Posts tagged apple

Microsoft should grab Apple’s ‘Handoff’ for Office

Rival’s ‘Continuity’ feature would make a useful addition to Office on iOS and OS X, says analyst

There’s no good reason why Microsoft can’t adopt Apple’s “Handoff” technology in its iOS and OS X Office apps, an analyst said today.

“Office would be more useful if they did,” said Wes Miller, an analyst with Directions on Microsoft. “I don’t see a good reason not to.”

Handoff, part of “Continuity,” a term that describes several new features slated to ship in iOS 8 and OS X Yosemite this fall, lets users begin an activity — writing an email, browsing the Web, creating a document — and then resume it on another device. The feature relies on Bluetooth-powered proximity awareness to recognize Apple devices registered to the same iCloud account. Once that ad hoc recognition takes place, users can hand off in-progress tasks.

Apple will support Handoff on many of its own iOS apps and OS X applications bundled with iOS 8 and Yosemite, including the iWork troika of Pages, Numbers and Keynote. But it will also open up Handoff to third-party developers via several APIs (application programming interfaces), giving them a chance to bake the feature into their own software.

If Microsoft were to add Handoff support to its iOS apps — Office Mobile on the iPhone, Office for iPad on Apple’s tablet — and its desktop edition for OS X, a document begun on the iPad could be picked up on a MacBook Air at the point it was left when the two devices neared each other.

But Microsoft already has its own solution to the multi-device problem in Office, said Miller. “With OneDrive, Microsoft has ‘document continuity,” Miller said. “You can step away from one device and the document is saved in the background. Then you can open it on another device from OneDrive.”

There are differences: When Computerworld opened a Word 2013 document on the iPad — the document was last edited on a Windows 8.1 notebook — it was positioned with the cursor at the top, not at the location of the last edit. And neither OneDrive nor Office spawned an on-screen alert that pointed the user to the document-in-progress, as does Apple’s Handoff.

Microsoft’s desire to support Handoff in Office will largely depend on how the Redmond, Wash. company perceives its rival’s requirements. To use Handoff, an Apple device owner must have an iCloud ID, and be signed into that account on all hardware meant for content forwarding. (That’s how Handoff recognizes the devices owned by an individual.)

Naturally, Microsoft pushes its own identity system for accessing its services, ranging from Office 365 and OneDrive to Outlook.com and Skype.

There should be no concern in Redmond about document storage, even though Apple makes it much easier for developers who use iCloud as their apps’ document repositories. iCloud is not a requirement — as Microsoft’s own Office for iPad demonstrated — and Microsoft can continue to rely on OneDrive as Office’s default online storage service. There were no other obvious barriers in the limited amount of documentation that Apple’s published on the technology.

Microsoft would likely benefit in the public perception arena — or the subset composed of Mac, iPhone and iPad owners — said Miller. When Microsoft took nine months after Apple debuted a full-screen mode to add the feature to Office’s applications, some customers criticized the firm for not putting its shoulder behind the OS X wheel. By jumping on Handoff, Microsoft would shut up those critics.

The move would also let the company again demonstrate that it’s in the game with all players, not just those inside its own ecosystem, a point CEO Satya Nadella has made numerous times — notably when he introduced Office for iPad — since his February promotion. “They’re more open to being open,” said Miller, citing the new regime’s viewpoint as another factor that could tip the debate.

Miller expected Handoff to debut in Office, if it does at all, when Microsoft launches the next edition for the Mac. “I’d expect Office 365 to pick it up automatically, but I wouldn’t expect it on the Mac side until the back-to-school timeframe,” said Miller.

Microsoft would also have to revise Office for iPad and the iPhone version of Office Mobile, and if it decided to support Handoff between native and Web-based apps, modify the free online editions of Word, Excel, PowerPoint and OneNote.


 


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Chromebooks’ success punches Microsoft in the gut

Chromebooks’ success punches Microsoft in the gut
Amazon, NPD Group trumpet sales of the bare-bones laptops in 2013 to consumers and businesses
Chromebooks had a very good year, according to retailer Amazon.com and industry analysts.

And that’s bad news for Microsoft.

The pared-down laptops powered by Google’s browser-based Chrome OS have surfaced this year as a threat to “Wintel,” the Microsoft-Intel oligarchy that has dominated the personal-computer space for decades with Windows machines.

On Thursday, Amazon.com called out a pair of Chromebooks — one from Samsung, the other from Acer — as two of the three best-selling notebooks during the U.S. holiday season. The third: Asus’ Transformer Book, a Windows 8.1 “2-in-1″ device that transforms from a 10.1-in. tablet to a keyboard-equipped laptop.

As of late Thursday, the trio retained their lock on the top three places on Amazon’s best-selling-laptop list in the order of Acer, Samsung and Asus. Another Acer Chromebook, one that sports 32GB of on-board storage space — double the 16GB of Acer’s lower-priced model — held the No. 7 spot on the retailer’s top 10.

Chromebooks’ holiday success at Amazon was duplicated elsewhere during the year, according to the NPD Group, which tracked U.S. PC sales to commercial buyers such as businesses, schools, government and other organizations.

By NPD’s tallies, Chromebooks accounted for 21% of all U.S. commercial notebook sales in 2013 through November, and 10% of all computers and tablets. Both shares were up massively from 2012; last year, Chromebooks accounted for an almost-invisible two-tenths of one percent of all computer and tablet sales.

Stephen Baker of NPD pointed out what others had said previously: Chromebooks have capitalized on Microsoft’s stumble with Windows 8. “Tepid Windows PC sales allowed brands with a focus on alternative form factors or operating systems, like Apple and Samsung, to capture significant share of a market traditionally dominated by Windows devices,” Baker said in a Monday statement.

Part of the attraction of Chromebooks is their low prices: The systems forgo high-resolution displays, rely on inexpensive graphics chipsets, include paltry amounts of RAM — often just 2GB — and get by with little local storage. And their operating system, Chrome OS, doesn’t cost computer makers a dime.

The 11.6-in. Acer C720 Chromebook, first on Amazon’s top-10 list Thursday, costs $199, while the Samsung Chromebook, at No. 2, runs $243. Amazon prices Acer’s 720P Chromebook, No. 7 on the chart, at $300.

The prices were significantly lower than those for the Windows notebooks on the retailer’s bestseller list. The average price of the seven Windows-powered laptops on Amazon’s top 10 was $359, while the median was $349. Meanwhile, the average price of the three Chromebooks was $247 and the median was $243, representing savings of 31% and 29%, respectively.

In many ways, Chromebooks are the successors to “netbooks,” the cheap, lightweight and underpowered Windows laptops that stormed into the market in 2007, peaked in 2009 as they captured about 20% of the portable PC market, then fell by the wayside in 2010 and 2011 as tablets assumed their roles and full-fledged notebooks closed in on netbook prices.

Chromebooks increasingly threaten Windows’ place in the personal computer market, particularly the laptop side, whose sales dominate those of the even older desktop form factor. Stalwart Microsoft partners, including Lenovo, Hewlett-Packard and Dell, have all dipped toes into the Chromebook waters, for example.

“OEMs can’t sit back and depend on Wintel anymore,” said Baker in an interview earlier this month.

Microsoft has been concerned enough with Chromebooks’ popularity to target the devices with attack ads in its ongoing “Scroogled” campaign, arguing that they are not legitimate laptops.

Those ads are really Microsoft’s only possible response to Chromebooks, since the Redmond, Wash. company cannot do to them what it did to netbooks.

Although the first wave of netbooks were powered by Linux, Microsoft quickly shoved the open-source OS aside by extending the sales lifespan of Windows XP, then created deliberately-crippled and lower-priced “Starter” editions of Vista and Windows 7 to keep OEMs (original equipment manufacturers) on the Windows train.

But Microsoft has no browser-based OS to show Chromebook OEMs, and has no light-footprint operating system suitable for basement-priced laptops except for Windows RT, which is unsuitable for non-touch screens. And unlike Google, Microsoft can hardly afford to give away Windows.

But Microsoft’s biggest problem isn’t Chrome OS and the Chromebooks its ads have belittled: It’s tablets. Neither Microsoft or its web of partners have found much success in that market.

Baker’s data on commercial sales illustrated that better than a busload of analysts. While Windows notebooks accounted for 34% of all personal computers and tablets sold to commercial buyers in the first 11 months of 2013, that represented a 20% decline from 2012. During the same period, tablets’ share climbed by one-fifth to 27%, with Apple’s iPad accounting for the majority of the tablets.

“The market for personal computing devices in commercial markets continues to shift and change, said Baker. “It is no accident that we are seeing the fruits of this change in the commercial markets as business and institutional buyers exploit the flexibility inherent in the new range of choices now open to them.”

But when you’re at the top of the personal computing device heap — as Microsoft was as recently as 2011 — words like “change” and “choice” are not welcome. From the mountaintop, the only way is down.


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Malware: War without end

We may be facing a stalemate. Or, we may be evolving a new cyber biosphere.

Ceaselessly, with no end in sight despite outlays that amount to a tax on doing business, the decades-long struggle against malware drags on.

Today, around 5% of the average IT budget is devoted to security, estimates John Pescatore, a director at the SANS Technology Institute. Cybercrime (including malicious insider attacks and theft of devices) costs U.S. corporations an average of $11.6 million yearly, according to an October 2013 study by the Ponemon Institute that was sponsored by HP Enterprise Security. This cost represents a 23% increase over last year’s average of $8.9 million per company.

Asked why malware is the war without end, experts commonly embrace either a military or an ecological metaphor. Those with the military viewpoint say flawed defenses have led to a stalemate. The ecology-minded don’t see it as a war to be won or lost — they see an eternal cycle between prey and predator, and the goal is not victory but equilibrium.
Around 5% of the average IT budget is devoted to security, says John Pescatore, a director at the SANS Technology Institute.

One who favors the military metaphor is David Hoelzer, director of research for Enclave Forensics in Henderson, Nev. “We are essentially going in circles,” he says. “We improve only after our adversaries defeat our defenses. Most software is still riddled with vulnerabilities, but the vendors typically make no move to fix one until it becomes publicly disclosed. Coders are not trained in security, and ‘well written’ means ‘under budget.'”

Security consultant Lenny Zeltser chooses the ecology metaphor. “Attackers take advantage of the defenders, and the defenders respond. It’s part of the cycle,” he says. “If attackers get in too easily, they are spending too much to attack us. If we are blocking 100% of the attacks, we are probably spending too much on defense. We have been in a state of equilibrium for some time and always will be. But being complacent is dangerous, as we must constantly apply energy to maintain the equilibrium.”

Developments in the financial sector offer an example of why it’s important to constantly apply energy to maintain the equilibrium. A new report from Trend Micro points out that attacks aimed at stealing online banking credentials recently surged to a level not seen since 2002.

Nevertheless, experts agree that progress has been made — even if only toward the maintenance of ecological equilibrium or a military stalemate.
The wins so far

At this point, “there are no types of malware for which there are no defenses that we are currently aware of,” says Roel Schouwenberg, a researcher at anti-malware software vendor Kaspersky Lab.

“We no longer see the kinds of big spreading malware that we saw three or four years ago, [such as] the ILOVEYOU virus of 2000,” adds William Hugh Murray, a security consultant and a professor at the Naval Postgraduate School.

Interviews with analysts and executives at security vendors McAfee, AVG and Kaspersky Lab suggest that the following are the four principal weapons that make this possible:

• Signature detection. This approach gives you the ability to spot malicious code, among other things.

• Behavior monitoring. By adopting this technique, you can do things like spot malicious activity in a computer or determine if a suspicious file will respond to virtual bait

• Blacklisting. This is a mechanism for blocking access to sites and files that are included on a list of undesirable entities.

• Whitelisting. With this approach, essentially the opposite blacklisting, users are only allowed access to sites and files on a list of entities known to be harmless; access is denied to sites and files that aren’t on the list.

Each of the four has its supporters and detractors, and all the anti-malware software vendors queried for this article said they use some form of all four weapons, in combination.

Other defenses include firewalls, which can prevent intrusions and — with Windows at least — are part of the operating system, and periodic vendor patches to address vulnerabilities.
Frequency of cyberattacks

The frequency of different types of attacks experienced during a four-week period in 60 companies benchmarked.
Viruses, worms, trojans 100%
Malware 97%
Botnets 73%
Web-based attacks 63%
Denial of service 50%
Malicious code 48%
Malicious insiders 42%
Phishing/social engineering 42%
Stolen devices 33%
Source: Ponemon Institute/HP Enterprise Security “2013 Cost of Cyber Crime” study.

A question sometimes raised is whether there are more advanced weapons that we haven’t yet learned about. “I’ve heard that [the anti-malware vendors] have better defenses up their sleeve that they choose not to release since they are not necessary yet, and they don’t want to tip their hand,” says Zeltser.

The vendors deny this. “Our secret weapons are in force every day — it’s a daily battle,” says Tony Anscombe, an executive at anti-malware software vendor AVG Technologies. Indeed, if vendors had something that can stop all viruses “it would be foolish to wait to use it,” says Kevin Haley, spokesman for anti-malware software vendor Symantec. “It would be a competitive advantage” to help sell more software, he points out.

Either way, the end result is that anti-malware software vendors can now respond to a new (or “zero-day”) exploit within two hours, although complicated exploits may require subsequent follow-up, says Haley.

In parallel, there have been efforts to make software less vulnerable to infection. For instance, Tim Rains, director of Microsoft Trustworthy Computing, says that Microsoft has revamped the code libraries used by developers to remove errors and vulnerabilities.
There are no types of malware for which there are no defenses that we are currently aware of.
Roel Schouwenberg, researcher, Kaspersky Lab

As a result, he notes, stack corruption was the vulnerability exploited 43% of the time in 2006, but now it’s used only 7% of the time. He also cites a study conducted in 2011 by analyst Dan Kaminsky and others indicating there were 126 exploitable vulnerabilities in Microsoft Office 2003, but only seven in Office 2010.

Years of security-related software patches downloadable by users have also had a measurable effect. Rains cites statistics derived from executions of Microsoft’s online Malicious Software Removal Tool, which showed that systems with up-to-date protection were 5.5 times less likely to be infected.

As of December 2012, the rate was 12.2 infections per 1,000 machines for unprotected systems vs. 2 per 1,000 for protected systems. The global average was 6 infections per 1,000.

On the other hand, infections still happen. But even the nature of the infections seems to have reached a state of equilibrium.
Today’s attacks: Two broad categories

Roger Thompson, chief security researcher at security testing firm and Verizon subsidiary ICSA Labs, divides today’s most common infections into two categories: APT (“advanced persistent threat”) and AFT (“another freaking Trojan.”)

New examples of APT malware appear about once a month, are aimed at a particular target and are produced by organizations with impressive resources, abilities and patience, he says. The classic example is the Stuxnet virus of 2010, whose goal appears to have been to make centrifuges in Iranian nuclear research labs destroy themselves by spinning too fast.

“Each one is different and scary,” Thompson notes.

As for AFTs, self-replicating malware is no longer the infection vector of choice, with attackers preferring to launch drive-by attacks from infected websites against victims who were tricked into visiting. (However, worms and older malware are still lurking on the Internet, and an unprotected machine can still get infected in a matter of minutes, sources agree.)
Average annualized cybercrime cost

These costs are weighted by attack frequency in 60 companies benchmarked.
Denial of service – $243,913
Malicious insiders – $198,769
Web-based attacks – $125,101
Malicious code – $102,216
Phishing/social engineering – $21,094
Stolen devices – $20,070
Botnets – $2,088
Viruses, worms, trojans – $1,324
Malware $997
Source: Ponemon Institute/HP Enterprise Security “2013 Cost of Cyber Crime” study.

The acquisition of new Trojans appears to be limited only by a researcher’s ability to download examples, experts agree; hundreds of thousands can be collected each day. Many examples are simply members of long-standing malware families that have been newly recompiled, and some malicious websites will recompile their payload — creating a unique file — for each drive-by attack. There are probably no more than a thousand such families, since there is a finite number of ways to take over a machine without crashing it, notes Thompson.

The initial infection is usually a compact boot-strapping mechanism that downloads other components. It may report back to the attacker on what kind of host it has infected, and the attackers can then decide how to use the victim, explains Zeltser.

These days, an infected home system is typically hijacked by the attackers for their own use. With a small enterprise, the object is to steal banking credentials, while with large enterprises, the object is typically industrial espionage, Murray explains.

While the anti-malware vendors have adopted a multi-pronged strategy, so have the attackers — for instance, writing malware that does not stir until it sees that it is not in the kind of virtual machine used to trick malware into revealing itself.

Meanwhile, the attackers have formed their own economy, with a division of labor. “Some are good at crafting malware, others are good at infecting systems, and others are good at making money off the infections, such as by sending spam, or by launching distributed-denial-of-service attacks, or by pilfering data,” says Zeltser.

“You can buy the software required to do the account takeover, and then to convert the money into cash you hire mules,” Murray adds.
New battlefields include XP, Android

But while many pundits expect to see a continued cycle of attack and defense, they also foresee additional future dangers: Windows XP may become unusable because of the support situation, and the Android smartphone environment may be the next happy hunting ground for malware.

For its part, Windows Vista is no longer receiving mainstream support, but Microsoft has announced the company will continue issuing security updates for the OS through mid-April 2017.

Windows XP, released in 2001, is still widely used, but Microsoft will stop issuing security updates for it after April 2014. At that point, Microsoft will continue to issue security updates for Windows 7 and Windows 8, and after each one is issued the malware writers will reverse-engineer it to identify the vulnerability that it addresses, Rains predicts.

“They will then test XP to see if the vulnerability exists there, and if it does they will write exploit code to take advantage of it,” Rains says. “Since XP will never get another update, the malware writers will be in a zero-day-forever scenario. If they can run remote code of their choice on those systems it will be really hard for anti-virus protection to be effective. The situation will get worse and worse and eventually you will not be able trust the operating system for XP.”

“People should not be running XP,” agrees Schouwenberg. “When it was written the malware problem was very different than it is today. It had no mitigation strategies and is extremely vulnerable.”

Android, meanwhile, is going like gangbusters on smartphones — outselling Apple’s iOS phones in the third quarter of this year, according to Gartner — making it a huge target for crackers.

Experts see many parallels between Android’s development and the early history of the Windows market, with hardware vendors adapting a third-party operating system for their products, leaving no single party ensuring security. And with the Android market, the additional involvement of telecommunications carriers is a complicating factor.
Average days to resolve attack in 60 companies benchmarked

Malicious insiders include employees, temporary employees, contractors and, possibly, business partners.
Malicious insiders – 65.5
Malicious code – 49.8
Web-based attacks – 45.1
Denial of service – 19.9
Phishing/social engineering – 14.3
Stolen devices – $10.2
Malware – 6.7
Viruses, worms, trojans – 3
Botnets – 2
Source: Ponemon Institute/HP Enterprise Security “2013 Cost of Cyber Crime” study.

“It is not like the case with Apple, which can push security updates to every iPhone in the world in one day,” says Schouwenberg. “With Android, the manufacturer has to implement the patches and then go through certification with the carrier before the patches are deployed. Assuming your phone still gets security updates it may be months before you get them. That would not be considered acceptable with a laptop.”

“Android is in a position that Windows was in a few years ago; there is not enough protection,” adds Johannes Ullrich, head of research at the SANS Technology Institute, which certifies computer security professionals.
Is there hope?

Returning to the ecology metaphor, sometimes the impact of an asteroid will drive species into extinction. And, indeed, sources can point to extinction types of events in the short history of the malware biosphere.

Thompson, for instance, points out that the adoption of Windows 95 drove MS-DOS malware into extinction by adding protected mode, so one program could not overwrite another at will. Microsoft Office 2000 drove into extinction (PDF) malware based on Office 1995 macros by adding a feature that basically required user permission before a macro could run. Windows XP Service Pack 2 in 2004 set the Windows firewall on by default, wiping out another generation of malware.
The success rate for social engineering is phenomenal.

John Strand, network penetration tester, Black Hills Information Security

“But there is no extinction-level-event in sight to wipe out the current Trojans,” Thompson says.

Even if there were such a miracle, attackers could fall back on persuasive email, officious phone calls, smiling faces or other non-technical manipulations usually referred to as “social engineering.”

“The success rate for social engineering is phenomenal,” says John Strand, network penetration tester with Black Hills Information Security in Sturgis, SD.

People will call in pretending to be from a help desk, suggesting that the user download (infected) software. Or plausible emails such as a delivery notification will entice users to click on infected links, he explains.

And then there’s software that tells the user to disable the system’s malware protection “to ensure compatibility.” “I don’t think there is any legitimate software that needs you to disable security protection for compatibility reasons,” says Schouwenberg. “But some software does ask you to disable it during installation, creating a precedent, so they think it’s all right when they get email from a website telling them to turn it off.”

Even if users are trained to resist such ploys, smiling people with clipboards and faux badges may show up at the front desk saying they need to inspect the server room on some pretext — and they’ll probably be allowed in, says Strand.

Beyond that, large numbers of log-in credentials to corporate networks are always for sale at various malicious sites, because people have registered at third-party sites using their office email addresses and passwords — and those sites were later compromised, Strand adds.
Holding on

“The good news is that it is relatively easy to defend against most malware, if you use up-to-date anti-virus software, run a firewall, get security updates and use strong passwords,” Rains says. “These techniques can block the major attacks used today and probably for years to come.”

“The best practices I was telling people about 10 years ago I still have to tell people about today,” Haley adds. “Have good security software, update the system and use good common sense. Don’t link to email that doesn’t seem right.”

Finally, Pescatore suggests looking to the field of public health (rather than the military or ecology) for a metaphor about living with malware. “We have learned to wash our hands and keep the cesspool a certain distance from the drinking water,” he notes. “We still have the common cold, and we still have occasional epidemics — but if we react quickly we can limit the number who are killed.”


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Tablet smackdown: iPad vs Surface RT in the enterprise

IPads are already making their way into businesses via bring-your-own-device efforts with Microsoft Surface RT tablets hoping to follow suit as employees lobby for their favorite devices. But which one makes more sense from an IT perspective?

Read Network World’s other tech arguments.

The two products are roughly similar in price ($500), run touch-centric operating systems, are highly portable and weigh about a pound and a half.

The two most significant differences are that Surface RT comes with both a keyboard and a version of Microsoft Office – Office 2013 Home & Student 2013 RT – which expand the potential corporate utility of the devices.

Third-party keyboards are available for iPads as are third-party versions of Office-compatible productivity suites but they represent more work for IT. A rumor says Microsoft is working on a client that will allow accessing Office from an iPad through Microsoft’s service Office 365.

Office on Surface RT has its limitations. It lacks Outlook but includes Word, Excel, PowerPoint and OneNote, and the Surface RT version requires a business license in order to be used for work. Still, having it installed out of the box is a leg up and gives workers the opportunity to tap into the productivity suite. The keyboard is a big plus.

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When it comes to numbers of applications iPad has far more than Surface RT, and neither one has the number of business applications that support traditional Windows operating systems. Surface RT is a Windows operating system that can’t run traditional Windows apps except for the Office suite specifically crafted for the platform.

Instead, Surface RT has its own class of applications called Windows Store apps, mainly because they can only be bought from the Window Store. They are tailored for touch tablets and must be vetted by Microsoft before they get into the store’s inventory.

They can be developed using XAML, with code-behind in C++, C#, or Visual Basic, and Microsoft has a provision for sideloading custom business apps to Surface RT without submitting them first to Microsoft. Even so, that’s a lot of work to get apps natively on the devices.

Both iPads and Surfaces support virtual desktops, which goes a long way toward making traditional apps available on them. Hosted virtual desktops (HVD) can be costly, Gartner says in a report called “Bring Your Own Device: New Opportunities, New Challenges”. Its research found that “shifting to an HVD model increases the onetime costs per device by more than $600.” Plus proper licensing of iPads for business use is complicated, the report says.

Managing Surface RT is possible via Windows cloud-based management Intune and Exchange ActiveSync for messaging. IPad also supports Exchange ActiveSync. Third-party mobile device management platforms can configure and update iPads as well as monitor compliance with corporate policies. They can also wipe or lock lost and stolen machines. OS X server can do all this as well.

Surface RT comes with security features iPad doesn’t. These include both hardware-based secure boot that checks that the system hasn’t been tampered with and also trusted boot that fires up anti-malware before anything else. That way malware can’t disable the anti-malware before it gets the chance to do its job. The same hardware security module can act as a smartcard for authentication, and Surface RT has full disk encryption.

The iPad has disk encryption but lacks the secure boot features of Surface RT. Its secure boot chain is based on read-only memory and its hardware security module doesn’t do double duty as a smartcard.

NOTE: There is another version of Surface that runs on x86 processors and supports any application that Windows 7 supports. It’s not available until next year, but is actually a tablet-sized full Windows laptop with all the touch capabilities of Surface RT.

That device would beat iPad hands-down if it cost the same, but it is likely to cost hundreds of dollars more than Surface RT.


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Why Microsoft should make its own tablets (and phones and PCs)

It looks like Microsoft plans to build and sell its own tablets, competing with its own partners. Great idea!

Computerworld – The All Things D site reported this week that Microsoft on Monday intends to announce its entry into the tablet hardware business.

While Microsoft does make hardware — mice, keyboards, Xbox, Kinect, Zune, Surface and other products — it has not yet made desktop PCs, laptops or tablets, opting instead to embrace a partner strategy of third-party OEM manufacturing.

Pundits will no doubt say that Microsoft has a case of Apple envy and suggest that the company is finally embracing the highly successful “Apple model,” in which the operating system maker also makes its own hardware.

In fact, Microsoft’s announcement will be more in line with the “Google model.”

The Google model is to have it both ways — making hardware, but also licensing your OS to hardware partners who make products of their own. Google partners with OEMs for smartphone handset and tablet hardware. But it also acquired Motorola, which makes Android hardware.
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The Motorola acquisition isn’t Google’s first foray into hardware sales and direct competition with hardware vendors. Google launched its Nexus One smartphone handset in early 2010. Although that phone was technically manufactured by one of Google’s partners, HTC, it was sold by Google and branded as a Google phone. As it turned out, Google didn’t like the support part of the hardware business and decided to exit that line of work for a while, but it had let its partners know that it was willing to compete with them.

Traditionally, the assumption has been that you must either partner with hardware companies to manufacture systems for your operating system (the Microsoft model) or not allow other companies to make hardware for your platform (the Apple model).

A hybrid approach has been considered suicidal because competing with your partners puts you in a gray area where you have hardware competition and fragmentation, but you also have a smaller number of partners who are also less committed and more distrusting.

But times are changing.

Microsoft’s application of the Microsoft model to mobile hasn’t worked out. A big partnership with Nokia has been a flop. The software vendor has fared badly in the mobile market, far outpaced by Apple, which uses the Apple model, and Google, which uses the Google model.

When Google announced its bid to acquire Motorola — effectively declaring its intention to compete with its hardware partners — many pundits predicted disaster for the company. But the disaster never happened. Google is getting away with it. Android OEMs are continuing to churn out more innovative and exciting hardware, and they don’t seem vexed by the prospect of competing with the company that makes the operating system they use.

Instead of the worst of both worlds, Google appears to be enjoying the best of both worlds, gaining the benefits of a hardware company (control and patents), while also gaining the benefits of an operating system company that partners with hardware OEMs (a thriving ecosystem, broad innovation and market choice).

Apparently, Microsoft wants the same thing. And why not? Microsoft has succeeded with a variation of the Google model in some areas. The company’s mice and keyboards, for example, have sold well, even though third-party hardware makers have offered similar products for the larger Windows PC marketplace. Admittedly, it’s a little different because we’re talking about peripheral devices that don’t run Microsoft operating systems directly. But still.

Microsoft has also succeeded with the Apple model. For example, one of Microsoft’s most successful products is the Xbox gaming console. In that case, Microsoft sells the operating system and the hardware, and it even created and runs the associated Xbox Live online service. Like Apple, Microsoft goes it alone, not seeking partnerships with third-party manufacturers to make competing Xbox hardware systems.

And, of course, Microsoft succeeds with the Microsoft model. Microsoft Windows can’t be described as anything but a major business success story. The model is to make the operating system software and rely entirely on partners for PC hardware.

But that’s the past. The future looks less rosy for Microsoft Windows and the Microsoft model.
Why the Microsoft model won’t work in the future

There are two reasons why Microsoft needs to move to the Google model for all of its product lines.

First, the world is becoming increasingly mobile. The so-called PC market is simultaneously becoming more mobile (more laptops, fewer desktops) and increasingly obsolete. Apple’s post-PC world is clearly the future of all computing. That’s why Windows 8 is so heavily optimized for tablets and touch.

The Microsoft model worked great for the old-and-busted desktop PC world, but it doesn’t work so well for the new-hotness mobile and touch-tablet world. With computing “appliances,” seamless integration is the highest virtue.

The world has changed, and the model that works is also changing.

Second, Microsoft can’t rely on its OEM partners anymore. If you go to, say, BestBuy, to shop for a low-cost laptop, as I did recently, it’s clear that Microsoft Windows systems on the low end (sub $1,000) are garbage.

These devices are bloated with crapware (cheap software loaded on the systems by OEMs as part of negotiated deals that offset price discounts), covered with ugly, sloppily applied stickers, and made from flimsy, cheap-feeling materials like plastic or wobbly metal. They look like junk.

The Apple table at BestBuy is 10 feet away, and for $1,000 you can buy a MacBook Air with zero crapware, no stickers and the highest quality materials (unibody aluminum). Their screens look far better, and their performance is shockingly superior. They’re displayed in an appealing and uniform way, with Internet running and everything ready to go and available to try (I spent 20 minutes trying to escape from a Dell system’s “demo mode” so I could try the machine out myself. I eventually gave up.)

Nobody washes a rented car. Likewise, discount PC OEMs don’t treat Windows machines with love and respect, as Apple does with Apple machines.

Higher-end Windows PCs offer a better experience than the low end models, but the cheap systems are destroying the Microsoft brand in the minds of consumers.

That’s why Microsoft has launched its own retail stores. Microsoft is willing to invest in retail stores as a way to gain some control over its brand image. But that’s not enough.

Microsoft needs to create its own premium, high-quality desktops, laptops, tablets and phones for the same reason that automakers like to have high-end car models in their lineups. The upscale models create a “halo effect” for the brand — an aura that extends to even the cheapest vehicles.

It’s a new world. Rather than viewing Microsoft as a competitor, Microsoft’s OEM partners should and, I believe, will welcome Microsoft’s participation in the hardware end of the business, because the company can create a halo effect that extends to the entire platform and benefits everyone. Nobody in the Windows world would benefit from an Apple takeover of the market.

There is absolutely no way Windows can compete as a tablet operating system against Apple’s iOS — unless Microsoft takes direct control by making its own integrated tablets, as Apple does with the iPad. And even then, it’s a long shot.

In general, though, Microsoft appears to be waking up to the new reality. That reality is that nobody except Apple can succeed with the Apple model. And the Microsoft model is yesterday’s news.

That leaves the Google model as Microsoft’s one hope for success in the post-PC world.

Apple awards senior execs $60 million each

Locks in leadership with stock grants that vest in 2013 and 2016

Computerworld – Apple last week awarded six senior executives $60 million each in stock contingent on them staying with the company through mid-March 2016.

 

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In a filing with the U.S. Securities and Exchange Commission (SEC) last Friday, Apple said it had granted 150,000 restricted stock units to each executive. At the close of trading Friday, the options were worth just over $60 million.

With Apple shares down slightly on Monday, the options were equivalent to about $59.8 million as of 2 p.m. ET.

Restricted share units are not given at the time of the grant, but instead are awarded when they vest. The shares will be worth their then-current price, which could, of course, be dramatically different than their value Monday.

Half of the shares vest in June 2013 and half in March 2016, assuming the executives remain with Apple.

Those awarded the grants included chief financial officer Peter Oppenheimer, general counsel Bruce Sewell and senior vice presidents Scott Forstall, Philip Schiller, Bob Mansfield and Jeffrey Williams.

Forstall heads Apple’s iPhone software group, Schiller is Apple’s chief marketing officer, Mansfield leads the company’s hardware engineering efforts, and Williams is the head of operations, responsible for the work once done by now-CEO Tim Cook.

Eddie Cue, another senior vice president who oversees all online work at Apple — including the App Store and iCloud — was awarded 100,000 restricted stock units that vest in September 2014 and September 2016.

In September 2011, Cue was given a grant of 100,000 shares when he was promoted to senior vice president.

CEO Tim Cook already has his stock options: In August, after he took the CEO position when co-founder Steve Jobs stepped down, the Apple board of directors awarded Cook one million shares that vest in August 2015 and August 2021.

Cook’s grant is worth approximately $399 million at Monday’s stock price.

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