By Ian Sherr

When Whole Foods Market Inc. opened a store in San Francisco’s Haight-Ashbury early this year, many locals and community leaders hoped it would help improve a grungy corner of their famous neighborhood. Nearly a year later, they’re still waiting.

Since the upscale market opened in February across from a section of Golden Gate Park known as Alvord Lake, known for attracting drug dealers and homeless people, crime within a 500-foot radius of the store has shot up, according to the San Francisco Police Department. At the same time, Whole Foods hasn’t lifted the overall neighborhood’s business prospects, sales-tax receipts data from the San Francisco Comptroller’s Office show.

While the Whole Foods store has brought new customers to the neighborhood, changing the feel of the area, “the riffraff hasn’t gone away,” says Joe Goldmark, who co-owns an Amoeba Music store across the street from the store.

For its part, Whole Foods has tried to meet these challenges. It hired security guards and one plainclothes officer who are at the store throughout the day. The store’s management also regularly confer with police about crime in the area.

The company has also tried to help improve the local economy in Haight-Ashbury by partnering with local food producers in its efforts to offer healthy food to customers. “We’re always concerned about the neighborhoods we’re in,” said Libba Letton, a Whole Foods spokeswoman, who added that the store’s managers are always looking for more ways to help the community.

Whole Foods’ experience in Haight-Ashbury so far shows how nearly a half-century after the 1960s “Summer of Love,” when thousands of people swarmed the neighborhood as part of the counterculture movement, the area is still grappling with the uneven gentrification unfolding there.

Today, vacationers flock to the area to snap pictures of the famous intersection at Haight and Ashbury streets. The neighborhood has become a destination for tech workers, as well as aging hippies and runaway youths. Amid that mix, property values have risen over the years, but some areas, like the end of Haight Street that Whole Foods inhabits, have improved at a snail’s pace.

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(Originally published Dec. 8, 2011, in the Wall Street Journal.)

By Ian Sherr

One day five months ago, Karim Hijazi saw an unusual sight while reading his work email. A message that had been marked as “read” was suddenly marked “unread.”

What the founder of Unveillance, a computer-network security firm, soon learned was that hackers had broken into his account.

The hackers gained access to his email by stealing log-in information from an insecure website, which they then matched up with a password they found on the Internet. After downloading all of his emails, the hackers sent Mr. Hijazi a message demanding he share sensitive security information with them. When he refused, the hackers released his emails on the Web.

“It was like a baby with a gun,” he says.

Mr. Hijazi is one of the latest victims of computer hackers focused on getting into websites, corporate networks and email accounts by using legitimate passwords. Many break into poorly secured websites, steal databases filled with personal information and then comb through that data for log-in information for companies, government agencies and banks.

The growing frequency of these attacks has pushed companies to seek other forms of data protection than simple passwords.

Demand for additional barriers and detection programs is already large. Sales of these types of products topped $900 million world-wide last year, according to International Data Corp., and the Framingham, Mass.-based research firm expects the market to double by 2015.

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(Originally published Sept. 26, 2011 in the Wall Street Journal.)

By Ian Sherr

Investors may be undervaluing Apple Inc. even as its shares near all-time highs on the strength of hit gadgets like the iPhone and iPad.

On Wednesday, investors had a new reason to re-evaluate one of the most popular destinations for equity investments: the resignation of co-founder Steve Jobs as chief executive.

Apple shares on Thursday eased $2.46, or 0.7%, to $373.72 in 4 p.m. Nasdaq Stock Market trading, as investors paused to consider how the company might change, even though Mr. Jobs’s departure wasn’t unexpected.

The ebb in Apple’s share price will likely prove fleeting, analysts and investors say. The company has built commanding positions in its mobile-device business, enjoys margins that are the envy of other manufacturers and has created a brand as closely associated with technology as that of Nike Inc. is with athletic equipment. The company also has $76 billion in cash that accounts for more than a fifth of its market valuation.

Analysts at Goldman Sachs expect Apple’s shares to grow by nearly a third to $490 over the next 12 months, a view broadly shared in the analyst community.

“Apple is priced like they’ve taken all the market share they can and I think that’s crazy,” said Kevin Landis, president of SiVest Group, which owns Apple shares. “It’s on its way to being the most innovative and dominant consumer electronics company in the world, and the lock they have on the market is breathtaking.”

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(Originally published August 26, 2011 in the Wall Street Journal.)

By Ian Sherr

Hewlett-Packard Co. wants to persuade appliance and car manufacturers to use its webOS operating system in their products. But the software’s late arrival to the market and relatively small footprint are prompting companies to pause before licensing the platform.

In June, Leo Apotheker, chief executive of the electronics giant based in Palo Alto, Calif., said his company plans to begin talks with various companies to gauge interest in webOS, which powers H-P’s TouchPad tablet computers and Pre smartphones.

H-P says webOS, which uses touch commands and connects to the Internet, can make machines easier to use while adding functionality that customers have come accustomed to in their mobile gadgets.

For example, a touch screen could replace the buttons on a stove, displaying recipes pulled from the Internet. Similarly, a refrigerator could be programmed to make extra ice during certain times of the day.

“We’re looking at expending the base and bringing to the webOS community an ecosystem that inspires developers out there,” said Stephen DeWitt, who is in charge of webOS for H-P. He said there is already an “enormous amount of interest,” but declined to name companies that might potentially license the software.

H-P hopes that getting webOS on appliances and in cars will create an ecosystem of devices and accessories around the operating system. That will encourage developers to write programs that can be used on those products, spurring a market of software like Apple Inc. has done with its App Store bazaar. Analysts say H-P also hopes that licensing the software to manufacturers will create a regular and predictable revenue stream.

The company’s ambitions, however, face a host of challenges from already-specialized software makers and companies uninterested in putting an advanced operating system in their products, analysts and industry insiders say.

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(Originally published Aug. 16, 2011 in the Wall Street Journal.)

By Ian Sherr

People don’t have tablet fever; it seems they simply have a mania for iPads.

The latest evidence: Hewlett-Packard Co. is dropping the price of its TouchPad tablet by 20% little more than a month after it hit stores, as the computer giant tries to goose sales of its answer to Apple Inc.’s iPad.

H-P, Motorola Mobility Holdings Inc. and Research In Motion Ltd. have all jumped into the tablet market this year, trying to close the gap with Apple.

The electronics giant created a multi-billion-dollar business last year when it launched the iPad—and has since seen its profits and market value swell as others have tried to keep pace.

Rivals have been routed so far. Motorola cut the price of its Xoom tablet after its February launch, released a cheaper model and warned shipments will decline this quarter. RIM’s PlayBook was delayed until April and still isn’t being offered for sale by the two biggest U.S. wireless carriers.

Samsung Electronics Co., which was the quickest to market an iPad rival and has shipped millions of tablets based on Google Inc.’s Android software, is now embroiled in a patent dispute with Apple that threatens sales of its Galaxy Tab in most of Europe.

Apple, meanwhile, says it is having difficulty keeping up with demand and selling every iPad it can manufacture. Five months after its release, its iPad 2 can be hard to find in retail stores. The company said it shipped 9.3 million iPads in the June-ended quarter.

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(Originally published Aug. 12, 2011 in the Wall Street Journal.)

By Yukari Iwatani Kane and Ian Sherr

Steve Jobs turned Apple Inc. into the world’s most valuable technology company with high-tech products like the iPad and iPhone. But one anchor of Apple’s success is surprisingly low tech: its chain of brick-and-mortar retail stores.

A look at confidential training manuals, a recording of a store meeting and interviews with more than a dozen current and former employees reveal some of Apple’s store secrets. They include: intensive control of how employees interact with customers, scripted training for on-site tech support and consideration of every store detail down to the pre-loaded photos and music on demo devices.

More people now visit Apple’s 326 stores in a single quarter than the 60 million who visited Walt Disney Co.’s four biggest theme parks last year, according to data from Apple and the Themed Entertainment Association. Apple’s annual retail sales per square foot have soared to $4,406—excluding online sales, according to investment bank Needham & Co. Add in online sales, which include iTunes, and the number jumps to $5,914. That’s far higher than the sales per square foot and online sales of jeweler Tiffany & Co. ($3,070), luxury retailer Coach Inc. ($1,776), and electronics retailer Best Buy Co. ($880), according to estimates.

With their airy interiors and attractive lighting, Apple’s stores project a carefree and casual atmosphere. Yet Apple keeps a tight lid on how they operate. Employees are ordered to not discuss rumors about products, technicians are forbidden from prematurely acknowledging widespread glitches and anyone caught writing about the Cupertino, Calif., company on the Internet is fired, according to current and former employees.

Behind Apple stores is Ron Johnson, 52, who J.C. Penney Co. confirmed Tuesday would become its new CEO in November.

Apple’s retail success is fueled to a large extent by demand for the company’s products. Retail analysts say many of Apple’s advantages over rivals such as Best Buy are technical: It sells a single brand, has far fewer products and has only a few hundred stores compared to Best Buy’s more than 4,000. As the company continues to expand, some analysts expect it to face more pressure to consistently execute good customer service. Some former employees say they have already seen the quality of Apple retail staff decline as the retail network has expanded and has fewer enthusiastic fans to choose from.

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(Originally published June 15, 2011 on the front page of the Wall Street Journal.)

By Ian Sherr and Nick Wingfield

On a Tuesday afternoon last month, engineers working for Sony Corp. were baffled when several servers running the company’s PlayStation Network suddenly turned themselves off and then back on.

At the time, the unexpected rebooting seemed like an odd malfunction. The next day, however, the engineers found the first evidence that an intruder had penetrated Sony’s systems, prompting the Japanese company to take what it calls “the almost unprecedented step” of shutting down the popular online gaming network.

Sony Chief Executive Howard Stringer issued a public apology this week for what the company later disclosed was a data breach that compromised more than 100 million user accounts on three public networks, and a delay in informing users of the theft. Sony says the loss included users’ names, birthdates and passwords. It also hasn’t ruled out the loss of credit card numbers associated with the Sony PlayStation network.

Some analysts believe the incident, which has drawn the attention of authorities around the world, will cost the company more than $1 billion for measures that include new security and a $1 million insurance policy for any victims of identity theft. The company hasn’t provided its own estimate of the cost. It also hasn’t resumed operating the network, but has said it is in final testing and is expected to do so within days.

“Taken as a whole, the number of customers affected, the PR impact and now the legislative inquiries,” this ranks “at the top” of data breaches to date, said Cynthia Larose, an attorney specializing in privacy matters with Mintz Levin in Boston.

PlayStation Network, which is accessed by owners of Sony game consoles, uses 130 server systems, 50 software programs and has 77 million user accounts, according to a letter that Kazuo Hirai, president and group chief executive of Sony Computer Entertainment Inc., sent Wednesday to a U.S. congressional committee. That letter, and a similar account included in a letter Friday to Sen. Richard Blumenthal (D., Conn.) provide the most detailed accounts of the incident.

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(Originally published May 7, 2011, in the Wall Street Journal.)

By Ian Sherr

New details emerged about Sony Corp.’s investigation into one of the biggest data breaches in history, as the company attempts to piece together who stole personal information from more than 100 million accounts on its online game networks.

At least some of the attacks came from a Malaysia-based server, a person familiar with the matter said, though it wasn’t clear if any of the hacking was actually done from there, or whether only the server there was used.

On Tuesday, a U.S. spokesman for Sony confirmed some of the companies helping to investigate the breach and secure its network against further intrusions. The security firms named are Protiviti Inc., Guidance Software Inc. and Data Forté Corp., which specialize variously in forensic computer investigations and security consulting.

The company has also retained the services of the law firm Baker & McKenzie in connection with the matter. Representatives of the law firm and two of the security firms didn’t respond to requests for comment. Guidance Software declined to comment.

Political pressure on Sony for a more complete accounting of its handling of the data breach has been increasing. Sen. Richard Blumenthal (D., Conn.) on Tuesday sent a letter to Sony executives saying he is “deeply concerned about the egregious inadequacy of Sony’s efforts thus far to notify its customers of these breaches or to provide adequate protections for users whose personal and financial information may have been compromised.”

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(Originally published May 4, 2011, in the Wall Street Journal.)

By Ian Sherr

Apple Inc. filed a lawsuit claiming Samsung Electronics Co. Ltd. copied the look and feel of its popular iPhone smartphones and iPad tablet computers, the latest in a series of legal skirmishes that underscore the increasingly high stakes of the mobile computing market.

The lawsuit, filed on April 15, alleged that Samsung’s smartphones, including the “Galaxy S 4G,” “Epic 4G,” “Nexus S” and its “Galaxy Tab” touchscreen tablet, violate Apple’s intellectual property. The 38-page lawsuit was filed in the U.S. court’s northern California district.

“Rather than innovate and develop its own technology and a unique Samsung style for its smart phone products and computer tablets, Samsung chose to copy Apple’s technology, user interface and innovative style in these infringing products,” Apple said in the filing.

A Samsung representative said the company’s development of core technology and intellectual property were key to its continued success.

“Samsung will respond actively to this legal action taken against us through appropriate legal measures to protect our intellectual property,” said Kim Titus, a Richardson, Texas-based spokesman for the company’s telecommunications unit.

The lawsuit is the latest in a series of legal battles among technology giants following the rapid sales growth of smartphones and touchscreen tablet computers. Apple has become the object of many lawsuits from numerous companies, including Eastman Kodak Co. and Nokia Corp., that claim the consumer electronics giant violated their intellectual property in its hit products. The Cupertino, Calif.-based company has also filed lawsuits against competitors, such as Motorola Mobility Holdings Inc. and Amazon.com Inc.

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(Originally published April 18, 2011, in the Wall Street Journal.)

By Ian Sherr

Apple Inc. is preparing to offer a package of services aimed at small- and mid-sized business that includes expanded support for company computer systems, part of the electronics maker’s efforts to appeal to users beyond its core consumer base.

Apple Wednesday will unveil “Joint Venture,” a $499-a-year service contract that gives companies using Apple’s computers, smartphones and tablets priority treatment for technical support, training programs and repairs, according to two Apple employees. The employees asked not to be identified because they weren’t authorized to speak about the initiative publicly.

Joint Venture contracts will cover five systems at a business, the people said. Coverage for each additional system—Apple’s term for a grouping of a computer, monitor and iPhone—costs $99 a year, they said.

An Apple spokesman declined to comment.

The introduction of Joint Venture, which comes as Apple is expected to unveil the next generation of its iPad tablet computer, marks the company’s further push into the business user market. Last year, the company began creating specialized teams at its chain of more than 300 retail stores to negotiate pricing terms with business customers. It also began incorporating conference rooms at some of its sleek stores for meetings with business executives.

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(Originally published March 1, 2011, in the Wall Street Journal.)