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Week in review: Shake-ups in Silicon Valley

Oracle and Sun announce merger, while Apple apologizes for the Baby Shaker game in its App Store. Also: Insecurity on the Internet.

Things were really shaking in Silicon Valley, and people weren't necessarily happy about it.

Oracle and Sun announced they have entered into a definitive agreement under which Oracle will acquire Sun in an all-cash transaction valued at about $7.4 billion.

Sun made its name as a supplier of server hardware during the dot-com heyday, but its best-known technology is software: the Java programming language. The two companies said Java is the "most important software Oracle has ever acquired."

Ellison didn't always see Sun as a desirable takeover target. In 2003, when Oracle was in the throes of trying to acquire PeopleSoft, Ellison said that buying Sun would be a "bad idea." At Oracle's annual shareholder meeting that October, Ellison said: "I don't think Oracle should be in the hardware business, so I don't think you'll see us buying any hardware companies."

Through one important piece of corporate computing jargon--"integration"--Oracle has found a justification for the acquisition. The acquisition puts the innovative but financially bumbling Sun out of its misery after IBM's move to buy it fell apart earlier in April.

What's smart about the approach is that it lets Oracle profit from Sun's diverse technology--which includes not just servers but also open-source software including Java and the MySQL database that Oracle already tried to buy years ago--without disrupting its own business too much.

Reporters caught up with Microsoft CEO Steve Ballmer in Moscow to get his take on Oracle's deal to buy Sun, but apparently Ballmer, who is rarely at a loss for words, didn't exactly have a sound byte at the ready.

"I need to think about it," Ballmer told reporters. "I am very surprised."

Oracle is, of course, one of Microsoft's chief rivals in the database and business applications space--a fact that Ballmer highlighted in an interview in February. Sun is also a longtime rival, although the two companies have had a technology partnership in recent years stemming from their settlement of legal hostilities back in 2004.

Apple shakes it up
Apple ignited a firestorm when it approved a Baby Shaker application for sale at its Apple App Store, but the company soon reversed course and removed the controversial app after just a few hours.

A successful game of Baby Shaker, now removed from the App Store. Screenshot by Tom Krazit/CNET

On Monday, a company called Sikalosoft started selling the 99-cent iPhone application, the object of which was to stop the incessant crying of an infant pictured on screen by violently shaking the iPhone, at which point two red "x" marks appear over the baby's eyes.

Jennipher Dickens, who founded a nonprofit organization in 2007 after her son Christopher was injured from being shaken by his father, brought the new application to our attention after reading about it on Krapps, an iPhone application review site.

"As a mother of a child who was violently shaken at 7 weeks old, causing a severe brain injury, and the founder of a national organization for Shaken Baby Syndrome prevention (as well as the communications director for a national organization helping children with brain injuries), I don't have to tell you how much this horrifies me!!!" she wrote in an e-mail.

Apple said it would vet every single application submitted to the App Store and approve or reject applications based on its internal standards. Apps aren't permitted that use swear words, or that could potentially harm existing or future Apple businesses. However, one of the most popular apps revolves around flatulence.

Apple issued an apology for allowing the app on its store. Just hours before the App Store was about to offer up its 1 billionth download, Apple was forced to acknowledge that perhaps the most notorious iPhone application ever constructed was "deeply offensive" and a "mistake."

But the news wasn't all negative for Apple. The company blew away expectations for its second fiscal quarter, reporting revenue and net income far beyond what the Wall Street community was expecting amid a poor economy.

Apple sold 2.22 million Macs, 11 million iPods, and 3.79 million iPhones during the quarter, meeting or exceeding expectations from financial analysts. CFO Peter Oppenheimer called it "the best nonholiday quarter revenue and earnings in our history."

Insecurity on the Internet
Security firm Finjan has uncovered what it says is one of the largest bot networks controlled by a single cybergang, with 1.9 million infected zombie computers. The botnet has been in use since February, is hosted in the Ukraine, and is controlled by a gang of six people who are instructing the Windows XP-based machines to copy files, record keystrokes, send spam, and take screenshots, Ophir Shalitin, Finjan marketing director, said in an interview on the eve of the RSA security conference.

The gang has compromised computers in 77 government-owned domains in the U.S. and elsewhere, he said. Nearly half of the infected computers were in the United States. Nearly 80 percent of the infected computers are running Internet Explorer, while 15 percent are using Firefox, Finjan said.

Meanwhile, the Conficker worm infected several hundred machines and critical medical equipment in an undisclosed number of hospitals recently, a security expert said in a panel at the RSA security conference.

It is unclear how the devices, which control things like heart monitors and MRI machines, and the PCs got infected. The computers are older machines running Windows NT and Windows 2000 in a local area network that was not supposed to have access to the Internet. However, the network was connected to one that has direct Internet access and so they were infected.

Conficker spreads via networked computers as well as through removable storage devices and a hole in Windows that Microsoft patched in October, but these machines were too old to be patched.

How bad is the situation? Defense Secretary Robert Gates said the United States is "under cyberattack virtually all the time, every day " and that the Defense Department plans to more than quadruple the number of cyberexperts it employs to ward off such attacks.

In an interview for an upcoming edition of "60 Minutes," CBS News anchor Katie Couric asked Gates about the nation's cybersecurity after hackers reportedly stole specifications from a $300 billion fighter jet development program as well as other sensitive information.

"We think we have pretty good control of our sensitive information both with respect to intelligence and equipment systems, but we, like everybody else, is under attack. Banks are under attack. Every country is under attack," Gates said.

Also of note
Microsoft reported the company's first ever year-over-year sales decline for the third quarter, down 6 percent from $14.45 billion to $13.65 billion in the same quarter a year ago...A new pilot program is launching in the Baltimore-Washington, D.C. area that will allow people to watch free mobile digital television on cell phones and other mobile devices...Yahoo is closing its GeoCities personal home page service, and with it will go an era of self-expression on the Web that's largely been replaced by social networks and blogs.