U.S. military reviews use of Twitter, other sites

By Adam Entous

WASHINGTON (Reuters) - The Pentagon has ordered a review of its use of social networking sites such as Twitter and Facebook, citing concerns that security could be compromised, officials said on Tuesday.

Many branches of the military use the popular, public-access sites in an effort to connect with young people, as well as to counter the propaganda of the Taliban and al Qaeda in Afghanistan and Iraq.

William Lynn, the deputy defense secretary, ordered the department-wide review in a memo to military commanders and service branch chiefs.

"These tools are proving valuable in areas such as recruitment, public affairs, and quality of life for our military personnel, as well as sharing information with allies, coalition partners and military families," Lynn wrote.

"However, as with any Internet-based capabilities, there are implementation challenges and operational risks that must be understood and mitigated."

Lynn asked the Pentagon's chief information officer to present a threat assessment as well as policy guidelines "to ensure the responsible and effective use of emerging Internet-based capabilities" to Defense Secretary Robert Gates by the end of August.

Lynn said a new policy would be developed by the end of September.

Pentagon spokesman Bryan Whitman said officials would try to strike a balance between benefits and risks arising from the use of social networking.

"It does highlight the tension between recognizing these as important ways to communicate ... and yet, on the other hand, the very real security concerns that the people that maintain our networks have with respect to using these sites," he said.

NO DEPARTMENT-WIDE BAN

Whitman said the risks could be offset through a combination of technology and training.
The Pentagon has not issued a department-wide ban on the use of social networking sites, but at least some services and departments have starting clamping down.

The Marine Corps, which has long prohibited its personnel from using the sites on work computers, issued a formal ban on Monday, said Lieutenant Craig Thomas, a spokesman for the Marines.

The Marines will allow waivers for "operational needs", such as for investigations, the distribution of news releases and for the recruitment of new personnel.

Marines can use the sites on their own personal computers.

Defense Secretary Robert Gates, 65, has said that he wants to utilize social networking to help the Pentagon interact with U.S. military members, many of whom are in their early 20s, and young people worldwide.

The effort has picked up pace in recent months.

When the U.S. commander in Afghanistan issued new rules for avoiding civilian casualties last month, they were published first on the Facebook page of U.S. forces in the country.
The Pentagon's Web site, www.defenselink.mil, features a link to its Facebook page and Twitter feed from its public affairs chief.

But Pentagon experts have been studying possible risks, such as whether posting to Facebook or Twitter from military computers could open a pathway for hackers.

(Additional reporting by Andrew Gray, editing by Philip Barbara)

EA results surpass Street view, shares climb

By Gabriel Madway

SAN FRANCISCO (Reuters) - Electronic Arts Inc (ERTS.O) reported better-than-expected results on strong sales of "The Sims 3" video game and cost-cutting, sending its shares up as high as 4 percent on Tuesday.

The results provided a measure of good news for the video game industry, which has struggled lately as the economic downturn continued to pinch consumer spending and take its toll on sales. [nN29205340]

EA also affirmed its forecast for the fiscal year.

Electronic Arts, which said it was the No. 1 video game publisher in Europe and North America in the June quarter, this year announced plans to cut about 11 percent of its workforce and close facilities, as it winnowed its product portfolio down to focus on fewer titles.

The company's restructuring effort is largely complete, Chief Financial Officer Eric Brown said in an interview.

Electronic Arts posted a net loss of $234 million, or 72 cents a share, in its fiscal first quarter ended June 30, versus a net loss of $95 million, or 30 cents a share, last year.

Excluding items, Electronic Arts reported a loss of 2 cents a share, better than the average analyst estimate of a loss of 12 cents a share, according to Reuters Estimates.

Revenue fell to $644 million, but non-GAAP revenue rose 34 percent to $816 million, ahead of Wall Street's forecast for $735.7 million.

Electronic Arts sold 3.7 million copies of "The Sims 3," and 1.8 million copies of "EA Sports Active," its best-selling title ever for Nintendo's (7974.OS) Wii, the most popular home console.
The company doubled its revenue on Wii titles in the quarter.
Electronic Arts also affirmed its fiscal 2010 forecast for earnings excluding items of $1 a share on non-GAAP revenue of $4.3 billion.

Shares of Redwood City, California-based Electronic Arts are up about 35 percent this year. Its stock closed at $21.89 on the Nasdaq and rose to $22.07 in extended trading.

(Reporting by Gabriel Madway; Editing by Robert MacMillan)

Microsoft deal will pay Yahoo more after 5 years

SAN FRANCISCO (Reuters) - Yahoo Inc will get slightly more revenue from Microsoft Corp during the second half of the companies' recently announced 10-year Internet search partnership.

The share of revenue that Microsoft pays to run search ads on Yahoo's network of sites will increase from 88 percent to 90 percent in the second five years of the partnership, according to regulatory filings by Yahoo on Tuesday.

At least 400 Yahoo employees will join Microsoft as part of the Internet search partnership, and the two companies will select an additional 150 Yahoo employees to help with the transition of powering Yahoo's search and ad search with Microsoft technology.

Yahoo and Microsoft announced the search partnership last week, ending a multiyear courtship between the two companies that at one point entailed Microsoft paying $47.5 billion, $33 a share, to acquire Yahoo outright.

Yahoo shares have declined roughly 16 percent since the deal was announced, on investor disappointment that Microsoft is not paying Yahoo an upfront payment.
Shares of Yahoo were unchanged at $14.51 in extended trading on Tuesday.

Under the terms of the deal, Microsoft will provide the technology to power the search results and the search advertising capabilities on Yahoo's sites. Both companies will maintain separate sales forces for selling display ads on their respective sites, but Yahoo's sales team will handle sales of so-called "premium" search ads that are sold to large, and highly-coveted brand advertisers.

If Microsoft opts to reclaim control of premium ad sales on its own sites after five years, it will have to pay Yahoo a 93 percent share of the search revenue on Yahoo sites. Should Yahoo in turn want to maintain its premium ad sales exclusivity in the face of Microsoft's intentions, then Yahoo's share of search revenue will decline to 83 percent.
If neither company seeks to alter the terms after five years, effectively allowing Yahoo to continue providing premium ads for both sites, Yahoo's will be entitled to a 90 percent share of the revenue.

(Reporting by Alexei Oreskovic; Editing by David Gregorio)

HSBC in talks to form securities JV in China

By Clare Jim

HONG KONG (Reuters) - HSBC Holding Plc (0005.HK) (HSBA.L), Europe's biggest bank, is in talks to set up an investment banking joint venture in China, a senior bank executive said, adding that acquisition prospects in Asia are too expensive and that the bank will focus on organic growth.

The bank is in talks with potential partners to set up an investment banking joint venture, said Vincent Cheng, HSBC executive director and chairman for Asia-Pacific.

The move would allow the bank to expand into China's domestic securities and debt markets.
"We have many networks in Asia, so there is no push for us to buy expensive assets in the region," Cheng told Reuters in an interview on Tuesday.

Cheng said HSBC Hong Kong has enough capital for acquisitions and had looked into some of Royal Bank of Scotland's (RBS.L) Asian assets but found, in general, that Asian assets were too expensive.

Australia and New Zealand Banking Group Ltd (ANZ.AX) said earlier on Tuesday that it had agreed to buy some Asian units from RBS for about $550 million.
On Monday, HSBC said its first-half profit halved from a year ago to $5 billion due to rising bad debts.

Still, its stock jumped 6.6 percent to HK$82.85 on Tuesday as investors reacted to news that its profit was better than an average forecast of $4.9 billion because of cost controls and lower credit charges. It beat the benchmark Hang Seng Index .HSI, which was virtually unchanged.
HSBC Asia will focus on organic growth, said Cheng, who added that business will improve in the second half and that profits from Hong Kong will increase.

The economies of many Asian markets, including Singapore, South Korea and China had bottomed out in the second quarter and should improve for the rest of the year, he said.
"Emerging markets' contribution will account for about 60 percent of the total after the U.S. market returns to profit," Cheng said. "This is our target and, of course, we would not mind if the portion from emerging markets is bigger," he added.

Asia contributed about 90 percent of the group's profit in the first half.
HSBC plans to seek a group listing in China's Shanghai market and has started the process for an IPO. The timing for such a listing will depend on China's regulators, Cheng said.
HSBC has said it aims to be the first foreign bank to be listed in China.

(Editing by Chris Lewis and Ken Wills)

The serious side of the "Funny People" aftermath

NEW YORK (Hollywood Reporter) - Let's call this weekend what it is: some cold proof that Judd Apatow's hot streak is over.

There are many metrics you can choose from after the underwhelming $23.4 million take this weekend of the writer/director/producer's "Funny People."
A few:

* This will likely be the eighth straight movie that Apatow produced that failed to top $100 million. ("Step Brothers" and "You Don't Mess With the Zohan," the latter of which he also wrote, just reached the mark but didn't surpass it.)

* Opening weekend has been a hallmark of Apatow in his robust years. But only two of these past eight films opened to at least $30 million -- after the three previous pictures all did.
* This month marks exactly two years since Apatow Prods. had a bona fide breakout along the lines of a "Talladega Nights" or "The 40-Year-Old Virgin" -- the Greg Mottola-directed "Superbad," which earned $121 million.

* After "Virgin" and "Knocked Up," Apatow was touted for his rare ability to bring overseas audiences to U.S. comedies. That was then, this is now. Outside of "Zohan," none of his previous seven pictures have topped $150 million internationally. "Funny People" isn't likely to change that.

Of course, it's worth bearing in mind that Apatow is in many ways a victim of his own success, and the high bar that success has set. A $60 million or $70 million comedy, as many have been (and "Funny People" may still be) is still good. It's just not Apatow good.

The line has been that Apatow should be judged first by what he directs, not necessarily what he produces -- after all, the writers, directors and actors Apatow Prods. has incubated are branching out, and it's harder to ensure consistent success when you're trying to establish something new. But "Funny People" puts a ding in that argument -- it's not likely to reach the $109 million of "Virgin" or the $149 million of "Knocked Up."

The weekend box office makes the recent news about Apatow's three-picture production deal at Universal so notable. It also makes you wonder how the studio will market/fare with the next Apatow Factory product, "Get Him to the Greek," which reunites "Forgetting Sarah Marshall's" Jason Segel and Nicholas Stoller behind the camera and Jonah Hill and Russell Brand in front of it.

As for Apatow himself, what he does next as a writer-director is anyone's guess. From a commercial standpoint, it's tempting, after the dramatic ambitions of "Funny People," to say he should go more broadly comedic. Except we'd argue that the dramatic elements actually are what seem fresh in this movie (it's the Apatow-ian broad stuff/d@&k jokes that are starting to feel a little old).

Besides, the character-driven material is exactly what gave juice to his first breakout, "Virgin," which was a comedy with a strongly defined person at the center and a touch of the serious (only with the theme of chastity instead of mortality). Come to think of it "Knocked Up" -- also "long," incidentally -- had some of those elements too. So this wasn't as off-brand as some would have it.
The man who wore the Apatow crown when JA was still toiling in TV actually has had a similar trajectory. Todd Philips, working at a time before the R-rated comedy was in vogue, had two breakouts in a three-year span ("Road Trip" and "Old School"). He then endured a five-year dry spell with comedies like "School for Scoundrels" before returning in a big way this year.
For Apatow, this weekend demonstrates that the party may be over. Now he may be ready for his "Hangover."

(Editing by dean.goodman at Reuters)

Germany, GM to meet Opel bidders Tuesday: government sources

BERLIN (Reuters) - German government officials and General Motors representatives will meet the remaining bidders for Opel on Tuesday to work on forging a deal on who takes over the GM unit, government sources said on Monday. Two rounds of talks are planned, one with Canadian auto parts supplier Magna and one with RHJ International, a Belgium-based financial investor that traces its origins back to U.S. private equity firm Ripplewood.

The two bidders are competing for Opel, in which GM is relinquishing control in return for state support for the local carmaker which it needed after filing for bankruptcy protection in June.
GM's new board meets later on Monday and industry sources have said Opel will likely be discussed.

German Economy Minister Karl-Theodor zu Guttenberg said in a weekend newspaper interview the two suitors must improve their bids to win government backing.
Magna wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of its bidding partner, Sberbank.
RHJ aims to shrink production to return Opel to profit and may be open to selling it back to GM at a later date.

In a blog entry posted on the GM Europe's website last Tuesday, chief negotiator John Smith said he still expected a deal to close by the end of September, although no preference had been made yet for one of the two bidders, and key points with Magna's offer still had to be resolved.
The German states that are home to Opel plants and the federal government have expressed a preference for Magna's bid.

(Reporting by Gernot Heller, writing by Paul Carrel)

Get Out the Wallets

If I were told by the economic gods that I could have the answer to one question about the fate of the global economy, I know what I would ask. "When will the American consumer start spending again?" I know that doesn't sound as sophisticated as a question about industrial production, interest-rate fluctuations, or the Chinese stimulus plan, but it's the key to understanding when we will get out of this recession—and what the recovery is likely to look like. The rise of emerging powers like China, India, and Brazil is real. But for now, there is still just one 800-pound gorilla. The American consumer is the single largest factor at play in the global economy. Our spending is currently equal to the entire economies of China and India added together and then doubled.

The gorilla is showing some signs of life. It's rare for a statistical report to make news, but in late July, the release of the Case-Shiller Price Index was reported as the lead news story by both The New York Times and The Wall Street Journal. The re-port showed that the American housing market seems to have stopped declining. That's big news because the housing collapse has been the driving force behind both the economic recession and the financial crisis. Usually, recessions end with a return to spending on housing, automobiles, and appliances, followed by other consumer durables.

But this is not a usual recession. The United States entered this downturn with the average American deeply in debt. In 2007, total household debt was $13.8 trillion. Household debt per person nearly doubled between 1997 and 2007, from about $25,000 to $46,000. That means people might spend the next few years rebuilding their personal balance sheets, spending less, saving more. In fact, they're already doing that. The savings rate has shot up to almost 7 percent, the highest rate in 15 years. But many experts think that it will have to get up to 8 or 9 percent—the historical average in the pre-credit-bubble years—before Americans start spending again. That would mean either a longer recession or a much weaker recovery than most expect. The Chinese government is spending pots of money building bridges right now, German industries are retooling, but eventually they will all need to be able to export to Americans again.

We have come to believe that Americans are genetically coded to consume. In fact, it's not about DNA. Historically, Americans were seen as puritans, thrifty and hardworking. In the early 1970s, the American savings rate was more than 10 percent. But a change in economic conditions began to get Americans spending. Credit expanded dramatically in the last three decades, especially in the last eight years. The inflation of the 1970s left people worried that their savings could be wiped out. And a series of government policies and programs subsidized debt and expenditure and did nothing to reward savings.

The biggest of these, of course, is the tax deductibility of mortgage interest, which costs the country almost $100 billion every year. Please don't tell me it creates an ownership society. Margaret Thatcher eliminated a similar program in Britain, and Canada doesn't have one either—and both have the same home-owner-ship rates as America. The policy does not encourage home-owner-ship; it encourages the accumulation of debt.

The point is that people respond to incentives. Japan had a relatively low savings rate until the 1950s and '60s, when the government put in place policies that raised the savings rate. Conversely, as Tokyo has tried to get consumers to spend over the last two decades, Japan's savings rate has plummeted. The Chinese may or may not have a propensity to save, but their current high savings rate reflects a government policy to create high savings. In addition, objective factors matter. Chinese know that they do not have a government safety net, that they will have to pay for their own health care and retirement, and so they save. The Japanese, by contrast, are aging rapidly and retirees are spending down their savings at a rapid rate.

What does this mean for America? I doubt that the country will return to historically high savings rates. The baby boomers are aging, which means that they will save less and spend more. Credit is not nearly as available as it was two years ago, but compared with the rest of the world, America remains awash in easy access to cash—and at historically low interest rates. And perhaps most important, we have decided as a society to massively favor spending over saving. All the programs and incentives to pull out the wallet remain in place. For example, the United States is the only advanced industrial country that does not have a national sales tax. The American consumer will likely start spending sooner than many imagine. That's good for the world, but is it good for America?

Zakaria Is The Host Of Fareed Zakaria GPS On Sundays At 1 P.M. Et on CNN.