Target Corp announced an overhaul of its information security processes and the departure of its chief information officer as the retailer tries to re-gain customers and investors after a massive data breach late last year.
CIO Beth Jacob is the first high-level executive to leave the company following the breach, which led to the theft of about 40 million credit and debit card records and 70 million other records of customer details.
Jacob, who comes from a sales background and has been CIO since 2008, will be replaced by an external hire, according to sources at Target.
“It’s a decision that should have been made by the CEO on January 1, not through the resignation of an employee that overlooked critical weakness in the operating model,” Belus Capital Advisors CEO Brian Sozzi said.
The breach at Target was the second largest at a U.S. retailer, after the theft of more than 90 million credit cards over about 18 months was uncovered in 2007 at TJX Cos Inc, operator of the T.J. Maxx and Marshalls chains.
Hacking has become a major concern for retailers in the United States. In the latest reported breach, beauty products retailer and distributor Sally Beauty Holdings Inc said on Wednesday its network had been hacked but no card or customer data appeared to have been stolen.
Target Chief Executive Gregg Steinhafel said the company would elevate the role of chief information security officer as part of its plan to tighten its security.
The company will also look externally to fill that position as well as the new position of chief compliance officer.
Steinhafel said Target would be advised by security consultant Promontory Financial Group as it evaluates its technology, structure, processes and talent.
“I believe this is definitely a measure in restoring faith and really showing that they are taking the breach seriously,” Heather Bearfield, who runs the cybersecurity practice for accounting firm Marcum LLP, told Reuters.
Target, the third-largest U.S. retailer, said last week customer traffic had started to improve this year after falling significantly toward the end of the holiday shopping season when news of the cyber attack spooked shoppers.
AMD’s Mantle has been a hot topic for quite some time and despite its delayed birth, it has finally came delivered performance in Battlefield 4. Microsoft is not sleeping it has its own answer to Mantle that we mentioned here.
Oddly enough we heard some industry people calling it DirectX 12 or DirectX Next but it looks like Microsoft is getting ready to finally update the next generation DirectX. From what we heard the next generation DirectX will fix some of the driver overhead problems that were addressed by Mantle, which is a good thing for the whole industry and of course gamers.
AMD got back to us officially stating that “AMD would like you to know that it supports and celebrates a direction for game development that is aligned with AMD’s vision of lower-level, ‘closer to the metal’ graphics APIs for PC gaming. While industry experts expect this to take some time, developers can immediately leverage efficient API design using Mantle. “
AMD also told us that we can expect some information about this at the Game Developers Conference that starts on March 17th, or in less than two weeks from now.
We have a feeling that Microsoft is finally ready to talk about DirectX Next, DirectX 11.X, DirectX 12 or whatever they end up calling it, and we would not be surprised to see Nvidia 20nm Maxwell chips to support this API, as well as future GPUs from AMD, possibly again 20nm parts.
Analysts speculate that Facebook may want to use the drones to bring Internet connectivity to the two-thirds of the world that are not connected.
The social networking company is reportedly paying $60 million for Titan Aerospace, according to TechCrunch, which cited unnamed sources.
Neither Titan Aerospace nor Facebook responded to requests for confirmation.
The aerospace company builds light-weight, high-flying drones that can take off at 20 mph and remain aloft for five years. The company’s Solara 50 drone, for instance, can fly as high as 65,000 feet above Earth.
“Drones are the latest rage with tech companies these days,” said Dan Olds, an analyst with The Gabriel Consulting Group. “Amazon, Google and Facebook, plus a whole lot more seem to be looking for ways they can shoehorn drones into their business plans. And what young geek didn’t dream of having a remote control flying machine that could do anything they wanted it to do?”
But could Facebook use these drones to bring Internet connectivity to remote areas? Sure, but it’s not the only way they could go about it.
Last June, Google’s research arm, Google X, announced that it was working on affordable Internet connectivity through the use of a fleet of high-altitude balloons. The company tested its plan by launching 30 balloons that flew twice as high as commercial airplanes with 50 users trying to connect to the Internet from below.
Amazon.com had another use for drones, and in December announced plans to use the machines to deliver merchandise to customers. Possibly taking a page from Domino’s old promise of delivering pizzas in 30 minutes or less, Amazon said with drones, some customers could get their purchases within half an hour.
“Could drones be the way to provide net connections in Third World countries?” asked Olds. “Yeah, maybe, but wouldn’t a set of non-sexy, long-range cell towers or low-power, cost-optimized microwave repeaters be a better solution? Sure, there are some drawbacks to physical infrastructure on the ground, but they can be worked around.”
He reiterated that drones simply are the cool new tech tool. How could a tech company with very deep pockets resist?
We already knew that Android was the mobile operating systems most targeted by malware, and that isn’t about to change any time soon.
Security firm F-Secure has reported that malicious activity on Android accounted for 97 per cent of all detected mobile threats for 2013.
The figures were revealed in F-Secure’s latest Threat Report for the second half of 2013, finding that there were 566 more Android malware variants found last year than during the previous year.
“97 percent of the mobile threats in 2013 were directed at the Android platform, which racked up 804 new families and variants,” F-Secure said in its report (pdf). “The other three percent (23) were directed at Symbian. No other platforms had any threats. In contrast, 2012 saw 238 new Android threats.”
F-Secure found that the top 10 countries reporting Android threats saw a little over 140,000 Android malware detections, with 42 percent of the reported detections coming from Saudia Arabia and 33 percent from India. European countries accounted for 15 percent of the total and the US just five percent.
F-Secure said that due to Android itself having relatively few vulnerabilities, the main distribution method is still through shady apps downloaded from third-party app stores.
“For mobile platforms, the continued dominance of the Android operating system makes it almost the exclusive target for mobile threats we’ve seen this period,” F-Secure’s report explained.
“Though the relatively low number of vulnerabilities found in Android makes the operating system itself difficult to attack, this security is largely circumvented by the relative ease with which malware authors can provide their ‘products’ and dupe users into installing it on their own devices, with the necessary permissions to straightforwardly use the device (and the user’s data) for the attacker’s own benefit.”
The Android malware families most commonly reported in that period were Ginmaster, Fakeinst and Smssend, which either harvest data from the device or send premium-rate SMS messages.
The F-Secure report also found that web based attacks, which typically involve techniques that redirect the browser to malicious websites, were the most commonly reported type of attack for the period, making up 26 percent of malware detections, followed by the Conficker worm with 20 percent.
“The three most common exploits detected during the period were all Java-related,” the report said. “Java exploits, however, declined compared to [the first half of] 2013. Mac malware continues a slight but steady increase, with 51 new families and variants detected in 2013.”
Fujitsu Labs have worked out a way to improve vibration feedback when typing on a virtual keyboard. The prototype haptic sensory tablet emits ultrasonic vibrations under the surface of the tablet’s display.
The company says that although producing ultrasonic vibrations would generally require a good deal of power, its engineers have come up with a way of shrinking down the tech and allowing a tablet prototype to run its haptic feedback system. Essentially, the vibrations create a layer of high pressure air between a user’s fingertips and the surface of the screen, resulting in reduced friction so the fingers can skate across the screen. This alternates between high and low friction to create the illusion of a textured surface.
It is possible to feel a CD beneath the fingers while spinning and scratching like a DJ, as well as physically feeling and manipulating the deck controls. Research continues to improve the technology, but the company is looking to commercialize the development by next year.
Based on the firm’s Kabini system on chip (SoC), the APU is named the “AM1 Platform”, combining most system functions into one chip, with the motherboard and APU together costing around $60.
Due to be released on 9 April, the AM1 Platform is aimed at markets where entry-level PCs are competing against other low-cost devices.
“We’re seeing that the market for these lower-cost PCs is increasing,” said AMD desktop product marketing manager Adam Kozak. “We’re also seeing other devices out there trying to fill that gap, but there’s really a big difference between what these devices can do versus what a Windows PC can do.”
The AM1 Platform combines an Athlon or Sempron processor with a motherboard based on the FS1b upgradable socket design. These motherboards have no chipset, as all functions are integrated into the APU, and only require additional memory modules to make a working system.
The AM1 SoC has up to four Jaguar CPU cores and an AMD Graphics Core Next (GCN) GPU, an on-chip memory controller supporting up to 16GB of DDR3-1600 RAM, plus all the typical system input and output functions, including SATA ports for storage, USB 2.0 and USB 3.0 ports, as well as VGA and HDMI graphics outputs.
AMD’s Jaguar core is best known for powering both Microsoft’s Xbox One and Sony’s Playstation 4 (PS4) games consoles. The AM1 Platform supports Windows XP, Windows 7 and Windows 8.1 in 32-bit or 64-bit architectures.
AMD said that it is going after Intel’s Bay Trail with the AM1 Platform, and expects to see it in small form factor desktop PCs such as netbooks and media-streaming boxes.
“We see it being used for basic computing, some light productivity and basic gaming, and really going after the Windows 8.1 environment with its four cores, which we’ll be able to offer for less,” Kozak added.
AMD benchmarked the AM1 Platform against an Intel Pentium J2850 with PC Mark 8 v2 and claimed it produced double the performance of the Intel processor. See the table below.
The FS1b upgradable socket means that users will be able to upgrade the system at a later date, while in Bay Trail and other low-cost platforms the processor is mounted directly to the motherboard.
The AM1 Platform will ship to system vendors in Europe, the Middle East, Africa, South East Asia and Latin America first, then to North America and the Pacific region later this year.
AMD lifted the lid on its Kabini APU for tablets and mainstream laptops last May. AMD’s A series branded Kabini chips are quad-core processors, with the 15W A4-5000 and 25W A6-5200 clocked at 1.5GHz and 2GHz, respectively.
Worldwide sales of tablets to end users totaled 195.4 million units, fueled by sales of low-end, smaller screen devices, and purchases by first time buyers, the company reported.
Android has become the biggest tablet operating system with 62% of the market. In 2012, Google’s OS trailed Apple’s iOS by a margin of about 8 million tablets, but by the end of last year had turned that into a 50 million-unit lead.
The Android camp led by Samsung sold almost 121 million tablets, for a 61.9% share, compared to 53.3 million units and a 45.8% share in 2012. Apple’s tablet sales increased from 61.5 to 70.4 million units, but because the overall market grew faster, the company’s share dropped from 52.8% to 36%.
Microsoft’s Windows tablet sales improved but the share remained small at 2.1%, with shipments growing from 1.2 million to 4 million units. To compete, Microsoft needs to create a more compelling ecosystem for consumers as well as developers across all mobile devices, Gartner said.
Apple’s strong fourth quarter helped it maintain the top position among the manufacturers. Samsung, ranked in second place, had the biggest growth of the worldwide tablet vendors, at 336 %. The expansion and improvement of its Galaxy tablet portfolio, together with a lot of marketing, helped Samsung shrink the gap with Apple.
Samsung sold 37.4 million tablets for a 19.1% slice of the market.
The rest of the top 5 was made up of Asus, Amazon.com and Lenovo. Of those three companies, Lenovo did particularly well with tablet sales growing by 198% to 6.5 million units, or a 3.3% market share. The company’s success was due to a combination of new tablet models launched during the second half of last year, and sales of its Yoga model and its Windows tablets doing particularly well, Gartner said.
However, Lenovo is still behind Asus, with 11 million units sold, and Amazon, with 9.4 million. Asus’ market share grew from 5.4% to 5.6%, while Amazon’s share declined from 6.6% to 4.8%.
As the tablet market becomes even more competitive, this year it will be critical for vendors to improve user experience, technology and ecosystem value beyond just hardware and cost, Gartner said.
Sprint Corp and the federal government both agreed to fight in court over how much money law enforcement agencies owe the wireless provider for help the company was required to give investigators who wanted to tap phone calls.
The Obama administration filed a suit in U.S. District Court in San Francisco on Monday, alleging that Sprint overcharged the government $21 million for expenses it incurred while complying with court-ordered wiretaps and other surveillance help.
Sprint said it plans to defend the matter “vigorously.”
Telecommunications companies, including Sprint, are routinely asked to assist with investigations by helping facilitate phone surveillance such as wiretaps or so-called “pen registers,” which record data about phone calls, though not their content.
The companies are required to maintain equipment and facilities to be ready to assist. They are allowed to request reimbursements for related “reasonable expenses.”
In the case, San Francisco U.S. Attorney Melinda Haag alleged that Sprint “knowingly submitted false claims” to the FBI, Drug Enforcement Administration, Marshals Service and other law enforcement agencies from January 1, 2007 to July 31, 2010, inflating costs by about 58 percent.
The lawsuit said Sprint violated the anti-fraud law known as the False Claims Act and went against the federal regulations that prohibit carriers from using the reimbursements for wiretap cooperation to pay for updates to their equipment, facilities and services.
“Because Sprint’s invoices for intercept charges did not identify the particular expenses for which it sought reimbursement, federal law enforcement agencies were unable to detect that Sprint was requesting reimbursement of these unallowable costs,” the Justice Department said in the lawsuit.
Sprint, however, said its invoices to the federal agencies fully complied with the law that requires the government to reimburse reasonable costs incurred in assisting law enforcement agencies with electronic surveillance.
“We have fully cooperated with this investigation and intend to defend this matter vigorously,” said Sprint spokesman John Taylor.
The False Claims Act is the U.S. government’s main tool for recovering money when it think it has been defrauded, usually by a contractor such as an arms maker or hospital chain.
The site, which enables strangers to meet for shared-interest activities ranging from parents’ groups to software development, was back online but still being attacked , Meetup CEO Scott Heiferman told Reuters.
Meetup has refused to pay the small ransom as it believes doing so would make the perpetrators of the attacks demand more money.
“It’s a cat and mouse game,” Heiferman said, adding he was not yet sure how long it would take to keep the site reliably online.
A Meetup blog had earlier said the company was a victim of a distributed denial of service (DDoS) campaign, a type of attack that knocks websites offline by overwhelming them with incoming traffic. It said that no personal data, including credit card information, had been accessed.
Heiferman said he was open to the possibility of some financial relief for members who pay between $12 and $17 a month to organize Meetup groups in their geographic and thematic areas of interest. He said his first priority was to resume the service of creating communities wholly via an Internet connection.
“we’re going to come out of this much stronger. And I don’t mean that as just a trite euphemism, I mean it literally. Like, we are going to be much more secure,” he said.
The Federal Bureau of Investigation has been investigating the attack since late last week when the assumed criminal group first offered to withhold it if Meetup paid $300.
The attack was the first in the site’s 12-year history, and Heiferman defended the move not to pay the paltry ransom.
“We made a decision not to negotiate with criminals,” he said in the post. “Payment could make us (and all well-meaning organizations like us) a target for further extortion demands as word spread in the criminal world.”
Meetup has almost 17 million members and, when online, was signing up between 15,000 and 20,000 people every day.
The site represents a soft target for online criminals, who often attempt to extort companies in return for calling off DDoS attacks, said Kevin Johnson, chief executive of cybersecurity consultancy Secure Ideas.
“It’s very common for this sort of attack to start off with a small demand,” Johnson said. “It’s not like Meetup can write a check for a million dollars.”
Heiferman’s blog post said the site should be able to protect itself over time, even though it has struggled to stay online since the attacks began on Thursday morning. He said Meetup spent millions of dollars a year to secure its systems.
The Meetup site and related mobile apps have been intermittently unavailable since Thursday.
Every black hole conceals a secret — the quantum remains of the star from which it formed, say a group of scientists, who also predict that these stars can later emerge once the black hole evaporates.
The researchers call these objects “Planck stars” and believe that they could solve a very important question in modern physics: the information paradox, or the question of what happens to information contained in matter that falls into a black hole.
The idea could also finally reconcile quantum mechanics and Albert Einstein’s general theory of relativity that describes gravity, thus showing how a theory of quantum gravity might solve longstanding puzzles in the world of physics. [The Strangest Black Holes in the Universe]
Warping space and time
Black holes are regions of space so incredibly dense that nothing, not even light, can escape from them. Most are thought to form at the end of a big star’s life, when its internal pressure is insufficient to resist its own gravity and the star collapses under its own weight.
Most scientists believe that, since there is nothing to stop this collapse, eventually a singularity will form — a region where infinite densities are reached and Einstein’s general relativity ceases to be predictive.
But this “singularity theory” has flaws. Since the laws of physics no longer apply in a region of infinite density, no one knows what could possibly happen inside a black hole.
Stephen Hawking suggested in the early 1970s that black holes can slowly evaporate and disappear. But in this case, what happens to the information that describes an object that falls into a black hole? According to general relativity, information cannot simply disappear; inside a black hole, however, information apparently does. This “information paradox” has puzzled researchers for decades.
Carlo Rovelli at the University of Marseille in France and Francesca Vidotto at Radboud University in the Netherlands have attempted to answer this question by exploring the idea that the universe, which is assumed to have started with the Big Bang, actually emerged — because of quantum gravitational effects — from a “big bounce,” following an earlier contracting phase.
“The quantum gravitational effects produce an effective repulsive force, so that matter wouldn’t have collapsed into a singularity, but it would have just reached a maximal compact state,” Vidotto said.
This way, the universe would “bounce” when the energy density of matter reached the Planck scale, the smallest possible size in physics, causing the universe to expand again, and then possibly collapse again, and so on, back and forth. [Alternatives to the Big Bang Theory (Infographic)]
A similar idea has now been proposed for the fate of the collapsing matter of a dying star.Researchers say that quantum effects — similar to those that prevent an electron falling into the nucleus of an atom — would stop the collapse of a star before it could shrink to a single point, or singularity. The star would then become a super-compact object, bounce back during the evaporation process of the black hole and finally explode. Eventually, everything that would have fallen into the black hole would be released.
The researchers say that, as the black hole evaporates and shrinks, its boundary will at some point meet that of the Planck star as it expands after the bounce. When that happens, there is no black hole horizon any more, and all information trapped inside the black hole can escape.
In this case, the information paradox would be solved; the information would simply be re-emitted into the universe.
“The black hole has a huge remnant — a Planck star — and this allows us to understand the evaporation of black holes, their final stage of life, without paradoxes. Paradoxes are not part of nature; they are the sign of some incomplete knowledge,” Vidotto said.
Rovelli agrees: “Information is never too concentrated, and it can escape with the explosion of the star.” This release of information, he estimates, would generate radiation with a wavelength of about 10^-14 cm — the wavelength of gamma rays.
“Now we glimpse a tantalizing possibility: If, in the black holes, matter collapses and then bounces, the expansion can be a very dramatic event, a big explosion,” Vidotto said.
And possibly, the scientists add, astronomers have already observed Planck stars releasing the information into space, in the form of extremely bright events called gamma-ray bursts.
No ‘end of physics’
Finally, if the theory is confirmed, it could be a solid proof that quantum gravity exists, said Aurelien Barrau of the Joseph Fourier University in Grenoble, France, who was not involved in the study.
“The paper shows that there might be experimental consequences of quantum gravity,” he said. “This would be fascinating.”
The next step would be to get a more accurate description of the quantum gravitational process that should lead to the “big bounce,” possibly with the help of an accurate computer simulation of a realistic collapse, said Stefano Liberati, a physicist at SISSA (International School for Advanced Studies, Trieste, Italy), who did not take part in the research either.
“If the idea [is confirmed] with more detailed calculations, it will be further evidence that what we call singularities in general relativity are just situations where our current theory lack predictability, but are resolved successfully by quantum gravity,” he said. “At that point, the Big Bang or the center of black holes would not be ‘the end of physics’ but just another door to be disclosed, leading us to a quantum leap in understanding the nature of our universe.”
The U.S. company’s CarPlay makes its debut in Ferrari, Mercedes-Benz and Volvo vehicles at the show, demonstrating the software system that allows drivers to control their iPhones via touch and voice, Apple revealed on Monday.
Carmakers have already enabled some access to smartphones via Bluetooth technology, but Apple’s latest offering aims to integrate iPhone functionality more seamlessly with dashboard-mounted display and speaker systems.
CarPlay enables drivers to access to contacts stored on the iPhone, make calls, return missed calls or listen to voicemails without taking their hands from the steering wheel.
Drivers can also use maps, listen to music and access messages “with just a word or a touch”, Apple said. Drivers will also be able to read messages and dictate responses via Apple’s voice-activated Siri software.
Apple said that CarPlay will also be available in cars from manufacturers including BMW,Ford, General Motors, Honda, Hyundai, PSA Peugeot Citroën, Subaru, Suzuki and Toyota Motor Corp.
Samsung appears to have delivered a huge snuff to Android OS maker Google. Samsung’s new smartwatch Gear 2 and Gear 2 Neo, the sequels to the poorly reviewed original Galaxy Gear are going to ship without Android.
Instead, the new Gears run Tizen, another open source operating system that Samsung, Intel, and others are working on. It is starting to look like Samsung wants to distance itself from its reliance on Google for software and services.
Samsung’s official reason is that Tizen has better battery life and performance. The new Gears can get up to an extra two days of battery life by running Tizen, even though they have the same size battery. The Galaxy Gear barely made it through a day on one charge.
To be fair Android isn’t optimized to run on wearable devices like smart watches, but Samsung didn’t want to wait around for Google to catch up. It was clearly concerned about beating Apple to market. So far Apple has not shown up.
The company’s PalmSecure scanners use near-infrared light to scan points in veins that lie beneath the surface of a user’s palm. There has to be blood flowing through a user’s hand for the sensor to work.
Every person’s palm pattern is unique, and scans of vein points are matched against previously registered scans to authenticate users and unlock whatever device or service they’re linked to.
“We have been reducing the size of our palm vein authentication units since their initial development,” a Fujitsu spokesman said. “In the future, we hope to eventually have these units embedded into smartphones.”
Fujitsu claims the biometric technology has a false acceptance rate of only 0.00008% and a false rejection rate of 0.01%.
The company first commercialized the technology in 2004 when palm-sized scanners were embedded in ATMs at Japan’s Bank of Tokyo-Mitsubishi to help authenticate customer identity and prevent fraud. In-store scanners at Suruga Bank also appeared in 2004.
Fujitsu later shrank the scanners and embedded them in laptops.
It recently showed off a stamp-sized version of the scanner that is the smallest yet. It’s been embedded in tablets for the first time and will be included in about 2,000 tablets provided to Fukuoka Financial Group, which includes the Bank of Fukuoka, Kumamoto Bank and Shinwa Bank.
“No one has this technology, and it’s significantly more secure than fingerprint,” the Fujitsu spokesman said, adding that some banks have shown interest in palm-vein scanners as a means of verifying identity in natural disasters in which ID or bank cards are lost or destroyed.
The customized 12.5-inch Fujitsu Arrows Q704/H tablets have Intel Core i5 processors and run Windows, acting as virtual desktops. Bank employees meeting customers off-site will be able to securely access their bank’s internal system by using the palm-vein authentication scanners.
Only users whose biometric info has been registered beforehand will be able to operate the tablets.
At CES in January, U.S.-based biometric payments company PulseWallet demonstrated a cardless point-of-sale terminal incorporating Fujitsu’s vein-imaging technology. It said registered users could leave their credit and debit cards at home and make payments simply by having their palms scanned.
Sears Holdings Corp acknowledged it has launched an investigation to determine whether it was the victim of a security breach, following Target Corp’s revelation at the end of last year that it had suffered an unprecedented cyber attack.
“There have been rumors and reports throughout the retail industry of security incidents at various retailers and we are actively reviewing our systems to determine if we have been a victim of a breach,” Sears spokesman Howard Riefs said in a statement on Friday.
“We have found no information based on our review of our systems to date indicating a breach,” he added.
He did not say when the operator of Sears department stores and Kmart discount stores had begun the investigation or provide other information about the probe.
Sears Holdings Corp operates nearly 2,500 retail stores in the United States and Canada.
Bloomberg News reported on Friday that the U.S. Secret Service was investigating a possible secret breach at Sears, citing a person familiar with the investigation. The report did not identify that source by name.
The Bloomberg report said that its source did not disclose details about the scope or timing of the suspected breach.
A spokesman for the U.S. Secret Service declined comment when Reuters asked if the agency was investigating a possible breach at Sears.
The Secret Service is leading the U.S. government’s investigation into last year’s attack on Target, which the company has said led to the theft of some 40 million payment card numbers as well as another 70 million pieces of personal data.
It is, for the moment, just a conspiracy theory, and it goes something like this: Microsoft wants to get out of the games console business. It’s planning to package up the Xbox part of the Devices & Studios division and separate it off from the rest of the company, so it can be sold as a going concern. Who’s buying? Amazon, which views acquiring Xbox as a step towards dominance of the living room. If there’s anything to this theory at all, the coming year or two could see the end of Microsoft Xbox and a warm welcome for Amazon Xbox.
Let’s lay all the cards on the table. The evidence is sketchy and circumstantial. We know that Microsoft is looking at some pretty major strategic changes in the wake of the appointment of new CEO Satya Nadella. Nadella’s focus throughout his career has been on the business end of Microsoft – servers, cloud services and enterprise tools – which remains in robust health compared to the troubled state of the firm’s consumer divisions. Choosing him as CEO could suggest that the company is aiming for a future focused on enterprise tools and platforms, not consumer products.
Then there’s the man who wasn’t chosen as CEO, Stephen Elop. Elop used to work at Microsoft, then became CEO of Nokia. Now that Nokia is selling its mobile phone division to Microsoft, Elop is back where he started. Moreover, he saw himself as a strong candidate for the CEO job when Steve Ballmer resigned. With Nadella in the CEO’s chair, Elop’s consolation prize is that he’s taking over as head of Devices & Studios. That’s a logical choice, since Devices & Studios will include Nokia under its umbrella, at least to some extent, so Elop will continue running his old Nokia team alongside the Xbox and Surface teams at Microsoft.
Given that, it would perhaps be more surprising if Elop wasn’t put in charge of Devices & Studios. His presence ought to ease the transition as Nokia is absorbed into Microsoft, a major acquisition that’s likely to cause some indigestion along the way. However, during the CEO selection process, while Elop was still in the running, Bloomberg reported that he had some very interesting plans for the company if he was running it. The reported plans included, notably, a willingness to sell off business units Elop viewed as distractions from Microsoft’s main goals – business units including the Bing search engine and the Xbox. As logical as his new job at Devices & Studios may seem, you can’t blame people for raising an eyebrow when a man who supposedly wanted to sell off the Xbox division is put in charge of the Xbox division.
It takes two to tango, so how about the Amazon side of the deal? Well, whispers of Amazon’s keen interest in the games market have flown around for months now, including rumours that the company has discreetly hired a number of veterans from the games industry while keeping their involvement quiet – for now. Last month, Amazon bought games studio Double Helix, fresh from working closely with Microsoft to prepare Killer Instinct as a launch title for Xbox One. Something is afoot. Occam’s Razor suggests a “Kindle” console, an Ouya-style box under the TV linked to Amazon’s digital content platform, but given the plethora of Android consoles currently underwhelming the market and failing to gain a foothold, it’s not unreasonable to suggest that Amazon would want to make a much bolder move into the console space. Plus, Amazon certainly isn’t scared of making big acquisitions when it wants to open up a new market opportunity for itself – it’s hard to conceive of a cash value for Xbox, not least given how obfuscated the financials of the console business are, but I don’t doubt that Amazon could afford it if it really wanted to.
That’s it – that’s the conspiracy theory. I don’t deny for a second that the evidence, if you can call it that, is pretty thin. Microsoft is probably going to refocus on enterprise; a guy who wanted to sell Xbox is the new boss of that division, but he’s also the most logical choice for the job. Amazon is setting itself up for a big move into the games space and may (or may not) have hired some senior games people on the down-low. That’s the sum total of the evidence, and we should all bear that in mind. Even this article exists not to promote this theory, which I view as interesting but unsupported by the available information, but rather to evaluate, hypothetically, whether there is any real possibility of an Xbox spin-off and sale. In short, there’s no real evidence that Microsoft is going to do this thing, but it’s an interesting academic exercise to evaluate whether they could do it if they wanted, and whether a motivation to do so might exist.
So how hard, in theory, would it be to spin off and sell Xbox? The answer to that depends on what exactly Microsoft is proposing to sell. Xbox, as mentioned earlier, is part of the Devices & Studios division, which also houses Surface and will shortly be joined by Nokia. Some other odd things are rolled into this division, apparently. It was claimed last year that the patents which force Android device makers to cough up a fee to Microsoft for every handset they sell are held, for financial purposes, in Devices & Studios, thus accounting for a big chunk of the division’s revenue.
If Microsoft’s new management had come to view Xbox as a distraction that doesn’t fit with their new enterprise focus, one might reasonably ask if they’ll take the same view of Surface. That product which hasn’t performed well and has reportedly soured relationships between Microsoft and other hardware vendors, who aren’t terribly happy with the company from whom they license the Windows operating system suddenly being in direct competition with them. The company wouldn’t be happy about losing the patents related to Android, not least since Windows and Windows Phone presumably use the technology described by those patents as well, so that probably wouldn’t be included in any sale, but aside from that it’s plausible that Microsoft could sell the entire Devices & Studios operation, thus putting itself out of the hardware business entirely.
Alternatively, Microsoft could decide to hold on to Surface and simply divest itself of Xbox and the various Microsoft Game Studios operations. Surface would then be joined by Nokia in the much-reduced Devices division (no more studios!), which would be entirely focused on tablets and smartphones without the “distraction” of games. Such a disentanglement wouldn’t be terribly difficult, either. Xbox is actually fairly well divorced from the rest of Microsoft’s operations. Its operating system shares a visual language with the “Metro” interface of Windows 8 and Windows Phone, while various game-related elements of Microsoft’s other operating systems have also been given the “Xbox” and “Live” monikers. Bing, of course, runs on the Xbox dashboard. By and large, though, the technology and services which drive Xbox are divorced from the rest of Microsoft – although it’s worth noting that the much-vaunted Cloud functionality of Xbox One relies in part on Azure, Microsoft’s cloud services platform. Any buyout of Xbox would include various contracts ensuring that any Microsoft technologies or services upon which the console relies would continue to be provided to the new owner, so this would not be a major stumbling block.
A bigger question might be, would Microsoft even want to do this? That really depends how seriously you take the idea of “distraction”. Xbox One has had its thunder stolen by PS4, but is still selling well – and Xbox 360 was a major success. In fact, it’s the only success Microsoft has ever had in the consumer hardware space. Xbox proved Microsoft’s ability to create a great consumer brand and sell hardware to people. It’s a real bright spot in a few tough years for the company – especially compared to everything else it has attempted in the consumer space, from Zune and Surface to its latest operating system, Windows 8.
Why would you get rid of that? Well, you probably wouldn’t – but let’s brainstorm a motive. You could argue that Xbox is a bright spot that doesn’t have any real relevance to the rest of the company. Microsoft in the early 2000s wanted to reinvent itself as a consumer-facing company, but with Xbox being the only success in a small sea of failures, Satya Nadella is likely to try to bring the firm back to focusing on the enterprise market. As the oil tanker slowly turns around to head into more corporate seas, Xbox will be more and more at odds with the culture and mission of the rest of the company. It will arguably be a distraction both internally, where it won’t fit with Microsoft’s culture, and externally, where it will detract from a brand message that promotes Microsoft as a serious, corporate, business-focused partner for enterprise (as distinct from the more consumer-led branding of rivals Apple and Google). Selling off Xbox would generate cash (not that Microsoft needs it), streamline the company and start the new CEO’s tenure with a dramatic gesture that sets out his vision more clearly than any speech or press release.
In short, Microsoft could do this and, if we assume that upper management take the notion of “distraction” seriously and are genuinely willing to abandon the firm’s ambitions in the consumer devices space, there’s a motive for doing it. How about Amazon’s side of the table? This deal would cost billions; would Amazon stand to gain enough to justify that kind of outlay? After all, aren’t consoles a dying space? Plenty of pundits seem to expect that PS4 and XB1 will be the last generation of consoles. Would a company as smart as Amazon get sucked into a market that’s about to collapse?
Amazon, like Microsoft a decade ago, has major ambitions in the consumer devices space. The company built itself on the back of selling physical goods but has neatly sidestepped the so-called “innovator’s dilemma” by being more than willing to disrupt its own business. The world’s biggest seller of physical books became the world’s biggest promoter of ebook readers. Music downloads, streaming video, cloud services; Amazon has taken an active and enthusiastic interest in every field that might disrupt its existing businesses, seeking not to shut down threats but to be the biggest player in whatever comes next. It supplemented the Kindle e-reader with Kindle tablet devices whose market performance is largely unknown, but is thought by analysts to be one of the only genuine competitors to the iPad’s sales dominance. Anyone who owns a Kindle device knows that they are designed from the ground up to be a great interface to accessing and buying content from Amazon’s ecosystem. That’s Amazon’s play; own the media ecosystem, building the devices themselves if that’s what it takes.
That ambition is a pretty solid fit for the console business. Moreover, it can’t have escaped Amazon’s notice that Steam, PlayStation Network and Xbox Live together make up a big area of digital content provision in which it has no involvement right now. Amazon will also be paying careful attention to the interest around set-top boxes (like AppleTV and Google’s TV efforts) and Smart TVs. Here there’s huge potential for consumers to be accessing media ecosystems directly from their TVs and connected devices – again, a game in which Amazon has no skin. For Amazon, the ideal would be that when you want to watch or play something on your TV, you do so through Kindle interface that links right into Amazon’s digital library, just like the Kindle tablets work. Of course, an Android microconsole would achieve that goal, but it wouldn’t be of much interest to gamers – at best, it would capture a fringe of the market who engage with Kindle tablets.
Is appealing to gamers important? This comes back to the question of whether consoles are really dying – and honestly, who knows better about that question than Amazon? Amazon is the largest retailer in many countries. Not only does it see how many consoles and console games are sold, it also sees loads of connected information which is hidden from even game publishers. It knows how high-spending gamers are in other areas – whether they’re likely to buy a lot of gadgets, a lot of books, a lot of movies or albums. It knows how much they engage with the brands they love, whether they cross-promote to friends resulting in more sales, whether they leave reviews and promote products on social media. Amazon can make an estimation of the actual value of the core gamer market more accurately than any other company.
What is that estimate looking like? I don’t know, of course, but Amazon’s actions in the coming months are going to tell us a lot about it. Regardless of whether the Xbox conspiracy theory pans out, Amazon is going to make some kind of game-related move relatively soon. It will be interesting to see how much importance and focus the company places on the games space at that time.
Until we see more evidence, though, it’s impossible to construct a fully credible argument which places the future of Xbox anywhere but Microsoft. There’s simply not enough information out there to support that kind of conclusion. That said, there is a possible motive to sell on the part of Microsoft, and a possible motive to buy for Amazon. If I had to pin my colours to a mast on this, I’d say Microsoft is probably discussing a sale with interested parties, including Amazon, but hasn’t made a final decision on whether to start sale proceedings as yet. I also wouldn’t read too much into that, given that it’s the responsibility of management to consider such possibilities as part of their duty to the shareholders. Then again, under Microsoft’s new management, perhaps such things are being considered rather more seriously than before.