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.)

By Ian Sherr

Carmakers are taking apps for a spin.

Automakers from General Motors Co. to Hyundai Motor Co. are using the Consumer Electronics Show to announce plans that will transform dashboards into mini-computers running Internet-connected programs.

For example, Ford Motor Co. debuted an app that will allow owners of its new Focus electric car to schedule charging times from a smartphone. Toyota Motor Co. unveiled a program that lets motorists make reservations via booking site OpenTable.com.

The auto industry’s embrace of apps comes as carmakers look for new ways to differentiate their vehicles from the competition’s. “Internet-connected autos will be among the fastest-growing segments in four years,” said Gartner Inc. analyst Thilo Koslowski.

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

By Ian Sherr

Three-dimensional televisions are getting another “D” — discount.

Just a year ago, many 3-D TVs cost $1,000 more than regular sets. But during the recently ended holiday season, the gap halved and is set to shrink further.

Now, television makers, many of which had hoped 3-D would boost sales, are sandwiching the technology into their premium televisions while accepting a smaller premium for it. Like thinner displays, energy efficiency and high-definition, 3-D is becoming a “me-too” feature.

“Prices for 3-D TVs will definitely go down this year,” Skott Ahn, chief technology officer and president of LG Electronics Inc., said at the Consumer Electronics Show in Las Vegas. Mr. Ahn said LG would cut the premium it charges for 3-D TVs by 20% this year and build the technology into all of its new models by 2012.

The muted expectations for 3-D television mark a U-turn from last year’s enthusiastic embrace of the technology. Television makers rushed to bring the third dimension into living rooms after witnessing the success of the movie “Avatar.” Walt Disney Co.’s ESPN unit launched sports broadcasts in 3-D. Even Gucci Group N.V. designed stylish eyeglasses for 3-D viewers, hoping to cash in on the expected popularity of the televisions.

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(Originally published January 6, 2011, at Dow Jones Newswires and on WSJ.com.)

By Ian Sherr

The holiday shopping season, which starts online Cyber Monday, promises to be very good for Apple Inc.

The Cupertino, Calif.-based consumer electronics giant will likely take advantage of the gift-giving season to flex its muscles, grabbing market share for its popular iPod, iPhone and iPad products.

In particular, analysts say Apple will lock down its dominance of the touchscreen computer market, moving more of its iPad tablet devices through retail partners, including Wal-Mart Stores Inc., Target Corp. and Verizon Wireless. A recent survey by ChangeWave Research found that 9% of holiday shoppers plan to buy an iPad in the next 90 days. Apple has sold more than seven million iPads since the device went on sale in April.

Of course, Apple won’t be the only beneficiary of the season’s spirit. Smartphones are expected to do well as more utilities and productivity apps become available for phones running Google Inc.’s Android operating system, as well as Research In Motion Ltd.’s BlackBerry and Hewlett-Packard Co.’s Palm products. That software, known as apps, gives people a reason—other than making calls—to use their phones.

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(Originally published Nov. 29, 2010, in the Wall Street Journal.)

By Ian Sherr

Acer Inc. needs a new ace in the hole.

For two years, Acer has relied on netbooks—tiny, stripped-down laptops—to propel growth. The Taiwan-based company’s products, especially its Aspire One, proved so popular, Acer vaulted over Dell Inc. to become the world’s second-largest computer maker by shipments behind Hewlett-Packard Co.

Now the netbook craze is petering out.

After tripling to $14.3 billion in 2009, netbook sales are expected to fall nearly 2% this year, according to data tracker International Data Corp. In 2011, the market is expected to shrink even further.

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(Originally published Oct. 20, 2010, on Dow Jones Newswires and WSJ.com.)