Chinese Lenkovo may buy RIM (blackberrry)

A senior Lenovo executive said on Thursday that the Chinese computer maker may consider Research in Motion as a takeover target, sending the Blackberry maker's shares up 2 percent just a week before it launches a make-or-break line of redesigned smartphones.

But Levovo, which vaulted into the personal computer market with its 2005 purchase of IBM's PC division, would face formidable hurdles if it tried to buy a company that Canadian Prime Minister Stephen Harper once described as a national "crown jewel." The Chinese company would also encounter tough regulatory scrutiny in Washington, cybersecurity experts say.

Lenovo, on track to become the world's largest PC maker, has held talks with RIM and its bankers about various combinations or strategic ventures, its chief financial officer, Wong Wai Ming, said on Thursday.

"We are looking at all opportunities - RIM and many others," Wong told Bloomberg in an interview at the World Economic Forum's annual meeting in Davos, Switzerland. "We'll have no hesitation if the right opportunity comes along."

A spokesman for Lenovo said Wong was asked about RIM by the Bloomberg journalist and that Wong was speaking broadly about Lenovo's M&A strategy.

CRUCIAL JUNCTURE

RIM, once a pioneer in the smartphone industry, has struggled in recent years as its aging line-up of devices have ceded market share to Apple Inc's iPhone and devices based on Google Inc's Android operating system.

RIM hopes its new touch-screen and keyboard devices, powered by its new BlackBerry 10 operating system, will help it claw back some of the lost ground. Optimism surrounding the launch has powered the stock higher in recent weeks.

Last May the Waterloo, Ontario-based company announced a far-reaching strategic review under which it was expected to examine all options, from software licensing deals to an outright sale of the company.

Earlier this week, RIM shares surged to a 13-month high after Chief Executive Thorsten Heins said RIM might consider strategic alliances with other companies after next week's BlackBerry 10 launch.

In an interview with a German newspaper on Monday, Heins said RIM's ongoing strategic review could lead to the sale of its handset business or the licensing of its software to rival smartphone companies.

Even so, analysts expressed skepticism about a Lenovo bid.

"Anybody who's serious about buying a company doesn't go talking it up. ... It sounds to me like a comment made more for publicity's sake than a serious approach for RIM," said Charter Equity analyst Ed Snyder. "It is a very long shot at the best.'

NET BENEFIT TEST

Any bid for RIM would face a rigorous review by the Ottawa to determine whether the deal would bring a "net benefit" to Canada. The Investment Canada Act gives the government the authority to kill deals that could harm Canadian interests or threaten the country's national security.

In response to the comments by Heins, Canada's Industry Minister Christian Paradis told Reuters earlier this week that Canada may even go to the extent of reviewing a sale of RIM's handset business if such a deal was proposed.

"Research in Motion has made an important contribution to information and communications technology in Canada, a sector that is so important to the Canadian economy. We hope they continue to do so well into the future," Paradis said in an emailed response to the Lenovo comments on Thursday.

Cybersecurity experts said Lenovo would likely go up against tough U.S. government scrutiny as well since the Defense Department and other agencies rely on the Blackberry, which is considered more secure than other smartphones.

"A potential acquisition of RIM by Lenovo would raise a number of important security issues," said Michael Wessel, a Commissioner on the U.S.-China Economic and Security Review Commission, appointed by Congress.

"Government employees are one of the largest users of RIM's BlackBerry products and the security of their communications has to be of paramount concern," said Wessel, adding that he was speaking on behalf of himself and not the Commission.

After the comments from Lenovo, a RIM spokesman said the company had nothing new to report on its strategic review.

RIM shares closed 2.2 percent higher at $17.74 on Thursday the Nasdaq. The Toronto-listed shares closed 2.9 percent higher at C$17.80. RIM is a volatile stock, and moves of 3 percent and more are not uncommon.

Its shares are down almost 90 percent from an all-time high of over $148 in 2008, but the stock has rallied in the last four months as the launch of the BlackBerry 10 devices nears. The company's shares have nearly tripled in value since dipping as low as $6.22 in late September.

(Reporting by Euan Rocha in Toronto, Diane Bartz in Washington, Randall Palmer in Ottawa and Sinead Carew in New York; Editing by Frank McGurty

Microsoft Office sale lowered

Microsoft Corp's quarterly profit edged lower as Office software sales slowed ahead of a new launch, offsetting a solid but unspectacular start for its Windows 8 operating system and sending the company's shares down 1.4 percent.

The results mark a stark change from the 1990s, when Microsoft was the unchallenged king of computing and the release of a new Windows operating system would supercharge sales, generate excitement and generally boost its stock.

None of that appears to be true now, as Microsoft has been overtaken by Apple Inc and Google Inc in the rush toward mobile computing, while sales of traditional desktop computers are in decline.

"There's still no sign that Windows 8 is a gangbuster," said Andrew Bartels, an analyst at Forrester Research. "Compared to prior periods, where you saw a big increase when a new one came out, you're not seeing that."

Profit at the world's largest software company slid to $6.4 billion, or 76 cents per share, in the fiscal second quarter, from $6.6 billion, or 78 cents per share, in the year-ago quarter.

Wall Street had expected 75 cents per share, on average, according to Thomson Reuters I/B/E/S.

Overall sales rose 3 percent to $21.5 billion, Microsoft said on Thursday, in line with analysts' estimates.

The biggest factor weighing on Microsoft was a 10 percent decline in sales at its Office unit to $5.7 billion, which took into account the loss of deferred revenue relating to discounted upgrades to the new version of the software, expected shortly.

"It's a pause before a product launch, which is typical," said Josh Olson, an analyst at Edward Jones.

WINDOWS SHRUG

Windows sales jumped 24 percent to $5.9 billion, slightly ahead of analysts' average expectations, which had been gradually lowered over the last few months. That also included some deferred revenue relating to discounted upgrades.

Microsoft said it has sold more than 60 million Windows 8 licenses since its late-October launch, an unexceptional start for a product which has not gripped the public's imagination in the way of Apple's iPad.

The company already announced 60 million Windows 8 sales two weeks ago, broadly in line with Windows 7 sales three years before.

"Windows 8 continues to have an uphill battle in convincing investors this is going to be the key to the growth story for Microsoft," said Daniel Ives, an analyst at FBR Capital Markets. "It continues to be a major prove-me product cycle."

Microsoft did not detail sales of its new Surface tablet - a direct competitor to the iPad - although chief financial officer Peter Klein said the company was expanding production and distribution.

Windows executives suggest that Windows will win more people over when new touch-screen devices start hitting the shelves in coming months.

"Demand is stronger than supply across a number of key device types, whether Windows tablets, convertibles, or all-in-ones," Tami Reller, chief financial officer of Microsoft's Windows unit, told Reuters earlier this month. "Most of the opportunity is still ahead of us."

Analysts seem prepared to give Microsoft more time to prove its point.

"It's been disruptive but the PC market is far from dead," said Colin Gillis, an analyst at BGC Financial. "Even if they have minimal success with Surface, they don't need much to move the needle."

Microsoft shares have fallen 2 percent since Windows 8 was launched on October 26, compared to a 5 percent gain in the tech-heavy Nasdaq composite index. They fell to $27.06 in after-hours trading, after closing at $27.23 on Nasdaq.

www.mega,co,nz

We are a dedicated group of technologists who were given the time, opportunity and Internet access to build an awesome cloud storage service that will help protect your privacy. We have programmed this Internet service from scratch in Auckland, New Zealand. Unlike most of our competitors, we use a state of the art browser based encryption technology where you, not us, control the keys. Our design group includes Kim Dotcom, Mathias Ortmann, Bram van der Kolk, and Finn Batato. Our CEO, industry veteran Tony Lentino, has experience running a renowned global domain registry. We hope you like it.

Microsoft buyiing Dell

Microsoft Corp is in discussions to invest between $1 billion and $3 billion of mezzanine financing in a buyout of Dell Inc, CNBC cited unidentified sources as saying on Tuesday.

Private equity outfit Silver Lake Partners is trying to finalize a bidding group to take the world's No. 3 PC maker private, and has opened discussions with potential equity partners, sources familiar with the matter have said.

Dell also has formed a special committee to take a close look at any potential deal on the table, multiple sources with knowledge of the matter told Reuters. If successful, it would be one of the largest corporate buyouts since before the global financial crisis.

Microsoft, which accelerated its foray into computer hardware in 2012 with the launch of the Surface tablet, will provide the capital in the form of mezzanine financing according to CNBC, which is a hybrid of debt and equity.

Microsoft and Dell both declined to comment on the CNBC report. Shares in Dell gained climbed 2 percent to $13.08 in late morning trade.

Former exec said Steve Ballmer maybe a good coo, but not a suitable ceo

Microsoft Corp Chief Executive Steve Ballmer is not the right leader for the world's largest software company but holds his grip on it by systematically forcing out any rising manager who challenges his authority, claims a former senior executive who has written a book about his time at the company.

"For Microsoft to really get back in the game seriously, you need a big change in management," said Joachim Kempin, who worked at Microsoft between 1983 and 2002, overseeing the sales of Windows software to computer makers for part of that time. "As much as I respect Steve Ballmer, he may be part of that in the end."

As a senior vice president in charge of a crucial part of the company's business with direct access to co-founder Bill Gates, Kempin is the most senior former Microsoft executive to write a book critical of the company, which is famous for the loyalty of its ex-employees.

His criticism echoes that of investor David Einhorn of Greenlight Capital, who called for Ballmer to step down in 2011.

Kempin left Microsoft under a cloud in 2002 as some of the aggressive contracts he crafted with PC makers were seen as fodder for the U.S. government's antitrust prosecution of the company, which started in 1998 and was largely resolved by 2002.

His book, titled 'Resolve and Fortitude: Microsoft's "secret power broker" breaks his silence', is scheduled to be published on Tuesday. He talked with Reuters by phone on Monday.

DEFEND THE THRONE

Kempin charges Ballmer with purposefully ousting any executives with potential to wrest him from the CEO seat, which he has occupied since 2000.

He said he saw the process first with Richard Belluzzo, a former Hewlett-Packard executive credited with launching the Xbox game console who rose to chief operating officer at Microsoft but left after only 14 months in the post, in the same year Kempin left.

"He (Belluzzo) had no room to breathe on the top. When you work that directly with Ballmer and Ballmer believes 'maybe this guy could someday take over from me', my God, you will have less air to breathe, that's what it comes down to."

Microsoft representatives declined comment. Attempts to reach Belluzzo were not successful.

Several leading executives, touted by outsiders at one time or another as potential successors to Ballmer, have left the company in the last few years, most recently Windows unit chief Steven Sinofsky, who departed in November.

Before Sinofsky, Windows and online head Kevin Johnson went to run Juniper Networks Inc, Office chief Stephen Elop went to lead phone maker Nokia Oyj, while Ray Ozzie, the software guru Gates designated as Microsoft's big-picture thinker, left to start his own project.

"Ozzie is a great software guy, he knew what he was doing. But when you see Steve (Ballmer) and him on stage where he (Ozzie) opposed Steve, it was Steve's way or the highway," said Kempin.

Kempin said he spoke to Ballmer around two years ago and expressed his concerns about his management style and direction of the company, but has seen no changes since. He said he sent Ballmer and Gates copies of his new book but has yet to get a reply.

"Steve is a very good business guy, but make him a chief operating officer, not a CEO, and your business is going to go gangbusters," said Kempin. "I respect that guy (Ballmer), but there are some limitations in what he can and can't do and maybe he hasn't realized them himself."

MISSED OPPORTUNITIES

In his book, Kempin writes about how Microsoft foresaw the major moves in technology in the last decade, but bungled its entry into tablets, phones and social media, ceding leadership in the technology world to Apple Inc and others.

"They missed all the opportunities they were talking about when I was still in the company. Tablets, phones...we had a tablet going, we had tablet software when Windows XP came out, it was never followed up properly," said Kempin.

He also claims the decline of PCs is partly due to Microsoft's mismanagement of hardware makers, an area that Kempin oversaw at Microsoft.

"Just think about the insult of Microsoft coming out with a tablet themselves, trying to mimic Apple, and now they are going to come out with a notebook on top of it," said Kempin, referring to Microsoft's Surface RT tablet and soon-to-be-released Surface running Windows Pro.

Several PC makers went public with their unease about Microsoft's decision to make its own computers last year.

Kempin reserves his most pointed criticism for Ballmer.

"Is he a great CEO? I don't think so. Microsoft's board is a lame duck board, has been forever. They hire people to help them administer the company, but not to lead the company. That's the problem," said Kempin.

"They need somebody maybe 35-40 years old, a younger person who understands the Facebook Inc generation and this mobile community. They don't need this guy on stage with this fierce, aggressive look, announcing the next version of Windows and thinking he can score with that."

Kim dotcom's new site mega.co.nz

Kim Dotcom, founder of outlawed file-sharing website Megaupload, said his new "cyberlocker" was not revenge on U.S. authorities who planned a raid on his home, closed Megaupload and charged him with online piracy for which he faces jail if found guilty.

Dotcom said his new offering, Mega.co.nz, which will launch on Sunday even as he and three colleagues await extradition from New Zealand to the United States, complied with the law and warned that attempts to take it down would be futile.

"This is not some kind of finger to the U.S. government or to Hollywood," Dotcom told Reuters at his sprawling estate in the bucolic hills of Coatesville, just outside Auckland, New Zealand, a country known more for sheep, rugby and the Hobbit than flamboyant tech tycoons.

"Legally, there's just nothing there that could be used to shut us down. This site is just as legitimate and has the right to exist as Dropbox, Boxnet and other competitors," he said, referring to other popular cloud storage services.

His lawyer, Ira Rothken, added that launching the site was compliant with the terms of Dotcom's bail conditions. U.S. prosecutors argue that Dotcom in a statement said he had no intention of starting a new internet business until his extradition was resolved.

CODES AND KEYS

Dotcom said Mega was a different beast to Megaupload, as the new site enables users to control exactly which users can access uploaded files, in contrast to its predecessor, which allowed users to search files, some of which contained copyrighted content allegedly without permission.

A sophisticated encryption system will allow users to encode their files before they upload them on to the site's servers, which Dotcom said were located in New Zealand and overseas.

Each file will then be issued a unique, sophisticated decryption key which only the file holder will control, allowing them to share the file as they choose.

As a result, the site's operators would have no access to the files, which they say would strip them from any possible liability for knowingly enabling users to distribute copyright-infringing content, which Washington says is illegal.

"Even if we wanted to, we can't go into your file and snoop and see what you have in there," the burly Dotcom said.

Dotcom said Mega would comply with orders from copyright holders to remove infringing material, which will afford it the "safe harbor" legal provision, which minimizes liability on the condition that a party acted in good faith to comply.

But some legal experts say it may be difficult to claim the protection if they do not know what users have stored.

The Motion Pictures Association of America said encrypting files alone would not protect Dotcom from liability.

"We'll reserve final judgment until we have a chance to analyze the new project," a spokesman told Reuters. "But given Kim Dotcom's history, count us as skeptical."

The German national, who also goes by Kim Schmitz, expects huge interest in its first month of operation, which would be a far cry from when Megaupload went live in 2005.

"I would be surprised if we had less than one million users," Dotcom said.

A YEAR ON

Mega's launch starts the next chapter of the Dotcom narrative, dotted with previous cyber crime-related arrests and whose twists and turns have been scrutinized by all facets of the entertainment industry, from film studios and record labels to internet service companies and teenage gamers.

The copyright infringement case, billed as the largest to date given that Megaupload in its heyday commanded around four percent of global online traffic, could set a precedent for internet liability laws and depending on its outcome, may force entertainment companies to rethink their distribution methods.

A year on, the extradition hearing has been delayed until August, complicated by illegal arrest warrants and the New Zealand government's admission that it had illegally spied on Dotcom, who has residency status in the country.

Last January, New Zealand's elite special tactics forces landed by helicopter at dawn in the grounds of Dotcom's mansion, worth roughly NZ$30 million ($25.05 million) and featuring a servants' wing, hedge maze and life-size statues of giraffes and a rhinoceros, to arrest him and his colleagues at the request of the FBI.

Police armed with semi-automatic weapons found Dotcom cowering alone in a panic room in the attic, while outside, a convoy of police cars and vans pulled up in the driveway. Around 70 officers took part in the raid.

They left with computers, files and some of Dotcom's fleet of Rolls-Royces, Mercedes and a vintage pink Cadillac tricked with personalized license plates screaming "HACKER", "EVIL", and "MAFIA".

"Every time you hear a helicopter, you automatically think, 'Oh, another raid', so it's something that stays with you for a long time," said Dotcom, who says he and his wife still panic when they hear sudden, loud noises in the house.

Dotcom was coy about the details of the launch party as builders put the finishing touches to a festival-sized concert stage in the mansion's grounds, while two helicopters circled overhead.

But if the impromptu, Willy Wonka-styled ice cream social he threw in Auckland earlier in the week is any indication, the party could be a more wholesome affair compared with the well-documented soirees of Dotcom's past, where nightclubs, hot tubs and scantily clad women were a common fixture.

"I had to grow up, you know, I was a big baby," he said. "Big baby with too much money usually leads to baby craziness.

"I am going to be more of a person that wants to help to make things better and help internet innovation to take off without all these restrictions by governments. That is going to be my primary goal if this business is successful."

Facebook Graph Search

Facebook Inc's new search tool has strong potential to generate revenue for the social networking company, though it is unlikely to challenge Google Inc as the world's dominant search engine, Wall Street analysts said on Wednesday.

Facebook's "graph search" tool, rolled out on Tuesday, lets its more than 1 billion users trawl their network of friends to find everything from restaurants to movie recommendations and is the company's biggest foray into online search.

Graph search contains some category suggestions that can be easily monetized, BofA Merrill Lynch analysts said in a note.

"It should be easy to incorporate commercial search results via Facebook's partnership with Bing," they added.

Facebook currently has a partnership with Microsoft Corp, whose Bing search engine provides search results for external websites. Microsoft also integrates certain Facebook results into its Bing search results.

BofA Merrill Lynch analysts estimated Facebook could add $500 million in annual revenue if it can generate just one paid click per user per year, and raised its price target on the stock by $4 to $35.

Facebook's shares were flat at $30.10 in early trading on Wednesday. They have jumped about 50 percent since November to Tuesday's close after months of weakness following its bungled Nasdaq listing in May.

However, analysts at J.P. Morgan Securities said the lack of a timeline for the possible launch of graph search on mobile devices may weigh on the tool's prospects.

The success of the graph search, which will rely heavily on local information, depends on Facebook launching a mobile product, the analysts said. Half of all searches on mobile devices seek local information, according to Google.

Graph search also lacks the depth of review content of Yelp Inc, the analysts added.

Pivotal Research Group analyst Brian Wieser said monetization potential would be largely determined by Facebook's ability to generate a significant portion of search query share volumes and he expects that quantity to be relatively low.

"Consumers are likely to continue prioritizing other sources, i.e. Google. Advertisers would consequently only use search if they can, or are perceived to, satisfy their goals efficiently with Facebook," Wieser said.

NO GOOGLE KILLER

Analysts mostly agreed that Facebook's search tool was unlikely to challenge Google's dominance in web search at least in the near term.

"As of now, we do not see Graph Search as a threat to Google Web search. Looking forward, Facebook Graph searches could be competitive with certain categories of Google searches, such as Places and Maps," BofA Merrill said.

Internet search, social networking tools and e-commerce are among the biggest weapons that companies such as Facebook, Google and Amazon.com Inc have in their battle for supremacy. A successful combination of the three could win the day for them.

Google has been trying to combine social networking and search for more than a year by integrating Google+ into its search engine.

"Overall, Graph Search offers users a unique view to information not available on Google, but does not replace Google. We view the relationship between Facebook Graph Search and Google as both competitive and complementary," Piper Jaffray & Co analysts said.

The brokerage said users looking to buy a cellphone, for example, could search for friends' reviews on Facebook and expert reviews on Google.