Google shares break $1,000 barrier as mobile pays off

By Soham Chatterjee and Alexei Oreskovic20 hours ago

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The new Nexus 7 tablet is demonstrated during a Google event at Dogpatch Studio in San Francisco, California, …

By Soham Chatterjee and Alexei Oreskovic

SAN FRANCISCO (Reuters) - Google Inc shares jumped past $1,000 on Friday as investors bet on the Internet company's continued dominance of the mobile and video advertising businesses despite aggressive competition from Facebook Inc and Yahoo Inc.

Shares of the world's No. 1 search company rose more than 14 percent to an all-time high of $1,015.46, swelling its market value by about $40 billion.

That vaulted Google past Microsoft Corp and Berkshire Hathaway Inc in capitalization and brought it to No. 3 among U.S. companies, behind only Apple Inc and Exxon Mobil Corp.

Google, whose Android is the world's most-used mobile software and YouTube is the most popular video-streaming service, on Thursday reported a 23 percent jump in net revenue from its Internet business. Advertising volume soared 26 percent - the highest rate of growth in the past year - and more than made up for an 8 percent slide in ad prices.

But given concerns about how U.S. companies can increase revenue in an uncertain global economy, those numbers suggested Google was firing on all cylinders except for its perennially money-losing Motorola unit, analysts said.

"Google's ownership of the Android ecosystem makes Google like the house, in Vegas terms," said Stifel Nicolaus analyst Jordan Rohan. "The success of Android, which becomes more and more popular every day, is starting to really add up, and Google is collecting small tolls along the way."

Rohan said accelerating revenue growth outside the United States and the UK was impressive, particularly in South Korea and Japan. "That could go on a while," he said.

At least 16 brokerages raised their price targets on the stock to between $880 and $1,220. The shares were up 13.7 percent, or $121.82, at $1010.62 on Nasdaq at mid-afternoon.

"We view solid paid clicks growth to be a good indicator of demand, driven by the continued shift to mobile," JPMorgan analysts said. They had expected 21.5 percent growth in ad volumes.

BEWARE ...

While much of Wall Street raised their price targets to above $1,000, Brian Wieser of Pivotal Research Group kept his at $880 and rated Google a hold.

Some analysts warn that spending on ambitious projects with as-yet unproven commercial potential - self-driving cars and wearable Google Glass being among them - may erode margins. Wieser estimated that, excluding traffic acquisition costs, gross margins slipped to 34.9 percent in the third quarter from 37.2 percent in the previous three months.

Facebook and Twitter Inc, which will soon raise $1 billion or more in this year's most-anticipated initial public offering, may also increasingly grab smaller customers from Google.

And then there is Motorola - which only recently began selling the vastly customizable Moto X smartphone in a bid to reverse years of losses and finally generate growth. Sales numbers are not yet available but reviews generally dismiss the device's chances of displacing, say, the iPhone.

Motorola, acquired by Google in 2012, racked up a loss of $218 million before items in the third quarter, more than four times the $49 million it lost a year earlier.

"While we acknowledge that most investors will look at Google more positively following this quarter, we think that over time issues such as margin erosion, competition and capital intensity will eventually impact the stock," Wieser said, explaining his below-average price target.

A STUDY IN CONTRASTS

Google's Friday rally stemmed in part from investors' focus on Facebook and its own increasingly successful efforts to sell advertising on mobile devices. Google stock had gained just 26 percent this year, while Facebook's has almost doubled.

Google and Facebook, which is expected to report its third-quarter results on October 30, also stand head-and-shoulders above the likes of Yahoo. The once-dominant Internet portal this week reported a tepid quarter, losing market share in display and search advertising.

Facebook rose 3.6 percent to $54.08 on Friday, while Yahoo was up 2 percent at $33.40. Baidu Inc, often called China's Google, gained 7.1 percent to $164.78.

Some say Google still has room for improvement. JPMorgan analysts said continued efforts to counter declines in ad rates might yield a major opportunity in the upcoming holiday season.

Google this year rolled out a service to help advertisers promote their products on a mix of smartphones, tablets and desktops. The move is also expected to bolster Google's overall advertising rates by mitigating the impact of mobile ads, which command lower rates.

Others say YouTube's potential remains only partly tapped. Ads on the site increased more than 75 percent in the quarter, with 40 percent of traffic now coming from mobile devices.

"We estimate that Google's key YouTube asset generated approximately $4 billion in revenue in 2012, positioning Google extremely well for the strong growth in video advertising," RBC Capital Markets analysts wrote.

2013 Nobel Prize In Physiology Or Medicine

For their discoveries related to the machinery that regulates the cellular transport system, which is critical to cell functioning,James E. Rothman, Randy W. Schekman, and Thomas C. Südhof were awarded the 2013 Nobel Prize in Physiology or Medicine.

Cells move molecules around using tiny membrane-enclosed packages called vesicles. This year’s Nobel Laureates, who will share the $1.2 million prize, discovered how cells get those vesicles to their intended destination at the intended time.

The three winners discovered different aspects of the system. Schekman discovered a set of genes required for vesicle transport. Rothman determined the proteins that allow vesicles to fuse with their targets and thus transfer materials. Südhof discovered the signals that tell vesicles when to release their cargo.

Schekman, a cell biologist at the University of California, Berkeley, developed a genetic screen of the yeast Saccharomyces cerevisiae to determine the genes that regulate vesicle trafficking. By using yeast with defective transport systems, he was able to determine where vesicle traffic backed up. With this information, he identified 23 key genes, which can be divided into three classes that control vesicles at the Golgi complex, the endoplasmic reticulum, or the cell surface.

Rothman, a cell biologist at Yale University, determined that proteins known as SNARE (solubleN-ethylmaleimide-sensitive factor-activating protein receptor) allow vesicles to fuse with their target membranes. These proteins had already been discovered by others, but their function was unknown. Rothman determined that these proteins interact with high specificity: The SNARE protein on a particular target membrane is able to interact with only one or a few vesicle SNARE proteins.

Südhof, a biochemist at Stanford University, identified the genes that are responsible for controlling the timing of vesicle fusion, particularly those involved in the release of neurotransmitters. He discovered how calcium regulates neurotransmitter release and that two proteins—complexin and synaptotagmin-1—are key players in calcium-mediated vesicle fusion. Synaptotagmin-1 acts as a calcium sensor during synaptic fusion. Complexin acts as a clamp during synaptic fusion to make sure that regulated exocytosis occurs instead of the vesicle simply being incorporated into the cell membrane.

Glitches in vesicle transport are associated generally with some human diseases, such as diabetes. Mutations in genes associated with the protein machinery are involved in specific diseases. For example, mutations in one of the genes are involved in certain forms of epilepsy.

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Nobel Prize in chemistry honors 3 for computer modeling research Arieh Warshel of USC, Michael Levitt of Stanford and Martin Karplus of Harvard are recognized for their pioneering use of computer modeling programs in studying chemical reactions.

As a chemistry professor at USC, Arieh Warshel says he sometimes finds it difficult to convince his fellow scientists that computers have a place in experimental fields like his own.

Many people, he laments, use them to make or watch movies, "but not to understand."

Though Warshel may hold a minority view on a campus with strong ties to Hollywood — visitors to his laboratory's website are informed that his animated computer simulations are not available on Netflix — he got a huge endorsement Wednesday from the Royal Swedish Academy of Sciences in the form of a Nobel Prize.

Warshel, Michael Levitt of Stanford University and Martin Karplus of Harvard University were awarded the 2013 Nobel Prize in chemistry for their pioneering use of computer modeling programs to help predict and illustrate complex chemical reactions.

The longtime collaborators and close friends will share about $1.2 million in prize money for devising programs that blend elements of classical chemistry with the strange and dualistic realm of quantum physics.

Their work, which began in the 1970s, has revolutionized chemistry and biochemistry research to the point that some scientists now conduct as much of their work on computers as they do in the lab with beakers and test tubes.

Though much of this change has occurred outside the public eye, members of the academy said it had led to a deeper understanding of molecules essential for life, as well as those used for pharmaceuticals, energy production and other industrial purposes.

"Chemical reactions occur at lightning speed," the academy said in its announcement. "In a fraction of a millisecond, electrons jump from one atomic nucleus to the other. Classical chemistry has a hard time keeping up. … Aided by the methods now awarded with the Nobel Prize in chemistry, scientists let computers unveil chemical processes."

At Stanford, Levitt said he was thrilled to see that the contribution of computers to chemistry and biology research was finally being recognized. He said the approach he has championed for about 40 years was just now coming into its own.

"As somebody who never really worked in a lab, it's very nice to see that computers have this place to play," he said.

Levitt, 66, drew a parallel with the aircraft industry.

"Thirty or 40 years ago, airliners were designed by engineers in wind tunnels. Now it's all done by computer," Levitt said. "I think we're going to get that way in biology and chemistry."

At his home in Cambridge, Mass., Karplus told a Harvard Gazette reporter that well-wishers had been asking him to explain his work in "simple terms."

"If you like how a machine works, you take it apart," said the 83-year-old Vienna native, who also has an appointment at the University of Strasbourg in France. "We do that for molecules."

In the 1970s, chemists relied on three-dimensional models of molecules — Tinker Toy-looking assemblies of sticks and balls — and X-ray crystallography to divine the shape of molecules and study their interactions.

Even when scientists began using computer programs in the 1970s, limits in processing power forced them to focus on small molecules. They also had to choose between using classical or quantum theories of physics.

To address these problems, the three chemists came up with computer modeling programs that were able to use both. By applying quantum calculations to the most chemically active portions of interacting molecules, and classical equations to less dynamic areas, they were able to calculate plausible reactions that could then be tested in actual experiments.

Their methods are currently being used to optimize the efficiency of solar cells and improve catalysts that "clean" the exhaust fumes of motor vehicles. Warshel made particular mention of the fact that computers can help pharmaceutical researchers find ways to "outsmart" a virus, such asHIV, that mutates in response to a drug treatment.

Much of the prize winners' early work was conducted in Israel, where Warshel and Karplus worked together on a powerful computer called Golem. The device was named after a creature in Jewish folklore who is brought to life from mud.

Warshel, who, like Levitt, has U.S. and Israeli citizenship, said one of the first congratulatory phone calls he received Wednesday was from Israeli Prime Minister Benjamin Netanyahu.

Warshel, 72, said the prime minister did not understand the nature of the professor's work, but after a one-minute explanation he came to recognize its significance.

"Netanyahu told me that from now on he was going to force all his ministers to say whatever it was they wanted to tell him in just one minute," Warshel said, eliciting laughter from a crowd gathered at USC's Town and Gown Ballroom.

Meanwhile, theoretical chemists across the globe were basking in the new recognition of in silico, or computer simulated, research.

"I'm super excited," said James Skinner, a theoretical chemist at the University of Wisconsin-Madison. "Chemistry is basically an experimental field, and I think experimentalists sometimes were just skeptical that theorists could make a contribution."

Computer analysis is particularly helpful in studying large protein molecules, which consist of tens of thousands of atoms. John Straub, a computational chemist at Boston University, said that only with a computer could researchers create a model "that has a remarkable level of detail that can't really be captured by theory or experiment."

Asked what made him persevere for decades, even when his field received little recognition, Warshel shrugged.

"I had nothing else to do," he said.

Nobel Prize in Physics Awarded for Theories on Mass, Tied to Higgs Boson

Just about a year after the discovery of the elusive "God particle," the Royal Swedish Academy of Sciences awarded Peter Higgs and François Englert with the Nobel Prize in Physics today.

The prize isn't for the discovery of the Higgs boson itself, but for the physicists proposing two independent theories about how particles acquire mass.

Surprisingly, Englert and Higgs had never met each other until recently, despite working in the same field and creating theories that tried to explain the same thing. "The first time I saw him was at the Fourth of July conference at CERN [in 2012]," said Englert at a news conference today, referring to the European particle physics laboratory. When asked what he would say to Higgs when he saw him again, Englert said, "Of course I'm going to congratulate him."

Like this year's Nobel Prize in Physiology or Medicine, the physics prize was rewarded to research done several decades ago. Both Englert and Higgs published their initial theories of particles acquiring mass in 1964. But it was only as recently as last year that physicists at the Large Hadron Collider at CERN were able to put the theory to the test, observing a particle that fit the description of the Higgs boson.

Higgs Boson: Physicists See Best Proof Yet of 'The God Particle'

The so-called "Standard Model" of particle physics explains how subatomic particles like electrons and quarks interact with one another. While much of the Standard Model neatly falls into place thanks to the existence of the Higgs boson, there are still other problems that physicists are looking into to figure out why the universe is the way it is.

The topics of dark matter and dark energy are still at the forefront puzzles that physicists are looking to solve, Englert added. However, Englert said that there is one problem that he sees above all the rest.

"In my opinion, the most fundamental problem that is not solved today ... is the problem of the quantization of gravity," he said, referring to the fact that physicists have yet to come up with a viable framework to seamlessly integrate Einstein's General Theory of Relativity with the Standard Model of particle physics.

Stephen Hawking New Book

A brief history of me: Professor Stephen Hawking has a written a memoir without any help thanks to new technology

• Renowned scientist will give fans an unprecedented insight into his life
• For the first time he wrote a book without assistance
• The book will feature details on his childhood and family

By SAM WEBB

PUBLISHED: 03:16 EST, 24 July 2013 | UPDATED: 10:57 EST, 24 July 2013

Renowned scientist Stephen Hawking is releasing a memoir that will provide a warts-and-all insight into his remarkable life.

The book, My Brief History, is the first that Hawking, who suffers from Motor Neuron Disease, has written entirely on his own thanks to the development of new technology.

Hawking is one of the most famous scientists in the world and a wildly successful author. A Brief History of Time has sold more than 10 million copies in 40 languages.

Instead of writing his usual brilliant books about the cosmos, Stephen Hawking is now publishing one about his life

The publishers describe My Brief History as 'his most personal book to date' and said it will deal with how A Brief History of Time came into being, as well as details about his childhood in post-war London, his years at Oxford and Cambridge as his illness developed, his marriages, family and intellectual passions, reports the Independent.

 

Papal Selfie

Nintendo's Yamauchi died at 85

TOKYO (Reuters) - Former Nintendo Co Ltd President Hiroshi Yamauchi, who built the company into a video game giant from a maker of playing cards during more than half a century at the helm, died on Thursday of pneumonia, the company said. He was 85.

Yamauchi was the third-generation head of the family-run business, founded in the ancient Japanese capital of Kyoto in 1889 as a maker of playing cards, and served as president from 1949 until 2002. He was an executive adviser to the company at the time of his death.

Under his leadership, the company developed the Famicom home game console and the Game Boy handheld player that helped to usher in the era of home game machines, which in more recent years has been dominated by Nintendo's Wii, Sony Corp's PlayStation, Microsoft Corp's Xbox.

Yamauchi was listed by Forbes magazine as Japan's richest man just five years ago, when Nintendo was flying high with the launch of the Wii with its motion-sensing controller, although the company's fortunes have since faded as smartphones displace consoles among gamers. His net worth at that time was estimated at $7.8 billion.

He was ranked 13th on the latest Forbes Japan list released this year, with an estimated net worth of $2.1 billion.

Yamauchi bought the Seattle Mariners U.S. major league baseball team in 1992 when the franchise was struggling, although it was later taken over by Nintendo of America Inc.

(Reporting by Nobuhiro Kubo and Edmund Klamann; Editing by Robert Birsel)

Yahoo Inc Chief Executive Marissa Mayer said the Internet company now has more than 800 million monthly active users

Yahoo Inc Chief Executive Marissa Mayer said the Internet company now has more than 800 million monthly active users, which she said represented 20 percent growth.

Speaking at the TechCrunch Disrupt conference in San Francisco on Wednesday, Mayer said the 8

Facebook shares break $45 for first time since 2012 IPO

SAN FRANCISCO (Reuters) - Shares of Facebook Inc rose more than 3 percent to a new high Wednesday, valuing the world's No. 1 social network at $106 billion, as investors focused on its recent mobile advertising advances ahead of a speech by its chief executive.

The stock touched $45 at 1:50 p.m. ET and briefly hit $45.07 shortly after 2 p.m. on the Nasdaq - highs not seen since May 18, 2012, the day of Facebook's initial public offering. It closed at $45.04.

CEO Mark Zuckerberg is expected to speak later Wednesday at the Techcrunch Disrupt conference in San Francisco.

JMP Securities analyst Ronald Josey said investors expect Zuckerberg to discuss future video ad products as well as plans to make money from its Instagram unit. The mobile photo app, acquired in 2012 by Facebook, is popular with young people but does not carry any advertising.

The stock's new intraday high is the latest milestone in its year-long recovery from fears that Facebook would struggle to make money from mobile users at a time when young people go online mostly through their smartphones.

The sentiment changed completely on July 24 when Facebook said its mobile advertising revenue grew 75 percent in the second quarter, trouncing analyst targets and delivering the company's strongest revenue growth since the third quarter of 2011.

The stock has risen 67 percent since then.

"The second quarter was the turning point when a lot of their work over the last year with the newsfeed came through," Josey said, referring to the format of Facebook updates that also carry mobile ads.

"Mobile is very hard to get audience at scale and Facebook is proving that it's one of those places where advertisers can go to reach eyeballs."

Facebook has said it expects sales and user growth for its mobile apps to outpace its desktop website.

Facebook options also traded heavily on Wednesday.

A total of 317,000 calls and 131,000 puts in Facebook changed hands on Wednesday, above its recent combined daily average of 355,000 contracts, according to options analytics firm Trade Alert.

The weekly $45 strike calls expiring this Friday as well as the September $44 and October $45 strike calls are among the busiest options.

"But one play in the options market appears to be making a 'cheap' bet that the recent run higher is overdone," said WhatsTrading.com options strategist Frederic Ruffy.

The top trade on Facebook on Wednesday was a 10,250-lot of September $39 strike puts, which were bought for 7 cents per contract as a new position. The contract, which is out-of-the-money, expires at the end of next week and would be profitable if shares fall below $38.93, Ruffy said.

iPhone History

Apple announced two new iPhones on Tuesday, its seventh and eighth models since the iPhone made its debut in 2007. Here are details on the past iPhone releases, along with the new ones.

— iPhone, June 29, 2007, starting in the U.S. (announced Jan. 9)

— iPhone 3G, July 11, 2008, starting in the U.S., Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, and the U.K. (announced June 9)

— iPhone 3GS, June 19, 2009, starting in the U.S. (announced June 8)

— iPhone 4, June 24, 2010, starting in the U.S., France, Germany and Japan and the U.K. (announced June 7).

— iPhone 4S, Oct. 14, 2011, starting in the U.S., Australia, Canada, France, Germany, Japan and the U.K. (announced Oct. 4).

— iPhone 5, Sept. 21, 2012, starting in the U.S., Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the U.K. (announced Sept. 12).

— iPhone 5C, Sept. 20, 2013, starting in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore and the U.K. (announced Tuesday).

— iPhone 5S, Sept. 20, 2013, starting in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore and the U.S. (announced Tuesday).

Samsung smartwatch

BERLIN (AP) — Nearly 70 years after Dick Tracy began wearing a two-way wrist radio in the funny pages, the technology that once seemed impossibly futuristic will be widely available by Christmas.

Samsung on Wednesday introduced a digital watch for the holiday season that will let users check messages with a glance at their wrists and have conversations secret agent-style.

So-called smartwatches have been around for several years. But so far, they have failed to attract much consumer interest. That may change with the Samsung Galaxy Gear, which offers the company a chance to pull off the same as feat Apple did with the iPad — popularize a type of device that has lingered mostly unnoticed on store shelves.

The Gear must be linked wirelessly with a smartphone to perform its full range of functions. It acts as an extension to the phone by discreetly alerting users to incoming messages and calls on its screen, which measures 1.63 inches diagonally.

"With Gear, you're able to make calls and receive calls without ever taking your phone out of your pocket," Pranav Mistry, a member of Samsung's design team, told reporters at the launch in Berlin ahead of the annual IFA consumer electronics show here.

."Kazuo Hirai, President and CEO of Sony presents …
Sony and Qualcomm also introduced smartwatches Wednesday. Apple Inc. is expected to release its own smartwatch, though it's not clear yet when. The release of separate products from so many manufacturers could stir interest in smartwatches in general. Meanwhile, Google is working on Google Glass — a device designed to work like a smartphone and worn like a pair of glasses.

With smartphones and tablets now ubiquitous, electronics companies are trying to create a new category of products that put advanced computing technology into everyday objects such as wristwatches and glasses. Research firm Gartner projects that wearable smart electronics will be a $10 billion industry by 2016.

But Ramon Llamas, an analyst at research firm IDC, said many things have to go right for smartwatches to succeed. Llamas said the devices need to offer a range of useful applications that justify carrying around — and charging — another digital device.

"It can't just be notifications of how many incoming messages you have," he said. "Health applications seem to be the low-hanging fruit."

For starters, the Gear will work with sporting and fitness apps such as RunKeeper, which tracks runs and other workouts.

."
Gartner analyst Carolina Milanesi believes it ought to do more, such as monitor a user's pulse and other health information. Other sensors, she said, could also authenticate a user's identity when making payments or detect locations so users could share their whereabouts with their friends.

"The watch is smart, but not as smart as it could be," Milanesi said. "It doesn't look like Samsung pushed the envelope as much as I hope Apple will. Right now, it looks like (Gear) will just provide you with an extra screen that is more convenient to look at than to have to take out a larger device. I don't think that's what consumers want."

The Gear goes on sale in the United States and Japan next month. The rest of the world will get it sooner, on Sept. 25, with prices starting at $299. That is about twice the price of currently available devices such as the Sony SmartWatch and the Pebble, which was funded through more than $10 million pledged by individuals on fundraising website Kickstarter. Another startup, also funded through Kickstarter, hopes to launch a stand-alone watch called Omate TrueSmart that comes with built-in cell connectivity.

Samsung Electronics Co.'s smartwatch uses Google's Android operating system, just like many of the phones and tablets made by the South Korean electronics company.

Mistry demonstrated the calling function on the Gear by holding it up to his ear and talking into a microphone hidden in the watch. The watch then relays the call to a smartphone over a built-in Bluetooth connection.

."
The strap, which comes in six colors, holds a basic camera that can be used to shoot photos and video. When linked to a smartphone or tablet, the Gear lets people check emails and Facebook updates from their wrists. Samsung said replies are possible through voice dictation. Voice commands can also be used for such tasks as setting alarms, creating calendar entries and checking the weather.

The Gear will be compatible initially with two Samsung products also unveiled Wednesday — the Galaxy Note 3, a smartphone with a giant 5.7-inch screen and a digital pen, and the Galaxy Tab 10.1, a tablet computer with a 10.1-inch screen comparable to Apple's full-sized iPad. But Samsung promised to update other Galaxy phones and tablets to work with the Gear in the future.

The number of apps that work with the Gear is also still limited. More than 70 apps are currently supported, including Facebook, Twitter and RunKeeper. That compares with the hundreds of thousands available for leading smartphones.

Unlike normal watches that can tick away for years on end, Samsung only promises a full day's use out of the Gear before it has to be charged.

Apple's plans for a smartwatch aren't known, but the company has been seeking a trademark for the iWatch name. The company is widely believed to be developing a watch that works on the same software as its iPhone and iPad, although it's unclear if it will be ready before the holidays. An announcement event next week is expected to be on new iPhones. Apple declined to comment Wednesday.

."
Meanwhile, Qualcomm didn't disclose a specific price or date for the Toq, beyond saying it will come out this year. Sony didn't provide many details about its SmartWatch 2 either. The focus of its announcement Wednesday was a new smartphone with a high-resolution camera.

Robert-Jan Broer, head of Germany-based market research firm Chronolytics, said many people who have stopped wearing watches because they are surrounded by time-telling devices might consider buying a smartwatch.

Brian Profitt, a technology expert and adjunct instructor of management at the University of Notre Dame's Mendoza College of Business, said the real question is whether the Samsung watch "will make the purchase of yet-another smart device worth it."

"It's great to have hands-free capabilities to take notes or snap a picture," Profitt said. "But it is $299 great? That's going to be the real test for the Galaxy Gear."

___

."
AP Technology Writers Youkyung Lee in Suwon, South Korea, and Michael Liedtke in San Francisco contributed to this report.

___

Lee can be reached at http://www.twitter.com/YKLeeAP . Frank Jordans can be reached at http://www.twitter.com/wirereporter .
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R. I. P. Windows

Farhad ManjooWin­dows is dead. Let’s all salute it—pour out a glass for it, burn a CD for it, reboot your PC one last time. Win­dows had a good run. For a time, it pow­ered the world. But that era is over. It was killed by the unlike­li­est of col­lab­o­ra­tions—Microsoft’s ancient ene­mies work­ing over decades, in con­cert: Steve Jobs, Linus Tor­valds, and most of all, two guys named Larry and Sergey.

Microsoft swallows Nokia's handset business for $7.2 billion

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By Ritsuko Ando and Bill Rigby

HELSINKI/SEATTLE (Reuters) - Two years after hitching its fate to Microsoft's Windows Phone software, Nokia collapsed into the arms of the U.S. software giant on Tuesday, agreeing to sell its main handset business for 5.44 billion euros ($7.2 billion).

Nokia, once the world's dominant handset maker, has failed to close a yawning lead opened up by Apple and Samsung in the highly competitive market for smartphones and will now concentrate on its networking equipment unit, navigation business and technology patents.

Nokia's Canadian boss Stephen Elop, who ran Microsoft's business software division before jumping to Nokia in 2010, will return to the U.S. firm as head of its mobile devices business - a Trojan horse, according to disgruntled Finnish media.

He is being discussed as a possible replacement for Microsoft's retiring CEO Steve Ballmer, who is trying to remake the U.S. firm into a gadget and services company like Apple before he departs, though it has fallen short so far in its attempts to compete in mobile devices.

"It's very clear to me that rationally this is the right step going forward," Elop told reporters, though he added he also felt "a great deal of sadness" over the outcome.

"I feel sadness because inevitably we are changing Nokia and what it stands for," he said.

In three years under Elop, Nokia saw its market share collapse and its share price shrivel.

In 2011, after writing a memo that said Nokia lacked the in-house technology and needed to jump off a "burning platform", Elop made the controversial decision to use Microsoft's Windows Phone for smartphones, rather than Nokia's own software or Google's ubiquitous Android operating system.

Nokia, which had 40 percent of the handset market in 2007, now has just 15 percent, and only 3 percent in smartphones.

Shares in Nokia surged 39 percent to 4.10 euros on Tuesday. While up from their decade-low of 1.33 euros hit last year, they are still only a fraction of their 2000 peak of 65 euros.

View gallery."

The Microsoft logo is seen at their offices in Bucharest March 20, 2013. REUTERS/Bogdan Cristel

After today's gains the whole company is worth about 15 billion euros, a far cry from its glory days when it peaked at over 200 billion euros.

Tuesday's deal includes an agreement to license Nokia's patent portfolio for 10 years. Without it, Nokia's devices and services business would have been worth about 3.7 billion euros, the companies said.

Microsoft shares in Frankfurt were down about 5 percent.

SOLD FOR "PEANUTS"

While some investors have credited Elop for bringing urgency to Nokia, which has stepped up its pace of product development in recent months and is due to announce a "phablet"-type large-screen handset this month, his legacy will be a bitter one for Finland. The company, which began life as a paper mill and has sold an eclectic range from television sets to rubber boots in its 148-year history, was a national champion in its heyday, accounting for 16 percent of all exports.

Hired by former chairman Jorma Ollila, Elop was the first foreigner to lead it.

For many Finns, the fact that a former Microsoft executive had come to Nokia, bet the firm's future on an alliance with Microsoft, laid off about 40,000 worldwide and then delivered it into Microsoft's hands, was a galling snub to national pride.

"Jorma Ollila brought a Trojan horse to Nokia," a column in widely read tabloid Ilta-Sanoma said.

"As a Finnish person, I cannot like this deal. It ends one chapter in this Nokia story," said Juha Varis, Danske Capital's senior portfolio manager, whose fund owns Nokia shares. "On the other hand, it was maybe the last opportunity to sell it."

Varis was one of many investors critical of Elop's decision to bet Nokia's future in smartphones on Microsoft's Windows Phone software, which was praised by tech reviewers but hasn't found the momentum to challenge the market leaders.

"So this is the outcome: the whole business for 5 billion euros. That's peanuts compared to its history," he said.

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Nokia chief executive Stephen Elop (L) welcomes Microsoft chief executive Steve Ballmer with a hands …

Alexander Stubb, Finland's Minister for European Affairs and Foreign Trade, said on his Twitter account: "For a lot of us Finns, including myself, Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional."

Nokia's new interim CEO Risto Siilasmaa painted a picture of just how grudgingly the call to sell had been arrived at, describing how the board had met almost 50 times after the approach by Microsoft around February.

Ballmer, at a news conference in the Finnish capital, sought to assuage fears the deal would hit jobs in the Nordic country and said Microsoft would build on the recent growth of Nokia's flagship Lumia smartphones.

Nokia said it expected around 32,000 people of its roughly 90,000 worldwide staff would transfer to Microsoft, including about 4,700 who will transfer in Finland.

PIVOTAL FOR MICROSOFT

It is also a pivotal moment for Microsoft, which still has huge revenues from its Windows computer operating system, Office suite of business software and the X-Box game console, but has failed so far to set up a profitable mobile device business.

Microsoft's own mobile gadget, the Surface tablet, has sold tepidly since it was launched last year.

"It's a bold step into the future — a win-win for employees, shareholders and consumers of both companies," Ballmer said. "Bringing these great teams together will accelerate Microsoft's share and profits in phones and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services."

The move leaves the Finnish company with Nokia Solutions and Networks, which competes with the likes of Ericsson and Huawei in telecoms equipment, as well as a navigation business and a broad portfolio of patents.

The Nokia deal thrusts Microsoft deeper into the hotly contested mobile phone market, despite some investors urging it to stick to its core strengths of business software and services.

Elop will return to Microsoft as its board ponders a successor to Ballmer, who will depart in the next 12 months.

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A woman takes pictures with Nokia's new smartphone, the Lumia 1020 with a 41-megapixel camera, after …

Activist fund manager ValueAct Capital Management, which has been offered a board seat, is among those concerned with Ballmer's leadership and his attempts to plough headlong into the lower-margin, highly competitive mobile devices arena.

Others applauded Ballmer's aggressive gambit.

"Microsoft cannot walk away from smartphones, and the hope that other vendors will support Windows Phone is fading fast. So buying Nokia comes at the right time," said Carolina Milanesi, an analyst at Gartner.

"In today's market it is clear that a vertical integration is the way forward for a company to succeed. How else could Microsoft achieve this?"

As part of Microsoft, Elop will head an expanded Devices unit. Julie Larson-Green, who in July was promoted to head a new Devices and Studios business in Ballmer's reorganization, will report to Elop when the deal is closed.

FIRE SALE

Analyst Tero Kuittinen at consultancy Alekstra said the sale price of Nokia's phone business, about a quarter of its sales last year, represented a "fire sale level", though others were less clear about what a shrunken Nokia was worth.

The price agreed for the devices and services business gives it an enterprise value of about 0.33 times sales for a loss-making business, about half what Google paid for Motorola's handset business in 2012.

"What should be paid for a declining business, where market share has been constantly lost and profitability has been poor?" said Hannu Rauhala, analyst at Pohjola Bank. "It is difficult to say if it's cheap or expensive."

Nokia is still the world's No. 2 mobile phone maker behind Samsung, but it is not in the top five in the more lucrative and faster-growing smartphone market.

Sales of Nokia's Lumia series have helped the market share of Windows Phones in the global smartphone market climb to 3.3 percent, according to consultancy Gartner, overtaking ailing BlackBerry Ltd for the first time this year. Still, Google Inc's Android and Apple's iOS system make up 90 percent of the market.

Nokia said in a statement it expected that, apart from Elop, senior executives Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber would transfer to Microsoft when the deal is concluded, probably in the first quarter of 2014.

($1 = 0.7582 euros)

Regulators, Bitcoin group discuss digital currency 1 BTC = $131.98087 USD now

WASHINGTON (Reuters) - U.S. regulators and law enforcement agencies met on Monday with an advocacy group for Bitcoin, a digital currency that has been under fire for its purported role in facilitating anonymous money transfers.

Jennifer Shasky-Calvery, director of the Financial Crimes Enforcement Network (FinCEN), said her unit hosted a presentation by members of the Bitcoin Foundation, an advocacy group of Bitcoin-related businesses.

"This is part of our ongoing dialogue aimed at enhancing communication with our regulated financial industries," Shasky-Calvery said in a statement.

She also noted that virtual currency exchanges must register with regulators and face requirements similar to those imposed on other financial firms. FinCEN is the Treasury Department's anti-money laundering unit.

Bitcoins, which have been around since 2008, are a form of electronic money that can be exchanged without using traditional banking or money transfer systems.

Bitcoins are the most prominent of these new currencies, which have come under scrutiny from regulators and law enforcement officials.

Representatives of the Bitcoin Foundation did not immediately respond to requests for comment. The group's website says it aims to make the currency more respected and to improve and protect its integrity.

The currency first came under scrutiny by law enforcement officials in mid-2011 after media reports surfaced linking the digital currency to the Silk Road online marketplace where marijuana, heroin, LSD and other illicit drugs are sold.

In recent months, the U.S. government has taken steps to rein in the currency and more regulatory action is expected.

Tokyo-based Mt. Gox, the world's largest exchanger of U.S. dollars with Bitcoins, had two accounts held by its U.S. subsidiary seized this year by agents from the Department of Homeland Security on the grounds that it was operating a money transmitting business without a license.

The Federal Bureau of Investigation reported last year that Bitcoin was used by criminals to move money around the world, and the U.S. Treasury said in March that digital currency firms are money transmitters and must comply with rules that combat money laundering.

The Senate Committee on Homeland Security and Government Affairs launched an inquiry into Bitcoin and other virtual currencies earlier this month, asking a range of regulators to list what safeguards are in place to prevent criminal activity.