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This Week’s Stories

Icahn Demands $150 Billion from Apple October 1, 2013

That was one expensive dinner.

Activist investor Carl Icahn revealed he had dinner with Tim Cook on Monday night, and he told the Apple CEO that he wants the company to issue a $150 billion buyback of its stock. It's a bid to get Apple to return more money to shareholders ... and Icahn said Tuesday he "isn't going away anytime soon." Icahn tweeted: "Had a cordial dinner with Tim last night. We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks." Shares of Apple were up about 2.5% midday Tuesday, adding gains after Icahn appeared on CNBC's Halftime Report at noon ET to discuss the dinner. Icahn revealed during the CNBC interview that he now owns a nearly $2 billion stake in Apple, which he expanded by a few million dollars "a few weeks ago" when Apple's stock slumped. He used the phrase "no-brainer" several times during the interview, adding, "It makes no sense for this company not to do a major, major buyback." The reason is twofold, Icahn said: Apple's stock is undervalued, and the company "can borrow money so cheaply today ... they have a golden opportunity." He repeated several times that Apple choosing not to do a buyback would be "absurd." "The question is, why the hell wouldn't you just buy the hell out of it?" Icahn said. Icahn declined to say whether Cook was receptive to the buyback proposal presented during the dinner -- which Icahn's private chef cooked. But Icahn did admit that the conversation "got a little testy" when Cook mentioned Apple's board and its wishes. "The board isn't God," Icahn fumed. Icahn declined to comment on his future plans if Apple doesn't issue the buyback he wants, but he noted that he he has a lot of options. "I can't promise you that they're going to do the buyback, but I can promise you I'm not going away before they hear a lot more from me on this," Icahn said. Icahn's first disclosed his plans for Apple via Twitter, posting on August 13 that he had bought a "large" stake in the "extremely undervalued" Apple. A week later, Icahn revealed he made September dinner plans with Cook, and that they would discuss the magnitude of a buyback. It's unclear whether Icahn wants Apple to start a new buyback, or if he wants the company to expand its current program. Apple already announced in May that it will return $100 billion to shareholders over the next three years, through a combination of stock buybacks and a quarterly dividend of $3.05 per share. That announcement came shortly after David Einhorn of Greenlight Capital slammed the company for "hoarding" billions in cash. Apple had an impressive $147 billion in cash at the end of last quarter. Icahn is experienced in buying up shares in order to leverage them into influence at dozens of companies. He led a hostile takeover of the airline TWA in 1985, tried and failed to win a board seat at

Weekly Wireless Report WEEK ENDING

OCTOBER 4, 2013

INSIDE THIS ISSUE:

THIS WEEK’S STORIES

Icahn Demands $150 Billion from Apple AT&T CEO Deems Possible Federal Default the “Height of Irresponsibility” Target Confirms Brightspot Prepaid Service, Takes on Walmart’s Straight Talk

PRODUCTS & SERVICES

Twitter Not Yet Profitable Samsung on Track for Record Profit as HTC Stumbles

EMERGING TECHNOLOGY

Kaleidescape’s $3995 Cinema One is Everything Except Affordable

MERGERS & ACQUISITIONS

Cerberus Interested In Blackberry

INDUSTRY REPORTS

Samsung's Galaxy Gear Smartwatch Just Doesn't Cut It Trade-in Options Abound For Smartphones

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Motorola, pushed BEA Systems to sell to Oracle, attempted to take over Lionsgate, and advocated for CNNMoney parent Time Warner to break into four companies. Icahn had recently been in a prolonged fight with Dell, but he ended up admitting defeat in his attempt to keep the company public. money.cnn.com

AT&T CEO Deems Possible Federal Default the “Height of

Irresponsibility” October 4, 2013

The federal government shutdown continues, the possibility of the U.S. going into default is getting closer. AT&T CEO Randall Stephenson issued a strongly worded statement for any elected official who’s considering letting that happen.

"It is unthinkable that the United States could default on its financial commitments, and it would be the height of irresponsibility for any public official to consider such a course. In fact, even the discussion of default poses great risk to our economy and to our country. It is imperative to our Nation that the overwhelming majority of our public officials who recognize this reality unite their efforts, regardless of party, to bring a responsible solution forward," Stephenson said in the statement.

In 2011, Verizon Communications’ then-CEO Ivan Seidenberg chimed in on a possible default along with a group of other business leaders.

"The debt ceiling trigger does offer a needed catalyst for serious negotiations on budget discipline but avoiding even a technical default is essential," executives stated in the letter. "This is a risk our country must not take."

The government is due to hit the debt ceiling mid-October. Congress is currently at odds over continuing resolutions—particularly in regards to an individual mandate delay for the Affordable Care Act that the House passed but the Senate rejected.

wirelessweek.com

Target Confirms Brightspot Prepaid Service, Takes on

Walmart’s Straight Talk October 3, 2013

Target yesterday made its foray into prepaid official, taking to its Bulls Eye View blog to announce Brightspot.

The massive retailer’s new MVNO, available starting Oct. 6, will run on T-Mobile’s network. Plans begin at $35 for unlimited talk and text and jump to $50 for added unlimited data with the first 1 GB riding on T-Mobile’s HSPA+. Earlier reports suggested T-Mobile’s LTE could be part of the plan as well.

Although its yet to confirm specific models, Target will sell phones along with the service as well as offer SIMs for people bringing compatible, unlocked devices. As an added bonus, Target Redcard holders will score an extra five percent off and Brightspot customers will earn a $25 Target gift card for every six months paid.

Target’s new prepaid will be in direct competition with Walmart’s Straight Talk. Walmart’s Tracfone-run prepaid option still one-ups Brightspot, offering unlimited talk, text and data—with no throttling until after 2.5 GB—for $45 a month, with support for AT&T's LTE network. The high-speed data cutoff point for Straight Talk just recently came into focus following Tracfone’s long-awaited confirmation.

wirelessweek.com

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Products & Services Twitter Not Yet Profitable October 3, 2013 Twitter pulled back the curtain on its $1 billion initial public stock offering on Thursday, revealing that the social network is still unprofitable. In its first public financial statement, Twitter said it lost $79.4 million on about $317 million in sales in 2012. The company is on track for an even steeper loss in 2013. It already has racked up $69 million in losses during the first six months of this year. But sales are also rapidly increasing: Twitter recorded $254 million in revenue during the same period. Twitter, which was founded in 2006, has not recorded a profit for at least the past three years -- the time period for which the company was required to disclose its financial information. Losses came in at $67 million in 2010 and $164 million in 2011. But there were some bright spots in Twitter's IPO filing. Unlike Facebook at the time of its IPO, Twitter's mobile business is currently booming. Mobile ads accounted for 65% of ad revenue last quarter, and three-quarters of Twitter's 218 million monthly active users accessed the service from a mobile device. And Twitter is growing rapidly: The number of monthly active users jumped 44% from last year. Twitter had previously filed its IPO paperwork "confidentially," through a JOBS Act provision that gives companies with less than $1 billion in revenue extra time to keep their finances a secret. The company will trade under the symbol TWTR, though it hasn't yet said on which exchange it will trade. Goldman Sachs is the IPO's lead underwriter, while Morgan Stanley -- a bit tarnished after leading the botched Facebook IPO -- was relegated to Twitter's No. 2 underwriter slot. How much is Twitter worth? In the IPO initial filing, companies don't reveal how many shares they're going to sell, or how much those shares will cost. Those details won't be added until shortly before Twitter stock hits the market. And so Twitter's valuation remains speculative. Estimates based on purchases of private Twitter stock peg the company's value at around $10 billion. Sales breakdown: Like many of the newly public Internet companies, namely Facebook, Twitter's business model is dominated by ads. Advertising accounted for 87% of Twitter's revenue in the first six months of 2013, and 85% for all of 2012. Twitter runs ads for corporate accounts, specific tweets and topics, and the sponsored content is tucked right into users' feeds. Search for AT&T on Twitter, and a "promoted tweet" from Verizon or Microsoft's Windows Phone may pop up. A "who to follow" box suggests a promoted corporate account like Macy's in the top slot. Advertisers can also place "trends" -- say, the name of a TV show premiering tonight -- in the list of topics that are popular worldwide or in a particular locale. Even though 78% of Twitter's users are outside the United States, revenue from overseas markets accounted for just a quarter of the company's total sales for the first six months of 2013. The company said, however, that it plans to expand its international advertising sales soon. As of June 30, Twitter had $375 million in cash and liquid assets. The company employs 2,000 full-time staffers. Who owns Twitter: Twitter co-founder Evan Williams is the company's largest shareholder with a 12% stake. Twitter board director Peter Fenton is No. 2 on the individual list with 6.7% of the company.

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Williams' fellow co-founder Jack Dorsey holds a 4.8% stake, but their third partner, Biz Stone, was conspicuously absent from the list of largest shareholders. Twitter CEO Dick Costolo is No. 4 on the individual stakeholder list at 1.6%. Costolo is already a rich man, taking home $200,000 in salary last year, along with $8.4 million in stock and $2.9 million in stock options. This year, he'll only make $14,000 in salary, but he'll likely make a lot more from the IPO. Five institutional investors have stakes of at least 5%: Benchmark Capital, DST Global, Rizvi Traverse, Spark Capital and Union Square Ventures. Risk factors: Companies filing for IPOs are required to disclose "risk factors" to potential shareholders. Twitter pointed out its heavy reliance on advertising and the competition in that space from companies with more money and more users: Facebook, Google, LinkedIn, Microsoft and Yahoo. The company also cited its dependency on growing its already large user base. Other concerns include Twitter spammers who reduce the quality of the site, possible government censorship of Twitter in some countries, outages on the site, and financial results that "may fluctuate from quarter to quarter." During the IPO process, it's common for companies to re-file its paperwork several times over a period of weeks or months. Those updates will add more details on Twitter's business, and it could even restate some of the financial information detailed in the first filing. money.cnn.com

Samsung on Track for Record Profit as HTC Stumbles October 4, 2013 Samsung said Friday that it is on track for yet another record-setting performance in the third quarter, while rival smartphone maker HTC posted a rare loss.South Korea-based Samsung said it would report operating profit of $9.2 billion to $9.6 billion for the third quarter -- which works out to a minimum increase of 23% over the same period last year. The performance is a new record -- higher even than the $7 billion profit posted in the second quarter. Third-quarter sales were also higher than last year, rising a minimum of 11% to around $54 billion. Samsung shares advanced about 1% after the earnings guidance was released, but it wasn't enough to erase longer-term losses. Since the end of May, Samsung shares have lost 7% of their value amid concerns over slowing smartphone sales. The pressure on Samsung shares is part of an industry-wide trend driven by declining margins and possible saturation in the smartphone business. While Samsung can rely on other parts of its business including semiconductors and other technology to buffet losses, competing phonemakers haven't been so lucky. Former mobile powerhouse BlackBerry has burned through cash at a startling rate and is now hoping to go private. The company's Z10 smartphone, its latest bid for relevance, never really gained traction. Apple shares have lost 5% of their value since January 1, but have clawed back some of the loss in recent weeks after the company introduced a new set of iPhone models. Taiwan-based HTC is another hard-hit victim of the trend. The company said Friday that it lost $100 million in the third quarter, a number that was significantly worse than analysts had expected. Though analysts say HTC's smartphone One has sold admirably, it hasn't stopped the company from continuing its downward spiral. Samsung is scheduled to deliver final earnings results for the third quarter at the end of October. money.cnn.com

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Emerging Technology

Kaleidescape’s $3995 Cinema One is Everything Except

Affordable October 3, 2013 Ars has covered Kaleidescape many times over the past several years, most recently in March when the company was handed a defeat in its long-running court battle against the DVD Copy Control Association (CCA). (The company has since appealed the ruling.) Kaleidescape makes home theater machines—devices that can keep all of your DVD and Blu-ray movies in a single location and play them without the hassle of digging through DVD cases to find the right disc. The thing that sticks out about Kaleidescape is that its home theater boxes aren't small. These are typically enormous devices that cost many thousands of dollars, and the boxes are more likely to be installed by a home theater contractor than by a normal consumer. Any self-respecting home theater geek these days likely already has a setup designed to do something similar. This usually takes the form of a home theater PC running XBMC or one of its variants, with video and music stored either on internal storage or connected to a NAS over Ethernet. Doing this will get you a system that does most of the things Kaleidescape's boxes do, but the DIY route comes with the added hassle of installing and maintaining your own software. You also need to acquire a working knowledge of disc ripping and encoding, a task that isn't terribly difficult but isn't terribly easy either. Kaleidescape's systems automate a significant chunk of the HTPC experience, wrapping the movie ripping and storage aspect in a single attractive package that looks and functions more like an appliance than an HTPC. The company's traditional products, as mentioned, are expensive—like, $10,000-type expensive. They're great for an upmarket customer who wants to wire every room in his or her vacation home up for movie watching, but it's not a great option for the more middle-class among us.

The Cinema One is Kaleidescape's attempt at moving a bit down the market. The system still isn't anywhere near approaching "cheap," but it is significantly less expensive than previous Kaleidescape offerings. A Cinema One will set you back about $3,995.

Expense is relative, but that's still a heart-stopping chunk of change. For that amount of money, though, you get an awesome home theater system that stores hundreds of movies and can access hundreds more online. It's a great little box, but is it worth it?

That depends. Let's dive in.

The Cinema One arrived tucked away neatly inside its box, along with an accessory kit containing a very normal-looking infrared remote control with batteries, a power brick and cord, an Ethernet cable, an HDMI cable, and a tiny USB 802.11n Wi-Fi adapter. It's gratifying to see the cables and the Wi-Fi adapter already included. Considering the device's price, their absence would be inexcusable.

The system's casing is metal and quite sturdy; the entire thing weighs about 10 lbs (4.6 kg). The port layout on the back of the unit is as pleasingly sparse as its front bezel—from left to right, there's a power plug, an HDMI port, analog audio output ports, a digital audio coax output port, a USB port (for the Wi-Fi dongle), a gigabit Ethernet port, and a small plug for connecting an additional infrared receiver.

The Cinema One box connected without complaint via HDMI to my receiver, and it powered on very quickly, taking about five seconds for the box to go from off to menu. The first thing you're presented with out of the box is a graphical view of all of the movies in your library; using the directional buttons on the remote, you can "fly" over the colorful, endlessly wrapping landscape.

Kaleidescape's signature "flyover" view, allowing you to graphically browse your movie library. It's not terribly useful, but it's really neat to look at.

The press demo system Kaleidescape sent came preloaded with more than a hundred movies and television titles. This gave me an opportunity to see how the system operates with a fair-sized library. The "cover fly" mode was certainly neat-looking with so many titles to display, but it wasn't terribly useful. The order appears random and the interface re-arranges itself every so often. Fortunately, your

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library can also be viewed in an alphabetic list, which is how I used the system for the duration of my time with it.

Each movie's entry in your library contains summary metadata—what it's about, who's in it, when it was made, and a number of other pieces of information. This information comes from Kaleidescape's own database of more than 220,000 movies, which it maintains and curates.

There are a great deal of configuration options that can be twiddled within the device's setup menu, including whether or not the Cinema One should decode movie audio or send it in pass-through mode directly to the attached receiver. The system can also be forced to specific video resolutions or set to simply pass through the video from the media being played. There are even some advanced calibration options intended for use by professional system installers; these are of particular use if the system is being used with a projector and a screen whose masking might not exactly match the correct dimensions.

One thing that isn't accessible is any kind of quality or encoding controls for ripping discs. The system will tell you how many movies are on its internal storage and how much room remains, but there is no way to compress or transcode content to save space.

The reason for this is that the Cinema One system doesn't transcode at all. When the box rips a disc, it reads and copies the data files off the disc (the VOBs and other files from DVDs, and the contents of the BDMV director for Blu-rays) and stores them locally on a 4TB "enterprise class" (per Kaleidescape's documentation) hard disk drive. The movies are played at their native resolution and look the same as they do when played from a disc—because they are the same.

There are other implications, too. Movies stored on the Kaleidescape player have the same audio and subtitle tracks as they do on-disc, along with all of the same special features. Ripping all this content from discs for an HTPC requires a bit of extra effort to extract and package; on the Kaleidescape box, a single button gets you everything.

It took the Cinema One 26 minutes to rip my DVD copy of Ghostbusters, which is almost exactly the same amount of time it took to make an ISO of the DVD using RipIt on my desktop. Blu-ray discs took longer, with the ones I tried clocking in between 150-180 minutes. Once a movie is copied from disc, it can be played back at any time from the Cinema One's menu.

Well, sort of. DVDs can be played at any time, but Blu-ray presents an additional complication. As explained to Ars by Kaleidescape CEO Michael Malcolm, Kaleidescape scrupulously sticks to the licensing terms put forth by the AACS Licensing Authority, the group which controls the AACS copy protection mechanism employed by Blu-ray discs. The AACSLA stipulates that Blu-ray discs may be copied but that only one copy of a disc be playable at any given time. Kaleidescape complies with this by mandating that a Blu-ray movie's disc be present in the player when the movie is being played, even if the movie is stored on the Kaleidescape box.

There is an alternative, but it requires additional hardware. Kaleidescape sells a Disc Vault add-on, which can be used to rip and store up to 320 Blu-rays and DVDs. If a Blu-ray disc is present in a connected Disc Vault, the ripped copy can also be played.

Kaleidescape noted that the disc-presence requirement is in place not because of any technical limitation; rather it's to comply with AACSLA terms. Breaking the AACSLA terms could conceivably result in the revocation of Kaleidescape's ability to play Blu-Ray discs, so compliance is essentially mandatory for any business that wishes to use Blu-rays. So far, the AACSLA appears completely satisfied with Kaleidescape's compromise.

Unfortunately, to comply with the terms of the AACS Licensing Authority, movies ripped from a Blu-ray disc will only play when that disc is in the Cinema One—or in an attached Kaleidescape Vault.

In practice, the limitation was annoying—but no more annoying than getting up to put a Blu-ray disc in my PS3. However, increased convenience is precisely one of the things one buys a Kaleidescape box for. Even though this is a regulatory issue and not a technical one, it could definitely be off-putting if you have a large number of Blu-rays you want to store on your Cinema One's hard drive.

However, even with the necessity of swapping Blu-ray discs to watch them, the Cinema One has quite a few extremely desirable qualities. One of the nicest things about the box is that it delivers an experience

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that's familiar to HTPC users who rip their own movies, an experience that has long been forgotten by folks shackled to DVDs and Blu-rays—movies start playing almost immediately. You pick from your library what you want to watch and hit play, and the title starts playing. There are no previews, no disc menu, no FBI or MPAA warning. Even movies pulled from discs with unskippable crap at the beginning—Disney is a particularly egregious offender here—immediately display their content.

At first blush, this would appear to be a violation of the DVD spec—specifically, the portion mandating that movie players obey user operation prohibitions. UOPs refer to the ability of DVD authoring software to disallow certain operations during certain chapters. The intent was originally to force the display of copyright warnings, but it's not uncommon for discs to have huge swaths of unskippable previews and logos in addition to copyright notices.

The Cinema One doesn't play any of these. However, Kaleidescape is quick to point out that it complies exactly with the letter of the DVD spec. There's nothing in the fine print saying that playback must begin at the beginning of the disc, so the player starts playback at the beginning of the feature title. It never actually displays any of the unskippable garbage in the first place.

It's sad that "movies start when you press play" is something worth remarking about, but content producers have so fantastically and egregiously abused UOPs on discs that finding a disc that starts up directly to its menu is almost unheard of these days. It's common practice for HTPC users to discard all but the main title when ripping movies for personal use, but this is the first appliance-style movie player I've ever used that skips the crap as a matter of course. This is a very, very good thing.

It's also something that requires quite a bit of work. Kaleidescape CEO Michael Malcolm explained that there's no fully automated process to determine exactly where a movie starts and stops on a DVD or Blu-ray (automatically playing the longest title isn't enough, especially for discs with seamless branching and complex structure). The exact process of marking the beginnings of movies is a mixture of automatic and manual processes. Kaleidescape employees generate the data, and it's kept as part of Kaleidescape's large movie database.

By default, when you play a movie ripped from disc, you'll have the option to change audio and subtitle tracks and to perhaps play a trailer. However, because the Cinema One player stores the entire disc, the on-disc menus and all of a movie's special features can quickly be accessed using the remote's "Disc menu" button. This launches the DVD or Blu-ray's menu, exactly as you'd see if you inserted the disc into a standard player. From there, you can play the movie—this time with the FBI warnings and other pre-roll silliness—or access the rest of the special features.

Playing Ghostbusters directly, without seeing any FBI warnings, and then hitting the "Disc Menu" button and playing Ghostbusters via the DVD menu to see the FBI warning.

Kaleidescape also offers "scenes" for each movie, which is a neat concept. For example, say you and a friend are quoting The Princess Bride at each other, and you can't remember the exact wording of

Westley's "rodents of unusual size" quip. You're pretty sure he says "it's doubtful they exist," but your friend insists that he actually say "I don't believe they even exist." Knives are drawn. The argument is about to turn bloody.

Rather than hunting for YouTube clips or scrubbing through tracks, you could pull up The Princess Bride on your Cinema One, punch the "Scenes" menu for that movie, and quickly pick out the "R.O.U.S." scene. The box will play just that 2:32 minute scene. You and your friend can then both feel shame; because the actual line is "I don't think they exist."

Predefined "Scenes" for each movie let you see the awesome parts that you want to see without having to search through the whole movie.

Kaleidescape has scenes defined for every one of the 220,000 movies in its database. Unlike the marking of start times, scenes are defined manually. There are typically a handful for each movie (though some have more than others), and they often contain the most quotable or important moments in the film. Some movies also feature a "Songs" collection—in The Hobbit: An Unexpectedly Long Movie, for example, the Cinema One will let you jump right in and listen to dwarves telling stories and cracking plates.

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Movie playback works just like a disc player. You can pause, play, and jog forward and backward at variable speeds. The Cinema One keeps track of the play position in your movies; movies that you've paused without finishing are automatically grouped together in one of the Cinema One's "collections."

In fact, paused movies are one of four separate collections that the player keeps track of. New movies are automatically added to a "New" collection; paused movies go into the "Paused" collection; movie scenes are collected in a third. There's also a fourth collection called "Watch Soon," which you can manually add items to from your library. If you know you want to watch Aliens the next time you have a party but you think you might get too hammered to remember, you can add Aliens to the "Watch Soon" collection. It will be queued up and ready when the guests show up and the drinking starts.

The system has a limited Web interface, which shows the contents of its library and the unit's current status. The interface also displays when each movie was added to the library, as well as the method by which it was added (ripping or downloading from the Kaleidescape store). If any disc rips or downloads are in progress, the interface shows their remaining time.

You can also view details of your library's contents via the Web interface, though you can't do more than look. The interface offers no "active" functionality. You can't program the player to do anything or interact with it in any way except to passively monitor what it's doing.

Kaleidescape's free iOS app, on the other hand, makes most of the Kaleidescape user interface portable. The app connects to your Cinema One via the LAN, and it can execute any function that can be executed with the infrared remote control. The app is quite a competent "second screen" style application, and it provides a neat alternative to the infrared remote for situations where line-of-sight with the Cinema One isn't possible.

However, one thing that the iOS application does not do is content streaming, over the LAN or over the Internet. Content stored on the Cinema One can only be played on the Cinema one. There's currently no way to stream the content somewhere else.

Kaleidescape's official app isn't the only app available. There are several competitors, which offer essentially the same functionality; however, most appear to cost money instead of being free. One app, Remotescape, costs a baffling $199.99; even more baffling is that the app maintains a 4.5-star rating. Kaleidescape's systems are typically marketed to up-market consumers as a luxury item, but a $199.99 remote control application that doesn't even stream seems ludicrous even in the rarified custom home theater space. (Perhaps aware of the sheer insanity of their application, the Remotescape maintainers have a comparison page showing what value their app adds over the free Kaleidescape app. I'll save you the trouble of clicking: the answer is not a whole lot.)

The Kaleidescape's user interface remained quite responsive throughout our time with the system, even when ripping a Blu-ray disc and simultaneously downloading a 30GB high-definition movie from the Kaleidescape Web store. Even banging on both the remote and the iOS app at the same time didn't result in a lot of delays. The system has enough juice to do everything it's supposed to do without lagging.

Under the hood, the Cinema One is using an Intel "Canmore" CE 3100 media processor. The CE 3100 is designed specifically for use in Blu-ray players and other consumer electronics devices, and it combines a 90nm Pentium M CPU with video- and audio-decoding silicon. There's also space on the chip dedicated to the complex decryption gymnastics required by Blu-ray's AACS copy protection.

The CE 3100 has been around since 2008, so the presence of a Pentium M as its CPU isn't surprising. It's important to remember that the Cinema One isn't a desktop computer, either—in spite of what appears on paper to be older hardware, the UI is smooth and snappy, and the system responds to remote control button presses instantly.

That responsiveness in spite of the older SoC is because the Cinema One isn't running a consumer grade operating system. Rather, the system runs a proprietary OS called "kOS" (for Kaleidescape OS, pronounced "chaos"), which has been evolving since its initial use in 2001 for Kaleidescape's earliest units. CEO Malcolm describes kOS as a message passing operating system, which in turn relies on a Linux layer and Linux drivers to talk to the box's hardware. The system uses an Intel CPU, though Kaleidescape was unable to provide further details beyond that.

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Purely out of curiosity, I hit the Cinema One up with several different nmap scans. There were several ports open beyond 80 and 443, but querying them in various ways yielded nothing usable or interesting:

The Cinema One isn't intended to exist in a vacuum, though—the discs you feed it are only one way to get movies into your library. Kaleidescape maintains its own digital storefront, and the Cinema One player is linked with your online Kaleidescape account. Weirdly, I didn't find a way to actually browse the Kaleidescape store through the Cinema One. I had to open up a Web browser on my computer and do my browsing there.

The Kaleidescape Web store sells a few small hardware accessories, but the key component is the ability to buy movies and TV shows in both standard definition and high definition. Video content purchased on the Web store is automatically downloaded to your Kaleidescape system (or systems), and those downloads can be quite large. The high-definition copy of The Goonies we tested, for example, was about 30GB.

The movies are so large because the Kaleidescape store is offering something that, to my knowledge, no other online video store is offering: uncompressed—or, more properly, non-transcoded—HD video. An HD movie downloaded from the Kaleidescape store is identical in resolution and encoding (and size) to a Blu-ray movie. In fact, it even downloads with the same special features. The Kaleidescape engineers remove the disc menu, but the download is otherwise identical to the contents of a Blu-ray disc.

One of the most attractive features about the Kaleidescape store is the ability to upgrade standard definition movies to high definition for a fee. The upgrade ability isn't universal—Kaleidescape must have the HD version of the movie available to download. Don't get all excited about finally seeing the 1986 epic animated Transformers: The Movie in HD, because it's not available. Believe me. I checked.

But if, say, you're still kicking yourself for buying the DVD of 300, this is your chance to pay $6.99 and upgrade to the 1080p version. The upgrade is downloaded to your Kaleidescape player as a separate movie, and you have the ability to watch both versions (or to delete the standard definition one if you'd like).

The upgrade process, though, has a small wrinkle: it requires you to link an UltraViolet account to your Kaleidescape Web account in order to get that $6.99 HD upgrade price. Without linking an UltraViolet account, the "upgrade" pricing appeared to be the same as simply purchasing the HD movie.

Kaleidescape CEO Michael Malcolm spent some time talking with Ars about the company's contentious history with the DVD CCA and about what the company would like to do next. Unsurprisingly, Malcolm spoke about expanding the role of digital delivery and the online Kaleidescape store while moving away from physical discs.

The company faces the same region-locked problems when distributing content as Netflix and Apple and other major players face. Kaleidescape players respect DVD and Blu-ray regions, and their digital content is still bound by territory distribution rules. This is a particularly complex issue for a company whose products often find themselves spread out across many different countries—or, in the case of yacht installations, potentially hopping to different regions.

"One of our great frustrations is trying to make things simple for the consumer," Malcolm explained when I asked about how Kaleidescape systems work across borders. There are separate stores for different countries, and IP addresses and credit cards are used to determine which store to display—just like with other content stores. "If a customer has one home in Canada and one in the United States," he continued, "they'll see different content on the store in the different homes."

"The landscape gets more complicated with time," Malcolm said. "Different formats, different types of media—it's become more and more complicated for the consumer. When you think about all the different types of audio tracks, all the aspect ratios, DVD versus Blu-ray versus all the different streaming formats... how many people really want to get involved with that? We figure that people just want to sit down, lean back, and be entertained," he finished. "Find a movie to watch with your family and make it play. Everything should be automatic and invisible."

In spite of the ongoing court case with the DVD CCA, Kaleidescape has been granted a writ of supersedeas with respect to the injunction and is currently still able to sell its players as its appeal goes forward. Malcolm was quick to point out that the movie industry has been extremely cooperative and

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that Kaleidescape has very positive relationships with the studios. Still, the DVD CCA lawsuit casts a shadow, even if it hasn't yet had any effect on existing product designs. Between that and the ever-evolving set of movie formats, Malcolm sees Kaleidescape's future direction as being primarily about digital distribution of movies.

"Whether or not we succeed with our appeal," Malcolm said, "we would like to move away from copying DVDs and even Blu-ray discs in the future, because our plan is to get all of the content on our store and

supply content from the store." The move away from physical to digital would let Kaleidescape continually mine value out of its database of movie metadata, neatly side-stepping any potential legal issues involved with copying media. Malcolm also noted that Kaleidescape is working on a way to not leave customers with large disc libraries out in the cold with the switch to digital distribution, though Kaleidescape wasn't prepared to comment further than that at this time.

$4,000 is a lot of money—to most folks, that puts this box firmly out of reach. The industrious HTPC geek reading this review is likely foaming at the mouth to get to the end so they can comment about how easy it is to build their own box that does even more stuff than the Cinema One.

But can you? Well...kinda.

From a hardware perspective, it's not terribly difficult at all to part together an adequately powerful, adequately quiet small form factor HTPC. We did our own Bargain Box Build back in February and kept things right at the $400 mark (though without a Blu-ray drive—that would set you back another $50 or so). Prices have obviously shifted a bit since February, but hitting a similar target is still possible. You could also up your storage capabilities to a few terabytes of hard disk space and choose a nicer case (one that looks pretty and unobtrusive in your living room) without adding too much to the cost. Building a good HTPC system for under $600 isn't too difficult.

If you're a Mac aficionado, a Mac mini is also easily within the same price range—a base model mini will set you back $599, though you have fewer options for internal storage expansion and you'd need to add a not-inconsiderable $100 for an external Blu-ray drive.

Hardware, though, isn't really the issue—it's the software and all of the hooks that go with it that are difficult to reproduce. Blu-ray is a big part of the problem, too—popular media center applications like XBMC don't natively support Blu-ray playback, and so if you're looking to replicate the Cinema One's disc-playing and -ripping functionality, you need a way to work around that.

One method is to buy a Blu-ray player application; these are not free. Another is to purchase something like SlySoft's AnyDVD HD, a system-level driver that automatically defeats DVD and Blu-ray restrictions. AnyDVD works well, but it limits your operating system choices to Windows only. There are also plugins to enable XBMC to read Blu-ray discs, but they're kludgy and inconvenient—the opposite of the goal of the Cinema One.

Ripping and encoding movies is also a multi-step, multi-application process, and not one that HTPC apps typically support. It's possible to script the entire process, but again, getting down in the weeds and writing scripts is kind of the antithesis of the Kaleidescape experience.

Physical content acquisition aside, Kaleidescape also considers its integrated store a key part of the value they're bringing to the table. A home HTPC box can pull content from various online sources—Netflix, Hulu, and others—but the Kaleidescape store still gets you access to full-resolution, non-transcoded HD movies, complete with special features, and that's something you can't get anywhere else... legally.

So, no, you can't build your own DIY version of the Cinema One. You can come close in many places, and you can do a lot of things with an HTPC that you can't with a Cinema One (like streaming to other screens on or off your LAN, or playing existing video from a NAS), but you can't duplicate all of Kaleidescape's features on a home-built box.

Yeah, but is it worth it?

The Cinema One is a disc player, an HTPC, an online store; it's a way to simplify the movie-watching process. It's well suited for high-end custom home theater setups. It's unquestionably neat, but does it actually deliver good value for the price?

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"Value" is a complicated subject when dealing with consumer goods, since everyone has different goalposts and people like different things. I loved my time with the Cinema One. It was extremely easy to use, and it was obvious that the system and its interface had been created with craft and thoughtfulness. The system is an excellent movie player and an incredibly convenient way to store your movies. If it cost $500, I would have one already.

But the truth here is that it costs eight times more than that. This shiny box retails for $3,995. It's not a typical home theater purchase, and it's not something most consumers will jump to buy. Moreover, this is Kaleidescape's mid-range product; it can be linked with other Cinema One players, but it's nowhere near the biggest thing the company sells. High-end Kaleidescape systems store thousands of movies. The largest installation, according to the Kaleidescape CEO, is a sprawling 103-player monster on-board a gigantic private yacht.

The point with the Cinema One is to scale that same interface and experience down for a less affluent user, but "less affluent" here doesn't mean a whole lot when we're talking about yachts. A Cinema One system would be too small for someone looking to wire up their palace, but it might fit the bill perfectly for an upper middle-class family building a $30,000 home theater room onto their house. The price could perhaps be offset by trying to calculate the system's total cost of ownership, but those calculations on home appliances are difficult because they necessarily require you to quantify soft factors like "time" and "convenience."

As the old saying goes, if you have to ask how much it costs, it's probably too expensive. Unfortunately, most scenarios where the Kaleidescape system are a good fit are simply overshadowed by its price—unless they're not. Technically minded home theater customers likely have already built HTPCs that mimic most of the Kaleidescape's functionality for a far lower cost. They won't have access to the same interface or to the long tail of Kaleidescape-provided original-resolution content, but they also won't cost four grand. Plus, a home-built HTPC brings capabilities that Kaleidescape systems do not and likely will not have due to licensing restrictions—most notably, the ability to play content to a screen not directly hooked in via an HDMI cable.

Still, it's nice to dream.

arstechnica.com

Mergers & Acquisitions

Cerberus Interested in BlackBerry October 3, 2013 Private equity firm Cerberus is interested in taking a look at BlackBerry's books as a prelude to a possible bid for the troubled smartphone company. Cerberus is looking to sign a confidentiality agreement with BlackBerry that would allow it to access the company's private information, an official familiar with the situation said Wednesday on condition of anonymity. The official spoke on condition of anonymity because the person was not authorized to discuss the private talks.

BlackBerry announced last month that Fairfax Financial Holdings Ltd. signed a letter of intent that "contemplates" buying BlackBerry for $9 a share, or $4.7 billion. Fairfax, BlackBerry's largest shareholder, is trying to attract other investors. It's unclear whether Cerebus is seeking to join Fairfax's deal or bid for Blackberry on its own. BlackBerry is allowed to look for other buyers while Fairfax conducts six weeks of due diligence.

BlackBerry shares were down four percent Wednesday before the Wall Street Journal first reported news of interest from Cerberus. The shares finished up four cents, or half a percent, closing at $7.96.

Blackberry's stock has recently traded lower than Fairfax's tentative offer on fears that the deal won't go through or that the final price will end up much lower.

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The BlackBerry phone, pioneered in 1999, was once the dominant smartphone for on-the-go business people and other consumers. But then came a new generation of competing smartphones, starting with Apple's iPhone in 2007. The BlackBerry suddenly looked ancient. Although BlackBerry was once Canada's most valuable company with a market value of $83 billion in June 2008, the stock has plummeted, giving it a market value of $4.1 billion, short of Fairfax's offer.

Cerberus has a history of investing in troubled companies, including Chrysler and Air Canada.

Blackberry declined to confirm Cerberus' interest.

"We do not intend to disclose further developments with the respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives," BlackBerry spokeswoman Lisette Kwong said in an email.

The Canadian company last month announced plans to lay off 40 percent of its global workforce.

wirelessweek.com

Industry Reports

Samsung's Galaxy Gear Smartwatch Just Doesn't Cut It

October 3, 2013

Samsung's Galaxy Gear smartwatch offers a glimpse into the future. Unfortunately, it's just not ready yet. For a watch, the Galaxy Gear sports some pretty impressive technology: It has a tiny but useable 1.6-inch touchscreen, 4 gigabytes of storage, 24 hours of battery life, a 1.9 megapixel camera, a speaker and a microphone. Samsung essentially shrunk a smartphone down until it was functional as a wristwatch.

It even does a number of smartphone-like things: Galaxy Gear displays updates, including texts, calendar appointments and other notifications. It has apps, it takes pictures, and it even makes phone calls. But the Galaxy Gear isn't a replacement for a smartphone. In fact, you still need a smartphone or tablet to use most of the smartwatch's features. Complicating matters further, the Galaxy Gear currently works with just two devices: the Samsung Galaxy Note 3 and the latest edition of the Galaxy Note 10.1. Not included is Samsung's wildly popular Galaxy S smartphone series, though Samsung has hinted that those devices might be supported in the future. And just because Galaxy Gear functions like a phone doesn't mean it's a particularly good one. You can make calls in a pinch, but only on speakerphone. And you awkwardly have to hold up your wrist within a couple of feet of your mouth for the mic to pick up your voice. The speaker is loud enough in a quiet setting, but can get a little drowned out when you introduce some background chatter. You can also speak commands to the smartwatch, but the feature is mostly a dud. You can use it to set an alarm, send a message, place a call or check the weather. But that's about the extent of it. Launching the "hands-free" interface still requires a considerable amount of finger action.

The camera isn't bad at all for what it is. But I mostly found myself asking what purpose it serves, considering I still have to carry around a phone -- with a better camera. Galaxy Gear is no faster at taking photos, and being strapped to my wrist, there was less freedom in getting the right angle. The home screen turns on when you turn your wrist to look at the watch. It would be a neat trick -- if it worked. It turned on in response to random movements of my arm. The selection of apps was particularly disappointing. Evernote lets you upload photos and look at to-do lists. Path offered a somewhat useful app. Samsung offers a suite of generic apps, including a clock, timer, voice memo taker and pedometer. And that's about it.

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The Galaxy Gear also isn't a particularly attractive piece of armwear. It is somehow both utilitarian and gaudy at the same time. The smartwatch offered just a few nice touches. The internal processor is fast enough and the screen was responsive. The battery got me through an entire 24 hours, and a little extra -- fine if you're OK with having another device to remember to charge every day. And the connection between the phone and the watch is solid as it should be, and notifications arrived in real time. Even if it's not totally life-altering, getting constant updates without having to take your phone out of your picket is maybe the best case to make for owning a Galaxy Gear. But the Gear ultimately doesn't do enough that a smartphone can't. Using the Galaxy Gear is like having a maid who only takes out the trash: It's a high price to pay for something that doesn't offer much added benefit. money.cnn.com

Trade-in Options Abound for Smartphones October 4, 2013

Feeling stuck with your old smartphone? Do you covet new releases like the iPhone 5S that boast niftier features like fingerprint sensors?

There's good news. A growing number of options allow you to trade in your old phone for cash or credit so you can buy a new one.

— MORE CHOICES: Online site Gazelle.com helped pioneer the trend toward recouping cash on your old smart phone or other gadget.

But a number of merchants have followed suit, including newcomer Wal-Mart Stores Inc., which announced a trade-in program in recent weeks. Apple Inc., which had offered a trade-in program online, launched one at its stores in August.

But if you're looking to upgrade your smartphone, act quickly, because resale values are dropping now that Apple's new iPhones — 5C and 5S — have been on sale for several weeks.

"Shoppers have a lot more options than ever before. But you have to be savvy," said Jeannette Pavini, consumer savings expert at Coupons.com. "It's worth it to take the time to do your due diligence."

— ONLINE VERSUS IN STORES: Doing trade-ins online may be more convenient than walking into a store. But remember you won't know for sure how much you'll get for your phone until the company checks it out and makes sure your assessment meets theirs.

For example, Amazon will deposit a gift card into your account assuming it agrees with your assessment of "like new," ''good" or "acceptable." If it doesn't, then you can receive a gift card for a lower amount or have the gadget returned.

One perk: Amazon just extended its lock-in program for trade-in values. That means you can create trade-in orders online but don't have to send in the phone until you receive a new one, as long as you ship it by Oct. 31.

At Gamestop, you can trade more than 600 devices at any of the GameStop's 4,400 U.S. store locations. You can also get estimated values at http://gamestop.com/DeviceTrader.

— ALL THINGS IPHONE: Apple has perhaps one of the most stringent trade-in programs among retailers.

Apple's U.S. stores will now take working iPhone as old as 3G. But you will only be able to receive a gift card that must go toward the purchase of an iPhone on contract with a carrier. And you can't trade in several phones at a time. Company officials declined to give price estimates, only saying that the prices depend on condition.

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— HOW MUCH YOU'LL GET: Pavini and others say that you should evaluate how stringent the program is and determine whether you want store credit or cash.

If you're focusing on just getting the best price, The Associated Press found that redemption values varied, based on a spot check of trade-in programs for Apple iPhone 4S 32GB with AT&T service.

During a check this week, Gazelle was offering $205 in cash for a flawless version, and $195 for one in good condition. At Amazon, com, the gadget commanded $205 in "like new" condition and $187.75 in "good" condition.

"Good" condition generally means the gadget works but may have limited signs of wear, like a small scratch.

Sometimes companies will offer other perks. Best Buy, for example, was giving out $50 gift cards with a trade-in and upgrade.

— CASH OR CREDIT? Pavini says it's often better to take store credit than cash because you will probably get more. In general, iPhones hold their value more than Android phones.

Wal-Mart launched a smartphone trade program where you will receive a credit from $50 to $300 when you trade in your working, undamaged phone. That's considered a good offer. But the credit must be used toward the purchase of a new phone, with a selection of more than 100 devices to choose from. And the trade-in has to be done at the same time you buy the new phone.

—PAYING FOR EASE: Convenience also may trump deals.

Cullen McClure, global information services manager at Kurt Salmon, says that when convenience is high, you may not get the best price.

Among the most convenient options are trade-in kiosks at malls. San Diego-based ecoATM has been rapidly expanding at hundreds of malls. The machine scans the device and dole out cash on the spot.

wirelessweek.com

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