Smartphone pioneer RIM looks to put recent hardships behind it with BB10

TORONTO, Cananda – Once a leader but now derided as a laggard, BlackBerry-maker Research In Motion hopes to regain the confidence of cynical smartphone users this week as the curtain is lifted on its much-anticipated new smartphones.

The stakes are high for the unveiling, which many observers say will determine whether RIM survives to see the launch of another BlackBerry smartphone.

It has been a steep decline for RIM, which less than five years ago was the most valuable company in Canada, above Royal Bank (TSX:RY). Affectionately called the “CrackBerry” maker, the mobile communications pioneer was Canada’s crowning achievement of the technology sector.

Back in 1984, the year RIM was founded, it was practically unimaginable that a tiny startup based in Waterloo, Ont. would help change the way we communicate, but for fresh engineering graduates Mike Lazaridis and Douglas Fregin that was always the plan.

“Like so many of these guys Lazaridis was a Star Trek lunatic,” said Alastair Sweeny, author of “BlackBerry Planet.”

“He says it’s almost like telepathy — humans have a yearning to communicate.”

The beginnings were humble for the two founders, with the majority of their time dedicated to Budgie, an LED sign business that was contracted by General Motors to communicate messages to workers on its assembly lines. Despite early interest, the project was a sales flop and RIM‘s owners decided to sell the business and look at other ventures.

One of those projects put RIM squarely in the eyes of Hollywood. The DigiSync film reader caught on with movie editors because its synching technology shaved hours off the time it took to turn miles of film into useable content in post-production. While the technology went on to win RIM both an Emmy and a technical achievement from the Academy Awards, it was never a top priority for RIM‘s founders.

“Lazaridis was always into security,” said Sweeny. “He realized that corporations needed secure communications because of industrial espionage, because of hacking.”

Throughout the late 1980s, RIM was working alongside other industry players to develop technology that would eventually be used in pagers and wireless payment processing systems. By the start of the 1990s, the wheels were turning on the communication systems that would become the foundation of the BlackBerry.

An agreement with Ericcson’s Mobitex wireless network allowed RIM to create pagers that operated as a two-way communicators, a revolutionary concept for data transfer.

Turning the idea into a marketable product was a bigger challenge. The world had yet to become accustomed to the Internet age and most people hadn’t heard of email, nevermind used it. While the project was a bust with its first partner Cantel, RIM forged ahead.

The technology captured the attention and imaginations of an industry, and perhaps most importantly Jim Balsillie, an energetic Harvard graduate who, at the age of 33, invested $ 250,000 of his own money into the company by re-mortgaging his house.

In 1996, RIM launched its first sales success, a clamshell wireless handheld device called the RIM 900 Interactive Pager. It was a two-way communicator that also had the ability to send faxes, as well as link to the Internet and email.

But Lazaridis discovered that the email feature, which he believed was one of the strongest qualities of the device, wasn’t being used by most customers. So he hired Lexicon Branding, based in California, to find a way to draw more attention to its keyboard, the main feature that differentiated it from other pagers.

Branding executives pondered the device, focusing mainly on its appearance, and when one of them pointed out the little keypad looked like similar to the seeds of a strawberry, the conversation zeroed in on the names of fruits and vegetables. Eventually, the group settled on “BlackBerry” because it was both punchy and remained true to the device’s original black casing.

The company listed on the Toronto Stock Exchange in 1997, raising more than $ 115 million, and debuted the first BlackBerry the following year.

From there it seemed the sky was the limit.

Suddenly the BlackBerry was everywhere in the technology community, thrust into the spotlight by the enthusiastic co-CEO Balsillie who touted the device on Wall Street and handed it out for free at select technology conferences. Balsillie knew how to build buzz and proudly tapped away on the BlackBerry whenever he appeared before the media.

A demand had been created, and subscribers to the BlackBerry services continued to grow in leaps and bounds. In 1999, RIM listed on the Nasdaq, raising another US$ 250 million.

The success grabbed the attention of Virginia-based NTP Inc. which filed a lawsuit claiming that RIM‘s network infringed on its patents. While NTP won the case, and the courts ordered RIM to pay US$ 23.1 million, the battle continued in appeals courts for years before a settlement was reached for a much heftier $ 612.5 million.

Outside the courtrooms the BlackBerry was a massive success, garnering headlines when its enterprise network remained intact after the terrorist attacks on Sept. 11 when other wireless phone systems broke down.

The BlackBerry’s reputation was growing at a steady clip, helped by the introduction of cellphone service in 2002 on what had been a text-only device. Within two years, BlackBerry reached more than 1 million subscribers.

The smartphone was in demand at corporate offices around the world, and soon the more casual consumer began to take notice, helping to boost its subscribers to nine million by 2007. RIM also secured a distribution deal in China, driving its stock to a level that made it the most valuable Canadian company.

But amid all of the success a storm of competition was brewing in the tech industry.

In June 2007, Apple unleashed the first iPhone touchscreen device onto the U.S. market, garnering widespread praise from critics and consumers, but hardly rattling its competitors.

Microsoft’s chief executive Steve Ballmer famously dismissed the touchscreen device that year, saying “there’s no chance that the iPhone is going to get any significant market share.”

Whether it was a strategic decision or simply coincidence, Apple kept its iPhone far away from the Canadian marketplace for nearly a year, choosing to launch in six other countries first.

The lower profile with Canadian consumers also seemed to minimize the concern from RIM’s executives, who publicly downplayed the influence of the iPhone in an already crowded mobile phone market.

“They just missed it,” said Carl Howe, vice-president of consumer research at Yankee Group.

“They missed the idea that you could create a really good experience without having a keyboard. They gave Apple a two-year head start.”

By the time the iPhone hit Canadian shelves, RIM was facing scrutiny from analysts who worried that the growing number competitors, which now also included Google’s Android system, would devour marketshare.

RIM went on the defensive in 2008, releasing a combination keypad and touchscreen device it called the Storm, but the phone was swept up in a flurry of other BlackBerry releases that year. Much of the marketing clout was put behind the debut of a high-end BlackBerry Bold, which wasn’t a touchscreen.

“A lot of tech companies have their heads in the sand,” said Howe of the co-CEOs.

“It’s not that they’re stupid, and I think that’s an important point. People who get hit by ‘innovator’s dilemma’ are not stupid … I think when you create something from scratch and turn it into a multi-billion dollar business you’re very reluctant to say ‘I’m now going to throw away everything I’ve learned and do something different.’ “

At the height of its hype, the BlackBerry device was splashed across television shows and movies, while then-presidential candidate Barack Obama proclaimed he was a BlackBerry faithful during his campaign.

As competition heated up with Apple, investors became concerned that RIM’s co-CEOs, in particular Balsillie, were distracted by the possibilities that success brought them, rather than focused on revamping the BlackBerry for a new era.

In 2009, Balsillie launched his third, and most aggressive, attempt to buy an National Hockey League team, with hopes that he could convince the NHL to move the Phoenix Coyotes to Hamilton. The battle dragged on for months before Balsillie abandoned his dream once again.

Back in Waterloo a storm was brewing as technical problems began to wreak havoc on the company’s network infrastructure.

There were two network outages in less than a year that left BlackBerry users temporarily without their services. Some industry observers suggested the company could buckle under its own success. BlackBerry sales were soaring, even with the technical problems, with subscriber growth up 70 per cent to 36 million by the end of 2009. RIM’s leaders reassured users that the outages were a fluke and wouldn’t be a reoccurring problem.

Despite the setbacks, the BlackBerry image appeared to emerge unscathed. In April 2010 it cracked the Top Five mobile phone carriers worldwide and soon afterwards Queen Elizabeth made a visit to RIM’s headquarters in Waterloo.

Behind the scenes there was unrest among the company’s board of directors as the leaders clashed over where the BlackBerry brand should go next. Rumours swirled around the industry that trouble was afoot.

Fanfare eventually gave way to the realities of competition, with the first major blow coming from the failed launch of the PlayBook, RIM’s answer to Apple’s iPad. In September 2010, the co-CEOs showcased the new product for the public but waited another six months before unleashing it to stores.

By then it was too late, the tablet market had already been cornered by Apple and reviews of the PlayBook harshly criticized its lack of connectivity to popular BlackBerry functions like email and instant messenger.

Within months the foundation of RIM started to crumble as it repeatedly missed its own revenue and earnings targets. In June 2011, the company slashed 11 per cent of its workforce, or 2,000 jobs, to keep its cost in line.

A stark reminder of its fragility came in October 2011 when a worldwide four-day outage left BlackBerry users again without the use of the device they had come to rely on. The smartphones wouldn’t connect to the Internet, email or its messaging services.

The anger from its loyal users was heard loud and clear, and Lazaridis emerged from days of silence to apologize and tell users the company had let them down.

In an earnings call several weeks later, Lazaridis urged investor “patience and confidence” as the executives tried to improve performance. Both he and Balsillie, two of the company’s biggest shareholders, reduced their salaries to $ 1.

Again, it was a decision made too late — the outage had cost RIM more than $ 50 million in revenue and tarnished its reputation. In December 2011, the company reported that profits tumbled more than 70 per cent, affected by a big charge from sales discounts it was forced make on PlayBook tablets.

Perhaps an even bigger blow to RIM’s reputation was the delay of its next-generation BlackBerrys, pushing the planned release into 2012. The phones — which were delayed again throughout last year and will be unveiled this Wednesday — were seen as the company’s best hope to maintain market share against Apple and Android devices.

The company stock had tumbled from its lofty height of $ 137.41 on the Toronto Stock Exchange in mid-2008 to $ 14.80 at the end of 2011.

RIM, once a symbol of Canadian success and innovation, had become awash in its own troubles. Apple’s iPhone had cornered the rapidly developing apps market while RIM sat on the sidelines with developers.

Sweeny recalls visiting a group of developers, who he considered BlackBerry fanatics, while doing research for his book in 2008.

“They were writing great games and programs for the BlackBerry and they couldn’t get the latest hardware from RIM to test them on,” he said.

“I called them a couple years later and they weren’t writing for BlackBerry at all. They were writing programs for Apple and starting to write for Android.”

From an outsider’s perspective, it’s often suggested that the co-CEOs lost control of their empire, but some industry watchers say that RIM saw the troubles several years earlier.

“In this market you can’t admit that you’re behind,” said Tim Long, an analyst at BMO Capital Markets.

“You have to put on the face because once you start to lose momentum that can shift the buying patterns.”

Numerous acquisitions were made by RIM throughout 2010 and 2011 to beef up its stable of technology, Long said. That included Ottawa-based QNX Software Systems, whose technology became the basis of the new operating system, and Astonishing Tribe, the Swedish company that helped develop an early user interface of the Android operating system.

But the acquisitions came too late, and by late 2011 some investors were calling for its leaders to resign.

Bowing to pressure, Balsillie and Lazaridis stepped down from their co-CEO positions in January 2012, pocketing a combined $ 12 million in the process. The duo were replaced by Thorsten Heins, RIM’s former chief operating officer, and hardly two months later Balsillie had left the company entirely.

Almost immediately, Heins launched a major revamp of RIM’s operations, hiring several new executives with experience at other major tech companies. The approach was a last-ditch effort to revive the company, but it has also thrown the BlackBerry maker into the most uncertain period in its history.

With nearly $ 2 billion in its coffers Heins had options, but the clock was ticking to get a new smartphone on the market.

“Nobody is delusional here,” Rick Costanzo, the company’s new executive vice-president of global sales, said last summer.

“We get it. That’s why we’re building BlackBerry 10 and man are we committed.”

A new chapter in RIM’s history begins this week as the BlackBerry 10 smartphones and operating system are showcased to the world.

Wireless News Headlines – Yahoo! News

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Ailing Jennifer Lawrence Plans to Attend the Screen Actors Guild Awards, Say Sources

By Alison Schwartz

01/27/2013 at 01:40 PM EST

Will Jennifer Lawrence walk the red carpet at Sunday night's Screen Actors Guild Awards?

The Silver Linings Playbook star, who's nominated for her leading role playing troubled girl-next-door Tiffany, is currently sick with pneumonia, according to her costar. But sources tell PEOPLE that Lawrence is planning to attend the SAG Awards unless she takes a turn for the worse before showtime.

"She's been very sick," says one source. "She was laying low all week. She plans to be there tonight."

The actress, 22, was unable to attend Saturday's Australian Academy of Cinema and Television Arts International Awards in Los Angeles, where she was honored for her work in the film.

"I'm going to receive this on her behalf," Jacki Weaver told the audience as she accepted Lawrence's best lead actress trophy, according to E! News. "Poor Jen is really sick. She really is sick. She has pneumonia."

After nabbing a Golden Globe earlier this month, the actress is a favorite to pick up the SAG Award.

The 19th Annual Screen Actors Guild Awardswill air live on TNT and TBS on Sunday, Jan. 27, at 8 p.m. ET (5 p.m. PT) from the Shrine Auditorium in Los Angeles.

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CDC: Flu seems to level off except in the West

New government figures show that flu cases seem to be leveling off nationwide. Flu activity is declining in most regions although still rising in the West.

The Centers for Disease Control and Prevention says hospitalizations and deaths spiked again last week, especially among the elderly. The CDC says quick treatment with antiviral medicines is important, in particular for the very young or old. The season's first flu case resistant to treatment with Tamiflu was reported Friday.

Eight more children have died from the flu, bringing this season's total pediatric deaths to 37. About 100 children die in an average flu season.

There is still vaccine available although it may be hard to find. The CDC has a website that can help.

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CDC: http://www.cdc.gov/flu/

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Fed waits for job market to perk up

LONDON (Reuters) - The Federal Reserve's ultra-loose monetary policy is a root cause of the "currency wars" that some see as a looming threat to the world economy, but don't expect the U.S. central bank to signal a shift back to normal any time soon.

The Fed, whose policy-setting Federal Open Market Committee concludes a two-day meeting on Wednesday, said just last month that it expects to keep short-term interest rates exceptionally low until the U.S. unemployment rate falls to 6.5 percent, inflation permitting.

That goal is still distant. Figures on Friday are likely to show that the jobless rate was unchanged in January at 7.8 percent, while the economy created 155,000 jobs, the same as in December, according to economists polled by Reuters.

So it would be a huge surprise if the Fed were to do anything other than reaffirm last month's decision to anchor short-term interest rates in a range of zero to 0.25 percent and to keep buying $85 billion of bonds each month to hold down long-term rates.

The only question mark is whether the FOMC vote will be unanimous now that Richmond Fed President Jeffrey Lacker, who opposes the current round of bond-buying, has rotated off the panel, said Harm Bandholz, an economist with UniCredit Bank in New York.

Most economists polled by Reuters expect the Fed to keep its open-ended bond-buying program in place well into next year, even though the economic news flow and market confidence are improving markedly.

True, Wednesday's preliminary report on fourth-quarter GDP is likely to show that growth slowed to an annualized rate of 1.2 percent from 3.1 percent in the July-September period.

And the current quarter will also be soft as the expiry of a 2 percent payroll tax cut is dampening consumer spending.

But then Bandholz expects an average growth rate of 2.8 percent over the rest of the year. That would be the strongest three-quarter period of the recovery so far, he said.

"The outlook has improved a lot in the U.S. I've been on the cautious side for the last three years, but this time I'm a bit more bullish," he said.

THE FED BIDES ITS TIME

The recovery in housing would add at least half a percentage point to GDP growth in 2013, while capital spending was likely to revive now that uncertainty over budget talks in Washington had been largely allayed, Bandholz said.

"There's a lot of pent-up demand in the system. I don't think all these investments have been abandoned; they've just been postponed," he said.

At some point, investors' exuberance over the super-easy stance of the world's major central banks will give way to worries that they are about to take away the punch bowl.

Gustavo Reis, an economist with Bank of America Merrill Lynch in New York, said concerns about the costs of money-printing were likely to spread but would be offset by uncertainty over the impact on growth of fiscal tightening in the United States and Europe.

"All told, although global activity seems more robust now than at any point in 2012, we expect policymakers to continue to worry predominantly about downside risks," he said in a note.

The bank does not expect the Fed to consider halting asset purchases before 2014, while the latest episode of monetary easing announced by the Bank of Japan is likely to be ‘long-lived and significant'.

Many economists argue that bold monetary action is long overdue in Japan, whose nominal output has not grown in 20 years, saddling the government with a debt-to-GDP ratio of more than 220 percent.

But Douglas McWilliams, who heads the Centre for Economics and Business Research, a London consultancy, fears Japan's decision will lead the global economy into unpredictable currency wars.

"It's a bit like if someone's rude to you, you're rude to them back. You get tit-for-tat behavior," McWilliams said.

CURRENCY FRICTION, BUT NO WAR

Olivier Blanchard, the chief economist of the International Monetary Fund, last week called talk of currency wars overblown and said countries had to pull the right policy levers to get their economies back on track, with corresponding consequences for exchange rates.

However, McWilliams said the problem was that it was difficult to get countries to agree NOT to wage currency wars.

Tellingly, Chancellor Angela Merkel voiced German concerns last week that Japan might be deliberately seeking to cheapen the yen to give its exporters a competitive edge.

"So we may well find that there is a period of very heavy volatility before the authorities involved try and get some kind of agreement," McWilliams said.

In a relatively quiet week for economic data in the euro zone - money supply figures and confidence surveys from the European Commission are the highlights - the focus is likely to remain squarely on the euro, which has been rising briskly as traders price in the policy shifts that Blanchard had in mind.

While the Fed and the Bank of Japan are expanding their balance sheets, the European Central Bank is starting to soak up some of the emergency cash it lent to banks a year ago.

The central bank said on Friday that banks would repay early 137 billion euros of cheap borrowed money.

"I'm not sure if we have too strong a euro for the moment but certainly we would not want to see a currency war of competitive devaluations which would have a negative effect on the euro," the European Union's top monetary official, Olli Rehn, told Reuters.

(Additional reporting by Paul Taylor in Davos; editing by Jason Neely)

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Riots Grip Egyptian City After Soccer Verdict

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Hackers claim attack on Justice Department website

WASHINGTON (Reuters) – Hackers sympathetic to the late computer prodigy Aaron Swartz claimed on Saturday to have infiltrated the website of the U.S. Justice Department’s Sentencing Commission, and said they planned to release government data.

The Sentencing Commission site, www.ussc.gov , was shut down early Saturday.

Identifying themselves as Anonymous, a loosely organized group of unknown provenance associated with a range of recent online actions, the hackers voiced outrage over Swartz’ suicide on January 11.

In a video posted online, the hackers criticized the government’s prosecution of Swartz, who had been facing trial on charges that he used the Massachusetts Institute of Technology‘s computer networks to steal more than 4 million articles from JSTOR, an online archive and journal distribution service.

Swartz had faced a maximum sentence of 31 years in prison and fines of up to $ 1 million.

The FBI is investigating the attack, according to Richard McFeely, of the bureau’s Criminal, Cyber, Response, and Services Branch.

“We were aware as soon as it happened and are handling it as a criminal investigation,” McFeely said in an emailed statement. “We are always concerned when someone illegally accesses another person’s or government agency’s network.”

(Reporting by Deborah Zabarenko; Editing by Vicki Allen)

Tech News Headlines – Yahoo! News

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Ashton Kutcher Parties in Sundance After jOBS Premiere

Caught in the Act

01/26/2013 at 01:50 PM EST

Ashton Kutcher's much-hyped movie jOBS premiered at the Sundance Film Festival on Friday, and the star was on hand – minus girlfriend Mila Kunis – for all the festivities.

Kutcher was one of the first to arrive at the official after party, hosted by Nur Khan Presents NK on Main Street for the cast and filmmakers and sponsored by Red Touch Media.

Kutcher was captivated by a floor-to-ceiling portrait of late Apple visionary Steve Jobs, whom Kutcher portrays in the film. Guests were quick to snap a photo of the actor admiring the subject of his role.

Without Kunis by his side, Kutcher very much remained a one-man guy, focusing his attention all night on his table of male friends and colleagues and posing for pictures with fans, according to an observer. The pride he takes in jOBS was palpable, as Kutcher was incredibly excited to chat about his film and role with all the guests who came up to greet him.

Co-star Ahna O'Reilly spent the evening in a very social mood, dancing to the beats of DJ Cash and catching up with co-star Josh Gad. Not to live down his "funny man" persona, Gad went into the evening entertaining all the guests and causing an uproar of laughter with Kutcher and O'Reilly while catching up about filming and their time at Sundance.


– Jennifer Garcia

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Wall Street Week Ahead: Bears hibernate as stocks near record highs

NEW YORK (Reuters) - Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. The bearish case is a difficult one to make right now.

Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again.

The Standard & Poor's 500 Index <.spx> has gained 5.4 percent this year and closed above 1,500 - climbing to the spot where Wall Street strategists expected it to be by mid-year. The Dow Jones industrial average <.dji> is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895.98, its highest close since October 31, 2007.

The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. On Friday, the benchmark S&P 500 ended at 1,502.96 - its first close above 1,500 in more than five years.

"Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years."

The most recent Reuters poll of Wall Street strategists estimated the benchmark index would rise to 1,550 by year-end, a target that is 3.1 percent away from current levels. That would put the S&P 500 a stone's throw from the index's all-time intraday high of 1,576.09 reached on October 11, 2007.

The new year has brought a sharp increase in flows into U.S. equity mutual funds, and that has helped stocks rack up four straight weeks of gains, with strength in big- and small-caps alike.

That's not to say there aren't concerns. Economic growth has been steady, but not as strong as many had hoped. The household unemployment rate remains high at 7.8 percent. And more than 75 percent of the stocks in the S&P 500 are above their 26-week highs, suggesting the buying has come too far, too fast.

MUTUAL FUND INVESTORS COME BACK

All 10 S&P 500 industry sectors are higher in 2013, in part because of new money flowing into equity funds. Investors in U.S.-based funds committed $3.66 billion to stock mutual funds in the latest week, the third straight week of big gains for the funds, data from Thomson Reuters' Lipper service showed on Thursday.

Energy shares <.5sp10> lead the way with a gain of 6.6 percent, followed by industrials <.5sp20>, up 6.3 percent. Telecom <.5sp50>, a defensive play that underperforms in periods of growth, is the weakest sector - up 0.1 percent for the year.

More than 350 stocks hit new highs on Friday alone on the New York Stock Exchange. The Dow Jones Transportation Average <.djt> recently climbed to an all-time high, with stocks in this sector and other economic bellwethers posting strong gains almost daily.

"If you peel back the onion a little bit, you start to look at companies like Precision Castparts , Honeywell , 3M Co and Illinois Tool Works - these are big, broad-based industrial companies in the U.S. and they are all hitting new highs, and doing very well. That is the real story," said Mike Binger, portfolio manager at Gradient Investments, in Shoreview, Minnesota.

The gains have run across asset sizes as well. The S&P small-cap index <.spcy> has jumped 6.7 percent and the S&P mid-cap index <.mid> has shot up 7.5 percent so far this year.

Exchange-traded funds have seen year-to-date inflows of $15.6 billion, with fairly even flows across the small-, mid- and large-cap categories, according to Nicholas Colas, chief market strategist at the ConvergEx Group, in New York.

"Investors aren't really differentiating among asset sizes. They just want broad equity exposure," Colas said.

The market has shown resilience to weak news. On Thursday, the S&P 500 held steady despite a 12 percent slide in shares of Apple after the iPhone and iPad maker's results. The tech giant is heavily weighted in both the S&P 500 and Nasdaq 100 <.ndx> and in the past, its drop has suffocated stocks' broader gains.

JOBS DATA MAY TEST THE RALLY

In the last few days, the ratio of stocks hitting new highs versus those hitting new lows on a daily basis has started to diminish - a potential sign that the rally is narrowing to fewer names - and could be running out of gas.

Investors have also cited sentiment surveys that indicate high levels of bullishness among newsletter writers, a contrarian indicator, and momentum indicators are starting to also suggest the rally has perhaps come too far.

The market's resilience could be tested next week with Friday's release of the January non-farm payrolls report. About 155,000 jobs are seen being added in the month and the unemployment rate is expected to hold steady at 7.8 percent.

"Staying over 1,500 sends up a flag of profit taking," said Jerry Harris, president of asset management at Sterne Agee, in Birmingham, Alabama. "Since recent jobless claims have made us optimistic on payrolls, if that doesn't come through, it will be a real risk to the rally."

A number of marquee names will report earnings next week, including bellwether companies such as Caterpillar Inc , Amazon.com Inc , Ford Motor Co and Pfizer Inc .

On a historic basis, valuations remain relatively low - the S&P 500's current price-to-earnings ratio sits at 15.66, which is just a tad above the historic level of 15.

Worries about the U.S. stock market's recent strength do not mean the market is in a bubble. Investors clearly don't feel that way at the moment.

"We're seeing more interest in equities overall, and a lot of flows from bonds into stocks," said Paul Zemsky, who helps oversee $445 billion as the New York-based head of asset allocation at ING Investment Management. "We've been increasing our exposure to risky assets."

For the week, the Dow climbed 1.8 percent, the S&P 500 rose 1.1 percent and the Nasdaq advanced 0.5 percent.

(Reporting by Ryan Vlastelica; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Chinese Officials Fired Over Chongqing Sex Scandal

BEIJING — The young women met the officials for illicit trysts with video cameras hidden in their purses. Every detail of the encounters was recorded. Then a group of men confronted the officials with the video recordings and made demands.

China’s state news media reported on Friday details of a sex extortion ring that brazenly operated “honey traps” in the southwest metropolis of Chongqing for several years. The widening scandal, which first emerged late last year, has led to the dismissals of at least 11 officials of the Communist Party, government or state-owned companies for having sex with women in the ring and then being blackmailed by the men who had set up the snares.

Xi Jinping, China’s new top leader, has vowed to root out official corruption and said this week that “flies,” or relatively low-level bureaucrats, as well as top officials he referred to as “tigers,” must be brought down.

The most famous victim of the sex ring scandal has been Lei Zhengfu, a middle-aged district party chief who was secretly filmed having sex in a hotel room in 2008 with a young woman. In late November, the leaked video of Mr. Lei began circulating on the Internet and he became the poster boy for a series of low-level or midlevel officials who have been brought down by scandals, often sexual in nature, across the nation. Mr. Lei was removed from his job and placed under investigation soon after the video appeared online. Now, according to Xinhua, the state news agency, 10 other officials have been removed as well for falling prey to the sex ring. Five of them were executives in state-owned companies.

The sex scandal might have come out earlier but Bo Xilai, the Chongqing party chief at the time, and Wang Lijun, his police chief, buried the results of an investigation into the ring. Mr. Bo and Mr. Wang were both felled last year by the fallout from the murder of a British business executive arranged by Mr. Bo’s wife; Mr. Bo is expected to be tried soon on a wide range of criminal charges. While the two scandals are unrelated, the airing of the blackmail ring at this time could reflect a decision by the Chinese leadership to highlight other problems in Chongqing under Mr. Bo’s rule.

The ring’s mastermind was a man named Xiao Ye, according to a report by Southern Metropolis Daily on Wednesday that was cited by Xinhua in its Friday article. Three women were used as bait. The state media reports did not say exactly what the officials gave the men in return for keeping their involvement secret, but one report said that a company run by Mr. Xiao was involved in a real estate development project in the district governed by Mr. Lei.

Mr. Xiao gave the women a list of Chongqing officials whom the women were to contact, Xinhua reported. The women sent text messages to the officials. They would tell the officials they worked for a local real estate company and had met the official at a banquet.

“Hope we can stay in touch a lot,” they wrote. If the officials said they had no memory of the meeting, the women would invoke the name of a chief executive and pretend to be angry that the official had forgotten the woman already. If the official bit, the woman would continue flirting by text or transmit seductive photos of themselves, Xinhua said.

A woman would then meet with the official in an upscale hotel to have tea, coffee or a snack. The official would hand her gifts, such as jewelry. Eventually, when the two were ready to have sex, the woman would make sure to show up at the hotel room with a hidden camera. The official would rarely stay the entire night, but the video caught all the action.

This happened over and over until the video was clear enough, Xinhua reported. Then at a later tryst, several men in the ring would show up while the official and the woman were in the middle of having sex. One of the men would pretend to be the woman’s boyfriend and throw a fit. Behind him would be another man pretending to be a private detective. A third man would then show up and say he was a member of a gang.

They would beat up the official and show him the video. Mr. Xiao entered the scene afterward to work out an agreement with the official and assure him that the video would remain buried, as long as the demands were met.

Of the victims, Mr. Lei was the one who tried to fight back most vigorously, one report said. He assumed the video would eventually come out, and so he went to senior Chongqing officials to explain his plight. Wang Lijun, who was then the police chief of Chongqing, took charge of the case. By 2009, the investigation was done and Mr. Wang and Mr. Bo had the results. But they decided to quash the case or ignored it, and the officials who were found to have been victims of the ring were eventually promoted.

The Xinhua article on Friday said people have been especially surprised that one district party chief in particular, Peng Zhiyong, who holds a doctorate, fell victim to the honey trap.

“He was spoken highly of by the people and enjoyed a reputation for being talented, smart, eloquent and outstanding in all ways,” Xinhua said. In addition, the report said, he “was widely regarded as having enormous political potential.”

Amy Qin contributed research.

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Everything You Need to Know About Kim Dotcom’s Mega

Click here to view the gallery: Hands On With Mega

Mega — the long-anticipated file sharing and cloud storage site from Kim Dotcom — is now open to the public.

[More from Mashable: Google Glasses Spotted and Two Other Stories You Need to Know]

Thanks to its association with the now-defunct Megaupload — and the legal issues facing its founder Kim Dotcom — the amount of press, user interest and hype surrounding Mega is greater than any file hosting/cloud storage launch in recent memory.

According to Dotcom, more than 1 million users signed up for Mega in the first 24 hours. On Twitter, the larger-than-life entrepreneur has continued to share usage stats and traffic graphs that compare Mega with perennial cloud favorite, Dropbox.

[More from Mashable: 9 Fresh YouTube Shows You’ll Love]

If you’re curious about the inner workings of Mega, how it works and how it handles security, we’ve got you covered.

The Phoenix of Megaupload

Mega is the spiritual successor to Kim Dotcom’s last business, the insanely popular file-hosting service Megaupload. Last year, the U.S. Department of Justice shut down Megaupload and pursued criminal charges against Dotcom. Dotcom, a New Zealand citizen, is actively fighting U.S. extradition orders.

Megaupload was targeted by the DoJ because of its role in illegally distributing copyright material — including digital copies of movies, TV shows, books, music and software.

Rather than try to start a new service eschewing the potential for copyright material to be uploaded and shared, Dotcom is positioning Mega as a service that cares about and protects its user’s privacy. In fact, Mega’s tagline is “the privacy company.”

How It Works

On the surface, Mega is a bare-bones cloud storage host. After signing up for accounts, users can upload files and folders of all types to the service. Those files can then be shared with others.

The free plan gives users 50GB of file storage. There are no hard limits on file size, meaning users can use Mega as a way to back up photos, documents and other data. Obviously, this means users can use Mega as a way to store media content — video files, music, DVD images — as well.

For now, Mega is optimized to work on desktop web browsers. Mega strongly encourages users to use Google Chrome. And while Mega has big plans for developers and client-side apps, for now, the only way to access files is via the web browser.

Files can be uploaded to the service using drag and drop or a file-upload menu. Users can create folders in the file manager.

Uploads and downloads take place in parallel. If you upload a large number of files at once, each file uploads one at a time. In the future, Mega says users will be able to change the upload order. If you need to upload or download multiple files at once, simply open a new Mega tab in your browser and select that file.

You can upgrade to a higher-tiered storage plan from within your account. Mega doesn’t sell these plans itself; instead it has resellers who sell vouchers for a service. A 500GB storage plan with 1TB of enhanced bandwidth is 9.99 euros a month or 99 euros a year (a little over $ 110 U.S. dollars). That’s cheaper than most of its competitors.

The Importance of Passwords

It’s very important to remember the password you select when setting up your Mega account. The password is a big part of how Mega encrypts data on both ends.

During the sign-up process, Mega uses your password to create a 2,048-bit RSA key. This is the key that tells the system you are who you say you are. If you forget your password, you’re not going to be able to get into your account.

Right now, Mega doesn’t even have a password reset or recovery feature. In the future, Mega says it will have a reset mechanism but it will only allow users access to files or folders they have file keys for (more on file keys below). Users won’t be able to access other files until or unless they remember their password.

Because your Mega password is also your master encryption key, it’s important that users choose a secure password. We recommend using a password manager and printing a copy of the password to store in a safe place.

Understanding File Security

Mega is focused on end-to-end encryption. This means that files are encrypted both on upload and on download. With most traditional file hosts or cloud storage lockers, a public link to a file also includes a file path. With Dropbox, for example, the public or shared link includes the file name.

With Mega, things are a bit different. While users can share specific files to other Mega users or via email, the URL to a file doesn’t contain a file name; instead, a cryptographic key is appended to the URL. Without this key, you can’t access the file. Once decrypted by the server, a user has the option to download the linked file.

Mega’s promise, in other words, is that users control who has access to their files and accounts and no one else.

For important files or folders, users might want to make a note of the file key and keep it in a safe place — if they are worried about getting locked out of their account.

How Safe Are Your Files

Since Mega is touting itself as “the privacy company,” it’s important to look at how the company stores files and content.

The end-to-end encryption scheme is only part of how Mega secures data. Still, some are already criticizing the service, noting that it’s not as secure as it says it is. An article for Forbes cites two professionals who have problems with Mega’s security.

Matthew Green, a cryptography professor at John Hopkins University, is particularly critical of the way Mega uses JavaScript to verify its encryption method telling Forbes that “it makes no sense.”

Mega has responded to Green’s claims on its own blog, noting that its scheme “basically enables us to host the extremely integrity-sensitive static content on a large number of geographically diverse servers without worrying about security.”

Meanwhile, at Ars Technia Lee Hutchinson raises concerns about how Mega comes up with its crypto key at sign-up, as well as how the company handles deduplication, or how it eliminates duplicate copies of data.

Again, Mega has taken to its blog to attempt to clarify its policies and the way it handles data.

While Mega’s crypto system certainly doesn’t seem any less secure than any other file locker, we do agree with critics who note that the system might be more about giving Mega culpability against claims that it knows infringing content is on its servers, rather than about protecting that data itself.

The service is still in beta and much of its code is available via open source, so security purists might want to watch how Mega’s system evolves before trusting it with important, sensitive data.

Will Mega Stick Around?

While security experts can quibble and argue over the way Mega uses cryptography and how it stores data on its array of servers, the bigger issue, for us, is long-term survival.

While I would argue that most users who actively used Megaupload were not using it as a traditional cloud service, the fact remains that when the service was shut down, user files went with it.

Already anti-piracy groups are campaigning to shut down payment processors to Mega’s resellers. One of the reasons Mega isn’t taking payments itself and is instead using resellers is to prevent those groups from shutting down payment processors or trying to seize funds.

This is worrisome because in addition to outside capital, Mega needs professional accounts to keep its site working.

It’s too early to say if Mega will be around for the long haul or not, but our advice is not to use Mega as your only file storage solution. Keep backups of crucial files on disk or other cloud-based services.

What do you think of Mega? Let us know in the comments.

This story originally published on Mashable here.

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