iPhone 5 hits China as Apple market share slips

SHANGHAI (Reuters) - The China release of its iPhone 5 on Friday should win Apple Inc some respite from a recent slide in its share of what is likely already the world's biggest smartphone market, but its longer-term hopes may depend on new technology being tested by China's top telecoms carrier.

Cupertino, California-based Apple has been in talks about a tie-up with China Mobile for four years. A deal with China's biggest carrier is seen as crucial to improve Apple's distribution in a market of 290 million users - which is forecast to double this year.

China is Apple's second-largest and fastest-growing market - it brings in around 15 percent of total revenue - but the company's failure to strike a deal with China Mobile means it is missing out on a large number of phone users. As the China pie grows, Apple's sales increase, but without China Mobile, it's losing ground at a faster rate compared to other brands.

"In absolute terms, this (iPhone 5) launch will certainly result in strong sales for Apple in China. However, in relative terms, I don't believe it will move the needle enough in market share," said Shiv Putcha, a Mumbai-based analyst at Ovum, a global technology consultant.

China Mobile and Apple initially said they were separated only by a technical issue - as the Chinese carrier runs a different 3G network from most of the world - but that has evolved into a broader and more complex issue of revenue-sharing.

"China Mobile and Apple still have to solve many issues, such as the business model, articles of cooperation and revenue division, but I believe we will reach an agreement eventually," China Mobile CEO Li Yue was reported by Chinese media as saying in Guangzhou last week.

Apple China declined to comment. China Mobile said it had no update to the Apple discussions.

STRONG PRE-ORDERS

Apple's ranking in China's smartphone market slipped to sixth in July-September, according to research firm IDC, [ID:nL4N09G1QK] but investors, primed to look to China product launches for an uptick in Apple's quarterly sales, have good headline numbers to digest - more than 300,000 iPhones pre-ordered on one carrier alone. But it's the lack of a deal with the No.1 carrier that prevents those numbers being stronger.

The iPhone is currently sold through Apple's seven stores, resellers and through China Unicom and China Telecom - which together have fewer than half the mobile subscribers of bigger rival China Mobile.

"Apple's market share declined because of the transition between the iPhone 4S and 5. Their market share will recover (with the iPhone 5), but if you don't have China Mobile, the significant market share gains will be very difficult," said Huang Leping, an analyst at Nomura in Hong Kong.

TD-LTE: STILL DISTANT

Cutting a deal with a Chinese state-owned carrier may be less optimal than the deals Apple is used to in other markets, and analysts note that China Mobile wouldn't necessarily open the flood gates for Apple.

Ovum's Putcha believes Apple and China Mobile will eventually strike a deal - though this would be for an iPhone running on China Mobile's next-generation network rather than its current 3G network.

Of China Mobile's 704 million subscribers, only 79 million are on its 3G network, and Apple has been reluctant to sign up to China Mobile's under-utilized, homegrown TD-SCDMA technology. "Apple likely doesn't see the return-on-investment in extending themselves for TD-SCDMA," Putcha said.

China Mobile is currently trialling its next-generation network, TD-LTE, which could be of more interest to Apple, but full-scale commercial use - and an iPhone tie-up - could still be years away.

ANDROID THREAT

Meanwhile, rivals are circling, eating away at Apple's smartphone market share. Samsung Electronics, Lenovo Group and little-known Chinese brand Coolpad held the top three slots in the third quarter, according to IDC.

All three have relationships with China Mobile and offer smartphone models at different price points. Apple competes exclusively at the high-end, and even there, rivals are rolling out models with China Mobile. Last week, Nokia said it planned to release its latest Lumia smartphone with China's top carrier, which is also expected to launch Research in Motion's new Blackberry 10, analysts predict.

"The threat will still come more from the Android camp where they have many vendors already working with China Mobile and offering high-end phones," said TZ Wong, a Singapore-based IDC analyst.

While these smartphones don't generate the buzz of a new iPhone, Chinese buyers are not known for their brand loyalty, and this could siphon away users considering an Apple upgrade.

"I've used a Blackberry, Android and iOS and, personally, I want to try the Windows 8," said Andy Huang, a 37-year-old fund manager, who owns most iPad models, an iPhone 4 and a 4S. "I think the Windows 8 is very innovative."

With a China Mobile deal looking some way off, Apple could always boost market share by offering cheaper models - the basic iPhone 5 will cost 5288 yuan ($850) without a contract - though this appears an unlikely route for a high-end brand.

"If they want to expand market share, probably the only way to do it here dramatically would be to put out a lower cost phone," said Michael Clendenin, managing director at RedTech Advisors. "It's really uncertain if they'd decide to go that route ... Apple's a mystery in that regard."

($1 = 6.2518 Chinese yuan)

(Additional reporting by the Shanghai Newsroom and Jane Lee; Editing by Kazunori Takada and Ian Geoghegan)

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Exclusive: Softbank caps how much Sprint can pay for Clearwire

NEW YORK (Reuters) - Sprint Nextel Corp's $2.1 billion offer to buy out Clearwire Corp appeared to be running into trouble on Thursday, as some shareholders said they wanted more money while Softbank Corp set a cap on how much Sprint could pay.

Sprint, which owns 50.45 percent of Clearwire, offered $2.90 per share for the rest of the company and said it would also provide interim financing of $800 million to the cash-strapped company. Any deal would need approval by Softbank, which has agreed to buy 70 percent of Sprint for about $20 billion.

Clearwire shareholders, who together hold about 7.6 percent of the company, criticized the Sprint offer on Thursday, with some saying that the No. 3 U.S. wireless carrier should raise its bid to at least $5 per share. Holders of at least 24.8 percent of Clearwire's outstanding stock, other than Sprint, need to approve the deal.

Clearwire, which is reviewing the Sprint offer, saw its shares jump almost 15 percent on Thursday to $3.16, suggesting investors expected a higher price.

But Softbank has told Sprint that it would not consent to any Clearwire bid higher than $2.97 per share, two sources close to the matter said. The threshold is the same price that Sprint recently paid to buy a small stake from Clearwire founder Craig McCaw's Eagle River Holdings LLC.

Sprint, Clearwire and Softbank declined to comment on the details of these discussions.

For Clearwire, the deal is one of the few options it might have to survive in the long term. The company needs to raise more financing to upgrade its network and to keep the business afloat. It has said that it has enough money to last it until the third quarter.

Stabilizing Clearwire is also in Sprint's interest, which not only has a majority ownership of the company. The hurdles Sprint is running into highlight the complexities it faces in trying to take on its larger rivals, Verizon Wireless and AT&T Inc. A deal would also bolster Sprint's network and give the carrier full control of Clearwire's substantial spectrum.

The timing of Sprint's current negotiations with Clearwire is being driven by Clearwire's uncertain liquidity position, said the sources who asked not to be named because the discussions are private.

A third source close to the situation said Clearwire is also in talks about other strategic alternatives besides the Sprint offer. The person did not give details about what those alternatives were.

INVESTORS GRIPE, SOFTBANK SETS CAP

Several Clearwire shareholders on Thursday said they were dissatisfied with Sprint's offer.

Crest Financial, which owns more than 3 percent, said it "intends to take whatever actions it can" to protect Clearwire shareholders against "unfair dealing by Sprint and other parties."

Even before the Sprint offer was formally announced, Crest had filed a lawsuit on Tuesday against Clearwire and Sprint to try to thwart a deal after reports emerged about discussions between the companies.

Another shareholder, who declined to be named, told Reuters in an interview that an offer in the $5 per share to $8 per share range would be more acceptable to investors.

"This deal should happen. It's good for Clearwire. It's good for Sprint. $2.90 is not the right price," said the person who asked not to be named due to a lack of authorization to talk in public about investments.

Chris Gleason, a managing partner of Taran Asset Management, said "$5 to $7 is a fair range."

"You're at $5.30 before you start being real," said Taran, who owns about 3 million Clearwire shares.

But Softbank, which holds the key to the deal, is not willing to go that high, according to the sources.

Softbank founder Masayoshi Son's $2.97 per share threshold for the bid comes as Clearwire's shares have risen over the past couple of months on investor expectation of the deal.

The Eagle River purchase represented roughly a 130 percent premium to where Clearwire's stock had been trading before news of Softbank's deal with Sprint.

Moreover, if Sprint were to pay any other shareholder a higher price than the Eagle River deal, it would have to increase its payments to Eagle River to match the higher price.

The final outcome of the deal, however, remains unclear.

Clearwire's other minority shareholders include Intel Corp and Comcast Corp, which own about 12.4 percent between them.

Sprint has been in discussions with those companies about purchasing their shares, sources have said previously.

Intel said on Thursday that it was evaluating Sprint's offer, while Comcast declined to comment.

Analysts said Clearwire could also afford to hold out for a higher price.

"With a year of liquidity on the books and the alternative of raising additional equity or refinancing debt at this level, Clearwire is hardly without options, and we don't see why the company would necessarily jump at the $2.90 bid," JPMorgan analyst Philip Cusick said in a research note.

Pacific Crest analyst Michael Bowen said he believes that Sprint "should not pay more than $3" per share for Clearwire, but he added that the company may be pressured into eventually increasing its offer to $3.50 per share.

(Reporting by Nadia Damouni and Sinead Carew; Editing by Ken Wills and Paritosh Bansal)

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Facebook unveils new privacy controls

SAN FRANCISCO (Reuters) - Facebook Inc began rolling out a variety of new privacy controls on Wednesday, the company's latest effort to address user concerns about who can see their personal information on the world's largest social network.

New tools introduced on Wednesday will make it easier for Facebook's members to quickly determine who can view the photos, comments and other information about them that appears on different parts of the website, and to request that any objectionable photos they're featured in be removed.

A new privacy "shortcut" in the top-right hand corner of the website provides quick access to key controls such as allowing users to manage who can contact them and to block specific people.

The new controls are the latest changes to Facebook's privacy settings, which have been criticized in the past for being too confusing.

Facebook Director of Product Sam Lessin said the changes were designed to increase users' comfort level on the social network, which has roughly one billion users.

"When users don't understand the concepts and controls and hit surprises, they don't build the confidence they need," said Lessin.

Facebook, Google Inc and other online companies have faced increasing scrutiny and enforcement from privacy regulators as consumers entrust ever-increasing amounts of information about their personal lives to Web services.

In April, Facebook settled privacy charges with the U.S. Federal Trade Commission that it had deceived consumers and forced them to share more personal information than they intended. Under the settlement, Facebook is required to get user consent for certain changes to its privacy settings and is subject to 20 years of independent audits.

Facebook's Lessin said some users don't understand that the information they post on their Timeline profile page is not the only personal information about them that may be viewable by others. Improvements to Facebook's so-called Activity Log will make it easier for users to see at a glance all the information that involves them across the social network.

Facebook also said it is changing the way that third-party apps, such as games and music players, get permission to access user data. An app must now provide separate requests to create a personalized service based on a user's personal information and to post automated messages to the Facebook newsfeed on behalf of a user - previously users agreed to both conditions by approving a single request.

The revamped controls follow proposed changes that Facebook has made to its privacy policy and terms of service. The changes would allow Facebook to integrate user data with that of its recently acquired photo-sharing app Instagram, and would loosen restrictions on how members of the social network can contact other members using the Facebook email system.

Nearly 600,000 Facebook users voted to reject the proposed changes, but the votes fell far short of the roughly 300 million needed for the vote to be binding, under Facebook's existing rules. The proposed changes also would eliminate any such future votes by Facebook users.

(Reporting By Alexei Oreskovic)

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As global consumers shop mobile, Apple outshines rivals

PARIS/PALO ALTO, Calif (Reuters) - Apple's stock may be sliding as investors fret about growing competition, but store visits and interviews with smartphone and tablet shoppers in 10 cities around the world suggest consumers share little of that negativity.

With tablets and other mobile devices the gadgets of choice this holiday season, Reuters canvassed over 70 shoppers and store employees across Sydney, Seattle, Palo Alto, Shanghai, Bangalore, Singapore, Paris, London, Mexico City and Boston for insight into what does and doesn't beckon.

Apple stores and electronics retailers were bustling last week, in contrast to the Microsoft pop-up stores in the United States promoting Windows 8 and Surface tablets, which were far less crowded.

Samsung appeared to be marketing aggressively, blanketing stores across major cities with signs for its Galaxy products and other devices, and large displays in many stores. Customers noticed, but only in Singapore and Bangalore did most of those spoken to by Reuters see it as a top choice.

Nokia, meanwhile, seems to have all but vanished from the front lines of the retail wars. Amazon's Kindle devices were also little in evidence, though that likely reflects its greater online sales focus.

Apple and its rivals are duking it out in displays, buying advertising and mobilizing armies of employees to try to win over the swarm of shoppers who will hit malls across the globe in coming weeks.

Loyalty to Apple's compelling orchard of products seemed to be a first line of defense for the Cupertino, California, company as shoppers in Europe, Asia and the United States weighed the pros and cons of switching to rival offerings.

Customers cited existing iTunes music and video libraries plus the traditional Apple virtues of simplicity and ease of use as reasons to stick with the iPhone and the iPad.

"I just taught my Persian grandmother how to use her new iPhone. She's 77 and speaks no English," said Soheil Arzang, a 27-year-old law student in Palo Alto, California. "With a Windows PC there are so many buttons, it's confusing. I converted my parents officially to Apple iPhones, Macs and iPads."

His father "used to go to Best Buy, but now he just says 'let's go to the Apple store,'" Arzang said at a store near company headquarters.

In Paris, Max Cevenne, a 62-year-old photographer whose iPad was recently stolen, grilled a sales clerk about how Samsung's 10-inch Galaxy tablet would work with his PC at home.

"The Samsung appeals to me because it has an SD (digital memory) card and is more flexible in terms of software and hardware you can use with it," he said at the FNAC electronics store near St Lazare train station. "But I may end up going back to the iPad since I already use other Apple products, and it might be simpler."

Across the English Channel at a John Lewis department store in London, Joanna Sargent cast her eye over Amazon's Kindle Fire, but since she's bought three iPad Minis for her sons, she said she would probably stay with what's familiar.

"I looked at going for another tablet, but although they are cheaper, you have to re-buy everything," she said. "We'd have to buy all the music again, and you have to take that into account."

Train engineer John Owen from Didcot, Oxfordshire, echoed: "Apple's got me in now."

WHAT'S HOT, AND WHAT'S NOT

Just three years after their inception, tablet computers are the indispensable item. In a U.S. Ipsos poll conducted for Thomson Reuters from December 8 to December 11, one in three of 1,330 people surveyed were thinking of buying one of the slim gadgets.

Of those predisposed, 42 percent were leaning toward an iPad or iPad Mini, 16 percent were considering the Kindle Fire, and 14 percent a Samsung Galaxy. A mere 4 percent of respondents were drawn to Microsoft's Surface.

Apple has led the mobile industry since it launched its first iPhone in 2007 and then the iPad in 2010. But rivals including Samsung, Google, Amazon and Microsoft are making gradual inroads. IPads accounted for 54 percent of the tablet market this year but are expected to dip to 50 percent by 2016 as competing tablets gain ground, according to market research firm IDC.

Apple has lost a quarter of its value since September as fears grow about its ability to fend off challengers.

Samsung in particular appears to have launched a global marketing blitz at stores and malls around the world.

In Mexico City, its logo was plastered on signs on roads and outside retailers such as Sanborns and Iusacell. Despite that high visibility, an employee at one shop said he's selling about 15 iPads a week.

"The iPad mini is selling out as soon as we receive the shipments. Last week we got 42 and this week 32, and they sold almost immediately. ... A lot of people buy them as gifts," he said.

There are 88.5 million mobile phone users in Mexico, out of which just 15 million have smartphones, according to industry data, an example of the sizeable potential market that Apple, Samsung and others are fighting for.

In India, where mobile phone sales grew at a 47 percent clip in the third quarter, according to Gartner research, iPhones are still the gold standard, and many models were sold out.

But Androids are steadily attracting consumers. In tech-savvy Bangalore, the affordable smartphones are pervasive, replacing many of the Nokia feature phones popular in the past.

IPhones and iPads are too expensive for many Indians, but that didn't discourage a steady stream of keen window shoppers at an electronics market plastered with Samsung advertising.

"You have to pay the Apple premium, but when you consider the ease-of-use and the whole Apple ecosystem, it's well worth the money," said 29-year-old Karthik Venkataraman.

That same stickiness was also a deterrent for many.

"I want to be able to sync to different devices," said Chenelle Brandford, a 17-year-old student from North London.

In Singapore, the Samsung kiosk at a StarHub store was crowded, with customers testing out the South Korean manufacturer's Note 2 phone-tablets.

"I didn't want to get stuck in the Apple ecosystem," said one customer who recently bought an Android phone made by LG.

At a major electronics retailer in downtown Shanghai, most tablet shoppers said their first choice would be an iPad, but Samsung also had its share of fans.

"I don't like the iPad because it is too inconvenient to use. You cannot drag files directly into it but only by using iTunes," said Wang Daliu, 26 and unemployed. "The iPad has a closed system, limiting its capability."

THE LAGGARDS

Since Amazon, Google and Microsoft sell most of their tablets online, their devices came up less often than Samsung's and Apple's in Reuters interviews with shoppers.

Those companies are building their own ecosystems, but none have neared Apple's success at creating a simple-to-use, closed market of apps, music and content.

Microsoft, worried about declining PC sales, launched its foray into hardware with the Surface tablet in October to compete with the iPad.

The world's largest software company has not revealed sales figures for the tablet, which has won mixed reviews and is only available in its own stores and online in certain countries. On Tuesday, Microsoft said it would sell the Surface through more retailers starting this month.

At a mall in Boston, one person wandered into a Microsoft store for every nine who visited a nearby Apple store on a weekday last week. In Palo Alto, 40-year-old Javier Sanchez returned his Surface.

"With the iPad, it's one step, and with this (Surface), it's two or three steps to do the same thing," said Sanchez, who also uses a Mac and an iPhone. "You open (the iPad) and it's ready for you."

Things looked not much brighter on Microsoft's home turf, in the greater Seattle area. A sales assistant at a Best Buy said he had been quizzed about sales of the Windows 8 device.

"A whole bunch of Microsoft guys basically interviewed me, asking me how well things were selling," he said, without going into details.

Another assistant, asked if the same store had 32GB or 64GB Surface tablets in stock, said, laughing: "We got plenty of both!"

Apple is likely to reveal holiday sales only in January, alongside results. For now, the loyalists have spoken.

"We're far more familiar with Apple," said Linda Jenkins at the Carphone Warehouse in London. Her husband, Vaughan, chimed in: "But they haven't taken us over yet!"

(Reporting by Tomas Sarmiento and Cyntia Barrera in Mexico City, Himank Sharma in Bangalore, Paul Sandle and Isla Binnie in London, Leila Abboud in Paris, Alistair Barr in Palo Alto, Bill Rigby in Seattle, Aaron Pressman in Boston, Ananthalakshmi A in Singapore, Thuy Ong in Sydney and Shanghai newsroom. Writing by Noel Randewich, editing by Edwin Chan and Prudence Crowther)

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Compromise emerges in global talks on Internet oversight

DUBAI (Reuters) - Hopes rose on Tuesday for a compromise agreement that would keep intrusive government regulation of the Internet from being enshrined in a global treaty.

As a 12-day conference of the International Telecommunication Union drew near its Friday closing, the chairman of the gathering in Dubai circulated a draft that sidelined proposals from Russia, China and other countries that have been seeking the right to know where each piece of Internet traffic comes from.

"The United States believes it is the basis for any further progress toward reaching an agreement at this conference," said U.S. Ambassador Terry Kramer, who had led Western opposition to the earlier proposals.

The new draft was greeted positively by a broad swath of delegates to the conference and came as a surprise to many who had been frustrated by the deadlock gripping the event over the weekend.

Hamaoun Touré, ITU secretary-general, told Reuters he had hosted discussions between the opposing parties and weary delegates seemed eager to resolve their differences as talks drag into the early hours each night.

A majority of the more than 150 countries represented at the conference had been willing to officially extend the mission of the United Nations agency to the Internet, while the Americans, most Europeans and some other advanced economies wanted to limit the ITU to oversight of international phone calls and other means of communication.

The issue is coming to a head now because the ITU is revamping its treaty for the first time since 1988, before the World Wide Web took shape and became an economic, cultural and political force usually free from international oversight.

The compromise-in-progress would move most Internet elements from the treaty itself to a separate, U.N.-style "resolution" that is not binding on the countries, delegates said.

A few matters that could govern the Internet remain in the main document and will be debated Wednesday, said Markus Kummer, vice president of the Internet Society, one of several nongovernmental groups that are involved in setting standards now and that sounded alarms about the Dubai conference.

Among the remaining provisions in the draft is a tentative assertion that countries could choose to "manage the naming, numbering, addressing and identification resources used within their territories for international telecommunications."

That could be interpreted as including the right to assign Web addresses, which is currently controlled by ICANN, a United States-based nonprofit under contract to the U.S. Department of Commerce.

"The Internet space as such isn't mentioned, but there are a few provisions that might go a little bit into the Internet space and that we need to look at carefully," Kummer said.

The nonbinding resolution, meanwhile, was further softened to allude to the roles of parties from outside government.

"All governments should have an equal role and responsibility for international Internet governance and for ensuring the stability, security and continuity of the existing Internet and its future development and of the future Internet, and that the need for development of public policy by governments in consultation with all stakeholders is also recognized," the draft states.

Most of the talks have been behind closed doors, and so far the key debate on whether the ITU has a mandate to set Internet-related regulations has not been held in public.

Conference Chairman Mohamed al-Ghanim, director-general of the United Arab Emirates' telecom regulator, has opted to hand over the more controversial issues to private sub-groups.

Open sessions are instead devoted to relatively minor issues, with much of Tuesday's final debate spent squabbling over when the next summit should be held.

When asked if member states had formed an agreement over the terms in which the Internet was referred to in the treaty, Touré said, "of course," but declined to give further details, saying it had yet to be formally approved.

Touré said the treaty would "absolutely not" cover Internet governance, but admitted some references to the Internet were likely to be included in the final text, which may be too much for the United States.

"It's normal to mention the Internet, it's not taboo, because we're all stakeholders of this Internet world," said Touré. "The Internet is one of the biggest issues here, so for me it was important that we resolve this issue. By Thursday we should be ready."

Though the Western camp was happy with Tuesday's negotiations, some of its opponents remained unappeased. A Russia-led coalition resubmitted a previously shelved proposal that calls for sweeping new governmental powers over the Internet.

The revised submission, now co-signed by Russia, China, Saudi Arabia, Algeria, Sudan, Bahrain, Iraq and the UAE, says countries should be able to block some Internet locations and take control of address allocation. The proposal also wants to allow states to track and direct Internet traffic and provides a definition of spam so broad it could potentially apply to almost any emailed message, which opponents warn could be used to curb online freedom of expression.

But this proposal has yet to be debated in the public sessions, and its recommendations may have little chance of being approved, especially following Touré's insistence that the treaty would not deal with Internet governance.

"The end result is very unlikely to have anything in it that would justify the amount of fear-mongering that led up to the conference," said Kieren McCarthy, a former ICANN official who runs .Nxt, an information service that specializes in Internet policy.

"But at the same time, there were several concerted efforts to increase government control over the Internet, so it's hard to tell what would have happened if people hadn't been so vociferous."

(Reporting by Matt Smith in Dubai and Joseph Menn in San Francisco; Editing by M.D. Golan)

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Microsoft ups Surface production, to sell in more stores

SEATTLE (Reuters) - Microsoft Corp has stepped up manufacturing of the Surface tablet, its new device designed to counter Apple Inc's iPad, and will introduce it to third-party retailers this week.

The moves suggest Microsoft is seeing some demand for its first own-brand computer in the crucial holiday shopping season, although it has yet to divulge any sales figures.

"The public reaction to Surface has been exciting to see," said Panos Panay, general manager of Microsoft's Surface project, which forms part of the company's Windows unit.

"We've increased production and are expanding the ways in which customers can interact with, experience and purchase Surface," said Panay, but gave no details of how many extra units were being produced.

Panay did not mention names of retailers that will sell the Surface, but separately office equipment retailer Staples Inc said it would stock the tablet from Wednesday.

He said the Surface would also be on sale at retailers in Australia from mid-December, with more countries to follow in the next few months.

Since launch in late October, the Surface has only been sold by Microsoft itself, in its own brick and mortar stores in the United States and Canada and online in Australia, China, France, the UK and Germany.

The only Surface model available now - officially called Surface with Windows RT - runs a version of Windows created to work on the low-power chips designed by ARM Holdings, which dominate smartphones and tablets but are incompatible with old Windows applications.

It starts at $499 for the 32 gigabyte version plus $120 for a thin cover that doubles as a keyboard.

A larger, heavier tablet - called Surface with Windows 8 Pro - will be introduced in January, running on an Intel Corp chip that works with all Microsoft's Windows and Office applications. Microsoft plans to price the new Surface from $899 for a 64 gigabyte version.

The world's largest software company also said it would keep its chain of 'pop-up' holiday stores open into the new year and will convert them into permanent retail outlets or what it called "specialty store locations".

Microsoft's recent push into physical retail - following Apple's great success - has resulted in 31 permanent stores plus 34 holiday 'pop-up' stores in the U.S. and Canada.

If Microsoft converted each of the temporary stores into permanent outlets it would have 65 stores, still well below Apple with almost 400 worldwide.

(Reporting by Bill Rigby in Seattle, Sruthi Ramakrishnan in Bangalore)

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Massive HP conference draws 10,000 attendees to ogle products, speakers, presentations

By Suzy Hansen

More than 10,000 customers, partners and attendees flocked to the Hewlett-Packard Discover conference in Frankfurt, Germany, this week to learn about HP's latest products, exchange ideas, swap business cards and basically examine whether HP can improve the way their companies are run. The event was held at Messe Frankfurt, one of the world's largest trade exhibition sites.

CEO Meg Whitman acknowledged in her speech on Tuesday that HP has gone through some rough times this past year. HP's stock price has been nearly halved during her tenure. Whitman, however, pointed out that HP has $120 billion in revenue and is the 10th-largest company in the United States. In Q4, HP has generated $4.1 billion in cash flow.

"We are the No. 1 or No. 2 provider in almost every market," Whitman told the crowd in Frankfurt.

Whitman emphasized  executives' increasing concerns about security and said that it will be addressed by "a new approach": HP's security portfolio, with Autonomy and Vertica, which helps "analyze and understand the context of these events." Executive Vice President of Enterprise Dave Donatelli spoke about converged infrastructure, or bringing together server, network and storage; their software-defined data centers; and their new servers, which "change the way servers have been defined." George Kadifa, executive vice president of software, said 94 of the top 100 companies use HP software. HP is the sixth-largest software company in the world, with 16,000 employees in 70 countries, Kadifa added.

Also at the conference was Jeffrey Katzenberg, CEO of DreamWorks and an old friend of Whitman's from their Disney days, who roused the crowd with a fun speech about his long relationship with HP. Katzenberg showed an old video of himself onstage with a lion, which nearly mauled him. This time, he appeared onstage with a guy in a lion suit. The lesson was to learn from past mistakes and move on.

"If I am smart enough to say 'scalable multicorps processing,' I am smart enough to not put myself onstage with a real lion again," he joked.

The Discover conference is a key vehicle for HP to show off products it's offering in the coming year. Among them were the latest ProLiant and Integrity servers, the 3PAR StoreServ 7000 and the StoreAll and StoreOnce storage systems. At the HP Labs section of the conference, attendees could learn about the cloud infrastructure or test HP's new ElitePad 900.

Throughout the three-day event, which saw attendance grow by 30 percent this year, attendees wandered the enormous halls, milling around displays, watching videos, listening to speeches and participating in workshops. People gathered on clustered couches and chatted with new acquaintances, frequently stopping to plug in their various devices and recharge themselves with coffee. With people coming from all over the world, you could hear many languages spoken, from Arabic to French to the most bewildering of them all: the language of technology. Despite the large crowds, it was hard not to notice there were very few women among the thousands in attendance. In fact, when asked about this phenomenon, one female HP employee said, "Trust me, you aren't the first person who has come up to me asking about this."

Indeed, the Discover conference was like a forest of men in suits. The few women stood out like rays of sunlight. 

Regardless of their presence at this conference, women are making big strides in information technology. Among the leaders are HP CEO Whitman, who also led eBay; Carly Fiorina, who ran HP before Whitman; Yahoo! CEO Marissa Mayer; and Facebook COO Sheryl Sandberg. Were the women at the Discover conference surprised by the low female turnout?

"No, for IT this is standard," said Stefanie, a 30-year-old product manager from Germany. "Many are afraid of all the technical stuff, and you have to prove that you are capable of it. You get more women in retail and distribution but not in high-tech areas, at least not in Europe. In America there are more women in management positions and in general."

Americans might assume that Europe, with its generous social programs that include free daycare, enables more women to ascend the corporate ladder. But that still doesn't mean that a woman trying to balance a high-tech career and a family is always accepted in European society.

"There is still a lot of emphasis on the family," Stefanie said. "It's easier to move up in the U.S., where there is a culture of 'having it all.' It's quite a fight to get there here."

Still, the IT industry might seem inhospitable to women. Could this male-dominated profession be male-dominant because women have a hard time breaking in?

Stefanie disagreed. "No, they actually like working with women," she said. "They want to."

One male conference attendee, who asked not to be named, was less certain.

"There's a lot of ego and testosterone," he said. "It can't be easy" for women.

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Google's GMail service suffers disruption

SAN FRANCISCO (Reuters) - Several Google Inc Web products, including the popular GMail service, appeared to go dark for users on several continents on Monday.

Google confirmed that "service disruptions" had affected GMail and Google Drive, its online storage service. The two products are part of Google's Apps suite, a Microsoft Office rival that caters to both consumers and businesses.

By 10:10 a.m. Pacific Time (18:10 GMT), Google's Apps Dashboard monitoring service reported that GMail and Drive service had resumed. The company did not specify how many users were affected, or where, but the outage prompted widespread complaints on social media on both coasts in the U.S. and other major markets, from the United Kingdom to Brazil.

Some users additionally reported that the outage had affected Google Docs, the company's word-processing and spreadsheet programs, while Chrome, Google's Internet browser, also crashed unexpectedly.

"We are currently experiencing an issue with some Google services," Google spokeswoman Andrea Freund said in a statement. "For everyone who is affected, we apologize for any inconvenience you may be experiencing."

Firmly entrenched in the consumer market, GMail is one of Google's most popular and important product offerings. The search giant, which has been pushing a corporate version of the email service and its Apps suite to businesses to compete with Microsoft, said this month that the package will no longer be free to business customers.

(Reporting By Gerry Shih; Editing by Andrew Hay and Nick Zieminski)

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Software guru McAfee wants to return to United States

GUATEMALA CITY (Reuters) - Software guru John McAfee, fighting deportation from Guatemala to Belize to face questions about the slaying of a neighbor, said on Saturday he wants to return to the United States.

"My goal is to get back to America as soon as possible," McAfee, 67, said in a phone call to Reuters from the immigration facility where he is being held for illegally crossing the border to Guatemala with his 20-year-old girlfriend.

"I wish I could just pack my bags and go to Miami," McAfee said. "I don't think I fully understood the political situation. I'm an embarrassment to the Guatemalan government and I'm jeopardizing their relationship with Belize."

The two neighboring countries in Central America are locked in a decades-long territorial dispute and voters in 2013 will decide in a referendum how to proceed.

Responding to McAfee's remarks, a U.S. State Department spokeswoman said U.S. citizens in foreign countries are subject to local laws. Officials can only ensure they are "treated properly within this framework," she said.

On Wednesday, Guatemalan authorities arrested McAfee in a hotel in Guatemala City where he was holed up with his Belizean girlfriend.

The former Silicon Valley millionaire is wanted for questioning by Belizean authorities, who say he is a "person of interest" in the killing of fellow American Gregory Faull, McAfee's neighbor on the Caribbean island of Ambergris Caye.

The two had quarreled at times, including over McAfee's unruly dogs. Authorities in Belize say he is not a prime suspect in the investigation.

Guatemala rejected McAfee's request for asylum on Thursday. His lawyers then filed several appeals to block his deportation. They say it could take months to resolve the matter.

The software developer has been evading Belize authorities for nearly four weeks and has chronicled his life on the run in his blog, www.whoismcafee.com.

McAfee claims authorities will kill him if he turns himself in for questioning. He has denied any role in Faull's killing and said he is being persecuted by Belize's ruling party for refusing to pay some $2 million in bribes.

Belize's prime minister has rejected this, calling McAfee paranoid and "bonkers.

BEATING HEAD AGAINST WALL

After making millions with the anti-virus software bearing his name, McAfee later lost much of his fortune. For the past four years he has lived in semi-reclusion in Belize.

He started McAfee Associates in the late 1980s but left soon after taking it public. McAfee now has no relationship with the company, which was later sold to Intel Corp.

Hours after his arrest, McAfee was rushed to a hospital for what his lawyer said were two mild heart attacks. Later he said the problem was stress. McAfee said he fainted after days of heavy smoking, poor eating and knocking his head against a wall.

He told Reuters he no longer has access to the Internet and has turned over the management of his blog to friends in Seattle, Washington. On Saturday, they began posting a series of files claiming to detail Belize's corruption.

Residents and neighbors in Belize have said the eccentric tech entrepreneur, who is covered in tribal tattoos and kept an entourage of bodyguards and young women on the island, had appeared unstable in recent months.

Police in April raided his property in Belize on suspicion he was running a lab to make illegal narcotics. There already was a case against him for possession of illegal firearms.

McAfee says the charges are an attempt to frame him.

"People are saying I'm paranoid and crazy but it's difficult for people to comprehend what has been happening to me," he said. "It's so unusual, so out of the mainstream."

(Editing by Dave Graham and Bill Trott)

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In giant "garage sale", Japan's TV giants hawk $3 billion of assets

TOKYO (Reuters) - Panasonic Corp, Japan's struggling maker of Viera brand TVs, owns more than 10 million square meters of office and factory space, dormitories for its workers and sports facilities for its rugby, baseball and women's athletics teams.

As it battles for Christmas shoppers' wallets in the year-end holiday season, the sprawling electronics conglomerate is also seeking buyers for some of those properties to trim its fixed costs and improve cashflow at a time of intense competition, particularly from South Korean rivals such as Samsung Electronics Co.

Japan's other troubled TV makers, Sony Corp and Sharp Corp, are also selling buildings and businesses in a giant 'garage sale' that could raise a combined $3 billion.

Panasonic plans to raise $1.34 billion from offloading property and shares in other Japanese companies by end-March, the group's chief financial officer Hideaki Kawai told Reuters.

"We have a lot of land and buildings in Japan and overseas," he said in an interview at the company's head office in Osaka, in western Japan. He declined to list which properties would go on the block, but said most are in Japan. He added that Panasonic would raise about a quarter of the sell-off funds by getting rid of shares it owns in other companies - a common practice of cross-shareholdings in Japan.

The proceeds would help bolster free cashflow to 200 billion yen ($2.43 billion) for the business year to March, Kawai said, and allow Panasonic to reduce its debt and maintain its crucial research and development effort as it revamps its business portfolio.

It will sell more assets in the year starting in April if cashflow dips below 200 billion yen, Kawai added. Panasonic President Kazuhiro Tsuga has promised to shut or sell businesses operating at below a 5 percent margin. Those sales could start as soon as April.

Panasonic's fixed assets of $21 billion are around 30 percent more than those of Apple Inc, and are almost double the company's market value. The company, founded almost a century ago as a small electrical extension socket maker, trades at around half its book value - which includes intangible assets such as patents. Sony trades at 39 percent of book, Sharp at 30 percent.

The fixed assets - buildings, land and machinery - of the three companies that were not so long ago a byword for innovation in household gadgetry total around $42 billion, while their combined market value is $24 billion.

CASHFLOW IS KING

The three firms have been downgraded by credit ratings agencies, making it tougher to raise funding on capital markets, and making asset sales more urgent.

Selling assets "is good in terms of their credit ratings because, for all three, it will lower fixed costs and they can reduce their capex requirements. Eventually, this could improve operating margins and, more importantly, cashflow," said Alvin Lim, an analyst at Fitch Ratings in Seoul.

Fitch, which makes its ratings without input from company management, last month cut Panasonic to BB and Sony to BB minus, the first time one of the major agencies has relegated either company to junk status. Sharp is ranked B minus, adding to its borrowing costs.

"We rate Panasonic as investment grade, and it should have various funding options. Selling assets it can do without, to avoid raising additional borrowing, can be an option," said Osamu Kobayashi, an analyst at Standard & Poor's.

While Korean rivals have also benefited from a weaker local currency, data from the Japan Electronics and Information Technology Industries Association shows that Japanese production of consumer electronic equipment fell to just above $15 billion last year from more than $19 billion a decade ago. Output in September was just $980 million, half last year's level.

"The gap with Korean makers seems to be widening. It's going to be very difficult for them to regain their top-tier position," said Fitch's Lim.

As the three Japanese firms, all under new leadership, have sketched out restructuring plans, the cost of insuring their debt against defaulting in 5 years has dropped from spikes just a month ago. Credit default swaps for Sharp and Sony are down to levels last seen 3 months ago, while Panasonic's have dropped 40 percent in the past month.

THREE PATHS

While Panasonic is looking to revamp its business around batteries, auto parts and household appliances, Sony is doubling down on smartphones, gaming and cameras. Sharp, meanwhile, is focusing on display screens and is forging alliances with the likes of Taiwan's Hon Hai Precision Industry and U.S. chipmaker Qualcomm Inc.

Sony may also take the real estate sale route to raise much-needed cash, with a possible sale of its 37-storey New York headquarters, dubbed by New Yorkers as the 'Chippendale' because of its design that is reminiscent of the period English furniture. Selling that jewel could raise $1 billion, media have reported.

The maker of Vaio laptops, PlayStation gaming consoles and Bravia TVs may also sell its battery business, which makes lithium ion power packs for tablets, PCs and mobile phones. The company has been approached by investment banks offering to sell the unit, which employs 2,700 people and has three factories in Japan and two overseas assembly plants. Sony values the business's fixed assets at $636 million.

Potential buyers could include BYD Co Ltd, a Chinese carmaker backed by billionaire investor Warren Buffett, and Taiwan's Hon Hai - which part owns Sharp's advanced LCD panel plant in Sakai, western Japan, and is in talks to buy TV assembly plants in China, Malaysia and Mexico for $667 million, Japan's Sankei newspaper has reported.

Sharp has mortgaged nearly all its properties to secure a $4.6 billion bailout from Japanese banks and so has few assets to offer in a grand garage sale.

Instead, it's selling part of the garage.

Qualcomm has agreed to buy a 5 percent stake in Sharp, making it the largest shareholder. Hon Hai, which earlier this year agreed to invest in Sharp - before its stock slumped in the wake of record losses - has said it remains interested in taking a stake.

"Whatever they can get to get through this fiscal period by scaling down their operation is a critical step for them to remain afloat," said Fitch's Lim.

($1 = 82.4700 Japanese yen)

(Additional reporting by Reiji Murai; Editing by Ian Geoghegan)

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