Microsoft pushes new Windows to developers

SEATTLE (Reuters) - Days after launching Windows 8, Microsoft Corp is mounting a strong campaign to win over the software developers it needs to kick-start its new operating system.

A lack of apps is Microsoft's Achilles heel as it attempts to catch Apple Inc and Google Inc in the rush toward mobile computing.

Windows 8, the new Surface tablet and a range of Windows-based phones - all unveiled in the past week - are designed to close that gap, but the world's largest software company still needs to convince developers to recreate the thriving 'ecosystem' that made PCs so successful.

"Please go out and write lots of applications," Microsoft Chief Executive Steve Ballmer pleaded with 2,000 developers on Tuesday, kicking off an annual, four-day meeting at its campus near Seattle.

The event, called 'Build,' is the equivalent of Apple's Worldwide Developer Conference and Google's I/O event.

Microsoft gave each paying attendee one of its Surface tablets and 100 gigabytes of free space on its SkyDrive online storage service. On top of that, handset partner Nokia threw in a free Lumia 920 smartphone running Windows Phone 8.

The unprecedentedly generous give-away signals the intent of what Microsoft openly calls "evangelism." Most developers at the meeting, who paid up to $2,000 to attend, are already converted to the Windows religion. But this year there is a feeling that Microsoft can re-establish itself as a relevant platform for developers.

"The sessions are overflowing. Everybody wants to learn," said Greg Lutz, product manager at development tools company ComponentOne, who is attending the conference.

"The Surface is really exciting. It's been interesting to see people that would normally be critics of Microsoft surprised to see how good it is," said Lutz, whose company makes features that developers can use in apps, such as calendars or charts.

Microsoft recognizes it needs apps to flesh out its new online Windows Store and make Windows 8 machines more attractive to users, said Russ Whitman, chief strategy officer at Ratio Interactive, a design agency that helps companies create apps.

"The catalog (of apps) is where they are weak, there's no doubt," he said. "But if Microsoft stays focused on quality not quantity, they can win."

DEVELOPER DOUBTS

When Windows 8 launched on Friday, some major content providers had prominent apps in the Windows store, such as Netflix Inc, the New York Times and Rovio's Angry Birds Space. But big names such as Facebook and Twitter were missing.

Twitter moved to rectify that on Tuesday, announcing that a native Windows app would be rolled out "in the months ahead." Dropbox, a fast-growing cloud storage service, also announced it would soon have a Windows app, as did online payment firm PayPal and sports network ESPN.

But Facebook, which now has more than 1 billion users, has not yet made public any plans for a Windows app, despite the fact Microsoft is a minor shareholder.

And Microsoft still has to overcome indifference from many developers who do not see demand from users or simply do not have the resources to build Windows apps alongside iOS and Android.

"Windows 8 is getting good reviews and the tile user interface is a great fit with our geo-visual content," said Jason Karas, CEO at website Trover, where users can share photos of interesting discoveries. "It's on the roadmap for Trover, but we are still a very lean team, so we're hesitant to support a third platform until we have all the innovations we want to see in iPhone and Android in place."

Microsoft has yet to persuade other influential online services, for example car-rental firm Zipcar or real estate information firm Zillow, to develop for Windows 8.

To get more developers on board, Microsoft is spending this week demonstrating how it is making it easier to develop apps for Windows and get them into the real world.

A key part of that is a new set of tools tying in its Azure cloud service, which allows Windows apps to easily harness data stored in remote servers.

"Some of the new changes are pretty incredible and are going to make developing, especially some of the mobile apps, much easier," said Mike Cousins, a software developer following the conference by webcast from Calgary, Canada.

"It just makes it super-easy to integrate mobile clients into your application," said Cousins, who is developing Shuttr, a site for photographers to display and sell their work. "It's been reduced from probably a week's work to minutes."

400 MILLION NEW MACHINES

Microsoft's best argument to developers is the sheer size of the Windows user base.

Microsoft sold 4 million upgrades to Windows 8 in its first four days, a mere fraction of the 670 million or so machines running Windows 7. Ballmer said there would be 400 million new devices running Windows next year, including PCs, tablets and phones, and the company would be marketing heavily to consumers.

That is an attractive audience for developers, and Whitman at Ratio Interactive said he saw many new faces at Microsoft's event this week who previously were more interested in web-based apps and other platforms.

"There's a new generation of developers that can build on Windows 8 that have been building using JavaScript and HTML," he said. "Seeing some of those developers show up and talk about building apps using other languages is pretty cool. It's a whole different group than Microsoft has traditionally been able to court."

One Wall Street analyst said developers may even be tempted to switch back to Microsoft after working with Apple's iOS platform.

"There does seem to be some excitement about the new operating system and many of the new devices that are coming to market," said Jason Maynard, an analyst at Wells Fargo Securities. "We have heard some developers talk about 're-Microsofting' and moving from their Macs for app development."

Cousins said that once developers see the user base for Windows 8 grow, the momentum will start to have an effect.

"All the new PCs people buy will be Windows 8, and people will start demanding Windows 8 apps from companies, and then they will start making them," he said. "I think we'll see a wave of apps coming out pretty soon."

(Reporting By Bill Rigby; Editing by Steve Orlofsky)

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FTC staff recommends Google be sued over patents: source

WASHINGTON (Reuters) - A Federal Trade Commission staff report has recommended that the government sue Google for violating U.S. antitrust law because it asked courts to stop the sale of some products that infringe its essential patents, a source told Reuters Thursday.

The five-member commission is inclined to vote in favor of suing Google Inc, the Internet search engine company, according to the source, who declined to be identified to protect business relationships.

Bloomberg News was the first to report the staff recommendation on Thursday.

Apple Inc, Google and Microsoft Corp have sued each other many times in various countries, each alleging that their respective patents are being infringed by rivals in the highly competitive smartphone market.

In many cases, the companies ask that their rivals' products to be banned from stores.

In a few cases, the patents involved are considered "standard essential patents," which holders pledged to license on fair and reasonable terms. Many antitrust enforcers believe it is inappropriate for companies to ask for sales bans based on the infringement of essential patents.

Google has sued both Apple and Microsoft in the United States, saying the companies infringed on standard essential patents, according to Florian Mueller, an expert on the smartphone patent wars.

The FTC is looking into a long list of complaints brought by rivals of the search company, which is also accused of using its dominance to squash rivals in vertical search areas such as shopping and travel.

Google declined to discuss the report, saying "we take our commitments to license on fair, reasonable, and non-discriminatory terms very seriously."

FTC Chairman Jon Leibowitz said in mid-September that he expected a decision in the case by the end of the year. A decision could be a lawsuit or, more likely, a settlement.

Google has settled with U.S. law enforcement agencies in the past.

For example, it settled with the FTC following privacy gaffes during the botched roll out of its social network, Buzz, and later paid $22.5 million to settle charges that it bypassed the privacy settings of customers using Apple's Safari browser.

Google also paid a $500 million settlement in 2011 to the Justice Department for knowingly accepting illegal advertisements from Canadian pharmacies selling in the United States.

(Reporting By Diane Bartz; Editing by Claudia Parsons and Andre Grenon)

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RIP Marty -- the Inspiration for Nyan Cat

Marty, the cat which inspired the 8-bit rainbow meme Nyan Cat, passed away Thursday, leaving a heavy heart in the Internet world.

The cat was diagnosed with Feline Infectious Peritonitis (FIP), a fatal, incurable disease. Marty's owner, and Nyan Cat creator, Chris Torres adopted Marty in 2010 -- along with another cat, Buster, who died of FIP soon afterwards.

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Torres tweeted that Marty began acting strange last week, so he immediately took him to the vet.

"Even with the medical treatment he received he still deteriorated quickly. I've been force feeding him and keeping him warm for three days," wrote Torres.

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Nyan Cat celebrated its first birthday in April, and has outlasted the lifespan of most Internet memes. The 8-bit rainbow Pop Tart cat continues to entertain the masses with its adorably infectious song -- and will no doubt continue to be played, in Marty's honor, for a long time to come.

1. Tiny Marty in the Tree

Images used with permission by Chris Torres

Click here to view this gallery.

Image used with permission by Chris Torres

This story originally published on Mashable here.

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Apple rolls out iPad mini in Sydney to shorter lines

SYDNEY (Reuters) - Apple fans lined up in Sydney, Australia, to get their hands on the iPad mini on Friday, but the device, priced above rival gadgets from Google and Amazon.com, attracted smaller crowds than at the company's previous global rollouts.

About 50 people waited for the Apple store to open, where in the past the line had stretched for several blocks when the company launched new iPhones.

Apple Inc's global gadget rollouts are typically high-energy affairs drawing droves of buyers who stand in line for hours. But a proliferation of comparable rival devices may have sapped some interest.

At the head of Friday's line was Patrick Li, who had been waiting since 4:30 am and was keen to get his hands on the 7.9-inch slate.

"It's light, easy to handle, and I'll use it to read books. It's better than the original iPad," Li said.

The iPad mini marks Apple's first foray into the smaller-tablet segment, and the latest salvo in a global mobile-device war that has engulfed combatants from Internet search leader Google Inc to Web retailer Amazon.com Inc and software giant Microsoft Corp.

Microsoft's 10-inch Surface tablet, powered by the just-launched Windows 8 software, went on sale in October, while Google and Amazon now dominate sales of smaller, 7-inch multimedia tablets.

Unveiled last week, the iPad mini has won mostly positive reviews, with criticism centering on a screen considered inferior to rivals' and a lofty price tag. The new tablet essentially replicates most of the features of its full-sized sibling, but in a smaller package.

At $329 for a Wi-Fi only model, the iPad mini is a little costlier than predicted but some analysts see that as Apple's attempt to retain premium positioning.

Some investors fear the gadget will lure buyers away from Apple's $499 flagship 9.7-inch iPad, while proving ineffective in combating the threat of Amazon's $199 Kindle Fire and Google's Nexus 7, both of which are sold at or near cost.

Also on Friday, Apple rolled out its fourth-generation iPad, with the same 9.7-inch display as the previous version but with a faster A6X processor and better Wi-Fi.

Apple will likely sell between 1 million and 1.5 million iPad minis in the first weekend, far short of the 3 million third-generation iPads sold last March in their first weekend, according to Piper Jaffray analyst Gene Munster.

"The reason we expect fewer iPad minis compared to the 3rd Gen is because of the lack of the wireless option and newness of the smaller form factor for consumers," Munster said in a note to clients. "We believe that over time that will change."

Reviewers have applauded Apple for squeezing most of the iPad's features into a smaller package that can be comfortably manipulated with one hand.

James Vohradsky, a 20 year-old student who previously queued for 17 hours at the Sydney store to buy the iPhone 5, only stood in line for an hour and a half this time.

"I had an iPad 1 before, I kind of miss it because I sold it about a year ago. It's just more practical to have the mini because I found it a bit too big. The image is really good and it's got the fast A5 chip too," Vohradsky said.

The iPad was launched in 2010 by late Apple visionary Steve Jobs and since then it has taken a big chunk out of PC sales, upending the industry and reinventing mobile computing with its apps-based ecosystem.

A smaller tablet is the first device to be added to Apple's compact portfolio under Cook, who took over from Jobs just before his death a year ago. Analysts credit Google and Amazon for influencing the decision.

Some investors worry that Apple might have lost its chief visionary with Jobs, and that new management might not be able to stay ahead of the pack as rivals innovate and encroach on its market share.

(Writing and additional reporting by Noel Randewich and Edwin Chan in San Francisco; Editing by Phil Berlowitz)

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Senate likely to revisit cyber bill when Congress returns

WASHINGTON (Reuters) - Senate Majority Leader Harry Reid hopes to reintroduce cyber security legislation opposed by business groups once lawmakers return after Tuesday's election, a Senate aide said, adding that a White House executive order might pave the way for a compromise on the bill.

Senator Joe Lieberman, one of the authors of the bill, would consider dropping a provision aimed at shoring up protection of critical infrastructure that had raised concerns among Senate Republicans, if that issue could be addressed in an executive order, Jeffrey Ratner, senior adviser for cybersecurity on the Senate Homeland Security Committee, said Wednesday.

Lieberman, who heads the committee, "wants legislation, but he's willing to focus on the rest of this bill, because there are important things there that he believes need to be implemented," Ratner said after a cyber security event hosted by the Washington Post.

"That is the easiest mechanism but we're open to other things," Ratner said, noting that Lieberman viewed it as critical to move ahead on a measure that would increase information-sharing between intelligence agencies and private companies.

He said final decisions on how to proceed would be made depending on the outcome of the election, but the cyber security bill was one of the first items Reid wanted to tackle when lawmakers came back to Washington.

The Senate bill floundered in August after just 52 of the 60 votes needed to advance the bill to a final vote were secured. Business groups opposed what they viewed as over-regulation, while privacy groups worried that the measure would open the door to Internet eavesdropping.

But congressional aides and cyber experts say the bill could get some fresh momentum given a spate of cyber attacks in recent weeks targeted at banks and financial institutions, as well a virus that disabled more than 30,000 computers at Saudi Arabia's state oil company, ARAMCO.

Defense Secretary Leon Panetta gave a major policy speech earlier this month about cyber threats, and the White House is expected to issue an executive order to increase oversight of security measures in the private sector.

CONCERN ON VULNERABILITIES

Homeland Security Secretary Janet Napolitano on Wednesday again urged Congress to pass legislation that would help expand information-sharing between the government and private industry, noting that U.S. financial institutions and stock exchanges had already been targeted.

"We know there are … vulnerabilities. We are working with them on that," Napolitano told executives at the Washington Post event. She said her agency was trying to adopt a more proactive approach to anticipate the next sector that could be targeted, noting that the U.S. energy sector was a particular concern.

James Lewis, cyber expert at the Center for Strategic and International Studies, said one possibility might be to conference the Senate bill and a separate, bipartisan measure introduced in the House of Representatives by Chairman of the House Intelligence Committee Mike Rogers and the top Democrat on that panel, C.A. Ruppersberger.

The idea, he said, would be to come up with some "minimally acceptable, passable thing."

Dmitri Alperovitch, chief technology officer of CrowdStrike, said passing legislation was only part of the solution and congressional passage of a watered-down bill might make it tough to get other needed changes enacted in coming years.

He said private companies and the government already shared information, but the bigger issue was that the government had been unwilling to take action against cyber attackers, even in cases involving major penetrations of private networks.

"We're having the wrong debate," he said, noting that private companies were also nervous about sharing information with the government given leaks in previous cases. "What's the benefit of information-sharing if you're not going to act on the information?"

(Editing by Cynthia Osterman)

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Pipsqueek: The First Bluetooth Smartphone for Kids [VIDEO]

Do your little ones constantly ask to play with your cellphone? Maybe it's time for them to have their own -- one made especially for kids.

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A company called Yip Yap developed a cellphone called Pipsqueek for children, ages three and older.

The cellphone, created by husband-and-wife team Michael and Angela Smith, works by connecting to mom or dad's cellphone through Bluetooth. Its Kickstarter page says there are no contracts or monthly fees.

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The reason for a kids-only phone? Durability. In a Pipsqueek promotional video, Smith shows what happens when she hands one of her kids a "$600 smartphone" to talk to dad: The phone's dropped on toys, plunged into the toilet, touched by peanut butter-covered fingers and licked by the dog.

To save your precious (and valuable) smartphone from damage caused by kids, simply route an incoming call to Pipsqueek. Not only does the phone withstand drops and dirty hands, but it comes with changeable covers, too, making it fun for kids to use. A toy-like charging station aims to encourage your child to keep the phone charged.

Yip Yap is trying to raise funds on Kickstarter and it's giving itself until Nov. 30 to raise $187,545. The funding will go toward getting the product on store shelves. If you donate to the fund, you can get a Pipsqueek for "as low as $50." If the project gets enough funding, the Smiths say their team will create apps for iOS and Android that will allow parents to set up a contacts list for their kids; that way, only phone numbers of their choosing can pass through the phone.

Pipsqueek is also an MP3 player, and -- once the app is made -- a locator for your child, too, as long as the phone is with them. It will work with Android and iOS devices, as well as all Bluetooth-enabled phones.

Would you buy your child a this kid-friendly cellphone? Tell us in the comments below.

Image courtesy of iStockphoto, ssj414

This story originally published on Mashable here.

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Sony, Sharp in turnaround battle; Panasonic battered

TOKYO (Reuters) - Sony Corp is likely to say it returned to an operating profit for July-September after it sold a chemicals business, but investors still aren't sure a consumer electronics revamp will deliver the profit growth the group seeks.

Sony shares, valued at less than $12 billion, have dropped 19 percent since end-June and its 5-year credit default swaps - the cost of insuring against debt default - have jumped by almost 60 percent. The benchmark Nikkei average is down by less than 1 percent.

The maker of Bravia TVs, Vaio laptops and PlayStation game consoles, battling weak demand and tough competition, is expected to say it earned operating profit of 33.8 billion yen ($424.7 million) in its second quarter, after losing 1.6 billion yen a year ago, according to an average estimate from five analysts on Thomson Reuters I/B/E/S.

"The reality for Sony now is that it's getting profit through financial accounting; beyond that, things are not good," said Tetsuro Ii, CEO of Commons Asset Management. "The question is whether Sony can tell a growth story or not."

Sony has sold a chemicals unit to state-backed Development Bank of Japan for 58 billion yen, and other asset sales may further inflate operating profit this business year. The Japanese group, which blazed a trail in the early 1980s with its Walkman portable music players, is closing the Shinagawa Technology Center, a 31-storey Tokyo office built in 1998 [ID:nL1E8LN16K] and may even sell the 37-storey Sony Tower, the New York headquarters of its U.S. business, according to media reports.

Sony has said it expects to reduce its global workforce by 10,000 people by end-March, around 6 percent of its total, as it seeks to lop 30 billion yen off its costs.

HIGH-RISK

Kazuo Hirai, who took over as CEO in April, has pledged to rebuild Sony around gaming, digital imaging and mobile devices, and nurture new businesses such as medical devices, as the TV business shrinks - Sony has lost close to $9 billion in TVs over the past 8 years. In late-September, Sony agreed to pay 50 billion yen to become the biggest shareholder in Olympus Corp, a world leader in medical endoscopes.

"The areas in which Sony is continuing to focus are of course high-risk, high-return markets," said JP Morgan analyst Yoshiharu Izumi in a recent report. "Although we expect (full-year) margin improvement in the electronics segment, we think it's too early to appraise a sustained recovery."

While battling weak demand for its products, fierce competition from Apple Inc and Samsung Electronics and others, Sony is also up against a strong yen and a depressed global economy.

Shares in rival Japanese TV maker Panasonic Corp slumped by nearly a fifth on Thursday, wiping $3 billion off its market value, a day after it said it will lose almost $10 billion this business year as it cleans its house of risky assets - writing down billions of dollars of goodwill and assets in its mobile and energy units and preparing for more restructuring that is likely to see it shift away from money-losing TVs and other consumer electronics.

"It may not be on the same scale, but for the same reasons I think there's a strong chance Sony, too, will opt for writedowns," said Makoto Kikuchi, CEO fo Myojo Asset Management in Tokyo.

OUTLOOK DIMMER

In August, Sony cut its full-year operating profit forecast by more than a quarter to 130 billion yen, still some way above the average forecast by 19 analysts for 107 billion yen. At a net level, Sony sees annual profit of 20 billion yen, while the market prediction is for around a third of that.

"It's unclear if Sony will cut its full-year operating profit guidance, but we see considerable potential for second-half shortfalls, mainly in smartphones and games," Goldman Sachs analyst Takashi Watanabe said in a client note.

Sales of Sony's handsets, including its Xperia smartphones, are expected to have slid by more than a fifth in July-September, to below 8 million devices, a Reuters poll found last month. [ID:nL6E8LAL10] Next year it is forecast to sell 34.4 million mobiles, about the same as Samsung shifts each month.

The South Korean firm and Apple are also encroaching on Sony's gaming business, and Hirai has cut the forecast for annual sales of the hand-held Vita and PSP consoles to 12 million from 16 million.

After four straight years of net losses, Hirai is also hampered by weakened finances. At end-June, Sony's shareholder equity ratio fell to below 15 percent - a rate of 20 percent is generally considered a healthy minimum.

While selling off non-core assets, Sony has also spent to bolster its business portfolio - laying out $1.8 billion in four months on the Olympus stake, a cloud gaming firm and a website for doctors, but this has prompted both Moody's and Standard & Poor's to lower their long-term debt rating on the company to the second-lowest investment grade.

SHARP DOWNTURN

At rival Japanese TV maker Sharp Corp, which also announces quarterly earnings on Thursday, the need to return to profit is more urgent.

The maker of Aquos TVs has secured a $4.6 billion bank bailout, and has pledged to axe 10,000 jobs, sell assets, and return to profit. At end-June, Sharp's shareholder equity ratio was 18.7 percent.

After adding restructuring charges, valuation losses on stocks of LCD display panels and other costs, Sharp will almost double its net loss forecast for the year to 450 billion yen, two sources familiar with the matter told Reuters.

But Sharp will keep its forecast for an operating profit in the current second half, a turnaround that will let its banks justify their bailout of Japan's TV pioneer. For July-September, Sharp is expected to have made a 50.4 billion yen operating loss, according to the average of six analysts on Thomson Reuters I/B/E/S.

The bank loans may prove to be just a sticking plaster rather than a salvation, said Myojo Asset's Kikuchi. "I don't think Sharp has a future. Even if it gets by this term, financial problems could emerge again next business year, and I don't see the banks coming to the rescue."

Both Sharp and Sony may also have felt the impact of a recent dispute with China over ownership of islands in the East China Sea, which triggered sometimes violent protests against Japanese products. Sharp had almost a fifth of its revenues in China, while Sony has around 8 percent of its business there.

Sharp shares have more than halved since end-June, to record lows below 150 yen. Five years ago, the stock traded at above 2,440 yen. Its market value has slumped to below $2.4 billion.

($1 = 79.5800 Japanese yen)

(Additional reporting by Reiji Murai; Editing by Ian Geoghegan and Eric Meijer)

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Apple's Cook fields his A-team before a wary Wall Street

SAN FRANCISCO (Reuters) - Apple Inc Chief Executive Tim Cook's new go-to management team of mostly familiar faces failed to drum up much excitement on Wall Street, driving its shares to a three-month low on Wednesday.

The world's most valuable technology company, which had faced questions about a visionary-leadership vacuum following the death of Steve Jobs, on Monday stunned investors by announcing the ouster of chief mobile software architect Scott Forstall and retail chief John Browett -- the latter after six months on the job.

Cook gave most of Forstall's responsibilities to Macintosh software chief Craig Federighi, while some parts of the job went to Internet chief Eddy Cue and celebrated designer Jony Ive.

But the loss of the 15-year veteran and Jobs's confidant Forstall, and resurgent talk about internal conflicts, exacerbated uncertainty over whether Cook and his lieutenants have what it takes to devise and market the next ground-breaking, industry-disrupting product.

Apple shares ended the day down 1.4 percent at 595.32. They have shed a tenth of their value this month -- the biggest monthly loss since late 2008, and have headed south since touching an all-time high of $705 in September.

For investors, the management upheaval from a company that usually excels at delivering positive surprises represents the latest reason for unease about the future of a company now more valuable than almost any other company in the world.

Apple undershot analysts targets in its fiscal third quarter, the second straight disappointment. Its latest Maps software was met with widespread frustration and ridicule over glaring mistakes. Sources told Reuters that Forstall and Cook disagreed over the need to publicly apologize for its maps service embarrassment.

And this month, Apple entered the small-tablet market with its iPad mini, lagging Amazon.com Inc and Google Inc despite pioneering the tablet market in 2010.

Investor concerns now center around the demand, availability and profitability of new products, including the iPad mini set to hit stores on Friday.

"The sudden departure of Scott Forstall doesn't help," said Shaw Wu, an analyst with Sterne Agee. "Now there's some uncertainty in the management."

"There appears to be some infighting, post-Steve Jobs, and looks like Cook is putting his foot down and unifying the troops."

Apple declined to comment beyond Monday's announcement.

Against that backdrop, Cook's inner circle has some convincing to do. In the wake of Forstall's exit, iTunes maestro Eddy Cue -- dubbed "Mr Fixit", the sources say -- gets his second promotion in a year, taking on an expanded portfolio of all online services, including Siri and Maps.

The affable executive with a tough negotiating streak who, according to documents revealed in court, lobbied Jobs aggressively and finally convinced the late visionary about the need for a smaller-sized tablet, has become a central figure: a versatile problem-solver for the company.

Ive, the British-born award-winning designer credited with pushing the boundaries of engineering with the iPod and iPhone, now extends his skills into the software realm with the lead on user interface.

Marketing guru Schiller continues in his role, while career engineer Mansfield canceled his retirement to stay on and lead wireless and semiconductor teams. Then there's Federighi, the self-effacing software engineer who a source told Reuters joined Apple over Forstall's initial objections, and has the nickname "Hair Force One" on Game Center.

"With a large base of approximately 60,400 full-time employees, it would be easy to conclude that the departures are not important," said Keith Bachman, analyst with BMO Capital Markets. "However, we do believe the departures are a negative, since we think Mr. Forstall in particular added value to Apple."

TEAM COOK

Few would argue with Forstall's success in leading mobile software iOS and that he deserves a lot of credit for the sale of millions of iPhones and iPads.

But despite the success, his style and direction on the software were not without critics, inside and outside.

Forstall often clashed with other executives, said a person familiar with him, adding he sometimes tended to over-promise and under-deliver on features. Now, Federighi, Ive and Cue have the opportunity to develop the look, feel and engineering of the all-important software that runs iPhones and iPads.

Cue, who rose to prominence by building and fostering iTunes and the app store, has the tough job of fixing and improving Maps, unveiled with much fanfare by Forstall in June, but it was found full of missing information and wrongly marked sites.

The Duke University alum and Blue Devils basketball fan -- he has been seen courtside with players -- is deemed the right person to accomplish this, given his track record on fixing services and products that initially don't do well.

The 23-year veteran turned around the short-lived MobileMe storage service after revamping and wrapping it into the reasonably well-received iCloud offering.

"Eddy is certainly a person who gets thrown a lot of stuff to 'go make it work' as he's very used to dealing with partners," said a person familiar with Cue. The person said Cue was suited to fixing Maps given the need to work with partners such as TomTom and business listings provider Yelp.

Cue's affable charm and years of dealing with entertainment companies may come in handy as he also tries to improve voice-enabled digital assistant Siri. He has climbed the ladder rapidly in the past five years and was promoted to senior vice president last September, shortly after Cook took over as CEO.

Both Cue and Cook will work more closely with Federighi, who spent a decade in enterprise software before rejoining Apple in 2009, taking over Mac software after the legendary Bertrand Serlet left the company in March last year

Federighi was instrumental in bringing popular mobile features such as notifications and Facebook integration onto the latest Mac operating system Mountain Lion, which was downloaded on 3 million machines in four days.

The former CTO of business software company Ariba, now part of SAP, worked with Jobs at NeXT Computer. Federighi is a visionary in software engineering and can be as good as Jobs in strategic decisions for the product he oversees, a person who has worked with him said.

His presentation skills have been called on of late, most recently at Apple annual developers' gathering in the summer.

Then there's Ive, deemed Apple's inspirational force. Among the iconic products he has worked on are multi-hued iMac computers, the iPod music player, the iPhone and the iPad.

Forstall's departure may free Ive of certain constraints, the sources said. His exit brought to the fore a fundamental design issue -- to do or not to do digital skeuomorphic designs. Skeuomorphic designs stay true to and mimic real-life objects, such as the bookshelf in the iBooks icon, green felt in its Game Center app icon, and an analog clock depicting the time.

Forstall, who will stay on as adviser to Cook for another year, strongly believed in these designs, but his philosophy was not shared by all. His chief dissenter was Ive, who is said to prefer a more open approach, which could mean a slightly different design direction on the icons.

"There is no one else who has that kind of (design) focus on the team," the person said of Ive. "He is critical for them."

(Additional reporting by Alistair Barr; Editing by Edwin Chan and Ken Wills)

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Disney to buy "Star Wars" producer for $4.05 billion

LOS ANGELES (Reuters) - Walt Disney Co agreed to buy filmmaker George Lucas's Lucasfilm Ltd and its "Star Wars" franchise for $4.05 billion in cash and stock, a blockbuster deal that includes the surprise promise of a new film in the series in 2015.

Disney Chief Executive Bob Iger told analysts on Tuesday that the plan is to release a new movie in the series every two to three years thereafter. The last "Star Wars" picture was "Revenge of the Sith" in 2005, and Lucas has in the past denied any plans for more.

Lucas, a Hollywood icon known for exercising control over the most minute details of the fictional universe he created, will remain as a creative consultant on the new films.

"It's now time for me to pass 'Star Wars' on to a new generation of filmmakers," he said in a statement. Lucas will become the second-largest individual holder of Disney shares, with a 2.2 percent stake.

Disney will pay about half the purchase price in cash and issue about 40 million shares at closing.

"This is one of the greatest entertainment properties of all time," Iger said. Like Disney's purchases of Marvel Entertainment and Pixar studio, LucasFilm will "drive long-term value to our shareholders," he said.

Chief Financial Officer Jay Rasulo said the deal would lower Disney's earnings per share by a low single-digits percentage in fiscal 2013 and 2014. He also said Disney would repurchase all of the issued shares on the open market within the next two years, on top of planned buybacks.

This agreement marks the third time in less than seven years that Disney has signed a massive deal to take over a beloved studio or character portfolio, part of its strategy to acquire brands that can be stretched across TV, movies, theme parks and the Internet.

In early 2006, Disney struck a deal to acquire "Toy Story" creator Pixar, and in the summer of 2009 it bought the comic book powerhouse Marvel.

"Disney already has a great portfolio and this adds one more," said Morningstar analyst Michael Corty. "They don't have any holes, but their past deals have been additive."

Iger said he and Lucas first discussed a possible sale about 18 months ago. Lucas was pondering his retirement, and Iger was looking to add another well-known brand to the Disney empire. The two signed the deal at Disney's Burbank, California, headquarters on Tuesday.

"Everywhere I went, 'Star Wars' was already there, and sometimes they got there ahead of us," said Iger in an interview. "I kept seeing that brand and decided maybe we should buy it."

He told analysts he believed there was "substantial pent-up demand" for new "Star Wars" movies. Each of the last three films in the series would have grossed $1.5 billion in today's dollars at the box office, CFO Rasulo estimated.

The film's iconic characters also will boost Disney's sales of toys and other consumer products, particularly overseas, executives said. Sales of "Star Wars" items such as Darth Vader and Yoda action figures total roughly $215 million a year, Rasulo said.

In 2005, the year the last "Star Wars" film was released, LucasFilm generated $550 million in operating income, Rasulo said.

Disney also will be able to extend the presence of the franchise at its theme parks around the globe, Iger said. The company's parks already feature rides based on "Star Wars" and "Indiana Jones," another Lucas property.

"Star Wars" characters also are likely to find a home on the Disney XD cable channel, which is aimed at young boys, Iger said.

Iger wouldn't commit to keeping the "Star Wars" operation separate from Disney, as he did with Pixar and Marvel.

And Lucas won't sit on the Disney board despite his 2.2 percent stake in the company, Iger said. The late Apple CEO Steve Jobs, who held a large stake in Disney after it bought his Pixar studio, had a seat on the Disney board.

From a fan's perspective, critics said there was sure to be at least some excitement at the prospect of episode seven in the saga of Luke Skywalker and Darth Vader.

"Do I want to see more Star Wars movies? Not really, but they're not making these movies for me," the film writer "Mr. Beaks" wrote on the well-regarded industry site Ain't It Cool News. "There's a whole new generation of Star Wars fans, and they worship the prequels like folks my age worshipped the original trilogy."

Besides "Star Wars," the Lucasfilm deal also includes rights to the "Indiana Jones" franchise, though Disney did not elaborate on any plans for that series.

(Additional reporting by Michael Erman in New York and Himank Sharma in Bangalore; Writing by Ben Berkowitz; Editing by Saumyadeb Chakrabarty and Ciro Scotti)

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Hurricane Sandy disrupts Northeast U.S. telecom networks

NEW YORK (Reuters) - Power outages and flooding caused by Hurricane Sandy disrupted telecommunications services in Northeastern states on Tuesday, resulting in spotty coverage for cellphones, television, home telephones and Internet services.

While all the region's telecom service providers were having problems, Verizon Communications, which serves many of the states in the hurricane's path, may have suffered some of the worst damage from the storm to its wireline network.

About 25 percent of the region's wireless cell towers were out of action after the storm and some 911 emergency call centers were not working, according to Julius Genachowski, chairman of the Federal Communications Commission.

"Our assumption is that communications outages could get worse before they get better," Genachowski told reporters on a conference call, noting that the storm had not ended.

Also power outages could disrupt more cell sites if they run out of back-up power before commercial electricity services are up and running again.

People lined up at pay-phones in at least one New York neighborhood, the Lower East Side, today as their phones had either lost coverage or they had run out of battery power because there was nowhere to charge their phones in the neighborhood which had lost commercial power.

New York-based Verizon said the storm caused flooding at three Verizon central offices that hold telecom equipment in Lower Manhattan as well as sites in Queens and Long Island.

Its downtown headquarters, which was put out of action 11 years ago by the September 11 attacks, had three feet of water in the lobby at one point. Because of flooding, all its telecom equipment at that office, which serves much of Wall Street and downtown consumers, was knocked out of service.

The company said it was working on pumping out the water in the hope that it could restart its back-up power generators in the facility as commercial power services were not yet restored the morning after the big storm hit.

"The bullseye of the impact is the metro area," said spokesman William Kula, adding that restoring service for the city's financial district was a top priority for Verizon.

Telecom disruptions affect electronic trading as well as corporate operators. The chief operating officer of the New York Stock Exchange, which is expected to open Wednesday, said "lots of telecom infrastructure is down" and that the NYSE was working with big firms to ensure they were doing testing of their systems.

Verizon did not give an estimate as to how many businesses and consumers were affected. Two of three Manhattan central offices were partially flooded and operating minimal services.

Customers served by the damaged central offices will experience "a loss of all services" including TV, Internet, and traditional telephone services, Kula said. Some customers may experience intermittent busy signals for non-emergency calls.

Verizon said its engineers were working on assessing the damage from the early hours. Outside of New York, the company warned that it was also having some trouble.

"Verizon is discovering that many poles and power lines/Verizon cables are down throughout the region due to heavy winds and falling trees," the company said in a statement.

Verizon Wireless, AT&T Inc, Sprint Nextel, and T-Mobile USA said they were dealing with wireless service problems in the hurricane region. Cable operators Cablevision Systems Corp, Comcast Corp and Time Warner Cable also said they were having service problems.

"I think everybody's equipment's going to be damaged, including cellphone towers," Stifel Nicolaus analyst Christopher King said from his Verizon Wireless cellphone in Baltimore.

"Particularly for Verizon, they're clearly going to have the most damage on the wireline side because its pretty much all of their territory (where the storm hit)," King said.

Sprint Nextel, the No. 3 U.S. mobile provider said it was seeing outages at some cell sites because of the power outages across all the states in Sandy's path including New York, New Jersey, Connecticut, Pennsylvania, Washington DC, Maryland, North Virginia and New England.

"(Repair crews) have started on some critical areas but they haven't been able to get to everywhere they need to be," spokeswoman Crystal Davis said. She noted that 80 of the company's stores would reopen at noon. Sprint had closed about 180 stores ahead of the storm.

T-Mobile USA said that "customers may be experiencing service disruptions or an inability to access service in some areas, especially those that were hardest hit by the storm."

People complained of outages to their cable telephone, Internet and television services from providers including Comcast, Cablevision and Verizon in New Jersey, Connecticut, and New York.

Cablevision said it was experiencing widespread service interruptions primarily related to loss of power. The company said it is working to restore services.

Comcast, whose headquarters is in Philadelphia and serves East Coast states, said that for the majority of customers, "Comcast service should be restored as power comes back on to their homes."

Cellphone service was spotty for top wireless providers Verizon Wireless, AT&T Inc and T-Mobile USA, a unit of Deutsche Telekom, according to some customers.

Verizon Wireless, a venture of Verizon Communications and Vodafone Group, said on Tuesday afternoon that customers may be experiencing service issues and that about 94 percent of its cell sites were up and running.

AT&T said it was experiencing some issues in areas heavily affected by the storm. By Tuesday morning, spokesman Mark Siegel said AT&T was in the initial stages of on-the-ground assessment and that it expected "crews will be working around the clock to restore service."

Several Time Warner Cable customers in Brooklyn said that their Internet, television and phone services stopped working Monday night but were back again by Tuesday morning.

Time Warner Cable said that while it has not seen any major damage to its infrastructure, its customers who do not have electricity do not have cable services.

Millions of people in the eastern United States awoke on Tuesday to flooded homes, fallen trees and widespread power outages caused by Sandy, which swamped New York City's subway system and submerged streets in Manhattan's financial district.

At least 30 people were reported killed in the United States by one of the biggest storms to ever hit the country. Sandy dropped just below hurricane status before making landfall on Monday night in New Jersey.

(Additional reporting by Jennifer Saba, Liana Baker, Katya Wachtel in New York, Dian Bartz in Washington DC and many other Reuters reporters around the hurricane region; Editing by Chizu Nomiyama and Andrea Ricci)

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