Newspapers online. 07-20-2013 | Politics Ob

The sell off comes after the stock was riding at five-year highs and is the biggest in percentage terms since April 2000, when the world's largest software company was locked in an antitrust dispute with the U.S. government and the internet stock bubble was deflating rapidly.

Friday's loss means about $36 billion has been wiped off Microsoft's market value in one day, exceeding the size of rival Yahoo Inc.

Microsoft's earnings were wrecked by a $900 million write down on the value of unsold Surface tablets after it cut prices in a bid to excite buyers.

The poor results shocked Wall Street, which had believed the company's strength with business customers would help it ride out a downturn in consumer PC sales. The results provoked fresh skepticism of Chief Executive Steve Ballmer's new plan to reshape the company around devices and services, unveiled last week.

"The recent reorganization does not fix the tablet or smartphone problem," said Nomura analyst Rick Sherlund in a note to clients on Friday. "The devices opportunity just received a $900 million hardware write-off for Surface RT and investors may not even like the idea of wading deeper into this territory."

Sherlund suggested that activist investors will pressure Ballmer to reconsider his strategy this summer, a reference to ValueAct Capital, which took a $2 billion stake in Microsoft in April and is widely expected to push for a board seat this summer.

"This (the results) was much more disruptive than investors have expected, with Microsoft missing its guidance in every division and guiding lower," wrote Sherlund. "Everything an activist investor could ask for."

Other Wall Street analysts were similarly dismayed by Microsoft's latest financial report.

Brokerages Raymond James and Cowen & Co cut their ratings on Microsoft stock by a notch to "market perform" and at least five others trimmed their price targets by as much as $3.

Price targets were cut as low as $35, below Thursday's closing price of $35.44. The shares fell to $31.55 on the Nasdaq.

FBR Capital Markets analyst David Hilal said Microsoft's revenue from Windows operating system in the fourth quarter was 9 percent below his expectations.

"The key potential growth drivers (Windows 8, Surface) of the Microsoft story appear to be fading, heading into FY14," Hilal wrote in a note.

Shares of the internet search giant were set to open 4 percent lower on Friday.

BMO Capital Markets, JP Morgan, Deutsche Bank and Raymond James cut their price targets on Google's stock by as much as $40 to factor in a drop in margins as the company invests in its non-core businesses.

The lowest price target was $860, compared to the stock's closing price of $910.68 on Thursday on the Nasdaq.

"... Investors should assume continued margin erosion as new investments will never match the margins of the core search business," BMO analysts said in a note to clients.

The brokerage cut its target price on Google shares to $890 from $915 and maintained its "market perform" rating on the stock.

Earlier this year, Google changed the way advertisers run campaigns on its website, offering the same ads simultaneously on PCs and mobiles.

However, cheaper ad rates on mobile devices ate into its margins.

Some brokerages, such as Piper Jaffray, JMP Securities and Canaccord Genuity, raised their price targets, with Piper Jaffray saying that the new system will increase ad revenue in the longer term.

Google, which posted worse-than-expected second-quarter results on Thursday, reported a quarterly operating margin of 28 percent, down from 33 percent a year earlier.

"Enhanced Campaigns is the biggest change in the Google ad platform to date and thus it will likely take 6-12 months for the positive impact to show in the numbers," Piper Jaffray analyst Gene Munster wrote in a note.

Prompted by customer complaints about the slowness of streaming video in peak evening hours, the regulator, ARCEP, examined if Iliad was hampering YouTube in a bid to get Google to pay money to help boost capacity on the overloaded network.

Many Internet providers and telecom operators globally have argued that companies like Google and Netflix, which generate massive traffic on networks, should help pay for them instead of getting a free ride.

Iliad's larger competitor Orange has disclosed that Google pays millions of euros annually to help upgrade capacity to ensure its services run well for Orange customers.

Competition regulators in Brussels raided the offices of three of Europe's biggest telecom operators earlier this month as part of an investigation into whether they abused their market position in deals with Internet companies to deliver content to consumers.

However, ARCEP said on Friday Iliad was not intentionally limiting the delivery of YouTube traffic, which would violate the principle that all Internet data should be treated equally.

Instead, it said interconnection points between Iliad's network and the middlemen used to deliver Google's YouTube simply did not have enough capacity to handle the traffic, leading to slowdowns.

Adding capacity to those interconnection points was Iliad's choice as a business, and if it chose not to, then consumers had the power to choose another broadband provider, it added.

"The inquiry did not reveal that (Iliad) was employing traffic management techniques on its network that differentiated traffic routing conditions based on the type of content, its origin, its destination or the type of protocol used," the regulator wrote in a decision.

Iliad did not immediately reply to a request for comment.

ARCEP stepped in when a survey of more than 16,000 broadband customers by French consumer group UFC Que Choisir found 83 percent of Iliad's customers, 47 percent of Orange customers and 46 percent of Vivendi's SFR customers could not use YouTube properly.

The fact that ARCEP did not find any infractions shows how difficult it is for regulators to ensure consumers are being treated fairly when opaque commercial agreements between internet providers, the middleman or transit companies, and content giants often determine users' experience of the web.

Prosecutors will test measures on Apple's iPhone 5 and Samsung's Galaxy S4 to measure effectiveness against common tactics used by thieves.

Various cities across the world have called on manufacturers to do more to deter phone theft.

London Mayor Boris Johnson has written to firms saying they must "take this issue seriously".

In a letter to Apple, Samsung, Google and other mobile makers, Mr Johnson wrote: "If we are to deter theft and help prevent crimes that victimise your customers and the residents and visitors to our city, we need meaningful engagement from business and a clear demonstration that your company is serious about your corporate responsibility to help solve this problem."

Kill switch

Prosecutors in the US are following a similar line - last month meeting representatives from the technology firms to discuss the matter.

They are calling for a "kill switch", a method of rendering a handset completely useless if it is stolen, rendering a theft pointless. Statistics from the US Federal Trade Commission suggest that almost one in three robberies nationwide involves the theft of a mobile phone.

In New York, 40% of robberies are phone thefts - a crime so common it has been dubbed "Apple-picking" by police.

London has seen a "troubling" rise in mobile phone theft, the mayor's office said, with 75% of all "theft from person" offences involving a phone - 10,000 handsets a month.

Close scrutiny

The firms have offered theft solutions to help combat the problem.

Apple's Activation Lock - which will be part of the next major iPhone and iPad software update - is to come under close scrutiny.

Thieves will often deactivate a phone immediately to stop it being tracked after a theft. Activation Lock is designed to make it harder to then reactivate, as it requires the entry of the log-in details used to register the phone originally.

For Samsung and other handsets, prosecutors, aided by security professionals, will be testing theft recovery system Lojack.

"We are not going to take them at their word," the prosecutors in New York and San Francisco said in a joint statement.

Francis, an Argentine, confirmed shortly after he assumed the papacy that he would head to his home region for World Youth Day, a weeklong visit beginning on Monday.

The biennial event, expected to draw more than a million visitors to Rio de Janeiro and nearby sites, is part of the Church's effort to energize Catholics at a time when inroads by rival faiths and secularism continue to thin its flock.

It also comes at a time when youth in Brazil, galvanized by a series of mass protests that erupted across the country last month, have grown increasingly vocal about their discontent with the status quo in Latin America's biggest country.

Francis' efforts to put a simpler stamp on the papacy and his origins in the ranks of the region's priests have raised hopes for many of the faithful in Brazil.

So has his stated intent to root out the child sexual abuse scandal that has rattled the Church and to place more emphasis on pastoral work - day-to-day ministry, as opposed to the doctrinaire focus favored by Benedict, his predecessor.

"This new pope is more simple," said Amanda Martins, a 21-year-old Catholic attending mass near São Paulo this month. "Maybe his visit can strengthen the Church."

REINFORCEMENT

The Church could use reinforcement in Latin America, a historical stronghold. Though still home to more Catholics than any other region, the fervor has faded because of growth by protestant faiths and because consumer-focused city-dwellers have eclipsed the rural populace in which Catholicism took root.

The percentage of Latin Americans who identify as Catholic fell to 72 percent in 2010 from about 90 percent in 1910, according to the Pew Forum on Religion and Public Life.

"The pope is coming as a pastor," said Cardinal Raymundo Damasceno, archbishop of Nossa Senhora de Aparecida, a sanctuary near São Paulo that Francis will visit. "His message will touch on the problems of the people and seek to shed light on the challenges ahead for the Church and society."

For Brazil's 120 million Catholics, challenges abound.

As a near decade-long economic boom gives way to slower growth, the country is roiling from popular protests. More than 1 million people hit the streets in June to protest against everything from rising prices to bad government and poor public schools and hospitals.

Stem cells can become any other part of the body - from nerve to bone to skin - and are touted as the future of medicine.

Researchers in Japan will use the cells to attempt to treat a form of blindness - age-related macular degeneration.

The announcement was described as "a major step forward" for research in the field.

There are already trials taking place using stem cells taken from embryos. But this is ethically controversial and the cells will not match a patient's own tissues, so there is a risk of rejection.

Induced pluripotent stem cells, however, are made by coaxing a sample of the patient's skin to become stem cells, so there should be no risk of rejection.

Sight saving?

Japan's health minister, Norihisa Tamura, has ruled that the cells can now be tested in patients.

The trial will by run by the Riken Center for Developmental Biology and the Institute of Biomedical Research and Innovation Hospital in Kobe.

Initially, six patients will receive transplants of cells to see if the procedure can restore their damaged vision.

Prof Chris Mason, an expert on regenerative medicine at University College London said: "This was expected, but it's obviously a major step forward.

"They are beneficial for two main reasons. One, they are from the patients themselves so the chance of rejection is greatly reduced and there are the ethical considerations - they do not have the baggage which comes with embryonic stem cells.

"On the down side we are a decade behind on the science. Induced pluripotent stem cells were discovered much later, so we're behind on the safety."

The powers - Russia, China, France, Britain, Germany and the United States - are hoping years of economic pressure will finally force Iran to scale back its nuclear work, which they suspect aims at allowing Tehran to make bombs.

President-elect Hassan Rouhani won the June 14 election largely on a promise of repairing the economy, and will be under pressure in the coming months to deliver, the diplomat said.

He would be mindful that without progress and at least some relief from sanctions, which would require the scaling back of Iran's nuclear work, his public support could quickly wane.

"Rouhani's election could provide an opportunity and we are expecting to see a change in tone," the diplomat said, who spoke on condition of anonymity but has close knowledge of the issue.

The comments follow a meeting of senior officials from the six nations in Brussels this week, convened to devise a strategy for the future of nuclear diplomacy after the Iranian election.

"Iran is also looking carefully at what is happening in its neighborhood, especially in Egypt and in Syria," the diplomat said.

Adding some skepticism voiced by negotiators from the six powers, the diplomat said: "We will have to judge the new Iranian government by its actions."

The six powers said this week they hope to resume talks "as soon as possible", and several diplomats said a new round of talks could take place in September, possibly before the annual meeting of the United Nations General Assembly in New York.

The last round, held in April, produced no breakthrough, after Iran rejected an offer of some sanctions relief.

The powers had asked, in return, that Tehran abandon enriching uranium to 20 percent fissile purity - a process that closes a major technological gap on the way to making weapons-grade material - as well as ship out an existing stockpile and close a facility where such work is done.

The news follows a report by parliament's intelligence committee which raised concerns that staff working at the base in Oxfordshire were employed by the Chinese firm.

Part of their job is to test Huawei's own equipment for vulnerabilities.

US politicians have claimed that the company posed a threat because of links to China's government and military.

The allegations are based, in part, on the fact that the company's founder, Ren Zhengfei, was a former member of the People's Liberation Army.

But Huawei has strongly denied having close ties to the Chinese state and has stressed that it is 98.6%-per-cent-owned by its employees.

Although the firm has been prevented from bidding for many US infrastructure contracts, it has been active in the UK after striking a multi-billion pound deal to provide networking equipment to BT in 2005.

A spokeswoman for Huawei highlighted the fact that the government has said it is confident that UK networks using the firm's equipment "operated to a high standard of security and integrity".

She added that her company supported the decision to carry out a review.

Trade links

The UK's Intelligence and Security Committee (ISC) raised concerns about the company's involvement in the Cyber Security Evaluations Centre in Banbury, Oxfordshire, last month.

"While we recognise that there are some benefits associated with the current staffing arrangements for the Cell, these do not, in our opinion, outweigh the risks of Huawei effectively policing themselves," its report read.

It added that national security was potentially being put at risk by the government's fear of jeopardising trade links with Beijing and it said staff from intelligence agency GCHQ should take over work at the centre.

A Cabinet Office spokesman said: "We take threats to our critical national infrastructure very seriously and need to be responsive to changes in a fast-moving and complex, globalised telecommunications marketplace.

"We have robust procedures in place to ensure confidence in the security of UK telecommunications networks.

"However, we are not complacent and as such we have agreed to the main recommendation of the report to conduct a review of Huawei's Cyber Security Evaluation Centre (the 'Banbury Cell') to give assurance that we have the right measures and processes in place to protect UK telecommunications."

The Chinese firm said that it welcomed the decision.

"Huawei shares the same goal as the UK government and the ISC in raising the standards of cybersecurity in the UK and ensuring that network technology benefits UK consumers," a spokeswoman said.

The device spins and heats the material to remove the sweat, and then passes the vapour through a special membrane designed to only let water molecules get through.

Since its Monday launch, its creators say more than 1,000 people have "drunk other's sweat" in Gothenburg.

They add the liquid is cleaner than local tap water.

The device was built for the United Nation's child-focused charity Unicef to promote a campaign highlighting the fact that 780 million people in the world lack access to clean water.

Moist cyclists The machine was designed and built by engineer Andreas Hammar, known locally for his appearances on TV tech show Mekatronik.

He said the critical part of the sweat machine was a new water purification component developed by a company named HVR in collaboration with Sweden's Royal Institute of Technology.

"It uses a technique called membrane distillation," he told the BBC.

"We use a substance that's a bit like Gortex that only lets steam through but keeps bacteria, salts, clothing fibres and other substances out.

"They have something similar on the [International] Space Station to treat astronaut's urine - but our machine was cheaper to build. "The amount of water it produces depends on how sweaty the person is - but one person's T-shirt typically produces 10ml [0.3oz], roughly a mouthful."

The kit has been put on show at the Gothia Cup - the world's largest international youth football tournament.

Mattias Ronge, chief executive of Stockholm-based advertising agency Deportivo - which organised the stunt - said the machine had helped raise awareness for Unicef, but in reality had its limitations.

"People haven't produced as much sweat as we hoped - right now the weather in Gothenburg is lousy," he said.

"So we've installed exercise bikes alongside the machine and volunteers are cycling like crazy.

The adjournment of the meeting, called minutes after shareholders gathered on the outskirts of Austin to decide on what could be the largest buyout since the financial crisis, buys time for co-founder and Chief Executive Officer Michael Dell to persuade naysayers to switch sides.

Complicating matters, billionaire investor Carl Icahn, who has amassed an 8.7 percent stake in Dell, is leading a charge with major shareholder Southeastern Asset Management against the buyout with an offer of his own. He and others say Michael Dell's deal undervalues the world's No. 3 personal computer maker.

Investors are divided over Dell's prospects. Some are ready to cash out of a company increasingly vulnerable to a crumbling PC market and already a shadow of an earlier self that led the global market and stood as a model of industry innovation.

Others remain convinced the company founded out of Michael Dell's dorm room in 1984 can transform itself into a dominant provider of business computing services - under his leadership or otherwise.

In the week leading up to Thursday's meeting, Icahn's team and Dell's special board committee - which supports the CEO's proffered deal - have flooded shareholders with letters and documents to argue their respective positions.

Vanguard and BlackRock Inc are now on board with the proposal, sources familiar with the matter told Reuters on Thursday.

Still, they said Michael Dell and private equity partner Silver Lake fell about 100 million shares short of the 735 million that they need for the buyout to pass.

Some investors say Michael Dell may have to raise his $13.65-a-share offer to secure the deal, but sources say he and Silver Lake remain reluctant to do so for a company that traded at about $10 before news of the buyout surfaced.

Dell shares climbed 2.4 percent to $13.19 in morning trading.

It is unusual for corporations to adjourn shareholder meetings on such short notice, but governance experts say it can be done if the company bylaws allow it.

Over the next week, the board will encourage the apparently large number of shareholders that had not cast votes to support the deal, said mergers expert Brian Quinn, an associate professor at Boston College Law School.

"To encourage these votes to come out, they will likely also try to re-engage Silver Lake to seek out a higher price," he added.

Netflix landed a