ECB’s Constancio compares Bitcoin to Dutch tulip mania

September 22, 2017

By Francesco Canepa

FRANKFURT (Reuters) – Bitcoin is not a currency but a mere instrument of speculation, the vice president of the European Central Bank said on Friday, comparing the digital currency to tulip bulbs during the 17th century trading bubble in the Netherlands.

The dollar value of the Bitcoin has nearly trebled this year and, while its adoption has yet to pick up in a significant way, the rise of this cryptocurrency is worrying central bankers across the world.

But ECB Vice President Vitor Constancio denied it posed a threat to monetary policy and compared its rise to the ‘Tulip mania’ seen three-hundred years ago.

“Bitcoin is a sort of tulip,” Constancio said at an ECB conference. “It’s an instrument of speculation … but certainly not a currency and we don’t see it as a threat to central bank policy.”

The ECB said year last year digital currencies, which are generally issued by private companies and only exist in electronic form, could in principle erode its power over the supply of money, inviting European Union lawmakers to tighten proposed rules on the matter.

Earlier this month, President Mario Draghi quashed an Estonian proposal to launch a government-backed cyrptocurrency, saying the only valid money in the euro zone was the euro.

Last week, Chinese authorities ordered Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure, signaling a widening crackdown by authorities on the industry to contain financial risks.

(Reporting By Francesco Canepa; Editing by Toby Chopra)

At smartphone pioneer HTC: a new, or virtual, reality

September 22, 2017

By Jess Macy Yu and Jeremy Wagstaff

TAIPEI/SINGAPORE (Reuters) – When HTC Corp brought back founder Cher Wang two years ago to turn around the struggling Taiwanese mobile phone maker, investors hoped she could stem a sharp loss in market share to Apple and Samsung Electronics.

But the gamble to rebuild the early smartphone pioneer’s reputation failed, as its market share has continued to dwindle – to below 1 percent from closer to 10 percent in 2011.

On Thursday, Wang announced HTC was shifting around 2,000 staff, mainly handset engineers, to Alphabet’s Google in a $1.1 billion deal that casts doubts over the company’s longer-term future.

“Our main consideration is that our brand will continue,” Chialin Chang, who heads HTC’s mobile business, told reporters. “So our major releases will be as usual. In future, HTC will concentrate not on our portfolio size, but what’s in the portfolio.”

Wang, a pioneer in Taiwan’s male-dominated technology industry, founded HTC 20 years ago as a contract manufacturer and established it as a leader, designing and making Microsoft-powered smartphones.

It later turned out its own branded phones, but often struggled to translate positive early reviews into strong sales, despite spending heavily on marketing, including a collaboration with “Iron Man” star Robert Downey Jr for its flagship HTC One phone.

It also struggled to carve out a strong consumer brand in a market where Apple and Samsung grew quickly and have since been joined by Chinese rivals such as Huawei, Oppo and Vivo.

HTC shares have slumped around 90 percent since the company’s 2011 peak.

This week’s deal marks a retreat from HTC’s smartphone legacy.

“It may take a hard look at its smartphone business … and think it’s probably better to wind it down as soon as possible rather than for it to drain more cash,” said David Dai, an analyst at Sanford C. Bernstein.

“If it focuses on virtual reality (VR) and augmented reality (AR), there’s a much more concrete chance the company turns things around.”

That prospect pushed up HTC shares by their daily maximum of 10 percent on Friday, valuing the company at around $1.7 billion, as some investors hope the Google cash helps HTC focus on its Vive VR headsets and reduce its development costs.

HTC Chief Financial Officer Peter Shen said the deal will cut operating costs by 30-40 percent.

GLIMMER OF HOPE

While the Google cash throws HTC a lifeline for now, it may find it hard to retain staff, analysts said.

Google has cherry-picked the best people, said a former HTC executive who has spoken to current employees, adding: “It’s hard to see how anyone remaining would be enthusiastic.”

“Google’s investment will probably slow, but not stop, HTC’s decline,” said Neil Mawston, an analyst at Strategy Analytics.

Even Vive faces tough competition against the likes of Samsung and Sony Corp, which control half the $2 billion global AR and VR headset market.

HTC saw flat second-quarter growth, and had 4.4 percent market share after a price reduction.

“Vive remains in the red; free cash flow is negative; book value is eroding; and sales growth is decelerating,” JP Morgan analyst Narci Chang said in a note following the Google deal.

“Nevertheless… we think HTC might narrow the loss considerably… enough to keep the business afloat and beat the (market) consensus for the next few quarters.”

For now, no major VR overhaul has trickled down to staff.

“It (Google’s investment) could be (a good thing), but it’s business as usual,” one Vive employee told Reuters.

(Writing by Miyoung Kim; Editing by Ian Geoghegan)

Exclusive: U.S. Homeland Security found SEC had ‘critical’ cyber weaknesses in January

September 22, 2017

By Sarah N. Lynch

WASHINGTON (Reuters) – The U.S. Department of Homeland Security detected five “critical” cyber security weaknesses on the Securities and Exchange Commission’s computers as of January 23, 2017, according to a confidential weekly report reviewed by Reuters.

The report’s findings raise fresh questions about a 2016 cyber breach into the U.S. market regulator’s corporate filing system known as “EDGAR.” SEC Chairman Jay Clayton disclosed late Wednesday that the agency learned in August 2017 that hackers may have exploited the 2016 incident for illegal insider-trading.

The January DHS report, which shows its weekly findings after scanning computers for cyber weaknesses across most of the federal civilian government agencies, revealed that the SEC at the time had the fourth most “critical” vulnerabilities.

It was not clear if the vulnerabilities detected by DHS are directly related to the cyber breach disclosed by the SEC. But it shows that even after the SEC says it patched “promptly” the software vulnerability after the 2016 hack, critical vulnerabilities still plagued the regulator’s systems.

The hack, two weeks after credit-reporting company Equifax said hackers had stolen data on more than 143 million U.S. customers, has sent shockwaves through the U.S. financial sector.

An SEC spokesman did not have any comment on the report’s findings.

It is unclear if any of those critical vulnerabilities, detected after a scan of 114 SEC computers and devices, still pose a threat.

During the Obama administration, such scans were done on a weekly basis.

“I absolutely think any critical vulnerability like that should be acted on immediately,” said Tony Scott, the former federal chief information officer during the Obama administration who now runs his own cybersecurity consulting firm.

“This is what was at the root of the Equifax hack. There was a critical vulnerability that went unpatched for some long period of time. And if you’re a hacker, you are going to … try to see if you can exploit it in some fashion or another. So there is a race against the clock.”

For the past several years, the Department of Homeland Security has been producing a report known as the “Federal Cyber Exposure Scorecard.” It provides a weekly snapshot to more than 80 civilian government agencies about potential outstanding cyber weaknesses and how long they have persisted without being patched.

A directive by Homeland Security requires agencies to address critical vulnerabilities within 30 days, though sometimes that deadline can be difficult to meet if it might disrupt a government system.

The January snapshot shows improvements have been made across the government since May 2015, when there were a total of 363 critical vulnerabilities on devices across all of the civilian agencies, according to the report.

As of January 23, by contrast, there were a total of 40 critical vulnerabilities across the agencies reviewed by DHS and another 280 weaknesses categorized as “active high,” which is the second more severe category.

The top four agencies with the most “critical” vulnerabilities as of January 23 included the Environmental Protection Agency, the Department of Health and Human Services, the General Services Administration and the SEC.

However, more vulnerabilities do not necessarily mean one agency is worse than another because things depend on how many computers or devices known as “hosts” were scanned and what kinds of information could potentially be exposed.

“All it takes is one,” Scott said. “You can have one host and one vulnerability and your risk might be 10 times as high as someone who has 10 hosts and ten vulnerabilities.”

(Reporting by Sarah N. Lynch; Editing by Nick Zieminski)

Venture fundraising in yuan soars as investors target Chinese tech firms

September 22, 2017

By Elzio Barreto

HONG KONG (Reuters) – China-focused venture capital funds are increasing their bets on local technology companies and a further opening of Chinese domestic capital markets, raising money in the yuan at the fastest pace in five years.

Fund managers have raised 95.8 billion yuan ($14.54 billion) this year through late September in funds denominated in the Chinese currency, which is also known as the renminbi, compared with 56.7 billion yuan in all of 2016. That puts 2017 on pace to be the biggest year since 2012, when 145.8 billion yuan was raised, according to data provider Preqin.

There are currently 78 funds looking to raise as much as another 1.15 trillion yuan over the next couple of years, Preqin said, most of it coming from mammoth-sized state-owned entities and so-called government guidance funds, which seek to foster domestic innovation in different industries from advanced engineering and robotics to biotechnology and clean energy.

    Those include the 350 billion yuan sought by the China Structural Reform Fund, 200 billion yuan targeted by the China State-Owned Capital Venture Investment Fund and a proposed 150 billion yuan for the state-owned Enterprise National Innovation Fund.

The enormous size of the fundraising ambitions of the Chinese state-backed funds means it may take some time before they reach their final goals. The China Structural Reform Fund, which was launched in 2016, has raised 20 percent of its registered capital and its president said in an interview with Caixin Global that funding will be completed by the end of 2018.

“We’re at the all-time highest of capital-raising high water marks, with a tsunami of government-backed entities seeding incubators, VC funds, locally, provincially, nationally,” said Peter Fuhrman, CEO of China-focused investment bank China First Capital. “China has a lot of money in its government apparatus. It wants to seed innovation and entrepreneurship and this is how it’s doing it.”

The surge contrasts with the slowdown in seed financing for start ups in the United States, which is down for the past two years. It also compares with flat growth expected for U.S. venture capital fundraising in 2017, according to estimates from the National Venture Capital Association (NVCA).

CATCHING ENTREPRENEURS

Firms such as Lightspeed China Partners, Morningside Venture Capital, GGV Capital and investment and merchant bank Ion Pacific that previously only had U.S. dollar funds are launching their first funds in yuan. Others like Hillhouse Capital, Sequoia Capital China and China Renaissance that have raised funds in both currencies are adding to their yuan cash pile with new funds.

Key to those firms is to not lose potential investment opportunities in sectors closed to foreign investors or miss out on investing with the Chinese entrepreneurs who now want to list their companies locally instead of in the United States.

“Catching the right entrepreneurs in the ecosystem is our number one priority, so currencies to us are just tools, those are the tools that I need to catch these entrepreneurs,” said Harry Man, partner at Matrix Partners China, which has funds in both currencies. “That’s why if you don’t have RMB in your hand, ultimately you’ll be missing 50 percent of the deals. Then you’ll be forced to raise an RMB fund and that’s why everybody is doing it.”

Sequoia Capital China, which backed top Chinese technology firms such as Alibaba Group , is looking to raise at least 10 billion yuan for a new fund, while Hillhouse Capital, an early investor in companies including Tencent Holdings Ltd <0700.HK>, Baidu Inc and JD.com Inc , is targeting about 8 billion yuan for its fund, sources told Reuters. 

The investment management arm of securities firm China Renaissance is also adding to its yuan reserves with a new fund worth about 6 billion yuan, according to a person familiar with the plans who couldn’t be named because details of the fundraising aren’t yet public. Ion Pacific is raising 1 billion yuan for its debut fund in the Chinese currency, while GGV Capital is about to close fundraising for its first yuan-denominated fund.

“Some sectors don’t allow foreign investors, so for example, in the culture and media industry you need to apply for certain licenses like video licenses and you need to be a local investor,” said Helen Wong, a partner at Qiming Venture Partners.

“Now the IPO window is open for the local stock market, so that encourages a lot of companies to go for a local listing,” she added, in reference to the increase in IPO approvals by regulators in 2017 that is prompting more companies to start preparations to go public. Previously, a slow approval process and long line of companies waiting for clearance dissuaded many from those plans.

The shift would give an added boost to the Shenzhen and Shanghai bourses. China has had 322 new listings this year, raising a combined $22.9 billion, Thomson Reuters data showed. This already surpasses the 252 for all of 2016, even after the country’s securities regulator slowed the number of weekly IPO approvals in May.

It could also reduce the influence of the Nasdaq and New York stock exchanges, where many Chinese technology companies previously flocked when they went public.

“For the RMB side, you see more companies in restricted sectors like healthcare and media and certain parts of cleantech that needs government support to get started,” said Hans Tung, managing partner at GGV Capital. “You also see companies in the fintech space and a lot of them need a license to operate a business in the financial services industry, so they tend to want to list in China.”

(Reporting by Elzio Barreto; Editing by Martin Howell)

Twitter to meet Congressional panel probing 2016 election

September 21, 2017

(Reuters) – Twitter Inc representatives will meet with the U.S. Senate Select Committee on Intelligence staff next week in relation to inquiries into the 2016 U.S. presidential election, a company representative said.

The committee, along with other congressional committees and special counsel Robert Mueller, is investigating possible links between President Donald Trump’s campaign and Russia.

Twitter’s meeting with the committee comes amid mounting pressure on regulators and Silicon Valley companies to open up the opaque world of online political ads and to prevent governments from using them to sway elections or attempt other meddling.

Facebook said earlier this month that a Russia-based operation spent $100,000 on thousands of ads on its social media platform promoting ‘divisive’ messages before and after last year’s presidential election.

After Facebook’s revelations, Democrats have urged the Federal Election Commission to require transparency for social media advertising.

Russia continues to deny meddling in the election, in which Republican Donald Trump defeated Democrat Hillary Clinton.

(Reporting by Kanishka Singh; Editing by Gopakumar Warrier)

Apple concedes new watch has connectivity glitch

September 21, 2017

By Supantha Mukherjee and Stephen Nellis

(Reuters) – Apple Inc on Wednesday conceded its latest smartwatch unveiled a week ago has problems with its most important feature: the ability to make phone calls and access data without an iPhone nearby.

Several prominent reviewers said Wednesday they could not recommend the device because of a wifi glitch that causes cellular connectivity problems.

The Watch Series 3 starts at $399 and was launched alongside new iPhone models. Unlike previous versions of the watch, it has cellular network connectivity built in.

Apple said the watch can experience LTE connectivity problems when it connects to open wi-fi networks such as at a hotel or a coffee shop.

The company is “investigating a fix for a future software release,” Apple spokeswoman Amy Bessette told Reuters.

Many reviewers such as the New York Times praised the new features and gave generally positive assessments.

But other prominent publications, including the Wall Street Journal and The Verge, recommended against purchasing the new model because the LTE cellular data connectivity did not work as expected.

The mixed reviews weighed on Apple shares, which closed down about 1.7 percent at $156.07.

“Considering that my Apple Watch Series 3 with LTE (both first and second review units) didn’t function like it was supposed to, I can’t recommend buying it — and paying the monthly cell fee — based on promises,” Verge reviewer Lauren Goode wrote. (http://bit.ly/2fj8Jiy)

Apart from connection issues, some reviewers were disappointed with the drain on the watch’s battery while making calls. Apple had touted up to 18 hours of battery life but said the watch would get only one hour on a cellular phone call.

Gene Munster, a longtime Apple analyst with Loup Ventures, doubted issues with the Series 3 Watch would hurt Apple’s bottom line. “That review takeaway is a negative but is not a surprise. This is the first generation watch with LTE,” he told Reuters.

Bob O’Donnell, an analyst with Techanlysis Research, said the watch reviews, paired with reviews of the iPhone 8 that were generally positive but described the phone as an incremental improvement on its predecessor, put more pressure on the iPhone X to garner good press before its Nov. 3 launch.

Apple also experienced hiccups with iOS 11, the new operating system the firm released Tuesday.

For business users, iOS 11’s Mail application had problems sending mail for Microsoft Exchange and Outlook.com mail accounts.

(The story fixes typographical error in paragraph 1)

(Reporting by Supantha Mukherjee in Bengaluru and Stephen Nellis in San Francisco; Editing by Anil D’Silva and Cynthia Osterman)

At U.N., Britain to push internet firms to remove extremist content quicker

September 20, 2017

By Michelle Nichols

UNITED NATIONS (Reuters) – The leaders of Britain, France and Italy will push social media companies on Wednesday to remove “terrorist content” from the internet within one to two hours of it appearing because they say that is the period when most material is spread.

British Prime Minister Theresa May, French President Emmanuel Macron and Italian Prime Minister Paolo Gentiloni will raise the issue at an event on the sidelines of the annual gathering of world leaders at the United Nations.

Internet companies including Facebook Inc, Microsoft Corp Alphabet Inc’s Google said they will attend the meeting.

Google will be represented by general counsel Kent Walker, who will also speak on behalf of a recently formed industry group called the Global Internet Forum to Counter Terrorism.

Facebook is sending Monika Bickert, head of global policy management, who is expected to make remarks reiterating the companies’ commitment to combating online extremism.

Microsoft is sending Dave Heiner, a senior policy advisor.

The European Union has threatened legislation if internet companies do not step up efforts to police what is available on the web.

The British U.N. mission said May will welcome progress, but urge companies to go “further and faster” to stop groups like Islamic State spreading material that promotes extremism or shows how to make bombs or attack pedestrians with vehicles.

“Terrorist groups are aware that links to their propaganda are being removed more quickly, and are placing a greater emphasis on disseminating content at speed in order to stay ahead,” May plans to tell the event.

“Industry needs to go further and faster in automating the detection and removal of terrorist content online, and developing technological solutions which prevent it being uploaded in the first place,” she will say.

Responding to pressure from governments in Europe and the United States after a spate of militant attacks, key firms created the Global Internet Forum to Counter Terrorism in June to share technical solutions for removing extremist content and work more with counter-terrorism experts.

Twitter said it had removed 299,649 accounts in the first half of this year for the “promotion of terrorism”, a 20 percent decline from the previous six months, although it gave no reason for the drop. Three-quarters of those accounts were suspended before posting their first tweet.

May said ahead of Wednesday’s event: “We need a fundamental shift in the scale and nature of our response – both from industry and governments – if we are to match the evolving nature of terrorists’ use of the internet.”

(Reporting by Michelle Nichols; Additional reporting by Paresh Dave and Joseph Menn in San Francisco; Editing by Paul Tait)

Amazon working on ‘smart glasses’ as its first wearable device: FT

September 20, 2017

(Reuters) – Amazon.com Inc is working on its first wearable device – a pair of ‘smart glasses’, the Financial Times reported on Wednesday.

The device, designed like a regular pair of spectacles, will allow Amazon’s digital assistant Alexa to be summoned anytime at all places, the report said, citing people familiar with the plans. http://bit.ly/2jIMrIq

There would be a bone-conduction audio system in the device to allow the wearer to hear Alexa without inserting headphones into his or her ears, according to the report.

Amazon was not immediately available to comment on the report outside regular business hours.

Earlier this year, Alphabet Inc re-introduced its own wearable glass headset, Google Glass, after discontinuing its production last year.

(Reporting by Kanishka Singh in Bengaluru; Editing by Gopakumar Warrier)

U.S. Senate votes to ban Kaspersky Lab software from government networks

September 18, 2017

By Dustin Volz

WASHINGTON (Reuters) – The U.S. Senate on Monday voted to ban Moscow-based cyber security firm Kaspersky Lab’s products from use by the federal government, citing concerns the company may be a pawn of the Kremlin and poses a national security risk.

The vote is the latest in a series of setbacks in the United States for Kaspersky Lab, a 20-year-old anti-virus company that reaches 400 million customers globally and has vigorously denied that it conducts espionage on behalf of the Russian government.

The vote, which was included as an amendment to an annual defense policy spending bill approved on Monday by the Senate, seeks to codify and expand a decision by the Trump administration last week to order civilian government agencies to purge from their networks any Kaspersky Lab products.

U.S. lawmakers and intelligence officials have grown more alarmed about Moscow’s capabilities to conduct cyber espionage following a 2016 presidential contest that was marred by allegations of Russian interference.

Co-founder and chief executive Eugene Kaspersky has repeatedly denounced the allegations against his company as false and lacking credible or public evidence. Last week, he accepted an invitation to testify to U.S. lawmakers later this month about the security of his products, but said he would need an expedited visa in order to do so.

Democratic Senator Jeanne Shaheen, who has led efforts in Congress to blacklist Kaspersky Lab, said in a statement that the prohibition “removes a real vulnerability to our national security.”

She added that the amendment had strong support in the House of Representatives, which also must vote on a defense spending bill, and that she expected it would soon be signed into law.

The bill would bar the use of Kaspersky Lab in civilian and military agencies. The directive issued by the Trump administration last week applies only to civilian government agencies and not the Pentagon, but U.S. intelligence leaders said earlier this year that Kaspersky Lab was already generally not allowed on military networks.

(Reporting by Dustin Volz; Editing by Jonathan Oatis)

Exclusive: Google offers to treat rivals equally via auction – sources

September 18, 2017

By Foo Yun Chee

BRUSSELS (Reuters) – Google has offered to display rival comparison shopping sites via an auction, as it aims to stave off further EU antitrust fines, four people familiar with the matter said.

Google is under pressure to come up with a big initiative to level the playing field in comparison shopping, but its proposal was roundly criticized by competitors as inadequate, the sources said.

EU enforcers see the antitrust case as a benchmark for investigations of other areas dominated by the U.S. search giant, such as travel and online mapping.

Google has already been fined a record 2.4 billion euros ($2.9 bln) by the European Commission for favoring its own service, and could face millions of euros in fresh fines if it fails to treat rivals and its own service equally.

In its proposal submitted to the European Commission on Aug. 29, the company said it would allow competitors to bid for any spot in its shopping section known as Product Listing Ads, the sources said.

EU competition chief Margrethe Vestager said it was too early to say if the offer would be accepted.

“It is at this point in time of course impossible to say what will happen but obviously market reactions will be one of the things that we’ll be taking under consideration,” she told reporters in Washington on Monday.

Google, whose parent is Alphabet Inc, sought feedback from four to five competitors and it was overwhelmingly negative, the sources said.

The adverse reaction could undermine Google’s efforts to win over EU antitrust regulators.

Three years ago, the world’s most popular internet search engine made a similar offer in an attempt to settle a long-running investigation by the Commission and avoid a fine. That was ultimately rejected following criticism from rivals and discord within the EU executive.

Under that proposal, Google would reserve the first two places for its own ads. The new offer would also see Google set a floor price with its own bids minus operating costs.

The offer does not address the issues set out by EU competition regulators, the sources said.

“This is worse than the commitments,” one of the people said, who requested anonymity.

The European Commission said the onus was on Google to comply with its cease and desist order.

“It is Google’s sole responsibility to ensure compliance with the Commission antitrust decision, and it is for Google to explain how it intends to do so,” spokesman Ricardo Cardoso said.

Google did not respond to a request for comment.

UK price comparison site Foundem, whose complaint triggered the EU investigation in 2010, dismissed the auction proposal.

“Unless Google is volunteering to break up its general-and specialized-search businesses, the inclusion of Google’s comparison shopping competitors into a new or existing pay-for-placement auction would simply create an additional anti-competitive barrier,” the company said.

Google has until Sept. 28 to stop its anti-competitive practices or Alphabet could be fined up to 5 percent of its average daily worldwide turnover, or around $12 million a day, based on Alphabet’s 2016 turnover of $90.3 billion.

(Reporting by Foo Yun Chee; Additional reporting by Diane Bartz in Washington; Editing by Susan Fenton and Dan Grebler)