Saturday, June 14, 2008

HTC iPhone rival launches in Taiwan Saturday

High Tech Computer's Touch Diamond handset, the company's answer to the 3G iPhone, will be launched in Taiwan on Saturday as a series of promotional events begins leading up to sales of the phone at the end of the month, the company said Friday.
The suggested retail price of the handset is NT$23,900 (US$786). The price is only for Taiwan and does not reflect possible subsidies by service providers that want to bundle the handset with a 3G (third-generation) contract. Still, it's nearly quadruple the price of Apple's new iPhone, which now sells for just US$199.

HTC may have lowered its price a bit due to the iPhone launch, however. A few weeks ago, people familiar with the situation said the Touch Diamond would cost NT$26,000.

The Touch Diamond is a Microsoft Windows Mobile-based 3G handset with a 2.8-inch touchscreen, GPS (Global Positioning System) receiver and 3.2-megapixel camera. The iPhone boasts a 3.5-inch touchscreen, and many of the same wireless technologies, but only has a 2.0-megapixel camera.

Taiwan isn't the first place the Touch Diamond will go on sale. HTC shipped some handsets to Hong Kong CSL, a mobile service provider late last month. People in Hong Kong could buy the handset on May 31.

Apple's announcement of a US$199 price for the new 3G iPhone has shaken up smartphone makers. HTC's stock, which is listed in Taiwan, plunged after Apple's announcement over fears the iPhone's price will undercut HTC's smartphone prices.

MySpace to shake up its layout

MySpace will unveil next week a large-scale redesign that will alter major components of the social-networking site, like its home page, navigation scheme, search engine and video player.
On Wednesday, MySpace users will see the first phase of the redesign, which has been in the works for the past six months, according to the company.

MySpace, the world's most popular social-networking site, expects the changes to boost user engagement by making the site easier to navigate.

MySpace is routinely criticized by users and observers for a layout that many consider visually strident and messy. Its members have many options to alter their profile pages, such as changing their background color, adding hyperactive animations, using fonts of many sizes and colors and plastering them with videos and photo slideshows.

On the other hand, rival Facebook is much more conservative in its design, aiming for a cleaner and more organized look, and gives its members fewer liberties to adorn their profile pages. In fact, layout and design is one of the key areas of differentiation between the two sites, and people often choose one or the other based on this issue.

As part of the redesign plans, MySpace has conducted surveys, performed usability tests and gathered focus groups.

In addition to revamping the home page, MySpace is also changing the profile editor to make it easier for members to design and decorate their profile pages. The profile pages will also undergo renovations.

Meanwhile, the search engine interface is getting a more streamlined layout, an enhanced relevancy algorithm and a tabbed results page including categories like people, MySpace site, Web, music and video.

In addition, the video player is gaining new controls and support for Flash 9 full-screen mode.

Facebook is also busy these days toiling away at a major redesign of its member profile pages, which it has previewed and which it hopes to roll out at some point this month.

Insider threat exaggerated, says study

Insiders are not, after all, the main threat to networks, a detailed new analysis of real-world data breaches has concluded.
Verizon's 2008 Data Breach Investigations Report, which looked at 500 breach incidents over the last four years, contradicts the growing orthodoxy that insiders, rather than external agents, represent the most serious threat to network security at most organizations.

Seventy-three percent of the breaches involved outsiders, 18 percent resulted from the actions of insiders, with business partners blamed for 39 percent -- the percentages exceed 100 percent due to the fact that some involve multiple breaches, with varying degrees of internal or external involvement.

"The relative infrequency of data breaches attributed to insiders may be surprising to some. It is widely believed and commonly reported that insider incidents outnumber those caused by other sources," the report states.

"Our caseload showed otherwise for incidents resulting in data compromise. This finding, of course, should be considered in light of the fact that insiders are adept at keeping their activities secret."

Fifty-nine percent of breaches were attributed to hacking, 31 percent involved malicious code, 22 percent exploited vulnerability, with 15 percent involving a physical threat. Sixty-two percent -- the overwhelming majority - had at their root human error.

Nevertheless, the report cautions from using the statistics to dismiss the internal threat altogether. When internal or partner security compromises happen, they tend to involve greater amounts of data. Where data loss was involved, external security breaches resulted in a media of 30,000 records being compromised, some way behind the figure for internal breaches, at 375,000.

When internal hacks occur, they tend to be nastier, with 50 percent blamed on IT staff themselves, way ahead of other types of employee.

The report concludes that honest network admins are obsessed with outdated ideas of perimeter security. Had data security been looked at within the network, almost nine out of ten data breaches could have been avoided.

"While a strong network perimeter is important, it cannot be the only or even the main layer of protection around sensitive information assets," the authors say.

Weak evidence links congressmen's cyber-attacks to China

U.S. House of Representatives members who worry that China may have been responsible for attacks on their computers have provided little evidence to back up their claims, according to computer security experts.
The two Republican congressmen, Representatives Frank Wolf and Christopher Smith, disclosed Wednesday that computers in their offices were hacked in late 2006 and early 2007. Both men have been critical of China's human rights record and said that the attacks raised concerns that they were being targeted for their support of Chinese dissidents.

Wolf said that the U.S. Federal Bureau of Investigation had told him that the attackers came from within China. Smith said that the IT professionals who repaired his hacked computers told his staff that the attacks came from Chinese IP addresses and that the hackers had accessed files related to China.

"My suspicion is that I was targeted by Chinese sources because of my long history of speaking out about China's abysmal human rights record," said Wolf in a statement. He is the senior Republican on the State and Foreign Operations subcommittee.

The Chinese Foreign Ministry has denied any connection to the attacks, according to reports. An FBI spokeswoman declined to comment on the matter late Thursday.

However, computer security experts said that the evidence that the two congressmen provided to back up their claims simply does not prove that the Chinese government, or even Chinese nationals, were involved.

"It's so very hard to conclude that something came from someplace if all you're going from is an IP address," said Marcus Sachs, director of the SANS Internet Storm Center, a volunteer-run effort that tracks emerging computer threats. "Those of us who have done this for a living, we know that you can't prove that it was a Chinese person on the keyboard if you have a Chinese IP address," he said. "Without making some of the evidence public … you leave everybody else guessing."

Computer attacks are often launched from Chinese IP addresses because a large number of computer systems in China have been hacked and are being used to redirect online attacks. Also, the country is notorious for providing so-called "bulletproof" hosting services that keep servers running even when international law enforcement tries to take them down.

"For US$1,000 a month or less you can get a bulletproof server in China," said Gary Warner, director of research in computer forensics with the University of Alabama at Birmingham.

China has been blamed for many intrusions on federal computer systems, including breaches at the U.S. Department of Commerce and the Pentagon, but according to Warner, virtually any computer plugged into the Internet will find itself scanned by probes from China IP addresses. "Anybody who looks at their firewall logs can prove that they're being attacked from China. Does this prove that they're really being attacked by the Chinese? I don't know, "he said.

Nearly 12 percent of all Web servers using China's .cn domain space are considered risky because they may be associated with spam, adware or computer attacks, according to security firm McAfee.

Representative Smith's office did not return a call seeking comment.

A spokeswoman for Congressman Wolf's office refused to provide any more detail on the attacks or to say what evidence linked the attacks to China. "Everything we have to say is in our press release," she said.

That's not good enough for Richard Smith, an Internet security consultant with Boston Software Forensics. "If someone is going to make these kind of charges, they really need to be willing to produce the hard evidence," he said via e-mail. "Perhaps the office is embarrassed that a staffer accidentally shared their C: drive with the entire Internet."

Google, Yahoo strike ad deal

Just hours after saying it had ended talks over a possible investment from Microsoft, Yahoo announced a deal with Google to run some of Google's advertisements alongside Yahoo search results.
The nonexclusive deal unites the online advertising businesses of Google and Yahoo and comes as a setback to Microsoft, which had been trying to acquire all or part of Yahoo to strengthen its own online business and compete better with Google.

Yahoo said it expects the deal to generate US$250 million to $450 million in operating cash flow during the first 12 months, and that it represents an annual revenue opportunity for Yahoo of $800 million. The deal is for an initial period of four years, with an option for Yahoo to extend it for a further six years.

The deal was announced after Yahoo said earlier on Thursday that it had ended its talks with Microsoft over a possible investment by the software giant. Yahoo said it ended the talks because Microsoft was interested only in acquiring Yahoo's search business, not the entire company.

"Clearly it is time to move on," Yahoo CEO and cofounder Jerry Yang said during a conference call. "We believe this agreement with Google helps us to do so by strengthening our competitive position and generating attractive financial benefits."

Yang and Sue Decker, Yahoo's president, said the deal will allow Yahoo to capitalize on growth in the online advertising market and "the convergence of search and display advertising."

They emphasized the flexible terms of the deal for Yahoo. Yahoo will be able to choose the search term queries for which Google's advertisements will appear, and also the pages on which they appear. The deal applies to the U.S. and Canada only and is nonexclusive, so Yahoo could cut deals with other companies and can also keep selling ads from its own Panama advertising platform.

Advertisers will pay Google for its ads that appear by Yahoo searches, and Google will then pay a portion of the revenue to Yahoo, Decker said. "We improve our access to the paid search universe, but on terms that work for us," she said.

While this deal isn’t quite as good as a Microsoft acquisition for Yahoo's investors, it’s the next best thing, said Greg Sterling of Sterling Market Intelligence. “While it’s no substitute for an outright acquisition from Microsoft in terms of shareholder value, this is probably smart for [Yahoo] provided they invest in their own platform,” he said.

Continuing to develop Panama will be key to Yahoo’s future, Sterling said. “If they get lazy about it and start to turn over more and more to Google because they have the inventory and neglect their own platform, that could over time erode the position of Panama,” Sterling said. “So they have to be vigilant about that.”

As part of the deal, the companies also plan to make their instant-messaging services interoperate, Decker said.

Yahoo and Google had been in talks over a potential deal for months. It was seen as a way for Yahoo to strengthen its advertising business and alleviate the pressure to be acquired by Microsoft. Microsoft had cited any deal with Google as a potential deal-breaker in its talks with Yahoo. It had also called it a bad business decision that would only serve to strengthen Google, the online ad market leader.

Yahoo and Google said they don't require regulatory approval for the deal, but that they would delay its implementation for three-and-a-half months while the U.S. Department of Justice reviews the arrangement. Various groups ranging from farmers to Microsoft have expressed concern about such a deal.

The deal doesn't mark the end of the turmoil around Yahoo. Its board faces a proposal by billionaire investor Carl Icahn, who hopes to replace the entire board and force the company into a deal with Microsoft.

However, the announcement probably spells the end of Icahn's plan, according to Sterling. Shareholders would only be inclined to vote for Icahn’s proposed board if they think it would help force a sale to Microsoft, Sterling noted. But Microsoft has said that it isn’t interested in buying all of Yahoo, only its search business. That kind of deal would leave the remaining Yahoo in a much worse position than it is now, he said.

British hacker faces extradition hearing next week

A British hacker fighting extradition to the U.S. on computer hacking charges is preparing for his final U.K. appeal on Monday in London.
If Gary McKinnon loses this appeal, he would be the first British hacker extradited to the U.S. He could face up to 60 years in prison.

McKinnon, of London, is accused of deleting data and illegally accessing information on 97 U.S. military and NASA computers between February 2001 and March 2002. He's been charged in U.S. District Court for the Eastern District of Virginia.

McKinnon admitted to using a program called "RemotelyAnywhere" to hack into PCs late at night when employees were gone. His hacking exploits started to unravel after McKinnon miscalculated the time difference between the U.S. and U.K., and one employee noticed their PC was acting oddly.

The U.S. pursued extradition, which McKinnon sought to block. Then-U.K. Home Secretary John Reid approved the extradition order, but McKinnon appealed. He lost that appeal in London's High Court in April 2007.

McKinnon then filed an appeal with the House of Lords, the final court of appeal for points of law in the U.K. Five lords will hear his case on Monday and then take three weeks to decide, McKinnon said earlier this week.

If the lords reject his appeal, McKinnon said he could take his case to the European Court of Human Rights. The backlog of cases in that court, however, means that an appeal could take years and in the meantime, his extradition could proceed, McKinnon said.

McKinnon said a U.S. public defender has visited him in the U.K. to prepare for his case if he is extradited. McKinnon's passport has been taken, although he still may use a computer.

McKinnon, who said he probed the computers looking for evidence that the U.S. government has knowledge of UFOs, maintains that his hacking never caused any harm.

However, the U.S. said that the intrusions disrupted computer networks used by the military that were critical to operations conducted after the Sept. 11, 2001, terrorist attacks. The U.S. estimates the damage caused by McKinnon at US$700,000.

Chinese woman disrobes online for earthquake donations

A young woman from earthquake-stricken Sichuan province hopes to draw attention to the area and inspire people to donate -- although her online photos seem to be giving rise to thoughts of a different kind.
Known only as "Xiaoyun," or "Little Cloud" in Mandarin, she has posted as many as 100 photos of herself in various poses ranging from clothed to in her underwear to seemingly naked.

However, she claims her motivation is not intended to publicize herself, but to keep eyes focused on her native province. "I am not from Shanghai, I'm from Sichuan, my hometown was hit by the recent earthquake. I have seen people from all over the country help Sichuan, and I am really happy. I hope everyone can continue donating for Sichuan, so I am posting some photos to encourage contributions."

Chinese bulletin board users have had mixed reactions to the photos. "What is with these post-90 girls, why don't they know anything about Marxist theory and work ethic? What do they hope to achieve taking everything off?" wrote one poster known as "First Light on South Street." "Post-90 girls" refers to young women born after 1990 who are often stereotyped for being materialistic and lacking morals.

"This just gets more and more crazy. I don't understand it," said a poster known as "pthxhy2008."

In May, police detained Gao Qianhui, a 21-year-old woman from Liaoning province, for making an online video of herself complaining about the lack of regular television programming during a three-day national mourning period. The mourning period commemorated the nearly 70,000 victims of the May 12 earthquake.

Xiaoyun is not the first person, in China or elsewhere, to use the Internet as a vehicle for self-promotion. In 2005, Shi Hengxia, better known as her online persona "Sister Lotus" ("Furong Jiejie" in Mandarin), achieved national notoriety for her blog posts and attempts at alluring photos. Chinese government regulators moved against her in 2006, keeping her off state-run television and asking Internet portals to keep her off of prominent positions on their sites.

One observer dismissed the woman's altruistic claims, saying she is just the latest person to be elevated to an Internet celebrity by posting racy photos of herself. But "the difference is perhaps that a lot more people in China seem to care," said Jeremy Goldkorn, editor of English-language media blog Danwei.org.

Groups ask court to review laptop searches

U.S. border agents should not be able to search travelers' laptops without a reasonable suspicion of illegal activity, despite a court ruling allowing such searches, two groups said.
The Electronic Frontier Foundation (EFF) and the Association of Corporate Travel Executives (ACTE) filed an amicus brief on Thursday with the 9th Circuit Court of Appeals, asking the full court to rehear and reverse a decision by a three-judge panel that ruled that border agents can routinely search files on laptops and mobile devices.

The random searching of laptops is "widespread," said Lee Tien, senior staff attorney with the EFF. The U.S. Department of Justice "claims that U.S. border agents have the power to do so, no suspicion needed, and there are plenty of reported incidents," he added.

There have been multiple media reports in recent months of laptops or other electronic devices searched and seized at U.S. borders, Tien noted. In some cases, travelers have not gotten their electronic devices back from customs officials, he said.

The case the two groups have asked the court to review involves a U.S. man named Michael Arnold, who returned to Los Angeles International Airport from the Philippines in July 2005. A U.S. Customs and Border Patrol officer asked to see Arnold's laptop, and customs officers found pictures of naked women, and later, pictures they believed to be child pornography.

Customs officials seized Arnold's laptop and later had him arrested.

Arnold's lawyer argued that the search violated the U.S. Constitution's Fourth Amendment, prohibiting unreasonable searches and seizures. His lawyer argued that the pictures obtained in the search should not be allowed as evidence in a trial, and a judge in the U.S. District Court for the Central District of California agreed with Arnold's lawyer.

However, the three-judge panel at the 9th Circuit overturned the district court's ruling. U.S. border agents have broad authority to search luggage and their contents at borders, Circuit Judge Diarmuid O'Scannlain wrote in the panel's April 21 decision.

"Courts have long held that searches of closed containers and their contents can be conducted at the border without particularized suspicion under the Fourth Amendment," O'Scannlain wrote. "We are satisfied that reasonable suspicion is not needed for customs officials to search a laptop or other personal electronic storage devices at the border."

The EFF and ACTE argue in their brief that "invasive" searches of electronic devices should be treated differently from searches of luggage. "Your computer contains a vast amount of information about your private life, including details about your family, your finances and your health," Tien said. "All that information can be easily copied, transferred and stored in government databases, just because you were chosen for a random inspection."

Tien said he expects a decision on whether to rehear the case within a few months.

Asked if defending an alleged child pornography user was a tough place to make a stand on laptop searches, Tien disagreed. "If they randomly search your machine, don't find anything interesting, and let you go, would you sue them?" he said.

FCC examines mobile termination fees

The U.S. Federal Communications Commission should abolish early-termination fees because they're unfair to customers, two mobile phone customers and a state regulator said Thursday.
Early-termination fees, or ETFs, charged by wireless carriers are "unique and frankly predatory," Molly White, a corporate consultant from Portland, Oregon, told the FCC.

"I do not sign time-sensitive contracts and agree to early termination fees with any other utility with whom I do business," said White, who had to pay an ETF for her personal phone service when former employer Nike provided a mobile phone to her. "The cellular industry appears to have built an elaborate system of additional fees, early termination clauses and hardware purchase requirements, all with the intentional appearance of offering the consumer, me, a deal, while ultimately locking me into a long-term service agreement."

A second mobile phone customer, Harold Schroer, asked the FCC to take action on ETFs, but also requested that the agency not end class-action lawsuits against the carriers in exchange for abolishing ETFs, as has been proposed by FCC Chairman Kevin Martin. In late 2007, after two senators introduced legislation that would regulate ETFs, Martin said he wanted to examine ETFs charged by mobile carriers and broadband providers.

Schroer, part of a class-action lawsuit against Verizon Wireless, told the FCC that the 4 million Verizon customers represented in the lawsuit paid about US$500 million in ETFs.

"We are seeking a refund of every penny of that money," said Schroer, a resident of New York state. "I never signed a contract [with Verizon], nor was I ever requested to sign a contract."

In 2003, Schroer cancelled a Verizon contract extension that was recommended by a sales representative, and he refused to pay the $175 ETF. Verizon then reported him to credit agencies, resulting in higher interest rates on credit cards and in him being turned down for new credit, he said. Bill collectors harassed him, he added.

Schroer complained to the FCC, but staffers there told him the agency had no authority over New York contract law, he said. "When I came to this commission for help, you sent me away," he said. "When I'm now about to get my day in court somewhere else, the commission purposes to step in and prevent me from doing that."

The FCC shouldn't take half steps such as requiring that ETFs be prorated based on how long the customer has had service or requiring that wireless carriers give customers more information about pricing plans and fees, said Anne Boyle, the chairwoman of the Nebraska Public Service Commission. Instead, the FCC should prohibit wireless carriers from offering plans with ETFs, she said.

Wireless carriers would benefit from the elimination of ETFs, Boyle said. "For some time, the wireless industry has ranked among the highest in the nation for consumer complaints," she said. "Many [complaints] are related to misunderstandings, misstatements and confusing, non-negotiable contracts."

Other witnesses at the hearing said ETFs help subsidize the cost of mobile handsets and allow customers to get cheaper rates than pay-as-you-go plans. "Term contracts allow the consumer to take advantage of bundled services at competitive prices and the latest devices they choose in exchange for a commitment to keep the service for usually one or two years," said Tom Tauke, Verizon's executive vice president of public affairs policy and communication.

Verizon would support an FCC policy governing ETFs as long as the agency also took away the "patchwork" of state regulation on the fees, Tauke added.

Verizon would support an FCC policy that set reasonable ETFs, required more information be provided about ETFs, that they be prorated and have test-drive periods, Tauke said. "While we continue to question the necessity of some of these provisions, we nevertheless believe that an FCC-adopted national policy ... is workable for the wireless industry," he said.

Verizon has listened to customer demand and began prorating ETFs in November 2006, Tauke said. The carrier also allows customers a test-drive period for new service, usually 30 days, and customers who cancel service within that time period are not charged an ETF, he added.

But one witness questioned the assertion from some wireless carriers that ETFs cover the costs of subsidizing mobile handsets. Lee Selwyn, president of the Economics and Technology consulting firm, said his calculations show that mobile carriers subsidized an average of $14.33 per handset in 2006, while ETFs were in the $150 to $200 range.

Selwyn, who testified last month on behalf of customers in a class-action lawsuit against Sprint Nextel in California, said Sprint lost less than $10 per customer when customers ended their contracts early.

Wireless providers have long used handset subsidies as a marketing tool, Selwyn added. "Over time, as the volume of handsets being manufactured mushroomed and the product costs plummeted, the magnitude of such subsides diminished to the point where it has all but disappeared," he said.

Intel developing video search technology

In a quest to make computing more interactive, Intel on Wednesday said it is working on video search technology that it hopes to bring to its future multimedia platforms.
The video search technology, which is being developed at Intel labs in U.S. and China, cuts down videos frame-by-frame and then uses image and face recognition technology to recognize faces, objects, voices, locations and movements. The frames are then patched together to make video search possible.

For example, users will be able to search videos of football games to zoom into moments when their favorite players score, said Lin Chao, a researcher with Intel. The technology recognizes and categorizes a player's face and objects like a goalpost and ball using algorithms and statistical processing technology that Intel has developed.

Once a user requests to see the goal, the technology looks for frames that contain related objects and delivers the video to the user.

Users can zoom into specific moments without watching entire videos, Chao said. The technology's recognition capabilities also help categorize images by person and object, which saves users from typing keywords to tag photographs.

However, the technology has challenges that can be overcome as processing power increases, Chao said. Processing a video to make it searchable takes hours, as current processing on PCs is limited. Chao couldn't predict when the technology would reach consumers.

The technology is part of Intel's "visual computing," which combines multiple cores, software development platforms and graphics capabilities to enable a more human interaction with a PC, said Justin Rattner, chief technology officer of Intel during a keynote at Intel's research show in Mountain View, California, on Wednesday. Intel wants to use the visual computing platform to enable interaction with a PC in life-like 3-D environments or to analyze video instantly.

Intel is already working on the Larrabee platform, which will combine multicore processors, multithreaded streams and graphics capabilities to deliver teraflops of processing power. Larrabee is due for release in 2010.

Intel's researchers are also working on a project that can track human activity to help caregivers. The company implemented a pilot in Seattle, where it has deployed monitors in 20 homes to track human activity.

RFID (radio frequency identification) tags are attached to objects such as toothbrushes, combs and medicine containers, and when those objects are moved, the tags tell an electronic monitor. RFID bracelets worn by members of the household identify who moved the object.

Ultimately, the technology could be used to identify if someone has taken medicine, for example. If the medicine container with an RFID tag wasn't opened, the monitor would alert the caregiver.

The activity tracking is unreliable for now, at between 70 percent to 90 percent accuracy, said Matthai Philipose, a researcher at Intel. It needs to reach between 95 percent to 98 percent to become reliable, he said. No study on the technology has been done to see if it is commercially viable, so it may or many not reach users in the future, he said.

Human problems could also affect the use of this technology, Philipose said. In countries like India or China, where homes have multiple caregivers, the workload of monitoring tasks will need to be broken up equally. If multiple people monitor tasks ineffectively, for example, people may end up taking medicine twice.

At this stage in the project, the RFID tags are protected by black blobs of plastic and so the lack of pleasing aesthetics is a problem, Philipose admitted. However, the plastic makes the RFID tags dishwasher safe, he said.

Wall Street Beat: All eyes on Apple, Yahoo

Yahoo and Apple announcements overshadowed all other tech events this week for IT investors. Apple's iPhone 2.0 launch raised mobile and consumer market issues, while the breakdown of talks between Yahoo and Microsoft removed the possibility of a truly game-changing event in the Internet realm.
All eyes were on Apple's US$199 iPhone 2.0 launch this week as the announcement, made Monday by CEO Steve Jobs at the Worldwide Developers Conference in San Francisco, stirred concerns -- and hope -- for the overall mobile device and retail tech markets.

Apples' good fortunes since the introduction of the iPod have depended on the success of its hit consumer products, which in turn have a "halo" effect on its Mac line. But attention is also paid to these launches because the devices themselves are seen as harbingers of things to come in the music, broadband video and smartphone markets, and IT investors bet heavily on them.

Right after the launch, the low price on the 8G-byte model and the fact that the company did not release a high end 32G-byte version, stirred fears that Apple would see its profit margin erode. Apple shares sank $4.03 to close Monday at $181.64. But the day after, high-profile analysts issued research reports saying the low price will help increase market size. They also said the already widespread geographical coverage, and an ending to exclusive carrier agreements, are setting the stage for iPhone user growth.

Citigroup and Lehman raised price targets on Apple Tuesday, sparking Apple shares to rebound to $185.64. Citing "potential for significant market share opportunities in the handset and personal computer markets," Merrill Lynch on Wednesday added Apple to its US 1 list, the investment bank's top-ranking investment suggestions for "buy"-rated U.S. companies, and reiterated its $215 price target. The investment firm also raised its forecast of 3G iPhone unit sales, estimating a 12 percent increase in fiscal 2009 to 22 million units, and a 13 percent increase in fiscal 2010 to 34 million units.

But Apple shares slumped again on Wednesday, as tech companies were dragged down with the rest of the market on renewed fears of high energy costs and inflation. The uncertain economy has depressed IT company share prices this year.

Though first quarter financial reports were better than expected, there are enough reports about faltering sales in pockets of IT -- especially in the retail market -- to stoke fears. For example, shares of Texas Instruments fell Tuesday after the company adjusted its second-quarter earnings and revenue estimates, bringing the top range of its forecasts down. Company shares declined 2.1 percent to close at $30.66 Monday.

TI now says second-quarter sales will be between $3.33 billion and $3.46 billion, compared with its prior estimate of $3.24 billion to $3.5 billion. The chip maker said sales of chips for mobile phones are weak in the second quarter and revenue from wireless devices is running behind last year's levels.

In the Internet arena, the big news of the week was the breakdown of the second round of talks between Microsoft and Yahoo.

After Microsoft ended its acquisition bid for all of Yahoo on May 3, the companies said they were negotiating for what observers believed was Yahoo's search-advertising business. That, in fact, turned out to be the case, but Yahoo once again spurned Microsoft. In a statement on Thursday, it said, "With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future."

Meanwhile, Yahoo was said to be near a deal with Google, under which it would outsource some search ad business to the Internet giant. But investors appeared unconvinced, at first blush, that a deal with its archrival -- rather than Microsoft -- would be in Yahoo's best interests. Yahoo shares dropped by $2.63, or 10 percent to close at $23.52 Thursday. Microsoft shares rose by $1.12 to close at $28.24. IT investors might be relieved that Microsoft earnings will not, after all, be diluted by a big acquisition.

Yahoo ends Microsoft talks, nears Google deal

Yahoo has ended its talks with Microsoft about a deal narrower in scope than a full acquisition, Yahoo revealed on Thursday.
Instead, the company is nearing an agreement with Google involving its search advertising business, The Wall Street Journal reported. Yahoo made no mention of such a deal in a statement it issued late Thursday afternoon. Such deals are typically announced either before U.S. financial markets open in the morning or after they close at 4 p.m. Eastern time.

Yahoo said it has concluded talks with Microsoft because Microsoft was only interested in purchasing Yahoo's search business, not all of the company.

With respect to this, Yahoo's board decided "that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo stockholders," the company said in a statement.

Microsoft on Thursday confirmed that it was not interested in rebidding for all of Yahoo, but had been seeking an "alternative transaction" that it believed would bring Yahoo shareholders more than US$33 per share, according to a statement. $33 per share had been Microsoft's previous final bid for all of Yahoo.

Microsoft said this alternative transaction remains on the table, and did not confirm that talks between it and Yahoo have concluded.

After Microsoft ended its acquisition bid for Yahoo on May 3, the companies acknowledged that they were in talks for an unspecified deal that most observers assumed involved Yahoo's search-advertising business.

Yahoo and Google had also been in talks about a search-advertising deal for several months, a deal that Microsoft cited as one of its primary reasons for ending its acquisition bid.

In April, Yahoo announced that it would test running Google ads along with its search results. Afterward, the companies said the test had gone well, but declined to provide more details on whether they would seek a longer-term, more formal, search ad deal.

Microsoft and Yahoo failed to come to terms on either a full or partial acquisition after months of on-again, off-again negotiations. Yahoo now faces the possibility of its board members being voted out by shareholders in a proxy battle spurred by billionaire investor Carl Icahn.

Icahn and Yahoo Chairman Roy Bostock have been trading barbs in public letters back and forth for the past week and a half as Icahn increased public criticism of how Yahoo has mishandled its dealings with Microsoft. On Friday he told Yahoo's board to offer itself up for sale to the software giant for $49.5 billion and be done with it. Icahn also said he would seek to replace Yahoo CEO Jerry Yang if his proxy bid is successful.

In response, Yahoo's board has defended its actions of the past several months. Through this public disagreement between Icahn and Yahoo, Microsoft has remained noticeably silent, so it was never clear if the company was still interested in purchasing Yahoo for that price or any other.

Thursday's news likely will inspire more ire from Icahn, though it's not clear what he would do with Yahoo if he is successful in ousting its board but cannot find another company to purchase Yahoo.

On May 15, Icahn sent a letter to Yahoo's board announcing he is nominating 10 candidates to replace all incumbent directors at the company's shareholders meeting in July. A few days later Microsoft and Yahoo said publicly that they were both open to negotiating another deal, although not one for Microsoft to totally purchase Yahoo but instead to buy only pieces of the company.

Icahn's move and the possible shake up of Yahoo's board may have led one director, Edward Kozel, to resign on May 22. His resignation prompted Yahoo to push its shareholder meeting back to August and to operate with only nine directors until then.

Icahn's actions came after Microsoft and Yahoo failed to come to an agreement after two months of haggling on a price.

On Feb. 11, Yahoo rejected Microsoft's Feb. 1 official bid for the company of about $44.6 billion, claiming it was too low. This set about several weeks of negotiations between the companies.

During that time, Yahoo did everything it could to avoid an acquisition by Microsoft, seeking other suitors and striking the deal with Google to test Google's AdSense for Search service as one of the Web publishers that carry pay-per-click text ads from Google.

Yahoo also attempted to buy time when Microsoft threatened to mount a proxy battle for the company, which it implied it would do first in a letter to the company on Feb. 12 and later in harsher terms in a letter to Yahoo's board on April 5.

For example, on March 5, Yahoo lifted the following week's deadline for nominating directors to its board, an attempt to discourage Microsoft from trying to replace the current board with members willing to approve its Yahoo acquisition bid.

Yahoo also unveiled a flurry of product and strategy announcements in the months following Microsoft's bid, pointing out that each initiative proved it could continue go it alone as an independent company.

Microsoft eventually pushed the price it was willing to pay for Yahoo up about $5 billion, or to $33 per share, but Yahoo still wasn't happy with the price. Yahoo executives later claimed it was Microsoft that ultimately walked away from the deal the first time.

In the days that followed before Icahn mounted his proxy battle, Microsoft distanced itself from Yahoo and executives said the company was moving on. Yahoo executives, meanwhile, seemed to backpedal when it became clear board members and investors weren't happy with the deal falling through, and said they would be open to being acquired for the right price if Microsoft or another suitor came calling.

Hacker gets 41 months for running rogue botnet

A hacker who hooked up a botnet within Newell Rubbermaid's corporate network was sentenced to 41 months in prison on Wednesday, according to the U.S. Department of Justice.
Robert Matthew Bentley, of Panama City, Florida, must also pay US$65,000 restitution. He was sentenced in U.S. District Court for the Northern District of Florida.

Bentley could have received a 10-year sentence. He pleaded guilty to charges of computer fraud and conspiracy to commit computer fraud for using the botnet to install advertising software on PCs located throughout Europe without permission.

Newell Rubbermaid, which makes products such as Sharpie markers and plastic food-storage containers, reported their European computer network had been hacked around December 2006. At least one other European-based company also complained.

Bentley's indictment was enabled by investigations conducted by several law enforcement agencies worldwide, including London's Metropolitan Police Computer Crime Unit, the U.S. Secret Service, the U.S. Federal Bureau of Investigation, the Finland National Bureau of Investigation and other local U.S. agencies.

Others who helped Bentley are still under investigation, the department said. Bentley received a commission from a company called DollarRevenue for every installation of the advertising software.

Ad software can be very difficult to remove and trigger unwanted pop-ups. Many hackers have become astute at installing the software through surreptitious means, such as exploiting software vulernabilities in a PC's operating system or Web browser.

In December 2007, DollarRevenue was fined €1 million (US$1.54 million) in the Netherlands, one of the largest fines ever levied in Europe against a company over adware. That investigation found that hackers were paid €0.15 each for installation of DollarRevenue software on computers in Europe and $0.25 for PCs in the U.S.