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Nintendo Cuts Profit Forecast and Price of Key Product

July 28, 2011 by Leave a Comment

TOKYO — In a striking reversal of fortune for the world’s largest videogame maker, Nintendo drastically cut its annual profit outlook and said it would discount its new 3DS handheld device as it struggles to stem a flow of users to casual online games.

Nintendo said Thursday that it had tumbled to a loss of 25.5 billion yen for the three months to June 30, as sales plunged 50 percent from a year earlier. The loss prompted Nintendo to lower its annual profit forecast 82 percent to 20 billion yen ($257 million) for the year to March, down sharply from a previous estimate of 110 billion yen. The company also slashed its annual sales forecast by 18 percent to 900 billion yen.

Nintendo had been banking on the 3DS, its first major new gaming system since its wildly-popular Wii home console, to lock in a new generation of fans and bolster profits eroded by maturing sales. The handheld machine lets users play games that appear in 3-D, without the need for the clunky glasses that accompany most current 3-D technology.

But sales of the 3DS — which went on sale in February in Japan and in March in other parts of the world — have fallen short of expectations, hurt partly by the device’s unfortunate release date just before the devastating earthquake that struck Japan in March. The Kyoto-based company said it had sold just 710,000 units of the portable console in the three months to June, bringing the total number of units sold to 4.32 million. The company had said it was aiming to sell that many devices in just the first weeks following the product’s rollout.

The lackluster sales also reflect increasing competition for video game companies from new players that are redefining the industry. Apple has sold more than 200 million devices like the iPhone and iPad that let users choose from tens of thousands of games to download for a few dollars, or for free. Smartphones that run Google’s Android operating system also run simple, downloadable games. Casual games played within social networks like Facebook have taken off, too, as membership of those networks grows.

The new crop of casual games has added to the traditional rivalry between gaming systems developed by the videogames sector’s traditional top three: Nintendo, Sony and Microsoft. Nintendo has dominated the last generation of game consoles, selling over 146 million DS handheld game machines and 86 million Wii home consoles. Nintendo’s Japanese rival, Sony, is set to introduce a new portable game machine called the PlayStation Vita later this year, while Nintendo plans to sell a new home console in 2012.

But for now, players complain of a lack of game titles for the 3DS, a problem that plagues most new gaming systems. Nintendo said Thursday that two flagship titles for the 3DS — Super Mario 3D Land and Mario Kart — would go on sale in November and December, releases that are expected to improve sales of the device. But unless more consumers start buying the 3DS soon, third-party developers could be scared away from making games for the device, leading to a vicious cycle of fewer games released and fewer 3DS units sold.

Nintendo is hoping that a steep price cut will help kick-start sales. The 3DS will cost 15,000 yen in Japan from Aug. 11, down 40 percent from the original price of 25,000 yen, the company announced Thursday. In the United States, the price will drop the following day to $169.99 from $249.99. The company said that it expected the price cut to help it meet a previous sales forecast of 16 million 3DS machines by the end of March.

In a letter posted online, Satoru Iwata, Nintendo’s president and chief executive, offered a profuse apology to Nintendo users, saying that lowering prices so soon after a game machine’s release was a painful move.

“Never in Nintendo’s history have we lowered prices to such an extent, less than half a year since the product launch,” Mr. Iwata said. “But we have judged that unless we move decisively now, there is a high possibility that we will not see many of our customers enjoying a Nintendo 3DS.”

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State of the Art: Upgrading to Lion Means Embracing the iPad

July 21, 2011 by Leave a Comment

In Mac OS X 10.7, known as Lion, Apple went with the “shake things up” philosophy. It follows an old Apple pattern of embracing what’s cool and progressive, and ruthlessly jettisoning what it considers antiquated. That’s great if you love stuff that’s cool and progressive, and not so great if you hate people moving your cheese.

Even the way you install Lion is radical; starting immediately, you can download it from the Mac App store for $30. You can’t buy it on disc or in a box. It’s a 4-gigabyte download. If your Internet connection is too slow, or your monthly Internet plan data caps too restrictive, you can download it at an Apple store, or buy it on a USB flash drive in late August. (I’m writing a handbook to Mac OS X Lion.)

There are some very attractive elements to the download-only system. No serial numbers to type in. No family plans to buy; your $30 covers as many Macs as you own. No discs to store and hunt down later; if you ever need to reinstall, you just re-download the latest version. (Lion requires a post-2006 Mac with Mac OS X Snow Leopard installed.)

If the Lion upgrade is about any one thing, it’s about the iPad.

What made the iPad a mega-hit? Two factors, really. Factor 1: simplicity. No overlapping windows; every app runs full screen. No Save command; everything’s autosaved. No files or folders. No menus. All your apps are in one place, the Home screen.

Factor 2: the multitouch screen. You cycle through screens by swiping the glass, zoom out by pinching and rotate something by twisting two fingers.

In Lion, Apple has gone as far as it can go to bring those factors to the Mac.

Full-screen mode makes a program fill the screen, edge to edge, without any scroll bars, menus or other window-edge clutter. It’s refreshing and useful, especially on laptops, because your screen feels so much bigger.

Autosave spares your having to remember to hit Save as you work. New commands in the title bar can rewind your document to an earlier state, lock it in one version or spin off a copy that you want to take in a different direction.

There’s even a new program, Launchpad, a clone of the iPad’s Home screen, with evenly spaced app icons, on swipeable pages, that open with one click.

And what about Factor 2, the touch screen?

Touch-screen computers don’t work. There, I said it. Spending the day with your arm outstretched, manipulating tiny controls on a vertical surface is awkward and exhausting. The ache you feel later is not-so-affectionately known as Gorilla Arm.

Apple has built what it considers a better solution, a horizontal multitouch surface. That’s the trackpad of its laptops, and the top surface of its current mouse.

In Lion, there are iPad-like multitouch gestures. Pinch four fingers to open Launchpad. Twist two to rotate. Swipe up with three fingers to open Mission Control, a clickable constellation of thumbnails that show all open programs and windows. And so on.

Warning: you scroll a page up by dragging two fingers up, as on the iPad. It makes sense; after all, you scroll the screen left by dragging left, and right to go right. But it takes a couple days to stop scrolling the wrong direction, as we’ve been doing for decades.

Does the iPadization of the Mac succeed? There’s good news, bad news and then good news.

The good news is that once you learn all of this stuff, it does work. Swiping sideways with three fingers takes you from one full-screen app to the next, animated as though someone’s dealing full-screen cards. Launchpad would be a better fit for technophobes if it were always there waiting, and not a program you have to open manually every time; but otherwise, the Lion makeover is fluid and satisfying.

E-mail: pogue@nytimes.com

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Virtual Bridge Allows Strangers in Mideast to Seem Less Strange

July 10, 2011 by Leave a Comment

“I joined immediately because right now, without a peace process and with Israelis and Palestinians physically separated, it is really important for us to be interacting without barriers,” Mr. Arqoub said as he sat at an outdoor cafe in this Palestinian city.

It has been nearly two years since Israeli and Palestinian leaders have negotiated their peoples’ future and, with the region in turmoil and prospects for peace dim, interaction between Israelis and Palestinians is increasingly limited to Israeli military checkpoints in the West Bank.

But over the past month, the Facebook page has surprised those involved by the enthusiasm it has generated, suggesting that the Facebook-driven revolutions in Tunisia and Egypt may offer guidance for coexistence efforts as well.

Called Facebook.com/yalaYL, the site, created by a former Israeli diplomat and unambiguous about its links to Israel, has had 91,000 views in its first month. Of its 22,500 active users, 60 percent are Arabs — mostly Palestinians, followed by Egyptians, Jordanians, Tunisians, Moroccans, Lebanese and Saudis.

“All communication today is on the Internet — sex, war, business — why not peace?” asked Uri Savir, the president of the Peres Center for Peace and the founder of the new site. Mr. Savir was a chief peace negotiator for Israel in the 1990s as well as the director general of its Foreign Ministry and a member of Parliament. But he said he had never been more excited about a project.

“Today we have no brave leaders on either side, so I am turning to a new generation, the Tahrir Square and Facebook generation,” Mr. Savir, 58, said as he sat in his Tel Aviv apartment running his finger over his iPad to scroll through the site. “We need to emulate Tunisia. My goal is to have 100,000 people working on Yala on joint projects that will lock our leaders into making peace.”

The YL in the site’s name stands for young leaders (Yala means “let’s go” in Arabic), and Mr. Savir said he saw the page as a place where the next generation of regional innovators could meet. It helps that he has a few connections. The page has welcome messages from Shimon Peres, Israel’s president, and Mahmoud Abbas, the president of the Palestinian Authority, as well as from Tony Blair, the former British prime minister who serves as an international envoy to the Palestinians, and the actress Sharon Stone.

The site has already sponsored a photography contest — won by a Palestinian and an Israeli who will be flown to New York next month — and discussions are under way for sponsorship or involvement from the Italian government, the Barcelona soccer team and MTV. Mr. Peres and Mark Zuckerberg, Facebook’s founder, have chatted by phone about the effort.

But most interesting so far have been the interactions online. At a time when Arabs generally shun contact with Israelis, those on the site speak openly about their desire to learn more about one another.

“This is my first contact with Israelis,” said Lyth Sharif, an 18-year-old Palestinian student at Birzeit University in the West Bank who comes from Dura, a town near Hebron. “A friend of mine told me about it, and I think it’s cool. I joined a few days ago. It helps me understand the difference between Israel and the occupation.”

Unlike members of his parents’ generation who worked in Israel, learned some Hebrew and watched Israeli television, Mr. Sharif has never set foot inside Israel or Jerusalem, a result of the security barrier and Israeli regulations.

Mr. Arqoub, who is 29, knows Israel better. As a youth he sneaked into Israel and worked for a family he grew to love. Later he was imprisoned by the Israelis for two years without explanation, he said. But he rejected bitterness.

Salah al-Ayan, a Palestinian Authority official and a friend of Mr. Savir’s who is helping with the site, said the lack of interaction today between Israelis and Palestinians about ordinary things was alarming.

“Believe me, they don’t know each other at all,” he said in his Ramallah office. “Our goal is to start by talking about art and sports. Since Israelis and Palestinians don’t meet face to face anymore, this is a virtual place to meet. I was happy when I saw that some Palestinians had voted for Israeli photos in the contest.”

The notes posted on the page are mostly in English, but also in Hebrew and Arabic. Some are playful, others poetic.

Most of the talk seems to be between people in Ramallah and Tel Aviv. But Hamze Awawde, a 21-year-old student here in Ramallah said he got “friend” requests on Yala from Morocco and Egypt.

He said: “I asked one Egyptian why he had contacted me and why he was taking part in this, and he said: ‘After the revolution, everything is permitted. I want to see what Israelis are like.’ ”

Nimrod Ben Ze’ev, a 25-year-old student of Middle Eastern studies at Tel Aviv University, said much of the interaction on the site was still rather wooden — what he called “a peace dialogue mentality.” But he is optimistic.

“I think the official letters from Peres and Blair help give the site a feeling that there is something behind it,” he said. “But what is great is that the discussions are unmediated — people aged 15 to 30 talking among ourselves. We don’t talk about a two-state solution or a one-state solution but about being a young person in Israel or Palestine. Our experiences are obviously very different, but we share a frustration about greater powers restricting us. That is very mutual.”

In one exchange, an Israeli named Alon Kadmon asked what would happen if Prime Minister Benjamin Netanyahu of Israel and Mr. Abbas of the Palestinian Authority were locked in a sealed room for a week.

Nadine Firas Yaghi, a Palestinian, replied that the two leaders would realize “that both have ears, eyes, hands and a mouth, a moment of epiphany that they share the same qualities, that before being Palestinian, Israeli, Jewish, Muslim or Christian, they are human beings.”

Another Palestinian response was sharper: “Don’t open the door.”

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State of the Art: Pretty Tablet, Though Late for the Ball

June 30, 2011 by Leave a Comment

What’s that you say? This all sounds like last year’s news?

Well, don’t tell that to Hewlett-Packard. This week, it introduced what it considers a groundbreaking new product: a tablet with a touch screen!

It’s the H.P. TouchPad ($500 for the 16-gig model, $600 for 32 gigs): a black rectangle with a glossy 9.7-inch multitouch screen. You can zoom into maps, photos or Web pages by putting two fingers on the glass and spreading or pinching them. The screen image rotates when you turn the tablet 90 degrees.

The only buttons are a Home button below the screen and volume up/down buttons on the edge.

If that description sounds just like the iPad (and the 47,298 Android tablets that compete with it), you’re right. H.P. has some nerve coming out with a tablet now — especially because the biggest distinguishing component is its operating system. It’s WebOS, a variation of the software that runs the Palm cellphones (the Pre, Pixi and so on) — but it’s new to tablets.

Which means, of course, that there aren’t many apps for it yet. How many is “not many”? Well, 300.

(H.P. points out, however, that there are even fewer for Android tablets, even after several months: only 232.)

There’s a Kindle app, Pandora and Angry Birds, thank goodness. But some pretty popular apps are among the missing. No Flixter or IMDB. No Pocket God. No Google apps like Google Mobile, Google Earth or Google Voice. No Netflix.

Now, from a hardware-checklist perspective, the TouchPad doesn’t get off to a good start. It’s the same size as the iPad, but it’s 40 percent thicker (.75 inches thick) and 20 percent heavier (1.6 pounds) — a bitter spec to swallow in a gadget you hold upright all day long.

It has a front camera for video chatting but, unlike its rivals, no camera on the back. It has Wi-Fi, but can’t get online over the cellphone network, too. It can sometimes pinpoint its own location on Bing Maps by referencing nearby Wi-Fi hot spots, but it doesn’t have real GPS (what were they thinking?).

It supposedly has a blazing-fast chip inside, but you wouldn’t know it. When you rotate the screen, it takes the screen two seconds to match — an eternity in tablet time. Apps can take a long time to open; the built-in chat app, for example, takes seven seconds to appear. Animations are sometimes jerky, reactions to your finger swipes sometimes uncertain.

And despite being thicker, the TouchPad’s battery life lasts only about eight hours on a charge (the iPad gets 10 hours). .

Now, even H.P. understands that the TouchPad’s only hope is differentiating itself from the better established tablets. The only buying question you have to ask yourself, then, is: Does H.P. make a convincing enough case that you should gamble on this unknown quantity?

Here’s the crux of H.P.’s argument.

First of all, the TouchPad is beautiful. It’s iPad beautiful. The case is glossy black plastic — a magnet for fingerprints, unfortunately, but it looks wicked great in the first five minutes.

The WebOS is beautiful, too. It’s graphically coherent, elegant, fluid and satisfying. That, apparently, is the payoff when a single company designs both the hardware and the software. (Android gadgets, by contrast, are a mishmash of different versions and looks.)

The central conceits of WebOS are the same as on Palm’s phones. For example, when you press the Home button, all open apps shrink into half-size window “cards”; at this point, you can swipe with your finger to move among them, or swipe an app upward to close that app. It works beautifully, and conveys far more information than the iPad’s application switcher (which is just a row of icons).

H.P. says that the TouchPad offers real multitasking: all open apps are always running. On the iPad, by contrast, only certain apps (like music playback and GPS tracking) chug away in the background; everything else is just suspended until you return. Apple argues that true multitasking runs down the battery — and the battery-life stats prove it correct. Choose the compromise you like best.

E-mail: pogue@nytimes.com

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Retailers Offer Apps With a Catalog Feel

May 30, 2011 by Leave a Comment

“It’s a reasonable facsimile of doing a little window shopping and maybe you stop in somewhere and get something that piques your fancy,” she said, like the blue silk Phillip Lim blouse she recently bought on the Net-a-Porter.com iPad app.

Shopping on the iPad is more convenient than using her laptop in bed, Ms. Sara said, and easier than scrolling through tiny images on her phone while waiting in the car for her children.

“It’s greatly enhanced my kind of depressing soccer mom life,” she said.

Shopping, as old-timers may remember, was once fun.

Then Google came along, and afternoons spent wandering past store windows, or flipping through catalogs, were often condensed into two-minute searches for “jeans 32 waist dark wash -bootcut -stretch city fit”

Now, though, retailers like Net-a-Porter think they have found a way to give online shopping more of the feel of an outing at the mall or an hour with a catalog — by creating apps that resemble magazines for tablet computers. Just as magazine publishers are producing iPad apps that mimic print in a way they never could on ordinary Web sites, retailers are making iPad catalogs, with big, stylized photographs that users can flip through on the couch or in bed. And also like magazine publishers, they are adding rich features like video, sound and 3-D views.

Though most retailers started with the iPad, some are starting to build versions for other tablets. EBay, for instance, is building Android tablet apps and a new version of its Web site designed for tablets. Others, like Blue Nile, the online diamond retailer, are taking a different approach, constructing tablet versions of their Web sites instead of apps on the theory that most traffic still comes through Web searches.

The idea is to offer “shop-ertainment,” said Siva Kumar, chief executive of TheFind, a shopping search engine that last week introduced Catalogue, a tablet app that pulls together interactive catalogs from about 30 retailers including Crate Barrel and Sephora.

Traditional retailers like Sears and Ralph Lauren, along with e-commerce focused companies like Amazon, Gilt, QVC, HSN and eBay have all introduced tablet apps.

Many retailers say they see a lucrative future in tablet shopping because even though tablets made up only about 4.4 percent of all computers shipped in 2010, according to Morgan Stanley, they are expected to make up about 20 percent within two years. And iPad owners, who tend to be affluent given the $499 price tag for the device, already prefer not only browsing but also buying from a retailer’s app rather than the Web site in some cases.

At Net-a-Porter, for example, about 15 percent of shoppers buy from the iPad app, while eBay says the average purchase amount through its iPad app is higher than through either its Web site or through mobile phones. Meanwhile, Blue Nile executives say they expect iPad shopping to outpace Web shopping at some point.

Retailers also see the tablet as a more appealing backdrop for presenting their goods. On a computer, anyone can put up a Web site and compete with an established retailer. But on a tablet, big retailers have the deep pockets and development skills to set up eye-catching features and also add the ability to drop an item in a cart with a quick drag of a finger.

It is also easier than on a phone, say, to swipe to the next image or zoom in on a hemline. And the image and video quality are often better than on either phones or computers.

At the same time, tablets allow retailers to fix what many think went wrong for them online, when search engines made shopping all about the price, rather than about the store. In the new apps, retailers edit their merchandise, focusing on just a few top items. This is meant to appeal to shoppers who might be overwhelmed by the pages of search results they see on a computer. Because it is about presentation and selection rather than price, it gets the stores out of the low-price game that many are forced to play online, and back into being fashion arbiters.

“The iPad app is really our magazine app,” said Alison Loehnis, vice president of sales and marketing for Net-a-Porter. Its app was introduced last summer, and has been downloaded 120,000 times.

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The New Yorker Begins to Offer iPad Subscriptions

May 10, 2011 by Leave a Comment

“Whether it’s in there,” he said, pointing to the magazine, “or on there,” pointing to the iPad, “is going to cost about a dollar under this plan. That’s what a song costs. A lot has gone into it. Imaginative effort, editorial footwork, fact-checking and copy editing, all at the highest level every week. All of that for the price of a song? Seems like a pretty good deal to me.”

Apple, which released the iPad last March, has been busy rounding up publishers to help make its tablet even more appealing to consumers. Last week, Hearst Magazines announced a deal for iPad subscriptions to some of its magazines that will begin in July and Time Inc. made an arrangement for subscribers to get some magazines free, but Condé Nast is the first major publisher to begin a subscription plan on the iPad for one of its magazines (previously readers had to download each issue individually).

And the iPad subscription offer is quite aggressive: $5.99 for one month (for four issues) and $59.99 for a full year. But even more surprising, a bundled version of print and digital subscriptions, is available for $6.99 a month, or $69.99 a year. (Current print subscribers can sign in to the iPad version at no additional charge.)

Subscriptions on the iPad to The New Yorker went on sale early Monday, and subscriptions for other Condé Nast magazines, including Vanity Fair, Glamour, Golf Digest, Allure, Wired, Self and GQ, will become available in the coming weeks. The Condé Nast-Apple deal was first reported in The New York Post last week.  

“We already have these applications in our store and the No. 1 bit of feedback that we have gotten from our customers, the one thing that everyone wants, is to be able to subscribe,” Mr. Cue said.

Condé Nast has traditionally gotten its magazines in the hands of consumers at a cheap price in the hopes of building up big rate bases, the number used to sell advertisers, and the deal with Apple is consistent with that advertising-first approach. Over time, the new tablet subscribers could be a boon to advertising now that the Audit Bureau of Circulations has ruled that digital subscribers can be counted toward the rate base. The bundled subscriptions could also help protect the legacy business by giving a boost to print subscriptions while selling many more digital ones — young people and international consumers are a particular target.

“In terms of the price, we are constantly examining what will work and decided that we wanted to make the initial offer as attractive as possible,” Mr. Sauerberg said.

It will come at a price. Although Condé Nast can sell digital subscriptions on its own Web sites, the vast majority of sales will take place in the Apple App Store, where nearly a third of the price will go to Apple (specific terms were not disclosed). In addition, the consumer data derived from app store sales will belong to Apple and shared as the company sees fit, although Mr. Cue said that “magazine publishers will know a lot more about subscribers on the iPad than they ever did about print subscribers.”

By teaming with Apple, Condé Nast and other publishers gain access to a database of 200 million credit card holders and a sales environment where billions of songs and millions of apps have already been sold. But the music industry lesson is one that is not lost on publishing. Apple may have “saved” the music industry, but it is a much smaller business with little control over its pricing.

“Of course, we have a very different perspective on that,” Mr. Cue said. “We didn’t shrink the music business, it was pretty shrunk by the time we came along. We have proven that people are willing to pay for content and that’s something people never believed would happen. Some people still don’t believe it.”

Condé Nast, which has often been cautious with the digital realm — for a long time many of its magazines didn’t have individual Web sites — has moved swiftly to be first to market with iPad subscriptions.

“If you are going to get thousands of readers that you didn’t have before, or maybe even hundreds of thousands of readers, you’d be foolish to complain about the work that went into coming up with something they found compelling on the iPad,” Mr. Remnick said. “It is a very big opportunity for a magazine like The New Yorker to find whole new audiences.”

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The Media Equation: Now to Sell Advertisers on Tablets

May 9, 2011 by Leave a Comment

What would it be worth to reach the same reader if he or she were on an iPad? More, less or the same?

That is the one very pertinent question after an active week in magazine publishers’ fitful effort to be part of, rather than run over by, the digital revolution. Hearst Magazines struck a deal to sell three of its magazines — Esquire, Popular Mechanics and O, the Oprah Magazine — for the iPad, using Apple’s subscription model, beginning in July. Hearst is the first major publisher to agree to sell multiple magazines in the app store.

The Hearst announcement comes on the heels of word that Time Inc. negotiated an agreement with Apple in which subscribers to Sports Illustrated, Time and Fortune would be able to read their magazines on the iPad free as long as they verified their identity. (Both deals were first reported in The Wall Street Journal.) And there are indications that Condé Nast, the third part of the triumvirate, will actually be the first to market among major publishers with iPad subscriptions to some of its bigger magazines.

The deals represent a significant thaw between the technologists in Cupertino, Calif., and the mandarins of Manhattan publishing. According to the publisher in each of those discussions, Apple, which has a reputation for setting unilateral terms, demonstrated some degree of flexibility around pricing, terms and custody of data.

And that incremental progress is on top of a decision in March from the Audit Bureau of Circulations that each of those digital subscriptions will count toward the all-important rate base — the number of copies used to sell advertising — even if the electronic version is not precisely identical to the print edition.

Anybody in publishing will tell you that the prices they can charge advertisers for print (and now tablet) subscribers are far above the commodity pricing that rules on Web-based content. As more and more magazines end up in people’s laps, backlighted and without a mailing label, it’s a huge win for magazines, right?

Not so fast, said Robin Steinberg, executive vice president and director of publishing investment and activation for MediaVest. She helps giants like Kraft and Wal-Mart make ad-buying decisions. Ms. Steinberg sent a pre-emptive letter to publishers on April 29 suggesting that she and her clients would not simply go along with the assumption that a digital subscriber should count the same as a paper one.

Although she is on the Audit Bureau board and voted in favor of the changes, Ms. Steinberg made it clear that she wanted her clients to have the flexibility to opt in and out of digital editions. In a tart reminder that these are the early days of the process, she wrote that for media buyers, it was “critical that we determine how copies are qualified and counted when served either traditionally or digitally.”

In other words, if her clients want to buy apples, they will buy apples (print subscribers) and if they are in the mood for oranges (digital subscribers) they expect to make a separate and presumably lower-cost purchase. And she stressed that buyers were keeping a close eye on digital subscriptions to make sure that they did not become the electronic equivalent of a New Jersey landfill, a place where unwanted copies were dumped to make the numbers look good.

Ms. Steinberg’s letter was a signal that the Audit Bureau ruling was the beginning of that negotiation, not the end, and publishers had best be transparent about their circulation figures.

“Publishers are most comfortable with traditional metrics because their business models have been structured around these data points for years,” she said. “There is an increasing need to evolve and reinvent archaic practices into modern approaches, delivering and reporting audience- and engagement-based measurement.”

She also suggested that simply replicating the existing print ads and editorial experience in pixels represented a failure of imagination and adaptation. “Delivering the right creative experience is key. Consumers demand and expect something very different from these devices,” she added

E-mail: carr@nytimes.com;
Twitter.com/carr2n

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PC Sales Off, Games Buoy Microsoft

April 29, 2011 by Leave a Comment

While Microsoft reported Thursday that its fiscal third-quarter profits were up 31 percent, revenue from the division that includes the Windows operating system fell 4 percent, to $4.45 billion.

The fall was due in part to an overall decline in PC sales worldwide of about 3.2 percent. Analysts have blamed the earthquake and tsunami in Japan, a big market for computers, for part of that decline.

But the sales of tablet computers, like the iPad, were another major factor and that could become a persistent problem for Microsoft. The category of the tablet computer created by Apple and its iPad is expanding quickly. Apple has sold 19.5 million iPads, and all the big PC makers and cellphone makers are making tablets.

Most of the tablets on the market run either Apple’s operating system software or Google’s Android software. Manufacturers have shown little interest in using Microsoft Windows software to run a tablet.

Canalys, a technology market research firm, noted that when tablet computers are grouped with PCs, Apple becomes the fourth largest PC manufacturer in the world with almost 10 percent of the market. The three biggest PC makers, Hewlett-Packard, Acer and Dell, are all making tablets that don’t use Microsoft software.

One other indication of Microsoft’s changing stature: for the first time, Apple’s quarterly profits exceeded Microsoft’s — $5.99 billion compared with $5.23 billion. Last year, Apple surpassed Microsoft in market capitalization and in revenue.

“It’s a huge testament to Apple,” said Colin Gillis, an analyst with BGC Financial. “There is clearly some disruption in the PCs.” However, Mr. Gillis noted that Microsoft Windows 7 is the fastest-selling operating system in history. He thinks Microsoft will probably make a move into tablets later this year with its expected release of Windows 8. In any case, Mr. Gillis said, “PCs aren’t going to disappear.”

Microsoft also has found itself left behind in software for cellphones. It recently acted to ramp up its presence on mobile phones through an agreement with Nokia, the Finnish handset maker that is troubled, but still the largest makers of cellphones in the world. The two companies are working together on new mobile phones that would use Microsoft’s Windows Phone operating system.

Microsoft has seen declines in its operating software before, as recently as last year’s first fiscal quarter when it fell 4 percent.

To be sure, other parts of the company’s business remain strong and helped Microsoft report Thursday that net income in its third quarter rose 31 percent to $5.23 billion, or 61 cents a share, from $4 billion, or 45 cents a share, in the quarter a year ago. Revenue climbed 13 percent, to $16.43 billion, from $14.5 billion.

The company’s Office software, where it has no significant competition, grew 21 percent, to $5.25 billion. Office 2010 is the fastest-selling version of Office ever, Microsoft said, with businesses deploying the software at five times the rate of its predecessor.

However, revenue from Microsoft’s entertainment and devices, which includes the Xbox 360 video game console and the innovative Kinect game controller that interprets gestures and voice commands, gained 60 percent, to $1.94 billion. Kinect, a sensor that lets players interact with video games without having to hold a controller, did particularly well, selling 2.4 million units in the quarter. Customers bought 2.7 million Xbox 360s.

Microsoft blamed the economy for the lower revenue from Windows. Consumers are saving their money rather than buying new computers, said Peter Klein, Microsoft’s chief financial officer. Asked in an interview about the impact of tablets on computer sales, he acknowledged that “it’s part of the story.”

“There are a whole host of consumer purchases vying for the consumer wallet,” Mr. Klein said.

Sales of Windows for consumers PCs fell 8 percent in the quarter, Microsoft said. Windows for netbooks, the small laptops that had been big sellers until tablets came along, declined 40 percent, highlighting the rapid shift in computer buying habits.

Revenue from Microsoft’s online properties like the MSN portal and Bing search engine rose 14 percent, to $648 million. The unit lost $726 million in operating income, continuing a pattern of losses.

Two years ago, Microsoft signed an agreement to take over Yahoo’s search business to create a more formidable rival to Google. However, Yahoo’s chief executive, Carol A. Bartz, said last week that the partnership had not yielded the expected financial results for Yahoo and that technical glitches by Microsoft were to blame.

Downbeat reports about personal computer shipments in early 2011 had raised questions about Microsoft’s future dominance. Microsoft has developed an operating system for smartphones, but it is on relatively few phones. It does not have software that makers of tablet computers want. In after-hours trading, Microsoft’s shares lost 1.4 percent. They had ended regular trading at $26.71, up 33 cents, or 1.25 percent.

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Samsung Countersues Apple on iPhone and iPad Patents

April 23, 2011 by Leave a Comment

SEOUL, South Korea (Reuters) — Samsung Electronics filed a patent lawsuit on Friday against Apple over the iPhone and iPad in a tit-for-tat case after Apple claimed Samsung’s smartphones and tablets “slavishly” copied its products.

Apple filed a lawsuit last Friday accusing Samsung of violating patents and trademarks of its iPhone and iPad, as the popular gadgets are being threatened by the fast rise of rival devices based on Google’s free Android operating system.

The legal battle could jeopardize business ties between the two technology companies. Apple, based in Cupertino, Calif., relies heavily on Samsung for components like chips and LCD displays.

Operating systems have emerged as the crucial battlefield for dominance of the world’s smartphone market. Android became the most popular smartphone software in the United States in the three months ending in February, ahead of the software of Apple and Research In Motion, according to a recent survey by research firm comScore.

Samsung is one of the fastest-growing smartphone makers on the back of the Android boom and has emerged as Apple’s strongest competitor in the tablet market, with models in three sizes.

In a statement, Samsung said on Friday that Apple’s iPhone and iPad infringed its 10 mobile technology patents and it called for Apple to stop infringing its technology and compensate the company.

The suits, filed in South Korea, Japan and Germany, involved 10 claims of infringements mainly involving patents for power reduction during data transmission, 3G technology for reducing errors during data transmission and wireless data communication technology.

“Samsung is responding actively to the legal action taken against us in order to protect our intellectual property and to ensure our continued innovation and growth in the mobile communications business,” the statement said.

Global technology companies are locked in a web of litigation as they try to defend their shares of the booming tablet and smartphone market.

Strong sales of the iPhone and iPad translate into more revenue for Samsung. Apple was Samsung’s second-biggest client after Sony of Japan last year, bringing in around 6.2 trillion Korean won ($5.7 billion) in sales, and is widely expected to become Samsung’s top client this year.

The battle comes ahead of Samsung’s release of a new version of its successful Galaxy S smartphone next week in Korea, a crucial product for it to meet its goal of sales of 60 million smartphones this year.

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Apple Lifted by Verizon iPhone Deal and Updates of iPad and MacBook

April 21, 2011 by Leave a Comment

A surge in demand for its products yielded gains in income and revenue that were impressive even by Apple’s lofty standards. If there is a problem, it is that Apple is having trouble keeping up with some of the consumer demand.

Apple’s deal to make iPhones available on the Verizon Wireless network helped to lift iPhone sales, which more than doubled, to a record 18.65 million. The phones had previously been exclusive in the United States to ATT’s network, which many criticized for dropped calls.

“We did actually very well everywhere,” Tim Cook, Apple’s chief operating officer, said in a conference call with analysts.

Apple did not give specific numbers for iPhone sales for Verizon. But overall sales for both ATT and Verizon increased more than one and a half times in the United States compared with the quarter a year earlier.

The arrival of the iPad2, just before the quarter ended March 26, helped stoke tablet sales. Apple sold 4.69 million tablets in the quarter, including the iPad2 as well as the original version.

Consumers bought so many, in fact, that Apple is having trouble keeping up with the demand, prompting analysts to ask when Apple could ramp up production, and by how much.

Mr. Cook acknowledged the problem, calling it “the mother of all backlogs,” but he declined to be more specific about this quarter’s production. Apple’s Web site says there is a one- to two-week delay in shipping online orders. 

A. M. Sacconaghi Jr., an analyst with Sanford C. Bernstein Company, said that while Apple’s overall results were extraordinary, the number of iPads sold was a disappointment. “Whether Apple somehow messed up or was unable to secure components is an open question,” he said, but added, “It does sound like production will increase dramatically in the current quarter.”

To underscore his confidence, Mr. Cook reminded analysts that he approved Apple’s introduction of the iPad2 in 25 additional countries in late March and that the device will go on sale in 13 more countries next week.  

Even Apple’s MacBook laptop computers, an afterthought amid all the buzz around Apple’s phones and tablets, showed big gains after the introduction of updated versions during the quarter. Apple sold 2.75 million laptops, a 53 percent increase.

Sales of Mac desktop computers, however, fell 12 percent, to one million.

Apple’s computer sales defied an industrywide decline of 3.2 percent in computer shipments in the first quarter that was attributed to the disasters in Japan and a lack of better technology that would prompt consumers to upgrade, according to the research firm IDC.

Apple said it did not expect any significant impact on its supplies from Japan, where it gets hundreds of components.

The iPod, Apple’s music player, was among the few disappointments. Sales declined again, yet another indication of how smartphones, generally incorporating music players, are replacing single-function products. Sales of the iPod fell 17 percent, to 9.02 million.

Apple reported that net income in the second quarter rose 95 percent, to $5.99 billion, or $6.40 a share, from $3.07 billion, or $3.33 a share, in the year-ago quarter.

Revenue climbed 83 percent, to $24.67 billion, from $13.5 billion.

The results surpassed analysts’ expectations of $5.35 a share and revenue of $23.27 billion, according to Thomson Reuters.

Shares of Apple rose 3.1 percent, to $353.02 in after-hours trading after the announcement. In regular trading, shares had climbed 1.35 percent, to $342.41.

Mr. Cook has been in charge of Apple’s day-to-day operations since early this year after Steven P. Jobs, Apple’s chief executive and co-founder, took a leave of absence. Mr. Jobs, who has battled pancreatic cancer, said he needed to deal with health issues.

Asked about Mr. Jobs and his role at the company these days, Mr. Cook said: “He continues to be involved in major strategic decisions, and I know he wants to be back full time.”

Apple said it expected third-quarter revenue of around $23 billion and $5.03 a share. That is below analysts’ forecasts of $23.82 billion in revenue and $5.25 a share in income.

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