Nokia will Launch Mobiles with Microsoft Platform In 2011

Nokia is facing steep competition from competitors in several products. At the top end of the market it is struggling against smart phones such as Apple's iPhone, Research in Motion's Blackberry as well as Android, and on the lower end against emerging market phone makers who are dropping their prices.Nokia will start to deliver the Windows-based mobile phones in bulk next year, CEO Stephen Elop said in a speech at a technology trade show in Singapore. Finnish handset maker Nokia Corp. plans to introduce its first mobile phones using the Microsoft Windows operating system this year, the company's chief executive said Tuesday.  "Our primary smartphone strategy is to focus on the Windows phone," Elop said. "I have increased confidence that we will launch our first device based on the Windows platform later this year and we will ship our product in volume in 2012." Elop has acknowledged Nokia has been too slow to meet the challenge from competitors and has hinted that the company would drop its cellphone prices. Last month, the company warned both sales and profit margins in the second quarter would be substantially below previous forecasts. Nokia also unveiled Tuesday its N9 smartphone, which is based on the MeeGo platform. The company said it plans to launch up to 10 new Symbian-based smartphones over the next 12 months. Elop said the N9 would go on sale later this year, but declined to specify the date or price. Nokia developed MeeGo last year in a partnership with U.S. chipmaker Intel Corp. In February, Nokia turned to Microsoft's Windows Phone software as its main smartphone operating system.

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ICASI Publishes Standardized Framework for Reporting IT System Vulnerabilities : CVRF Version 1.0

The Industry Consortium for Advancement of Security on the Internet (ICASI), a nonprofit association dedicated to enhancing global IT security by proactively driving excellence and innovation in security response, today announced the publication of its Common Vulnerability Reporting Framework (CVRF) Version 1.0.     

CVRF is an XML-based framework that enables stakeholders across different organizations to share critical vulnerability-related information in an open and common machine-readable format. This format replaces the myriad of current nonstandard reporting formats, thus speeding up information exchange and processing. CVRF is available to the public free of charge, along with additional information, at ICASI.org/cvrf.
"CVRF represents a true milestone in industry efforts to raise and broaden awareness of security vulnerabilities," said Linda Betz, president of ICASI and director of IT Policy and Information Security at IBM. "With the use of CVRF, the producers of vulnerability reports will benefit from faster and more standardized reporting. End users will be able to find, process and act upon relevant information more quickly and easily, with a higher level of confidence that the information is accurate and comprehensive. Consumers will ultimately benefit with safer systems and applications."
Although the computer security community has made significant progress in several other areas in recent years, including categorizing and ranking the severity of vulnerabilities in information systems, there has been no standard framework for creating vulnerability report documentation. Methods such as embedding security metric and vulnerability data inside response reports are all vendor-specific, non-standard and time consuming to decipher manually.
Through its CVRF Project, ICASI undertook to remedy this lack of standardization, using the Internet Engineering Task Force (IETF) draft Incident Object Description Exchange Format (IODEF) as a starting point. The project team – including contributors from ICASI Founding Members Cisco Systems, Intel Corporation, International Business Machines, Juniper Networks, Microsoft Corporation and Nokia, along with representatives from Oracle and Red Hat – also surveyed enterprise users about similarities and differences in current vulnerability reporting, asking them what future reporting methods should address. The team then expanded existing security documentation formats and integrated a best-of-breed solution into a common, open XML-based framework ‒ CVRF ‒ that brings consolidation and consistency to the security vulnerability documentation space, and is expected to grow organically among stakeholders.
The XML-based framework of CVRF predefines a large number of fields, with extensibility and robustness in mind. These fields are consistent in naming and data type, so that any organization that adopts and understands CVRF can easily produce documents or read the ones that another CVRF-equipped organization has produced. Independent discoverers of bugs, large vendors, security coordinators and end users of security response efforts worldwide can all write CVRF documents to share critical vulnerability-related information. Widespread use of CVRF will accelerate information dissemination and exchange and incident resolution as a result.
ICASI's intention is that CVRF be a living framework that will be enhanced and revised as necessary. ICASI plans to continue supporting CVRF to ensure that it will remain both stable and free for use by all. Implementers are encouraged to submit their suggestions for improvements to contactcvrf@memberws.org.     

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Why did Microsoft spend $8.5bn on Skype? (Detailed Report)

In a bold move, Microsoft acquires Nokia and catapults itself to the top of the smartphone world. The full integration of Windows Phone 7 software into Nokia hardware will result in a better user experience for customers, a zero-fragmentation platform for developers, easier deployment of a smaller number of SKUs for retailers, and more reliable update management for carriers.

It's worked before. Microsoft's hardware/software integrated devices, Xbox and Kinect, are enjoying strong revenue growth and great margins: $1.9bn revenue last quarter, 50% more than last year, with 10% operating profit.

In a prepared statement, Microsoft CEO Steve Ballmer says:

I welcome Stephen Elop back into my executive staff. His brief leave of absence has allowed us to more fully explore the possibilities of combining the best smartphone hardware, Nokia's, with the best OS, Windows Phone 7. Google's anticompetitive Android free and open licensing practices unfairly tilted the playing field against our better product; they made it impossible for us to sell Windows Phone 7 software. Instead, we're now ready to do battle with Apple from a superior position: a stronger product carrying the Windows Everywhere flag, wider carrier distribution around the world, and more retail partners in US, Europe, and BRIC nations. With our acquisition of Nokia, we're now a $100bn company, back where we belong: at the top of the high-tech industry.

When I woke up, I heard a different story: Microsoft bought Skype for $8.5bn.

We all know Skype: free voice and video calls from computer to computer, plus paid services if you need to dial a phone. As Skype prepared for its long-awaited IPO, we got financial data from their S-1filing with the SEC. S-1s are always instructive: This is usually the first time a private company opens the kimono – and the SEC watches closely as you prepare to sell shares to widows and orphans.

The Profit & Loss statement in Skype's S-1 looks like this:

With revenue of $860m in 2010, Skype's operating profit is a modest $20m, with a net loss of $69m due to interest expenses stemming from $686m in long-term debt. Except for in 2008, when they saw a $42m profit, Skype has racked up huge losses, including $1.4bn in 2007 and $370m in 2009.

(Technically, these figures straddle two different corporate structures because of Skype's complicated history. Started in 2003 as an independent European company, Skype was acquired by eBay in 2005 for a price pegged between $2.6bn and $3.1bn. After the acquisition, eBay discovered its ownership of Skype was "encumbered": A crucial piece of Skype's technology was owned by another company, Joltid, which was essentially in the hands of Niklas Zennström, one of Skype's founders. eBay settled with Joltid for about 14% of Skype. This caused wags to say the crafty Skype founders sold the company twice – and it certainly didn't make the ex-management consultants running eBay look so sharp. In 2009, eBay sold 70% of Skype to private equity and venture investors in a transaction that valued the company at $2.75bn.)

Why did Microsoft pay $8.5bn – 10 times the company's revenue – for a business that has changed hands so many times, never made money, and comes with substantial debt? (Admittedly, the $686m debt number is manageable – for Microsoft).

One eloquent answer comes from Brad Horowitz, a partner at the Andreessen Horowitz venture firm started by Netscape's founder. Horowitz invokes the network effect: A large number of users attracts more users and so on, in a kind of gravitation well:

500,000 new registered users per day – 170 million connected users – 30 million users communicating on the Skype platform concurrently – 209 billion voice and video minutes in 2010

And he concludes:

Today, I tip my hat to an old rival, Microsoft. By acquiring Skype, Microsoft becomes a much stronger player in mobile and the clear market leader in internet voice and video communications. More importantly, Microsoft gets a team, ably led by the exceptional Tony Bates, that can compete with anyone.

Well, this is a nice encomium to the guys who transformed the venture firm's $50m investment in Skype a few months ago into a $150m payday. My own venture investor hat is tipped to MM. Andreessen and Horowitz.

But not so much to Steve Ballmer.

Looking at Microsoft's recent quarterly numbers, we see the continuation of a now old and getting older tradition: losses in the Online Services Division. Only a few weeks ago, TechCrunch wondered: When Will Microsoft's Internet Bloodbath End? Business Insider provided a vivid illustration for the problem:

In just the past 12 months, Microsoft has lost $2.5bn in its online business. They spend $2 to make $1 in revenue. Buying and "integrating" Skype will make the picture even redder.

So, again, why spend $8.5bn on Skype?

The official explanation is that Skype will be targeted at professional users. For these, Microsoft already has a product called Lync, although not many have heard of it. And they have Messenger for consumers. (Actually, it's Windows Live Messenger for Windows and Microsoft Messenger for the Mac.) I don't think it's unfair to ask how, how well, and when Microsoft's Grand Unified Messaging platform will effectively exist, and how it will be monetised.

Given Microsoft's track record, there isn't much evidence of its ability to perform such integration, nor of its ability to move a big platform forward at a competitive pace, certainly not faster than what Google seems able to do with Google Voice, Talk and Google Video for Business.

The theory must be that every Windows PC will come with "Skype inside". But that isn't much progress: There are already 170 million connected Skype users, and 500,000 new registrations everyday. And imagine how carriers will react when they see a Skype client bundled with every Windows Phone 7 device, further pushing them towards their preordained destination: dumb pipes.

Today, Skype is joyfully used in both consumer and business environments. It's not perfect, but the price is right and Skype is now a verb. The next thing we know, Microsoft will take a good if imperfect service and "improve" it by integrating it with Office or SharePoint (a good product on its own). And, at some point, Microsoft will try to make us pay for it. In more ways than one.

But, again, the history isn't there. Microsoft's ability to successfully charge for a formerly free product is lacking.

Reactions to the Skype deal have been negative, if not downright derisive. Many see the Skype acquisition as more evidence that Microsoft can't innovate, or even effectively copy and out-implement any more. One local exec asked, rhetorically, how much it'd take to re-implement Skype. $100m? $1bn? It's not a question of money. Microsoft spends tons in R&D: 15% of sales, about $9bn per year. (Apple spends 2% of revenue, less than $2bn.) Think of iTunes: it's been out there for close to 10 years and there's no iTunes clone coming out of Redmond. Microsoft has to buy what it no longer has the people or the culture to create – or copy.

David Pogue, the NY Times' tech guru, thinks this acquisition will go where so many went before: to failure by mediocrity and to poisoning by matrix management.

Ben Brooks, a Microsoft shareholder – and not the disgruntled kind – comments on the Skype deal and concludes: The Ballmer Days Are Over. Perhaps, but who can tackle the job of turning Microsoft around?

In last year's 30 May Monday Note, I wrote Ballmer had opened the "Second Envelope". He was running out of explanations: first blame your predecessor, then fire a few subordinates. Next, you're out of excuses and out the door.

Since then, a few more subordinates have decided to "spend more time with their families": CTO Ray Ozzie, who wrote a long, long farewell memo (don't do that, it doesn't make you look good); tablet executive Bill Mitchell; Bob Muglia, president of the server and tools division. We'll exclude Stephen Elop, the president of the business division who went on to rescue Nokia, as he might have left of his own volition – or of his seeing Ballmer looking for the next excuse.

Last year, I noted Microsoft's stock had been stagnant for almost 10 years. Things haven't improved since then:

In the past 12 months, Microsoft's stock has fallen by 11% while the Nasdaq climbed 25%, Google 7%, and Apple 44%.

Having run out of ideas and envelopes, is Ballmer spending $8.5bn of Microsoft's $50bn cash, its biggest acquisition so far, as a desperate tentative to keep the company, or himself, in the game?

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Microsoft, Skype Deal Could Exploit Synergies with Nokia, Enterprise

Microsoft CEO Steve Ballmer is known for his public exuberance, punctuating keynote addresses with the sort of high-decibel verbal fireworks commonly associated with high-school coaches trying to goad a touchdown.
“Developers! Developers! Developers!” is one of his more famous refrains.
As Microsoft headed into the final stages of its acquisition negotiations with VOIP (voice over IP) and video-conferencing provider Skype, Ballmer’s shout to any Microsoft executives reluctant to embrace the deal might have been: “Synergy! Synergy! Synergy!”
Microsoft is paying a lot for Skype: $8.5 billion. In return for that hefty chunk of change, it will become a business division within Microsoft, headed by Skype’s current CEO Tony Bates. Skype in its new form will support Microsoft products, such as Windows Phone and Xbox Kinect, and integrate across the breadth of Microsoft’s already-extensive portfolio—including the Lync unified-communications platform. 
But that’s not necessarily enough to justify the biggest-ever payout in Microsoft’s history. According to some analysts, the secret sauce of the Skype deal—so to speak—is its potential to bolster Microsoft’s recent partnerships with other companies, as well as its relationship to the enterprise.
“Of [Skype’s] 633 million users, fewer than 8 million are paying users. No matter. What is important is that many of these users would love to make free calls on a mobile phone,” Mike Gualtieri, an analyst with Forrester, wrote in a May 11 corporate blog posting. “Microsoft’s plan to acquire Skype fits in perfectly with its recent partnership with Nokia because both offer incredible reach.”
In other words, Skype could allow Microsoft to boost its competitiveness in the mobile realm against both Apple’s iPhone and the growing family of Google Android devices. “There is no stopping Apple when it comes to mobile and cultural dominance,” he wrote. “But Microsoft could displace Google as the alternative based on the great UX provided by Windows Phone 7, the Nokia partnership and the Skype deal.” 
Whether or not that takes place—despite some analyst assertions that Windows Phone will increasingly dominate the market, Microsoft’s share of smartphones reportedly remains low—the Skype deal could allow Microsoft to maintain its grip on a segment very near and dear to its heart, or at least its bottom line: the enterprise.
That is, if Microsoft manages to swallow Skype without too much indigestion, according to a May 11 blog post by Yankee Group analyst Emily Green: “Two of the many reasons these things fail after the photo-op: a) they buy something sizzling hot, hoping to reinvigorate their own less dynamic offerings and culture—but end up suffocating the entrepreneurial spirit in the acquired firm that made it sexy in the first place. Or, b) they buy something that’s only available because it’s on the ropes.”
That being said, Green views the Skype-Microsoft deal as capable of sidestepping those pitfalls, if only because supple, lightweight VOIP and video-conferencing assets can serve Microsoft’s designs on the enterprise.
Specifically, as those enterprises shed physical infrastructure, “their leaders have to ask some very tough questions about investing in conventional hard-wired telecommunications infrastructure.” That, in combination with employees’ seemingly unstoppable desire to bring consumer software into the enterprise, could create an opportunity for Microsoft to “tightly weave Skype’s functionality into its corporate offerings” in ways that meet the approval of executives and IT administrators. In turn, that could give Redmond the opening it needs to “maintain relevance with the new breed of enterprises being born in this century.”
However, Green concedes that earning back the enormous costs associated with the acquisition “is another story.”
Skype found itself an acquisition target in 2005, when eBay agreed to pay $2.6 billion in cash and stock for the then two-year-old company. Four years later, a team of private investors—including Silver Lake Partners and Andreessen Horowitz—took it off the auction Website’s hands for $1.9 billion in cash. Skype had reportedly been raising money for an IPO, but that offering was delayed after the company appointed Bates to the CEO role in October.
For that substantial bump-up in cash, Microsoft is purchasing one of the Web’s most recognizable consumer brands—albeit one that’s faced increased competition from Google and others in recent quarters.
But one of Skype’s private investors took to the blogosphere to discount that competition as a threat. In a May 10 posting on his personal blog, Andreessen Horowitz co-founder and partner Ben Horowitz suggested that Google’s attempt to market a similar VOIP offering had failed to stop Skype’s momentum: “What was the result of this effort? … Skype new users and usage growth has accelerated since Google’s launch.”
Apple’s Facetime, he added, also failed to blunt Skype’s momentum: “How did that impact Skype’s use on the iPhone? 50 million users have downloaded Skype’s iPhone product since the release of Apple’s FaceTime.”
If you believe Horowitz’s assertions, then Microsoft managed to sidestep the potential acquisition dangers outlined by Green. But how well the company will integrate its newest property—and create synergy with its partners—remains the question of the hour. 

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