Microsoft plans sweeping pay raises: CEO memo

SEATTLE (Reuters) - Microsoft Corp plans to broadly raise salaries and stock awards to attract and retain top talent, Chief Executive Steve Ballmer said in an internal memo obtained by Reuters on Thursday.

Microsoft, which like Silicon Valley companies Google and Yahoo risks losing top employees to hot upstarts like Facebook, must improve the way it rewards and support its most talented staff, Ballmer said.

"Through our history, we have been THE place people came when they wanted to make a difference in the world through software, hardware and services," the chief executive said in a memo sent to all employees on Thursday morning.

"This is as true today as it has been at any time in our history, and the changes we're rolling out today will help ensure Microsoft continues to be the place that top talent comes to change the world."

The action follows Google's 10 percent increases this year. Microsoft plans, among other things, "important" compensation increases for divisions with fast-moving markets, including research and development and certain geographies.

All employees will have a portion of their stock awards shifted into base salary, according to the memo. Microsoft's shares are at the same level as 10 years ago.

The company will tie bonuses and stock awards closer to performance, with the review process also undergoing changes, Ballmer said.

Microsoft suspended merit-based pay raises for all employees two years ago, when it laid off 5,000 workers, or about 5 percent of staff, to cut costs. It brought back what it calls "modest" merit raises in 2010.

Last year it told employees they would have to contribute to health insurance for the first time, beginning in the next couple of years.

The changes will occur around September, according to the memo. Microsoft's shares closed down 0.9 percent at $25.52.

(Writing by Edwin Chan; Editing by Steve Orlofsky)
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Sony Ericsson battles for parts after Japan quake

By Simon Johnson and Tarmo Virki

STOCKHOLM/HELSINKI (Reuters) - Cellphone maker Sony Ericsson is suffering component shortages following the Japanese earthquake and has roped in its bigger parents to give it more muscle in the fight for supplies with bigger rivals.

Chief Executive Bert Nordberg said there were shortages of displays, batteries, camera modules and some printed circuit boards due to the March 11 quake, adding the problem was stabilizing but would definitely have a bigger impact in the second quarter.

"We are now fighting for parts with bigger players," Nordberg told Reuters in an interview, adding the company was cooperating closely with its parent groups Sony Corp and Ericsson to garner more influence in talks with parts makers.

First-quarter results from Sony Ericsson, which only returned to profit a year ago after seven straight quarters of losses, showed the company staying in the black on the back of booming smartphone demand and cost cuts. Yet Nordberg's comments add to signals from other global companies on the continuing impact of the earthquake.

Earlier on Tuesday Toshiba Corp said its operating profit missed forecasts due to the disaster, while chip maker Texas Instruments Inc warned overnight of slower-than-usual quarterly sales growth as it scrambles to restart production.

Japanese component factors will also be in focus in reports from Apple Inc on Wednesday and Nokia Oyj a day later.

DELAYED ROLLOUT

Sony Ericsson had said in early April the March 11 quake was limiting volumes in its new smartphone offerings and delayed the wider launch of its neo model to the third quarter.

"The second quarter and possibly third will be difficult because of Japan," said Gartner analyst Carolina Milanesi.

Sony Ericsson has slashed costs -- including cutting around 4,000 jobs -- and refocused on higher-margin smartphones that link to social networking sites like Facebook. The share of smartphones in its sales rose to 60 percent from 40 percent in the previous quarter.

But analysts say it still takes too long for the group to bring new products to market and it has been left trailing by the likes of Apple's iPhone and smartphones from companies such as Samsung Electronics Co and HTC Corp.

IDC analyst Francisco Jeronimo said the group -- which dropped behind HTC to ninth-largest phone maker by volume -- risks remaining a niche player if it does not expand its offering beyond the top end of the market.

"They are not Apple. I do not see a bright future for them if they do not do more," Jeronimo said.

Sony Ericsson posted a quarterly pretax profit of 15 million euros ($21.3 million), beating an average analyst forecast for a loss of 24 million, but within a wide range of estimates.

Revenue missed forecasts as Sony Ericsson sold just 8.1 million phones in the quarter, below all expectations, and giving it market share of just over 2 percent, the lowest level since the venture was formed 10 years ago.

Shares in Ericsson were 0.1 percent higher at 76.55 crowns by 1317 GMT, in line with a slightly firmer European technology sector.

"These results point to a significant and ongoing impact on Sony Ericsson's supply chain and operations caused by the Japan earthquake, with shipments falling a considerable way short of expectations," said CCS Insight analyst Geoff Blaber.

"This is a challenging situation for Sony Ericsson, but with lowered operating expenses and continued improvement to gross margin, it is at least in a better position to weather the storm than it was 12 to 24 months ago," Blaber said.

(Editing by David Cowell and David Holmes)

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Top court hears Microsoft appeal on i4i patent

By James Vicini

WASHINGTON (Reuters) - Microsoft Corp urged the U.S. Supreme Court on Monday to make it easier to challenge some patents as part of its appeal of a record $290 million jury verdict for infringing a small Canadian software firm's patent.

An attorney for the world's largest software company argued that the court should reject the long-held requirement that a defendant in a patent infringement case must prove by clear and convincing evidence that a plaintiff's patent is invalid.

Thomas Hungar, an attorney for Redmond, Washington-based Microsoft, said a lower standard should be used, which could make some patents more vulnerable to legal challenge while promoting innovation and competition.

An Obama administration lawyer and Seth Waxman, an attorney for the Toronto-based i4i, said Congress has accepted the standard in effect for at least the past 28 years, that it was correct and that it was based on long-settled precedent.

The Supreme Court justices questioned all three attorneys closely and gave no clear indication during arguments of how they would rule. A decision is expected by the end of June.

The legal battle stemmed from a federal jury's award of $290 million to i4i after finding Microsoft had infringed its patent relating to text manipulation software in 2003 and 2007 versions of Word, Microsoft's word processing application.

A U.S. appeals court upheld the award and the U.S. Patent and Trademark Office upheld the validity of the i4i patent. Microsoft continued to dispute those decisions, but removed the contested features from its current software.

In appealing to the Supreme Court, Microsoft said it wanted a new trial.

After the arguments, Loudon Owen, i4i's chairman, expressed confidence his company will prevail. "We thought it went very well," he said.

"Microsoft did not present either policy or legal reasons that would justify any changes to the law, particularly the sweeping change they now apparently seek," Owen said.

Several justices asked about a Supreme Court precedent from 1934 that could cast doubt on Microsoft's argument. "What do we do?" Justice Elena Kagan asked. "One answer to that question is we go with our prior precedent."

Justice Ruth Bader Ginsburg also cited the 1934 ruling and asked whether Congress had ever introduced legislation to change the standard. Hungar replied it had not.

Justice Stephen Breyer asked whether the current system protected not only inventions that deserve protection, but also those that may not deserve it. "We're trying to get a better tool if possible to separate the sheep from the goats," he said.

Justice Sonia Sotomayor asked whether the dispute could have been resolved with different jury instructions.

The case was heard by eight of the nine Supreme Court members. Chief Justice John Roberts, who owns Microsoft stock, recused himself from the case. If the justices split by a 4-4 vote, then the ruling against Microsoft would be upheld.

The Supreme Court case is Microsoft Corp v. i4i Limited Partnership and Infrastructures for Information Inc, No. 10-290.

(Additional reporting by Bill Rigby in Seattle; Editing by Tim Dobbyn)
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Apple to stay ahead in tablet boom: Gartner

By Tarmo Virki and Miyoung Kim

HELSINKI/SEOUL (Reuters) - Apple's iPad will continue to dominate the surging media tablet market for years, with Google playing catch-up, research firm Gartner said on Monday.

Gartner said it expects 70 million media tablets to be sold this year and 108 million in 2012, compared with just 17.6 million in 2010.

Apple's share of the market will gradually decline to 47 percent in 2015 from 69 percent this year, while Google's share will rise to 39 percent from 20 percent now.

Google's Android has stormed the smartphone market, where it will become the No 1 platform this year, and it has emerged as the only viable solution for tablet-makers who do not own their own operating system.

Research In Motion's QNX platform, used in its soon-to-be-launched PlayBook tablet, will take the No.3 position on the market this year, with a 5.6 percent share. Gartner sees that rising to 10 percent in 2015.

"It will take time and significant effort for RIM to attract developers and deliver a compelling ecosystem of applications and services around QNX to position it as a viable alternative to Apple or Android," Gartner analyst Carolina Milanesi said.

"It will be mainly organizations that will be interested in RIM's tablets because they either already have RIM's infrastructure deployed or have stringent security requirements," she said in a statement.

DISTANT NO. 2 IN HARDWARE - SAMSUNG

Apple is estimated to have sold about 1 million iPad 2's in the first weekend of its U.S. launch early last month. By comparison, its closest rival in hardware, Samsung Electronics

may have sold a similar number of Galaxy Tabs in the past three months and sales growth is expected to remain weak.

Slow sales of Tab, coupled with aggressive pricing plans of iPad2, is pressuring profit growth at Samsung.

Samsung, the most aggressive contender to Apple with three different sizes of tablets, is still playing catch-up and analysts expect the firm, which uses Google's Android in its tablets, to increase marketing expenses to boost sales.

"Their biggest challenge is user interface, how they are going to make their devices any different from those of Motorola

or HTC," said Milanesi.

Samsung is widely known as one of the fastest followers in the fickle electronics industry. To better compete with Apple, Samsung redesigned its new 10.1-inch tablet, first introduced in February, in just weeks to make it the thinnest in the category after Apple set the trend with the slimmer iPad 2.

Samsung's follow-up models will be on the market in June at the earliest, three months after iPad 2's rollout.

"Expectations for tablets have driven Samsung shares since November, but it has so far failed to live up to that expectation. Whether Samsung's share can rise again will largely depend on how strongly its follow-up tablet models do in the market," said Lee Seung-woo, an analyst at Shinyoung Securities.

(Editing by Jon Loades-Carter and Erica Billingham)
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Google's Page makes first changes to management

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Google Inc (GOOG.O) CEO Larry Page, in his first major reorganization since taking the reins as CEO, moved to streamline decision-making at the key social network, mobile, Internet software and Youtube product groups.

Social networking chief Vic Gundotra, Android head Andy Rubin, Chrome senior vice president Sundar Pichai and Youtube head honcho Salar Kamangar have been given a direct reporting line to Page and greater autonomy, according to a source familiar with the matter who confirmed changes first reported in The Los Angeles Times.

Also given a direct line to Page -- who officially assumed his role on Monday -- were search senior vice president Alan Eustace and advertising chief Susan Wojcicki, the source said.

A Google spokesman confirmed that there had been a management reorganization at the company, but declined to provide details. The spokesman noted that it had been very clear when the CEO change was announced in January that Page was looking to streamline the way the company is run and to make clear lines of accountability.

Investors had predicted bold and aggressive moves by Page to whittle down red tape at Google, and a renewed focus on search, mobile and technological innovation, following a decade under the leadership of former CEO Eric Schmidt. But some feared Page, who cofounded Google while a computer graduate student at Stanford in 1998, would neglect the crucial CEO's task of managing the expectations of Wall Street.

The changes point to major areas of focus for the company, which dominates Internet search and advertising but is increasingly expanding -- with mixed success -- into social networking and mobile software.

Google is the world's No. 1 search engine and generated roughly $29 billion in revenue in 2010. But the company is facing increasing competition from social networking site Facebook and iPhone-maker Apple Inc. (AAPL.O)

The management changes at Google also come days after the departure of Senior Vice President of Product Management Jonathan Rosenberg, who according to the company had intended to leave in the next year or two regardless. Of the promoted executives, several had reported to Rosenberg.

Shares of Google were up 0.3 percent at $581.80 on Friday afternoon.

(Reporting by Alexei Oreskovic, editing by Matthew Lewis)
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Google offers $900 million for Nortel patents

By Alastair Sharp

TORONTO (Reuters) - Global Internet giant Google has bid $900 million for a warchest of patents from bankrupt Nortel Networks, in an initial "stalking horse" bid that's expected to draw in higher competing offers.

Google, which runs the world's most popular search engine, wants the Nortel patents to help it fight a growing wireless patent war against well-armed mobile superpowers. The company has pushed its Android mobile phone software to the top of the wireless heap, attracting litigation in the process.

"Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories," Kent Walker, Google's general counsel, wrote on the company's blog.

Nortel, which filed for bankruptcy protection in January 2009, was a pioneer in wired and wireless network technology and the assets include some 6,000 patents and patent applications for wireless, data and optical networking, voice, Internet, semiconductors and other technologies.

"As the mobile market gets increasingly litigious it comes as little surprise that Google is interested in assets that could help it defend its Android mobile platform against rival patent claims," said Ben Wood, an analyst at CCS Insight.

Oracle is suing Google over Android, while Apple is fighting Taiwan's HTC in what is widely seen as a proxy attack on Android, which runs on HTC smartphones as well as devices from Samsung Electronics, Motorola Mobility and others.

More established mobile vendors have cross-licensing deals with each other. That keeps their patent fees low but makes entrance expensive for newcomers like Apple and Google.

INTEREST ROBUST

Interest in the Nortel patents has been robust, but a deal was been delayed as Nortel's liquidators and potential buyers haggled over price.

Other expected bidders include Chinese telecom network company ZTE, Ericsson, which bought most of Nortel's wireless operations, and RPX, which licenses patents on behalf of member clients for a fee.

"This is an unprecedented opportunity to acquire one of the most extensive and compelling patent portfolios to ever come on the market", Nortel's chief strategy officer, George Riedel, said in a statement.

The patent sale is a last gasp for Nortel, once a Canadian technology darling with some 90,000 employees and a market capitalization of more than $250 billion.

Nortel, which has sold most of its physical assets, said Google was chosen after multiple bidding rounds involving companies and consortia from around the world.

"The patent war is getting tougher and expensive," said IDC analyst Francisco Jeronimo. He said it was unclear how widely the Nortel patents have already been licensed.

Google's bid sets a minimum price for other bidders to use as a starting point for their own proposals.

Nortel will file the agreement to a bankruptcy court in Delaware and outline how it will run the auction, which it expects to hold in June.

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(Additional reporting by Tarmo Virki in Helsinki; editing by Pav Jordan and Janet Guttsman)
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