PC's Whipping up Come Secret "Apple" Sauce to Fend off The Tablet

NEW YORK (CNNMoney) -- As the iPad eats away at personal computer sales, the PC appears to have found a potential savior in ... Apple?

It's an unlikely source, but it's true. Ultrabooks, the ultra-thin notebook computers with no hard disk drive or slot for a DVD, are a category of PC that was essentially invented by Apple (AAPL, Fortune 500) with its MacBook Air, which debuted in 2008. Now, PC makers are scrambling in their attempts to replicate Apple's secret sauce.

Market analysts expect them to succeed: Sales of Ultrabooks are forecast to boom over the next few years in the same way that netbooks took off in 2007 -- until the iPad debuted. Ultrabook sales will reach 136.5 million in 2015, making up 43% of notebook sales, according to IHS iSuppli.

The rise of the Ultrabook is expected to happen quickly. This year, IHS predicts fewer than 1 million Ultrabook sales, making up just 2% of all notebook sales. But next year, the thin notebooks will rise to 13% of all laptop sales, then 28% in 2013 and 38% by 2014.

The PC is in need of a white knight. Consumer demand for PCs is slumping badly, particularly in the United States, Canada and Europe. Industry consultancy Gartner has repeatedly slashed its PC shipment forecasts over the course of the year.

The iPad isn't going to kill the PC entirely, but experts say it's slowing purchases of laptops, particularly small notebook PCs like netbooks. When Hewlett-Packard (HPQ, Fortune 500) said it was considering getting out of the PC business in August, then-CEO Leo Apotheker cited as a prime reason that "the tablet effect is real."

"To compete with media tablets, notebook PCs must become sexier and more appealing to consumers," said Matthew Wilkins, principal analyst at IHS. "Enter the Ultrabook, which borrows some of the form-factor and user-interface advantages of the media tablet."
Does Intel's ultrabook stand a chance?

In May, Intel (INTC, Fortune 500) first unveiled the Ultrabook -- a name it trademarked. Intel describes an Ultrabook as a notebook PC that is thinner than 0.8 inches, has Flash memory, can be turned on instantly, is always connected and has a battery life of longer than eight hours.

That list rivals the features found in the iPad and similar tablets -- and, of course, the MacBook Air.

Unlike netbooks -- which typically have cramped keyboards, sluggish processors and stripped-down versions of Windows XP -- Ultrabooks have full-sized keyboards, run the latest version of Microsoft (MSFT, Fortune 500) Windows and will feature Intel's newest chipsets.

Netflix in Trouble

Netflix dropped a double bomb late Monday: The company now expects to lose money for all of 2012, and it is looking to raise cash in a secondary offering of its stock.

Netflix (NFLX) warned in its last earnings report that it expects to be unprofitable "for a few quarters" starting at the beginning of 2012. The primary culprit is Netflix's pricey plan to expand its streaming video service into the United Kingdom and Ireland, but a wave of subscribers jumping ship hasn't helped.

• 50

• Print
• Comment

Monday's regulatory filing extended Netflix's "we're going to lose money" warning to the full 2012 fiscal year. Shares of Netflix fell about 3.3% in morning trading on Tuesday.

The filing also revealed that Netflix is in the process of raising $400 million from investors to help bulk up its cash stash.

Netflix is selling 2.86 million shares at $70 apiece -- 6% below Monday's closing price -- to mutual funds and accounts managed by T. Rowe Price. That offering is scheduled to close around November 28.

It's also selling $200 million in convertible bonds to investment funds affiliated with Technology Crossover Ventures, a fund that has been investing in Netflix for more than a decade.

While that will give Netflix more money to invest in content, secondary offerings are sometimes considered ominous signs. They can signal that expenditures have outpaced expectations and that a company needs to raise more cash.

Netflix, which had $366 million in cash on hand at the end of last quarter, is facing threats from rivals with much deeper pockets. Studios are demanding more money for their valuable content, and the playing field is getting crowded. Beyond direct rivals like Hulu and kiosk service Redbox (owned by Coinstar (CSTR)), big tech players like Amazon (AMZN, Fortune 500) and Google (GOOG, Fortune 500) are jumping into the streaming game.

One analyst predicted earlier this year that Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $2 billion in 2012. Netflix said in its filing on Monday that it has payments of more than $3.5 billion due over the next few years to pay for content under contract.

Meanwhile, Netflix is losing some of those all-important licenses. In September, Starz ended contract renewal negotiations with Netflix and said it will pull its movies and TV shows from Netflix early next year.

That loss of content leaves angry customers asking why they're paying more for less. In July, subscribers were incensed after Netflix said it would begin charging separate prices for its DVDs-by-mail and streaming video plans. That amounted to a big price hike for Netflix customers, as the cheapest-possible bill for customers who want both services jumped from $10 to $16 a month.

As a result of the price hike anger, on September 15 Netflix was forced to cut its U.S. third-quarter subscriber estimates by 1 million customers, or about 4%, to 24 million. Shares plunged 19% that day.

But the real debacle came just three days later, on September 18. Netflix CEO Hastings announced that the company's movies-by-mail service would be rebranded as Qwikster, while the Netflix brand would be dedicated to streaming video.

Again, customers raged -- so much so that Netflix pulled a stunning reversal a few short weeks later and canceled the Qwikster plan. Many pundits and customers were shocked by the flip-flop move.

The subscriber ire is finally starting to cool. Cancellations "continued to steadily decline" in October and November, Netflix said in its filing this week. The company now expects its domestic streaming customer base to be flat in November and to resume "strongly positive" growth in December.

Breaking the White Male Tech Start Up Mold

EW YORK (CNNMoney) -- In the tech world's startup scene, where investors gamble millions on promising ideas, accelerator programs operate as kingmakers. Get into a top one and you'll have access to seed funding, mentors and the industry's leading venture capitalists.

That's an edge that can reap rich rewards. It's also an edge that most often goes to those who fit Silicon Valley's typical demographic for entrepreneurs: Young white males. Few of the industry's incubators keep track of the racial and gender breakdown of the founders they choose to back.

• 57
• 15

• Print
• Comment

Take Y Combinator, for example. Based in Mountain View, Calif., it offers a bit of launch funding, typically a few thousand dollars, in exchange for a small equity stake. But Y Combinator's real value is its network: Participants get legal aid, guidance and advice from well-connected industry veterans. The program's reputation is so strong that three of the industry's most influential investors -- Yuri Milner, Ron Conway and venture capital firm Andreessen Horowitz -- offer every participant a no-questions-asked $150,000 investment.

Y Combinator has funded around 300 startups in its six-year existence. How many were run by women, or by minority entrepreneurs? Y Combinator has no idea.

"At the end of the day, as a startup investor, I only care about a great team and product," says Alexis Ohanian, Y Combinator's East Coast representative. "You could be from Mars, though the immigration hassle would be tricky."

Another Y Combinator representative told CNNMoney: "We've never collected any stats about people's race or ethnicity. It's not a big factor when we're judging applications."

That approach resonates with many in Silicon Valley. The tech industry likes to view itself as a pure meritocracy, where the only thing that matters is the quality of a visionary's idea and the depth of their technical skills.

But critics point out that subtle -- and sometimes not so subtle -- biases come into play. Legendary investor John Doerr made a telling, offhand remark a few years ago at a venture capital conference. He observed that the "world's greatest entrepreneurs" are almost all "white, male, nerds who've dropped out of Harvard or Stanford."

"When I see that pattern coming in -- which was true of Google -- it was very easy to decide to invest," he added.

Investor Mitch Kapor, who co-founded the Lotus Development Corp. 30 years ago and now runs his own technology investment firm, says the idea of a tech meritocracy is "an aspirational statement," not a factual one.

"Not everybody gets the same breaks; not everybody gets the same opportunities," he said in an interview this summer with Soledad O'Brien for CNN's Black in America documentary The New Promised Land: Silicon Valley. "The part that is meritocratic is great, and there's a big part of it that isn't. And so, please, let's not fool ourselves and pretend otherwise in some self-congratulatory kind of way."

Adobe Adnonding the Fight For Mobile Content

(Wired.com) -- In an abrupt about-face in its mobile software strategy, Adobe will soon cease developing its Flash Player plug-in for mobile browsers, according to an e-mail sent to Adobe partners on Tuesday evening.

And with that e-mail flash, Adobe has signaled that it knows, as Steve Jobs predicted, the end of the Flash era on the web is coming soon.

The e-mail, obtained and first reported on by ZDNet, says that Adobe will no longer continue to "adapt Flash Player for mobile devices to new browser, OS version or device configurations," instead focusing on alternative application packaging programs and the HTML5 protocol.

"Our future work with Flash on mobile devices will be focused on enabling Flash developers to package native apps with Adobe AIR for all the major app stores," the quoted e-mail says.

In the past, Adobe has released software tools for mobile developers that create a single platform programmers can use to make applications that work across three major mobile platforms: Android, iOS and the BlackBerry OS. While it's seemingly easier than learning all of the native languages for each operating system, some developers have claimed a loss in app performance when coding in a non-native language that then gets translated into other languages.

The move indicates a massive backpedaling on Adobe's part, a company who championed its Flash platform in the face of years of naysaying about its use on mobile devices. Despite Flash's near ubiquity across desktop PCs, many in the greater computing industry, including, famously, Apple Computer, have denounced the platform as fundamentally unstable on mobile browsers, and an intense battery drain. In effect, Flash's drawbacks outweigh the benefits on mobile devices.

Flash became a dominant desktop platform by allowing developers to code interactive games, create animated advertisements and deliver video to any browser that had the plugin installed, without having to take into account the particulars of any given browser. However, with the development of Javascript, CSS, and HTML5, which has native support for video, many web developers are turning away from Flash, which can be a resource hog even on the most advanced browsers.

Apple made its biggest waves in the case against Flash in April of last year, when Steve Jobs penned a 1,500-word screed against the controversial platform, describing it as a technology of the past. Jobs and Apple disliked the platform so intensely, it has since been barred from use on all iOS devices.

Despite attempts to breathe life into Flash on other mobile devices -- namely, Android and BlackBerry OS -- Adobe has failed to deliver a consistently stable version of the platform on a smartphone or tablet. In WIRED's testing of the BlackBerry PlayBook in April, Flash use caused the browser to crash on a consistent basis. And when Flash was supposed to come to tablets with Motorola's Xoom, Adobe was only able to provide an highly unstable Beta version of Flash to ship with the flagship Android device.

"Adobe has lost so much credibility with the community that I'm hoping they are bought by someone else that can bring some stability and eventually some credibility back to the Flash Platform," wrote software developer Dan Florio in a blog post on Wednesday morning.

The drastic reversal in Adobe's mobile plans comes in the wake of the company cutting 750 jobs on Tuesday, a move prompted by what Adobe labeled "corporate restructuring."

An Adobe representative did not immediately respond to a request for comment.

Groupon Hits the Market with a Splash

NEW YORK (CNNMoney) -- Shares of daily deals site Groupon closed at $26.11, roughly 31% above their initial offering price in the public debut of the stock on Friday.

Groupon (GRPN) had priced its initial public offering at $20 a share late Thursday, the last step on a rocky journey to its debut. Under the ticker GRPN, Groupon began trading Friday at about 10:45 a.m. ET on the Nasdaq stock exchange, and opened at $28, 40% above the target.

• 111
• 9

• Print
• Comment

Raising $700 million for the company, Groupon's IPO was the second-biggest tech IPO in history, behind the $1.7 billion Google raised in 2004.

The stock ticked up as high as $31.14 before falling back to around $28 later in the morning. In mid-afternoon trading it remained in that range, at $28.29, and then slipped a bit just before the close.

Groupon ended the day with a valuation of more than $16 billion. At that price, the pioneering coupon company is worth more than many traditional retailers, including Whole Foods (WFM), Best Buy (BBY, Fortune 500) and Bed, Bath & Beyond (BBBY, Fortune 500).

Because of Groupon's recognizable name and cachet, some stock analysts had expected an even bigger rise at the open, particularly because a miniscule number of shares were being offered. At the last minute, Groupon's underwriters threw in an additional 5 million shares to make the offering 35 million shares.

That's still only around 6% of the company's outstanding shares -- a very small amount, given the public's interest in the company.

"I think 'highly disappointed' is the operative phrase," said David Menlow, president of IPOfinancial. "With such a limited number of shares offered in what could have been unlimited demand, I thought thought the markets should have responded better. Now that it didn't happen, it's causing people to take a second look at the company's fundamentals."

Those fundamentals aren't pretty: Since the moment Groupon filed its paperwork, it's been hit with criticism for unorthodox accounting measures, which led to several downward revisions of its financials.

Groupon's initial filing in June drew heavy scrutiny for the company's reliance on a nonstandard metric called "adjusted consolidated segment operating income." The unwieldy "ACSOI" stripped out Groupon's steep costs for marketing and acquiring new subscribers.

0:00 / 1:59 Can Groupon survive big boy accounting?

Under pressure from regulators, Groupon re-filed in August to instead use only standard accounting procedures. As a result, the operating profits that Groupon cited in its first filing became operating losses.

Then, in late September, Groupon revised its reported revenue to "correct for an error" -- namely, including in its revenue the cash it has to hand back to merchants for their share of the coupons Groupon sells. That effectively whacked Groupon's sales in half, to $688 million for the first half of 2011, down from the $1.5 billion it claimed previously.

Will Your Next Phone be Bendable

As we enter the final months of 2011, the thoughts of tech watchers like me are turning to what we can expect in 2012.

Voice recognition in all our devices? Touch control replacing the mouse and keyboard? The death of the wallet as mobile payments become mainstream?

Maybe. But what I'm most excited about is something far more audacious: flexible screens.

Expecting this much-anticipated technology to become widely available in 2012 is optimistic but not unthinkable.

Last week, Nokia demoed a mindblowing prototype handheld device that lets you bend and twist the screen to complete actions like scrolling and zooming.

Pete Cashmore is the founder and CEO of Mashable.com.

Meanwhile, Samsung said on an earnings call last week that it expected to debut phones with flexible displays in 2012 and that flexible tablets would follow.

The advantages of flexible displays are obvious: They're more durable, and they pave the way for new input methods, such as bending the display to zoom.

But where will this new tech take us?

I think this technology will lead to the biggest breakthrough in mobile devices since the touchscreen. In fact, the next innovation in screen technologies may be an even bigger leap forward than touch displays.

Think not of a bendable display but of a foldable one.

You see, the biggest limitation of any device these days is screen size. There's a constant tension at play: You can have a small screen that fits in your pocket (your phone) or a big screen for home use (a tablet computer).

But you can't have both. Or can you?

The ultimate dream for these flexible displays is that they could roll up: Imagine a phone-sized device that could unfurl to be the size of a tablet.

Perhaps it would be like an ancient scroll, a tube that unrolls to create a full 10-inch screen. Or perhaps a phone display could expand in two directions, making it useable both when collapsed and when unfurled.

Ah, but why stop with our current form factors? Wouldn't it be wonderful if these devices could take forms more like the paper they replaced?

While the transition from newspapers, magazines and books to digital devices has led to a few compromises -- those tactile forms are all reduced to a rectangular square of glass -- flexible screens can mimic the paper they replace.

E-book readers might simply become single sheets of digital paper. Magazines and newspapers could be made up of multiple sheets that update their content wirelessly on a daily or even hourly basis.

Where flexible screens might have the biggest impact, however, is in their ubiquity. The iPad remains an expensive device, but that hasn't stopped it popping up in unexpected locations.

Some hotels let guests check in on an iPad installed with a custom app or even borrow one for the duration of their stay.

Upscale restaurants are using iPads instead of menus. One auto enthusiast installed one as his in-car entertainment system. Another put one in his kitchen cupboard, calling it a "kitchen entertainment system."

What will happen when screens are millimeters thick and virtually unbreakable?

Simply put: The cheaper, thinner, more portable and more durable screens become, the more uses we'll find for them. And what could be thinner or more durable than a flexible display? Any surface could -- and will -- become a screen.

Microsoft released a video this past week imagining what will happen when every surface is a digital display. It too is mindblowing.

It's an exciting future and one that's rapidly approaching: If the device makers can pull it off, next year could see the launch of the first "bendable" phone. Let's hope so.