Tech Industry

Week in review: Sweet and sour Apple

Apple earnings wow Wall Street, and the company's board stands behind Jobs despite stock options allegations.

Apple impressed Wall Street with its quarterly earnings, but those results came under the cloud of another accounting issue.

Apple surprised analysts by reporting that revenue for the second quarter was up 21 percent and profit was up almost 88 percent, or 87 cents per share, compared with the same quarter last year. Analysts had been expecting earnings per share of 64 cents. Investors welcomed the news by sending Apple's share price up several dollars.

But before revealing its financial performance, Apple's board of directors issued a statement confirming its support for Jobs in the wake of allegations made by Fred Anderson, the former chief financial officer at Apple.

Anderson issued a statement the day before claiming that he advised Apple CEO Steve Jobs of the accounting implications of backdating in January 2001, contrary to Apple's previous statements that Jobs had no idea of the ramifications.

Anderson's statement came just after the Securities and Exchange Commission filed a lawsuit against Nancy Heinen, the former general counsel at Apple, saying her actions led to "fraudulent" stock options backdating at the company. A similar lawsuit against Anderson was filed but simultaneously settled. The SEC said it doesn't plan to file any actions against Apple as a company.

While many CNET readers discussed Jobs' culpability and possible punishments, some readers came to his defense, noting some of the contributions he and Apple have made to the tech community.

"Steve Jobs is one of the driving forces of innovation these days, whether anyone wants to believe it or not," wrote one reader to's TalkBack forum. "Computers wouldn't be what they are now without his influence and vision."

Apple is also paving the way for free enhancements to the iPhone and Apple TV by making its accounting methods clear from the start. The company will gradually recognize a portion of the revenue from each sale of those products as new features are delivered.

This accounting method prevents Apple from having to endure a backlash similar to the one it faced over its $1.99 fee for activating the 802.11n Wi-Fi chip in MacBook Pros earlier this year. Because the famously secretive Apple kept the existence of this 802.11n chip under wraps, and because it recognized all of the revenue from the sale of those notebooks at the time they were sold, accounting experts said Apple had to charge a fee to satisfy accounting regulations that require companies to establish a value for product upgrades.

On the Hill
A White House task force wants Congress to enact a variety of new laws designed to punish identity fraud, even though it is already illegal.

The new national strategy calls for rewriting existing criminal laws to penalize use of malicious spyware and keyloggers, expand mandatory minimum prison sentences for certain levels of electronic data theft and allow identity theft victims to receive monetary compensation not only for their direct financial losses, but also for the time they spent piecing their lives back together.

Scores of state and federal laws, such as one President Bush signed in July 2004 and another that President Clinton signed in October 1998, already outlaw identity fraud, and federal prosecutors have successfully used them to secure convictions against phishers. Nevertheless, the task force members called for still more laws.

Lawmakers also are looking to overturn a controversial royalty fee increase that Internet radio advocates say threatens to cripple their services. The Internet Radio Equality Act would invalidate a March 2 decision by the U.S. Copyright Royalty Board that calls for raising royalty rates paid by Net radio operators.

The bill's introduction comes less than two weeks after the CRB declined to reconsider most of its decision. Small Webcasters, National Public Radio, Clear Channel Communications and others had filed petitions for a rehearing. If it were to stand, the CRB's existing ruling would result in fee increases on Internet radio operators ranging from 300 to 1,200 percent between 2006 and 2012, one lobby group claims.

Meanwhile, a key Democrat has proposed lifting a ban on online gambling, just six months after President Bush signed a law outlawing it. Rep. Barney Frank, a Democrat from Massachusetts and chairman of the House Financial Services Committee, introduced a bill that would replace the current broad prohibition with strict regulations, including criminal background checks and financial disclosure, imposed on companies that seek to offer legal Internet gambling.

Last year's legislation tried to eliminate many forms of online gambling by targeting Internet service providers and financial intermediaries, namely banks and credit card companies that process payments to offshore Web sites. Frank argues that because nearly all states already permit some form of traditional gambling--including lotteries, betting on horse racing and greyhound racing, and sports wagering--the federal government should legalize and regulate the online equivalents.

The wireless world
Vonage may continue to sign up new customers while appealing a patent infringement loss to Verizon Communications, a federal appeals court has ruled. The stay was part of a brief order that also dictated the schedule for the appeals process.

While the appeal is pending, the Internet phone company also plans to continue paying a 5.5 percent royalty rate on all future sales to an escrow account, and it has posted a $66 million bond required by the lower court. Verizon deputy general counsel John Thorne said he expected the verdict would be upheld on appeal, which he said the court has decided to hear within two months.

Meanwhile, Research In Motion and Verizon Wireless unveiled a BlackBerry "World Edition" smart phone and service designed to work in more than 60 countries. The BlackBerry 8830 combines CDMA compatibility (for use in the U.S.) and GSM/GPRS roaming support (for use in other regions, including Europe and Asia) and is designed to connect to Verizon's new Global BlackBerry service. Verizon plans to begin offering the device through its business sales channel May 14 and at its retail stores two weeks later.

Verizon's Global BlackBerry service will feature a local number for domestic and international use in Australia and Europe, and in portions of Africa, Asia, Latin America, the Middle East and North America. The service provides constant connectivity for the device's wireless e-mail, contacts, calendar, organizer and Internet access.

Cell phones also will soon get the same motion-sensing technology that is used in video games. GestureTek announced that NTT DoCoMo in Japan would be embedding EyeMobile gesture-recognition technology into two new FOMA 904i series handsets.

The new DoCoMo phones, which are being released in Japan this month, will initially use the motion-sensing technology for games. Later in the year, the phones will be able to use gesture-sensing for map browsing. Eventually, the technology will also be used for motion-controlled menu scrolling, picture browsing and mobile Internet surfing, company executives said.

Also of note
Sony PlayStation creator Ken Kutaragi announced that he will retire from his position as chairman and group CEO of Sony Computer Entertainment...Google has knocked Microsoft off the top spot and been named the most powerful global brand of 2007 in a recently published ranking...A security hole in QuickTime media player was apparently used to breach security in Apple's MacBook in a hack-a-Mac competition.