedman, an analyst with RBC Capital Markets in San Francisco. There's speculation Nvidia had no choice because its chips weren't included in the Wii U and won't be in coming consoles from Sony and Microsoft, he said.

Sony declined to comment on its PlayStation suppliers, said Dan Race, a spokesman. Hector Marinez, a spokesman for Nvidia, declined to comment on the company's decision process.

Huang said he has set up a dozen trial cloud-gaming services with the Grid, and is expecting more. Partners include Agawi Inc. in the U.S., Israel's Playcast Media Systems and Japan's G-cluster Global Corp.

Sony Moves

"We're not expecting much revenue contribution because the trials will take many months," Huang said by telephone this month. The cloud trials are "the most important indicator of future success for me."

Sony, in the meantime, is emulating some of the most popular aspects of mobile gaming, and doing some things smartphone games can't to keep customers using its hardware.

The PS4, planned for release by the holidays, will have a controller with a touchpad feature, and allow players to share content and transfer play across devices, including the Vita, Sony said at a Feb. 20 event. Eventually, the company will offer older titles for streaming through its Gaikai cloud-based service. Also, the PS4 is being built on PC architecture, making it easier to develop games.

Google Play

Until a cloud-based world develops, the Shield will make use of current technologies. The device resembles Microsoft's Xbox 360 controller, with a flip-up high-definition screen attached to its face. Like consoles, it can also direct play onto TV screens.

To play non-Android titles like Activision Blizzard Inc. (ATVI)'s "Call of Duty" without a console, the Shield connects to the PC. Those machines need to be equipped with an Nvidia graphics card.

The company was smart to join the Android-based Google Play marketplace, said Bernard Kim, senior vice president of the social mobile publishing unit at Redwood City, California-based Electronic Arts Inc. (EA), second to Activision among U.S. game makers. "EA's games for Android will be playable on the Shield," he said.

At a minimum, Nvidia has gotten the attention of Sony. The company is monitoring Shield for any potential impact, Sony CEO Kaz Hirai said at CES in January.

"It takes a little bit of time to digest what's going on here," Hirai said. "It's not an easy business to get into."