May 2012

Did banks cross the line in Facebook research calls?

As regulators scrutinize Facebook's problem-plagued stock market debut, they may have to confront areas of securities law that do not always clearly spell out what industry analysts are allowed to tell clients about companies on the verge of going public.

Facebook and the Wall Street banks that underwrote its $16 billion initial public offering are facing questions about how and why stock analysts decided to cut their financial forecasts on the company ahead of the IPO. An Internet analyst at lead underwriter Morgan Stanley told clients days before the offering that he had reduced his revenue projections - information that some other investors may not have received. JPMorgan Chase and Goldman Sachs, which were underwriters on the deal as well, also revised their estimates during Facebook's IPO road show.

Investors File Suit Against Facebook, Underwriters

Three Facebook investors filed a civil lawsuit in Manhattan federal court, alleging the company and its underwriters failed to properly disclose changes to analysts' forecasts made at the underwriting banks.

The suit follows reports that analysts at Morgan Stanley and Goldman Sachs Group cut their revenue forecasts on Facebook amid the investor roadshow, a change that wasn't widely disseminated. Late May 22, Massachusetts sent a subpoena to Morgan Stanley following the reports. Several other plaintiffs' lawyers have said they filed suits over the offering in other courts throughout the country, but Wednesday's investor suit focused specifically on the revelations about the analysts' changes. The investor suit, which is seeking class-action status, alleges changes made to Facebook's offering document a week before the IPO priced didn't accurately portray the impact on Facebook's revenue growth. Facebook had said in an amended filing that its mobile users were growing rapidly in the second quarter but that advertising revenue wasn't keeping pace. Following that report, several independent analysts issued new projections on revenue that were widely reported.

Lawmakers look into Facebook IPO

Banking committees on both sides of Capitol Hill are beginning to take a look at just what went wrong when Facebook took its stock public.

Both the Senate Banking Committee and the House Financial Services Committee said that they were looking into the issue, although both stopped short of promising probing investigations or hearings on the matter. "The Banking Committee is seeking to learn more about issues raised in the news regarding Facebook’s IPO by conducting staff briefings with Facebook, regulators and other stakeholders," said committee spokesman Sean Oblack. A spokesman for Sen. Richard Shelby (R-AL), the ranking committee Republican, said his staff was also in talks with regulators and "market participants" as a matter of "due diligence." The relevant House committee is also taking a look at the matter.

Mark Zuckerberg earns $1.1 billion from selling Facebook shares

Mark Zuckerberg completed the transaction of the 30.2 million shares he sold in Facebook's IPO. The shares he disposed of sold for $37.58 a piece, bringing him a cool $1.1 billion. But despite all that money, the Facebook CEO will be spending most of it to cover taxes, according to a document filed with the Securities and Exchange Commission.

Jury: Google did not infringe Oracle patents with Android

Over a week after it began deliberations, the jury has returned a verdict in the patent infringement case between Oracle and Google, finding that the search giant did not infringe upon Oracle's patents with Android.

In play were infringement counts on eight different claims across two separate patents: RE38,104 and 6,061,520. Given the decision, there will be no need for a damages phase in connection with the patent claims, and with the recent agreement by Google and Oracle to postpone any damages hearings related to copyright infringement, the jury has now been dismissed from the proceedings altogether. Judge William Alsup thanked the jurors for their hard work before they left the courtroom, noting that "this is the longest trial, civil trial, I've ever been in." It's the final victory in several coups for Google. While the jury did find that Android infringed Oracle copyrights by its use of the structure, sequence, and organization of 37 Java APIs, the jury was unable to reach a unanimous verdict on whether it was covered under fair use, rendering the verdict moot at the moment. The jury found that Google had infringed on only one other copyright count — the use of nine lines of rangeCheck code — though Judge Alsup later ruled that Google had also infringed by its use of eight Java test files in Android, adding a second minor infringement count to Google's plate. While the jury's involvement has come to an end, there are still several outstanding questions.

FCC Chairman: Government Airwaves Could Be Answer To Spectrum Crunch

The US could consider addressing the country’s shortage of airwaves for mobile telecommunications by re-licensing government-held spectrum for commercial use, the chairman of the Federal Communications Commission said. “We have to do things like look harder and more carefully at government spectrum,” and look for “innovative ways” to share airwaves between the private and public sector, FCC Chairman Julius Genachowski said at a cable industry conference in Boston.

Chairman Genachowski said the spectrum crunch was the positive result of an entrepreneurial economy that resulted in the popularity of bandwidth-intensive applications available to consumers. Mobile congestion is “in the category of problems you want to have,” he said, adding that foreign regulators are increasingly “envious of what they see in the U.S. in terms of broadband innovation.” The FCC chairman also pointed to new efforts by cable operators to introduce usage-based pricing as a “completely appropriate” step to meet consumers’ needs.

AT&T Shuffles Resources in New York in Push for Faster Data, Fewer Dropped Calls

Aiming to improve its service in New York City, AT&T said that it is shifting some of its bandwidth away from older networks and toward its newer 3G and 4G networks. The company said it is contacting customers on its older 2G network and providing upgrade offers in an effort to get them onto one of the newer networks. “Dedicating more capacity to our advanced wireless networks will help more of our customers in New York City have a better experience overall,” AT&T regional general manager Tom DeVito said in a statement. “By re-allocating network resources from our 2G network to support our newer, advanced networks, we’re moving capacity to support the voice and mobile internet services our customers want.” New York and San Francisco, in particular, have long been trouble spots for AT&T customers.

How Thomas Edison, Mark Zuckerberg and Iron Man are holding back American innovation

America needs its heroes, and it’s no different when it comes to innovation. “From Thomas Edison to Iron Man, you have this idea of single combat warriors working feverishly in the threadbare den of solitude,” scientist Eric Isaacs said at a Washington conference, dropping a reference to the Marvel superhero who discovers a boundless source of clean energy. But it’s rarely the case that ideas are born, fully fledged, out of the heads of geniuses, just in time to save the world -- outside the realm of fiction at least.

“Romantic myths about creative loners can’t be allowed to overshadow the fact that it’s a big collective enterprise...a multidisciplinary team, a system designed to maximize discovery,” explained Isaacs, who happens to oversee one such facility, Chicago’s Argonne National Lab, the federal government’s first science and engineering research lab. The problem is, the myth of the lone genius toiling away still reigns supreme in the eyes of ordinary Americans and politicians alike. And so policymakers neglect the links in the innovation chain that come after that first Eureka moment. The possibilities often fall by the wayside, leaving scientific breakthroughs in the lab instead of in the hands of consumers or society at large. That was the upshot of the New America Foundation’s event on the future of innovation, research and development, where Isaacs spoke before an audience packed into a narrow conference room. Too often, he argued, the conversation about R&D in Washington ends up stopping at that first phase: funding basic research aimed at letting scientists make their discoveries in peace.

Technical Advisory Board For First Responder Interoperability Submits Report to FCC

The Federal Communications Commission’s Technical Advisory Board for First Responder Interoperability was established by the Federal Communications Commission pursuant to Title VI of the Middle Class Tax Relief and Job Creation Act of 2012 (Spectrum Act). The Interoperability Board was required to develop recommendations for minimum technical requirements to ensure a nationwide level of interoperability for the Nationwide Public Safety Broadband Network (NPSBN) and submit those recommendations to the FCC. The recommendations are to be ultimately submitted to the First Responder Network Authority (FirstNet). Meeting its statutory requirements, the Interoperability Board formally submitted their recommendations to the FCC on May 22, 2012.

The Interoperability Board worked in consultation with the National Telecommunications and Information Administration, the National Institute for Standards and Technology, and the Office of Emergency Communications of the Department of Homeland Security. The Interoperability Board also used subject matter experts (SMEs), from both inside and outside the members’ organizations, which proved to be critical to the quality of the Board’s work. The Board’s commitment to seeking the broadest possible input within its constrained schedule aided them it developing a complete set of recommended minimum technical requirements within the scope of the Spectrum Act. These requirements not only seek nationwide interoperability but set a minimal baseline that, if adhered to, can further an interoperable, multi-vendor network for first responders.

FBI quietly forms secretive network surveillance unit

The FBI has recently formed a secretive surveillance unit with an ambitious goal: to invent technology that will let police more readily eavesdrop on Internet and wireless communications.

The establishment of the Quantico (VA)-based unit, which is also staffed by agents from the U.S. Marshals Service and the Drug Enforcement Agency, is a response to technological developments that FBI officials believe outpace law enforcement's ability to listen in on private communications. While the FBI has been tight-lipped about the creation of its Domestic Communications Assistance Center, or DCAC -- it declined to respond to requests made two days ago about who's running it, for instance -- CNET has pieced together information about its operations through interviews and a review of internal government documents.

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