Microsoft to acquire Nokia's devices business for $7.17 billion

Microsoft announced Monday night that it will purchase Nokia's devices business in a deal that will bring the Lumia smartphone line—along with Nokia CEO Stephen Elop—under the Microsoft umbrella.

The deal has been valued at 5.44 million euro ($7.17 billion), wth 1.65 billion euro of that going to license Nokia's patents. Microsoft will also provide Nokia an additional 1.5 million euro ($1.98 billion) in convertible notes that Nokia can exercise. Microsoft isn't buying Nokia as a whole, as the Nokia Siemens Networks enterprise business, Nokia's HERE brand, the office of the CTO, and Nokia's patent portfolio are not direct components of the deal.

"One brand, united voice," Microsoft said in a presentation packet explaining the deal.

The synergies of the aquisition are obvious. Elop led the Microsoft Business Division until 2010, at which point he became Nokia's chief executive, forging deep ties with Microsoft, and almost totally committing his company to the Windows Phone platform. Elop will lead "an expanded Devices business" at Microsoft, the company said, and will report directly to soon-to-be-departing CEO Steve Ballmer. Julie Larson-Green, who currently leads the Devices and Studios business (which includes the Xbox One and Surface tablets) will report to Elop after the deal is expected to close in the first quarter of 2014.

The most important piece of the puzzle is Nokia's phone business, including the Lumia brand. Nokia sold 7.4 million Lumia phones in the second quarter of 2013, and 53.7 million units overall. For now, Microsoft said that it would license the Nokia brand and use it with current Nokia phone products. Lumia, presumably, will fall under the Microsoft brand name.

"One brand, united voice," Microsoft said in a presentation packet explaining the deal.

image: michael homnickThe Lumia 1020 and its stablemates are destined for Microsoft ownership.

Of course, the deal is a slap in the face to HTC (among other handset makers), which must now assume it will play permanent second fiddle to Nokia in the Windows Phone smartphone game. Indeed, the HTC 8X was a key hardware element of Microsoft's Windows Phone 8 launch, but overall the Lumia name has become synonymous with Windows Phone. Overall, Windows Phone ranks third among smartphone platforms, with a tiny 3.2 percent in May.

Nevertheless, Microsoft's Steve Ballmer, who roiled the waters when he unexpectedly said he would step down within a year's time, painted the deal as a positive for the company.

"It's a bold step into the future – a win-win for employees, shareholders and consumers of both companies," Ballmer said in a statement. "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. In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution."

All told, approximately 32,000 Nokia employees are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide, Nokia said.

"For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter," said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today's announcement, Nokia Interim CEO. "After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders."

Microsoft has not been the only OS company to buy its way into the hardware market— Google bought Motorola in 2011 for about $40.5 billion, a deal suspected to be as much for Motorola's enormous patent portfolio as for its hardware business. That much, at least, seems to be true: Motorola hadn't released a phone until its update to the Droid line this summer, as well as the Moto X.

But with Nokia, Microsoft also gains a long-term patent licensing agreement with Qualcomm, as well as other licensing agreements. Nokia will retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the deal closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity, the company said. Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year license.

Microsoft said that it will continue to support the iPhone and Android platforms, but that it "cannot risk having Google or Apple foreclose app innovation, integration, distribution, or economics".

"This is a smart acquisition for Microsoft, and a good deal for both companies," Ballmer wrote in a note to employees. "We are receiving incredible talent, technology and IP. We've all seen the amazing work that Nokia and Microsoft have done together.  Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we expect a smooth transition and great execution."

Microsoft plans to hold a conference call Tuesday morning to explain the deal to Wall Street analysts.

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Steve Ballmer on Microsoft's Nokia Devices & Services buy

Editor's Note: On Monday evening, Microsoft announced it was buying Nokia's Devices & Services division, giving Redmond an in-house hardware arm for its Windows Phone platform. Here's the letter CEO Steve Ballmer sent to Microsoft employees announcing the move.

We announced some exciting news today: We have entered into an agreement to purchase Nokia's Devices & Services business, which includes their smartphone and mobile phone businesses, their award-winning design team, manufacturing and assembly facilities around the world, and teams devoted to operations, sales, marketing and support.

For Microsoft, this is a bold step into the future and the next big phase of the transformation we announced on July 11.

We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together. Our Windows Phone partnership over the past two and half years has yielded incredible work - the stunning Lumia 1020 is a great example. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market.

Now is the time to build on this momentum and accelerate our share and profits in phones. Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.

We have laid out Microsoft's strategic rationale for this transaction in a presentation that I encourage you to read.

This is a smart acquisition for Microsoft, and a good deal for both companies. We are receiving incredible talent, technology and IP. We've all seen the amazing work that Nokia and Microsoft have done together.

Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we expect a smooth transition and great execution.

As is always the case with an acquisition, the first priority is to keep driving through close, which we expect in the first quarter of 2014, following approval by Nokia's shareholders, regulatory approvals, and other closing conditions.

But I also know people will have some questions about what happens post-close. While details aren't final, here is what we know, and how we're generally approaching integration:

1. Stephen Elop will be coming back to Microsoft, and he will lead an expanded Devices team, which includes all of our current Devices and Studios work and most of the teams coming over from Nokia, reporting to me.
2. Julie Larson-Green will continue to run the Devices and Studios team, and will be focused on the big launches this fall including Xbox One and our Surface enhancements. Julie will be joining Stephen's team once the acquisition closes, and will work with him to shape the new organization.
3. As part of the acquisition, a number of key engineering leaders will be joining Microsoft from Nokia, reporting to Stephen in his new capacity:
   • Jo Harlow, who will continue to lead the Smart Devices team
   • Timo Toikkanen, who will continue to lead the Mobile Phones team
   • Stefan Pannenbecker, who will lead Design
   • Juha Putkiranta, who will lead the integration effort on Nokia's behalf
4. Regarding the sales team, we plan to keep the Nokia field team, led by Chris Weber, intact and as the nexus of the devices sales effort, so that we can continue to build sales momentum. After the deal closes, Chris and his team will be placed under Kevin Turner. We will develop a single integrated team that is selling to operators, and there may be other integration opportunities that we can pursue. Kevin will work with Chris Weber and Chris Capossela to make those plans.
5. Our operating system team under Terry Myerson will continue unchanged, with a mission of supporting both first-party and third-party hardware innovation. We are committed to working with partners, helping them build great products and great businesses on our platform, and we believe this deal will increase our partner value proposition over time. The established rhythms and ways of working between Terry and his team and the incoming Nokia team will serve us well to ensure that we do not disrupt our building momentum.
6. We are planning to integrate all global marketing under Tami Reller and Mark Penn. It is very important that we pursue a unified brand and advertising strategy as soon as possible.
7. Finance, Legal, HR, Communications, DX / Evangelism, Customer Care and Business Development will integrate functionally at Microsoft. Sourcing, customer logistics and supply chain will be part of Stephen's Devices organization. ICM / IT will also integrate functionally for traditional IT roles. We will need to work through the implications for factory systems given the differing manufacturing processes and systems at both Nokia and Microsoft.
8. We plan to pursue a single set of supporting services for our devices, and we will figure out how to combine the great Nokia efforts into our Microsoft services as we go through the integration process.
9. There are no significant plans to shift where work is done in the world as we integrate, so we expect the Nokia teams to stay largely in place, geographically.
10. Tom Gibbons will lead the integration work for Microsoft.

While today's announcement is big news, we have to stay heavily focused on running the current business. We have a huge fall and holiday season ahead of us, so we need to execute flawlessly and continue to drive our business forward. I have no doubt we will.

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Intel's new Core i7 Extreme Edition series: Gaming power for those who can afford it

Most of us go about our daily computing tasks secure in the knowledge that something like our Intel Core i5 or AMD A6 will render our Web browser just fine. But then there are the "1 percent" of geeks who demand the best of the best for gaming and high-end computing.

Intel built its three new Extreme Edition chips, including the six-core Core i7-4960X, for members of this elite. The new processors appear atop Intel's price list, and you can expect to pay up to $990 for the processor alone—not including a CPU cooler.

Nevertheless, if you're interested in pulling maximum frame rates and detail levels from top-tier titles like Metro 2033 or the Crysis series, you'll want to consider Intel's new chips. And you're hardly alone: Recent reports suggest that the gaming hardware market is alive and well, with hundreds of millions of dollars spent in preparing rigs for a single game.

An oldie but a goodie

Despite their 4000-series model numbers, the new Core i7 chips are based on Intel's older Ivy Bridge microarchitecture, not on Haswell (the code name for the new Extreme Edition series is Ivy Bridge-E). That means it's restricted to Socket 2011 motherboards running Intel's X79 chipset. The good news for people looking to upgrade from a previous-gen Extreme Edition CPU is that the new chips are backward-compatible, though you'll need to flash your board's BIOS with new firmware. That option will save you a couple of hundred dollars, but enthusiast motherboard manufacturers will do their best to tempt you with brand-new models, too.

According to Intel, the new Core i7-4960X will deliver a performance boost of just 7 percent in 3D gaming—based on the 3DMark benchmark—over its older Core i7-3960X Extreme Edition CPU. So we may not see a rush of consumers eager to upgrade from that part. Intel provided PCWorld with a sample of the new CPU for benchmarking, but the test motherboard we ordered didn't arrive in time for our deadline. We'll post a follow-up story as soon as we've had a chance to run our own benchmarks on it.

Intel claims the new Core i7-4960X is 36 percent faster with 3D games than the newer Haswell-based Core i7-4770K part that PCWorld tested in June. Put another way, the Core i7-4960X is a beefed-up, third-generation Core chip that Intel says will outperform its high-end fourth-generation chip.

IntelIntel's new Ivy Bridge-E die.

Don't expect that advantage to be permanent. A Haswell-based Extreme Edition chip should arrive eventually. But for now, the Core i7-4960X appears to be the fastest chip you can buy from Intel.

For the true gaming aristocracy with money to burn, the Ivy Bridge/Haswell complication won't matter. But socket issues are always a concern with PC builders. Midrange Ivy Bridge chips require Socket 1155 motherboards, Haswell chips need Socket 1150 boards, and these high-end Ivy Bridge chips need Socket 2011 boards. Each socket requires its own chipset architecture and motherboard, so upgrading from one microarchitecture to the next can be a pain. (If you're interested in building a powerful, inexpensive Haswell system for less than $1000, check out our guide from June.)

AsusMotherboards such as the Asus Rampage IV Extreme have multiple PCIe slots to accommodate multiple graphics cards.

The X79 chipset that the LGA 2011 infrastructure supports includes 40 PCIe 3.0 lanes—enough to support several high-end graphics cards (using Nvidia's SLI or AMD's CrossFire X technology). That capability combined with a high-end CPU and lots of fast memory can make for one ferocious system.

DIYers will be able to buy Intel's new chip through retail channels, and a number of boutique PC builders—including CyberPower, Digital Storm, Falcon Northwest, and Origin—will offer custom rigs based on the new chips.

Speeds and feeds

Intel has launched three Ivy Bridge-E chips: The four-core/eight thread, 3.7GHz Core i7-4820K is priced at $310. The six-core/twelve-thread, 3.4GHz Core i7-4930K will cost $555. And the six-core/twelve-thread, 3.6GHz Core i7-4960X will go for $990.

Each of Intel's Extreme Edition chips is an "unlocked" processor, so there are no hardware limitations for overclocking your chip (that is, making its clock run at a higher rate than stock in order to gain higher performance). In fact, these chips are designed to be overclocked. Sites such as HWBot.com publicize the accomplishments of enthusiasts who have pushed their CPUs to 5GHz and beyond, often relying on exotic cooling systems to avoid overheating. But before you consider joining their ranks, be aware that overclocking can put your entire computer at risk, and damage from overclocking is usually not covered by manufacturers' warranties. I'll go into more depth on overclocking shortly.

As you can see from the chart above, the new Extreme Edition processors have much higher thermal design power (TDP) than chips in the Haswell family, even though they don't have integrated GPUs as Haswell processors do. Also, unlike Haswell processors sold in retail packaging, Ivy Bridge-E chips will lack a stock cooling system. To that end, Intel is introducing its own Liquid Cooling TS13X kit—a water block, radiator, and 120mm fan—to be sold separately for between $85 and $100. Third-party air- and liquid-cooling systems from vendors such as Antec, Corsair, and Thermaltake will also be available.

The existing X79 chipset that the Core i7-4960X relies on supports up to four channels of DDR3/1866MHz memory. In addition to the forty PCIe 3.0 lanes plumbed directly to the CPU, the X79 chipset provides eight PCIe 2.0 lanes, plus input/output architecture that includes fourteen USB 2.0 ports, six SATA ports (two of which are 6-gbps SATA ("SATA 6 Gbit/s"), eSATA, gigabit ethernet, Intel's first-generation AVX instructions, and AES encryption acceleration.

Intel's TS13X liquid-cooling system.

As noted earlier, Intel's own comparisons between the new Core i7-4960X and the older i7-4770K show that the new CPU delivers a 36 percent boost in graphics, and a 37 percent boost in 3D modeling. Intel says that "everyday computing" tasks will run about 18 percent slower on the Core i7-4960X than on the Core i7-4770K (the unlocked Haswell CPU) because the newer chip lacks integrated graphics. But no one buying an Extreme Edition processor is likely to be concerned about that deficiency.

Overclocking: the need for (even more) speed

Here's another angle to consider: improved overclocking. You can push the cores on these unlocked processors to a CPU/bus ratio of 63, versus 57 for prior chips. Assuming a 100MHz bus, that means the CPU should overclock up to 6.3GHz—though temperature, voltage, and speed-path hurdles must be surmounted along the way, an Intel spokesperson said. (Each of the chips has Intel's Turbo Mode, which can automatically overclock a single core while running a single-threaded application, built in.)

Intel has also included a new feature: real-time core overclocking and turbo voltage control. "The previous generation Extreme Edition parts (Sandy Bridge-E) required that any change to individual per active core states, power limits or additional turbo voltage via CPU register controls required a reset to take effect," Intel's spokesperson explained in an email. "The new Intel Core i7 processors (Ivy Bridge-E) provide a new dimension of flexibility in that all three of these items can be controlled at the OS level without resetting the system. Therefore if an end user wants to easily toggle through overclocking states without ever leaving their application or work, it is achievable (using a tool like XTU or other ODM applications), where it was not as readily achievable in the previous generation."

Intel's Extreme Tuning Utility (XTU) has been upgraded to version 4.2, integrating HWbot.com support and adding an AppTune beta for application-specific tuning.

One take: Ivy Bridge-E offers a small improvement

So is it worth it? Kelt Reeves, chief executive of boutique builder Falcon Northwest, weighed in.

"It's a really nice step for the 6-core audience, with its lower power consumption and faster clock-per-clock performance," Reeves said via email. "I don't think it'll blow the press away though, as the chipset remains unchanged, and the top overclock speeds are a bit lower than last gen. So the net result at the benchmark drag-races in the press are scores that are pretty similar to the last generation—not an exciting story. But for the normal professional buyer that buys their 6-core systems at standard speeds, [Ivy Bridge-E] is a win for them."

Falcon Northwest is one of many boutique PC builders planning to offer systems based on Intel's new Extreme Edition processors.

Enthusiasts won't need to buy a top-of-the-line i7-4960X to realize a healthy performance boost over Intel's best Haswell processor. The "low-end," $310 Core i7-4820K runs at a higher clock speed, has more onboard cache, and supports more memory channels—and faster memory—than a $350 Core i7-4770K (but it also requires a video card, since the Ivy Bridge-E series doesn't have an integrated GPU).

Naysayers might turn up their nose at "just" six cores, and figure that the Ivy Bridge-E generation will close out the LGA 2011 infrastructure, forcing gamers to buy another motherboard—plus memory and a CPU—for next year's revision. That could represent an investment of at least $1200 or so.

But for users who would consider spending more than $900 for a new CPU—the price of a midrange PC desktop with discrete graphics—the limitations probably won't be deal-breakers. And then there's the overclocking angle.

Gamers can also choose to buy a PC with practically all the bells and whistles they desire. According to Reeves, Falcon won't charge a premium for the new part, and will simply swap in the Ivy Bridge-E chips for "existing 6-core offerings we have now."

Intel's Ivy Bridge-E processors do offer a range of pricing options for value-oriented enthusiasts. Popular X79 motherboards like the AsRock X79 Champion build in multiple PCIe slots, permitting "Frankenbuilds" that can reuse older graphics cards. Basically, if you're a gamer who sees the need to invest several hundred dollars a year to feed your PC games habit, the new Ivy Bridge-E series should be right up your alley. And if you're a gamer who doesn't, there's always a console.

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News junkie's open-source project links Bitcoin with publishers

Ankur Nandwani is a news junkie who keeps hitting pay walls. He would pay for content, but not for a subscription.

Nandwani, 27, merged his interest in news with Bitcoin, a virtual currency that many people think will change the future of payments. With co-founders Bo Li and Valerie Chao, he developed Bitmonet, an open-source tool that lets publishers accept micropayments in Bitcoin for news stories.

Bitmonet is just a side project for Nandwani, who has a day job as a senior software engineer in San Francisco. He started analyzing Bitcoin about six months ago and wanted to grow interest in the virtual currency.

"It's all about encouraging bitcoin adoption," Nandwani said. "I think in the early stages of the bitcoin ecosystem.....it's better to increase bitcoin adoption. We can think of making money later."

News publishers have struggled to strike the right balance between generating online revenue and not alienating readers -- already bouncing from one free online news outlet to another -- with pay walls. Many tease users with free stories and gently nudge them to paid subscriptions when they hit a limit.

But charging one-off fees for news stories is a hassle: users don't want to create an account and enter their credit card details for a single news story. It's easier just to move on.

Bitmonet leverages Bitcoin's strength as a digital substitute for cash. In a demonstration on Bitmonet's website, clicking on a story brings up a pop-up window offering a news story for US$0.10, a one-hour pass for $0.15 or a day-long pass for $0.20.

The one-hour pass costs 0.0012 of a Bitcoin. Clicking the "Pay with Bitcoin" button launches Bitcoin wallet software on a person's computer. Web-based wallet software can be used by copying the payment address, Nandwani said.

The transaction is painless: users don't have to enter their financial details or create an account with the publisher.

Bitcoin's peer-to-peer network uses a system of computers called miners to cryptographically verify that a transaction is legitimate. Usually, a transaction needs to garner six "confirmations" before it is considered complete, which at times can take up to three hours.

But Nandwani said merchants can accept as low as one confirmation to let people read the story as soon as possible.

If users choose to buy time-based access to a site, they will have to remember to keep their cookies, which are information files retained by a web browser that are used by websites to remember certain user information.

It's a small sacrifice, but one to keep in mind since many people configure their browsers to delete their cookies for privacy reasons. Nandwani said "we are trying to maintain a balance between creating an account and keeping it frictionless."

Bitmonet is configured now to use BitPay as a payment processor, but it can use different ones. BitPay, based in Atlanta, specializes in processing transactions for merchants. BitPay converts Bitcoin revenue to cash and wires it daily to a merchant's bank account.

Nandwani said Bitmonet plans to add a WordPress plugin in the coming weeks for micropayments on that publishing platform. Other development plans include creating SDKs (software development kits) for Android and iOS that would allow Bitmonet to be used for other things, such as virtual goods, he said.

Send news tips and comments to jeremy_kirk@idg.com. Follow me on Twitter: @jeremy_kirk

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HTC investigates three employees for stealing company secrets

Three HTC employees are under investigation in Taiwan for allegedly leaking company secrets and embezzling money from the smartphone maker.

The Taipei District Prosecutors Office said Friday it is investigating two managers and an engineer with HTC's design department following a complaint by the company.

Currently, two of three employees are being detained, Taipei deputy chief prosecutor Huang Mou-Hsin said Monday. One of them is Thomas Chien, HTC's vice president of product design, he added.

Huang declined to comment on the nature of the HTC secrets leaked.

Chien has been working at HTC for 12 years, according to a company blog post he wrote in February, where he praised its latest flagship phone for its all metal design. Chien could not be immediately contacted for comment.

HTC declined to comment on the investigation. It said in a Monday stock exchange filing, "the company has sufficient resources in our design team and this situation will not impact the company's operations, product portfolio plans and our overall business performance."

The investigation represents another blow to the Taiwan-based smartphone maker at time when it has been struggling to lift its product sales. The company's second quarter net profit was down 83 percent year-over-year, the latest in a string of weak financial earnings. But HTC executives believe the company can bounce back by releasing new products later this year. In addition, HTC has also launched a new marketing campaign starring Hollywood actor Robert Downey Jr.

HTC declined to comment on the three employees investigated and if they were still with the company. In 2011, HTC lost another design executive, Horace Luk, who resigned from his post as chief innovation officer.

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Microsoft ends top Masters certification exams for IT pros

Microsoft plans to retire its Masters level certification exams by Oct. 1 this year, generating strong protests on blogs and community forums from IT professionals.

The Redmond, Washington, software company, however, defended the move, with an executive stating that the Masters program reaches only "a tiny proportion of the overall community," and only a few hundred professionals had bagged the certification in the last few years. The certification was designed so that professionals could aspire to it as the peak of the Microsoft certified program.

The company said in an email to IT professionals that Microsoft will no longer offer Masters and Architect level training rotations and will be retiring the Masters level certification exams as of Oct. 1.

"The IT industry is changing rapidly and we will continue to evaluate the certification and training needs of the industry to determine if there's a different certification needed for the pinnacle of our program," Microsoft said in an email, reproduced in a blog post on TechNet by Neil Johnson, a Microsoft senior consultant.

The certifications that will be ended are Microsoft Certified Master, Microsoft Certified Solutions Master and Microsoft Certified Architect. These are top certifications for IT professionals working on Microsoft's products.

"As a Microsoft Certified Master, Microsoft Certified Solutions Master, or Microsoft Certified Architect, you have earned one of the highest certifications available through the Microsoft Certification program," Microsoft said in the mail. "Although individuals will no longer be able to earn these certifications, you will continue to hold the credential and you will not be required to recertify your credential in the future."

The criticism from professionals came fast and strong over the weekend. "It is a clear sign of how Microsoft values the skills of on-premises administrators of all its products (because all the MCSM certifications are going away, not just the one for Exchange)," wrote IT professional and author Paul Robichaux in his blog. "If all your messaging, directory, communications, and database services come from the cloud (or so I imagine the thinking goes), you don't need to spend money on advanced certifications for your administrators who work on those technologies," he wrote.

The decision to end the Masters program was a painful one, wrote Tim Sneath, senior director of Microsoft learning at Microsoft. The cost of running the program did not allow scaling further, and the US$20,000 program was limited to English and the U.S., creating non-technical barriers to entry, he wrote. Microsoft has decided to take a pause from offering the program, and see if there is a better way to have a new pinnacle certification, Sneath added.

Microsoft could not be immediately reached for further comment.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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Trojan entices Craigslist users with fake software freebie

Craigslist has made some strides over the years in protecting its users from Internet predators, but for some hackers those strides are just another challenge to be surmounted.

That's the case with a Trojan aimed at the online classified advertising service and revealed last week by Solera, a Blue Coat company.

The malware is ending up on the computers of unsuspecting users who click an infected link they encounter on the Internet, expecting to receive an update to a fictitious program called Adobe Photo Loader. (See also "Lose the Trojan.")

After infecting a machine, the malware transforms the computer into a zombie for a botnet making spam postings to Craigslist for a program called Stealth Nanny. The Android app is designed to be planted on a person's phone so all their activity on the handset can be monitored by a snooper.

"We don't see a lot of spam on the service, but when we do, it's interesting because it's stuff that has figured out a way to get around these roadblocks set up by the guys running the site," Solera's Director of Threat Research, Andrew Brandt, said in an interview.

When this Trojan contacts Craigslist, it's armed with information sent to it by the command and control (C&C) server running the botnet that enables it to set up an account on the service and post the advertising copy for Stealth Nanny.

Craiglist's authentication efforts

Before a listing can go live on Craigslist, its sponsor must verify it by email. The email confirmations for the ads posted by the Trojan are forwarded to it by its C&C server. "The bot then parses the Craigslist activation links, return them as a click through a browser without the browser user's knowledge and make the post go live," Brandt explained.

"It's a complicated mechanism that they've rigged up," he said. "It's amazing that it works, but it is quite functional."

The master of the zombie network has taken measures to keep the scheme off the radar of Craigslist spam fighters, Brandt added. "He'll do one post a day per infected machine."

The limited nature of the malware is also probably keeping its profile low. "It's a very bespoke malware for this specific purpose of just posting to Craigslist," Brandt said. "And the only thing we've seen it posting to Craigslist is this advertisement for this software that monitors cell phones."

Brandt added that he suspects that the maker of the software is also connected to the malware. All but one domain connected to the scheme was "private," he said. That one identifiable domain, however, contained a name, city and state that matched the same information in Stealth Nanny.

"It's clear to me that they're connected and entirely possible that the same person is responsible for Stealth Nanny and the malware," Brandt said.

Malware in waiting

Although the malware has a highly specific purpose now, once a machine is infected, the bad app could be repurposed for greater malignancy in the future. "Anytime a computer is infected with malware, the box is owned by someone else and they can use it to do all kinds of different things," Brandt said.

Mike Gross, director of professional services and risk management at 41st Parameter, said that credential theft is always a possibility with this kind of malware. "The biggest risk is always key loggers that essentially give the attackers access to any account where the legitimate user enters a username-password combination online," he told CSOonline.

In addition, since the botnet is controlled elsewhere on the Web, it likely has an auto-update function for downloading and modifying what's on an infected machine. "An auto-update feature would make the possibilities of danger endless for the infected device," said Tommy Chin, a technical support engineer with Core Security.

Craigslist did not respond to a request for comment for this report.

"Craigslist is a relatively open environment, with no strong validation of posts," Gross said. "It relies on users to post legitimate classifieds. Its primary form of policing spam is by user feedback, which is very reactive."

The online classifieds service is also largely free, which may also be contributing to its being a target of Internet lowlifes. "It's much easier to target a free service than it is a paid service," Chin said. "Free services require much less verification on the user's part."

"The site is also still in its infancy in regards to anti-spam and security practices," he said.

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Slight drop in tablet sales expected as wearables emerge

Researcher IDC last week slightly lowered its tablet shipment forecast for 2013 and beyond, saying that competing technologies, including larger-sized smartphones, and futuristic wearable computing devices will steal some dollars that would have gone to tablets.

In its revised predictions, IDC trimmed 2013 tablet shipment expectations by 1 percent from 229.3 million units to 227.4 million.

The change also affected forecasts IDC has made for the years 2014-17. IDC said global tablet shipments in 2017 will almost reach 407 million, about 1 percent less than a May estimate of 410 million.

IDC's projection for 2013, however, hinges on the tablet business having a bang-up back half of the year.

"A lower than anticipated second quarter, hampered by a lack of major product announcements, means the second half of the year now becomes even more critical for a tablet market that has traditionally seen its highest shipment volume occur during the holiday season," said Tom Mainelli, IDC analyst, in a statement.

Apple's iPad, for example, had a disappointing second quarter, with tablet shipments down 14 percent from the same period the year before. Like Mainelli, Apple CEO Tim Cook explained the downturn on the company's lack of a new iPad in the quarter. The first Retina-equipped iPad debuted in March 2012, and sales ballooned.

Along with slightly lower shipment tallies—which IDC attributed to the influence of larger smartphones, often dubbed "phablets" by wags, and wearable accessories that link to smartphones—the research firm also revised the timetable when emerging market dominate the business.

Phablets and wearables will impact developed markets—the U.S., Western Europe and Japan—before they do other regions, Mainelli said, and cause a faster-than-predicted slowdown there.

Where earlier this year IDC predicted that developed markets would hold a very narrow edge over emerging markets in 2017, now it has flipped the two, saying emerging markets—Africa, Central and Eastern Europe, China, Latin America and the Middle East—will account for 51 percent of all shipments in 2017.

Not surprisingly, China was highlighted as one of the countries expected to drive tablet sales.

"Much of the long-term growth will be driven by countries like China where projected growth rates will be consistently higher than the worldwide average," added Jitesh Ubrani, another IDC analyst, in the same statement.

If IDC's estimates end up accurate, Apple will have to adapt to retain its diminishing share of the tablet business. While the Cupertino, California company dominated the market with relatively high-priced devices until 2012, ever-cheaper models based on Android are continuing to drive down Apple's share.

The price competition will only get more fierce.

"We expect average selling prices to continue to compress as more mainstream vendors utilize low-cost components to better compete with the whitebox tablet vendors that continue to enjoy widespread traction ... despite typically offering lower-quality products and poorer customer experiences," Mainelli said.

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Sharks go wireless as scientists tag them to track their travels

Meet Mary Lee, a great white shark that's the same weight and nearly the same length as a Buick. And, by the way, you may have been swimming within a few feet of her this past year and not known it.

Since last September, when she received an array of radio, acoustic, and satellite tags, Mary Lee has travelled from Massachusetts to Florida, often hugging the coastline so closely that scientists tracking her called beach authorities in Florida to warn them about her. The 16-foot, 3456-pound shark also headed into open ocean, taking a February vacation off the beaches of Bermuda.

"She was undoubtedly not the only one there. Sharks have probably been doing it for millions of years," said Nick Whitney, a marine biologist with the Mote Marine Laboratories in Sarasota, Florida. "We're learning things that ten years ago we would have never dreamed we could have learned about these species."

OCEARCHMary Lee, a 16-foot 3456-pound great white shark, traversed the East Coast over the past year, at times hugging the shoreline so close as to prompt a warning call from researchers.

Whitney, who spoke from a research vessel off of Cape Cod, Massachusetts, is part of a team that runs OCEARCH, a nonprofit global shark-tracking project that uses four different tagging technologies to create a three-dimensional image of a shark's activities. OCEARCH is hoping to develop successful conservation and management strategies by studying shark habits in more granular detail.

While traditional research has focused on small-scale movements, the data being gathered by OCEARCH offers surprising new information about where sharks go and what they do. That's where the tracking technology is crucial.

A dorsal fin tag attached by OCEARCH uses a satellite to track a shark's position each time it breaks the surface. Other tags include an RFID implant whose ping is picked up whenever the shark passes a special, underwater buoy; an accelerometer, similar to the technology used in an iPhone or Nintendo Wii, that detects up or down movement; and a Pop-off Satellite Archive Tag (PSAT), which acts as a general archive, recording average water depth, temperature and light levels.

"On average, we're collecting 100 data points every second—8.5 million data points per day. It's just phenomenal," Whitney said. "Second by second, we can pick up every tail beat and change in posture."

One of the surprises the tracking data revealed is that white sharks don't always stick to cold water, as previously thought. Some even venture into the Gulf of Mexico during the summer.

Open-source research

In addition to in-depth data, what sets OCEARCH apart from past shark-tracking projects is that anyone—from a child in grade school to a television arm-chair warrior—can see the tracking data at the same time as researchers on the OCEARCH web site.

Each shark's location is represented by an icon on a Google Maps-based TruEarth Viewer. By clicking on the icon, a user can get detailed information such as the species, gender, size, weight, length, as well as where and when the shark was tagged. A user also gets images of the shark as it was being tagged.

By drilling down further, and clicking on the "Where Have I Been" icon, a user can also see a track of where the shark has been since being tagged, in some cases see a detailed trail over the course of a year or more.

OCEARCH expedition leader Chris Fischer calls the methodology "open source" research, since all scientists see the data at the same time; nothing's proprietary. Within a week, OCEARCH also plans to launch a "digital hub" shark tracker platform with a real-time social media interface that allows researchers to post FAQs and videos to the most popular social networks: Facebook, YouTube, Instagram or Twitter, according to OCEARCH spokesman Chris Berger.

OCEARCH will also be launching a Science, Technology, Engineering, and Mathematics (STEM) Education-based curriculum for K-12 students. "We currently have 30 lesson plans for sixth through eighth graders, and will have more for K-12—eventually, even pre-K," Berger said.

Currently, OCEARCH is tracking 47 sharks, some of them bull and mako but mostly great whites off the U.S. East Coast and in the waters off South Africa.

Many of the sharks are given endearing names, such as Princess Fi, Genie, Opera, and Sabrina. Others have handles more befitting ships, such as Poseidon, Redemption, Perseverance, and Courage.

Mary Lee, who was tagged off of Cape Cod, is named after Fischer's mother. "My parents have done so much. I was waiting and waiting for a special shark to name after her and this is truly the most historic and legendary fish I have ever been a part of and it set the tone for Cape Cod," Fischer wrote in an online description of Mary Lee.

Co-Captain Jody Whitworth and master of the Martha's Vinyard OCEARCH team Brett McBride prepare to stabilize a great white shark named Amy. Before taking measurements, blood and securing real-time technology tags, a device is inserted into the shark's mouth to irrigate its gills. (Image: OCEARCH).

How to catch a great white shark

To tag the sharks, the OCEARCH team first goes fishing with a hand-held line tipped with special barbless hook, engineered so it won't injure the animal. The team then brings the shark alongside their 126-foot boat, which has an underwater hydraulic lift that can hoist up to 75,000 pounds. That capacity is needed since the team is not only lifting what could be a one- to two-ton shark but also the water around it.

Once the shark is above the water line, from three to eight scientists get to work on it like a NASCAR pit crew, first placing a wet towel across its eyes to calm it and an irrigator in its mouth so it can breath. The crew then rolls the shark on its side to surgically implant the first tracking tag in its belly.

That device, known as an acoustic tag, is about the size of a Sharpie pen. It can remain in the shark for as long as ten years and can be "heard" whenever the animal swims to within a quarter to a half mile of underwater buoys that can pick up a radio frequency specific to marine tagging operations. Throughout the world, marine biologists have anchored such buoys, which can record an acoustic tag's unique ID as well as the day and time.

OCEARCHThe OCEARCH team tags a great white shark off of Cape Cod, Massachusetts.

Once the acoustic tag is in place, the OCEARCH crew rolls the shark back onto its belly and attaches a Smart Position Or Temperature Transmitting (SPOT) device. The SPOT tag is placed high on the shark's dorsal fin because its radio ping can only be received when the shark breaks the surface of the water and a satellite is in position to receive the signal. The longer the fin is out of the water, the more accurate the data. There are six ARGOS global positioning satellites orbiting the earth that can pick up a SPOT tag's ping at any time.

"The ARGOS satellite is only around about every two hours. Then the fin has to stay out of water for minute or two to get a good fix," Whitney said. "It's ridiculous that this works. It's pretty amazing when you look at the map and understand how many fixes we get on these sharks."

The third tag is an accelerometer package, which tracks fine-scale data on the shark's body movement and behavior along with water depth and temperature information. That tag, which is designed to release from the shark after just two days, records more than eight million data points each day, with the information stored to memory. The tag is embedded in a float package that contains a satellite transmitter and a VHF radio tag, which transmits a ping that can be heard over a ten-mile range with a VHF receiver and antenna.

"In this case, the VHF tag allows us to find the needle in the haystack, once the satellite tag tells us where the haystack is," Whitney said.

Although OCEARCH has been using two-day accelerometer tags, the team off Cape Cod is now going for the longest accelerometer track of a shark ever: two weeks of second-by-second behavioral information.

Finally, OCEARCH researchers attach a PSAT archival satellite tag, which records depth, temperature, and light levels (used for geolocation) and stores the data to memory. The tag is programmed to release from the fin anywhere from six months to a year after being attached. It then floats to the surface and processes and summarizes the data for transmission back to researchers via satellite.

"It'd be great if there was one tag to get all the information, but there's not," Berger said.

The researchers have gotten the tagging procedure down to, well, a science. They've perfected the process by performing it on more than 100 sharks—67 of them great whites.

To date, the largest great white the team has captured and tagged is an 18-foot, 5000-pound animal named Apache. Apache currently holds the world record as the largest fish ever caught and released by anyone, Berger said.

For their massive size and ferocious reputation, white sharks actually represent a small minority of shark attacks throughout the world, including the shark attack capital, Florida.

"Florida has more shark incidents than any place in the world, but virtually all of those bites form small sharks—black tips and spinner sharks. In fact, I'm not sure of any confirmed white shark attacks there," Whitney said.

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Big investor gets option to join Microsoft board

A week after Steve Ballmer said he plans to step down as CEO of Microsoft, ValueAct Capital, one of its biggest investors, has secured the right to appoint its president to Microsoft's board.

Microsoft has signed a "cooperation agreement" with ValueAct that allows its president, Mason Morfit, to meet regularly with Microsoft board members to discuss "a range of significant business issues," Microsoft said in a statement Friday.

The agreement gives ValueAct the option of having Morfit join Microsoft's board, beginning at the first quarterly board meeting after Microsoft's next annual shareholder meeting. Those meetings usually take place in mid-November.

ValueAct Capital, in San Francisco, holds about 0.8 percent of Microsoft's outstanding stock and is one of its largest shareholders, Microsoft said. The firm manages about $12 billion in assets.

The development, announced Friday afternoon ahead of the Labor Day weekend in the U.S., comes a week after Ballmer's surprise announcement that he will step down as CEO of Microsoft at some point in the next year.

Longtime Microsoft analyst Rick Sherlund has said that Microsoft was under pressure from ValueAct to increase value for shareholders.

"It's not clear how big a role ValueAct played here, but I suspect they were a strong catalyst for change," Sherlund told the Seattle Times shortly after Ballmer announced his plan to retire.

Ballmer responded that his retirement had nothing to do with ValueAct. My retirement has everything to do with what I think is the right long-term timing for Microsoft," he told the Times.

A Microsoft spokesman on Friday declined to provide additional comment for this article.

In the statement Friday, Morfit said he looked forward to "actively working" with Microsoft at "this critical inflection point in the company's evolution." Ballmer was quoted as saying Microsoft "looks forward to ValueAct Capital's input."

For its part, ValueAct has agreed that it won't attempt a merger with Microsoft or acquire shares beyond a certain level, and that it won't take part in a proxy battle, according to a copy of the agreement filed with the U.S. Securities and Exchange Commission. It has also agreed not to disparage Microsoft or its executives.

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