Samsung flags are set up at the main entrance to the Berlin fair ground before the IFA consumer electronics fair in Berlin, August 28, 2012.

BRUSSELS | Fri Dec 21, 2012 1:57pm EST

BRUSSELS (Reuters) - The European Commission charged Samsung Electronics on Friday with abusing its dominant position in seeking to bar rival Apple from using a patent deemed essential to mobile phone use.

The Commission sent a "statement of objections" to the South Korean group, with its preliminary view that Samsung was not acting fairly.

"Intellectual property rights are an important cornerstone of the single market. However, such rights should not be misused when they are essential to implement industry standards, which bring huge benefits to businesses and consumers alike," Competition Commissioner Joaquin Almunia said in statement.

Apple and Samsung, the world's top two smartphone makers, are locked in patent disputes in at least 10 countries as they vie to dominate the lucrative mobile market and win over customers with their latest gadgets.

The filing of competition objections is the latest step in the Commission's investigation. After notifying Samsung in writing, the company will have a chance to reply and request a hearing before regulators.

If the Commission then concludes that the firm has violated the rules, it could impose a fine of up to 10 percent of the electronics firm's total annual turnover.

Technology companies are increasingly turning to the European Commission as the European Union's competition authority, to resolve their disputes. The Commission is also investigating Google and Microsoft.

In the case of Samsung, its standard-essential patents (SEPs) relate to the EU's 3G UMTS standard. When this was adopted in Europe, Samsung committed to license the patents fairly to competitors, the Commission said.

However, it began seeking an injunction in 2011 in various EU member states against Apple's use of these patents. The Commission opened its investigation in January 2012.

Samsung said it was studying the Commission's statement. It said it would cooperate fully and "firmly defend ourselves against any misconceived allegations".

"Samsung is confident that, in due course, the Commission will conclude that we have acted in compliance with European Union competition laws."

(Reporting By Philip Blenkinsop and Barbara Lewis; Editing by Helen Massy-Beresford and Mike Nesbit)

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Fri Dec 21, 2012 4:37pm EST

n">(Reuters) - Shares of BlackBerry maker Research In Motion Ltd plunged more than 20 percent on Friday on fears that a new fee structure for its high-margin services segment could put pressure on the business that has set the company apart from its competitors.

It was the stock's biggest, single-day, percentage price drop since September 2008. But shares were still nearly 80 percent above the year's low, which was reached in September. They started to rally in November as investors began to bet that RIM's long-awaited new BlackBerry 10 phones, which will be unveiled in January, would turn the company around.

The services segment has long been RIM's most profitable and accounts for about a third of total revenue. Some analysts said there was a risk that the fee changes could endanger its service ecosystem and leave the Canadian company as just another handset maker.

The fee changes, which RIM announced on Thursday after market close, overshadowed stronger-than-expected quarterly results. The company said the new pricing structure would be introduced with the BlackBerry 10 launch, expected on January 30.

RIM said some subscribers would continue to pay for enhanced services such as advanced security. But under the new structure, some other services would account for less revenue, or even none at all.

Chief Executive Thorsten Heins tried to reassure investors in a television interview with CNBC on Friday, saying RIM's "service revenue isn't going away".

He added: "We're not stopping. We're not halting. We're transitioning."

Since taking over at RIM in January, Heins has focused on shrinking the company and getting it ready to introduce its new BB10 devices, which RIM says will help it claw back ground it has lost to competitors such as Apple Inc and Samsung Electronics.

But the new services pricing strategy came as a shock to markets, and some analysts cut their price targets on RIM stock.

RIM will not be able to sustain profitability by relying on its hardware business alone, said National Bank Financial analyst Kris Thompson, whom Thomson Reuters StarMine has rated the top RIM analyst based on the accuracy of his estimates of the company's earnings.

Thompson downgraded RIM's stock to "underperform" from "sector perform" and cut his price target to $10 from $15.

Forrester Research analyst Charles Golvin said the move was likely about stabilizing market share: "At the moment, they need to stem the bleeding."

He said the tiered pricing might line up better with RIM's subscriber base as it expands in emerging economies.

RIM's Nasdaq-listed shares closed down 22.7 percent at $10.91 on Friday. The stock fell 22.2 percent to C$10.86 on the Toronto Stock Exchange.

COUNTDOWN TO LAUNCH

The success of the BB10 will be crucial to the future of RIM, which on Thursday posted its first-ever decline in total subscribers. Heins said on CNBC that the company expected to ship millions of the new devices.

He cautioned that this will require heavy investment, which will reduce RIM's cash position in its fourth and first quarters from $2.9 billion in its fiscal third quarter. He said, however, it would not go below $2 billion.

Still, doubts remain about whether RIM can pull off the transformation. Needham analyst Charlie Wolf said the BB10 would have to look meaningfully superior to its competitors for RIM to stage a comeback.

Canaccord Genuity analyst Michael Walkley said it was highly unlikely that the market would support RIM's new mobile computing ecosystem, and he remained skeptical about the company's ability to survive on its own.

"We believe RIM will eventually need to sell the company," said Walkley, who cut his price target on RIM shares to $9 from $10.

Baird Equity Research analysts said BB10 faced a daunting uphill battle against products from Apple, as well as those using Google Inc's Android operating system, and, increasingly, phones with Microsoft Corp's Windows 8 operating system.

Baird maintained its "underperform" rating on the stock, while Paradigm Capital downgraded the shares to "hold" from "buy" on uncertainty around the services revenue model.

"RIM has gone from having one major aspect of uncertainty - BlackBerry 10 adoption - to two, given an uncertain floor on services revenue," William Blair analyst Anil Doradla said.

RIM will have to discount BB10 devices significantly to maintain demand, Bernstein analyst Pierre Ferragu said.

The BlackBerry, however, still offers the security features that helped it build its reputation with big business and government, a selling point with some key customers.

Credit Suisse maintained its "neutral" rating on the stock, but not because it expected BB10 to be a big success.

"Only the potential for an outright sale of the company or a breakup keeps us at a neutral," Credit Suisse analysts said.

Separately on Friday, ailing Finnish mobile phone maker Nokia said it had settled its patent dispute with RIM in return for payments.

($1=$0.98 Canadian)

(Reporting by Chandni Doulatramani in Bangalore and Allison Martell in Toronto. Additional reporting by Sinead Carew in New York; Editing by Ted Kerr, Dale Hudson, Janet Guttsman,; Lisa Von Ahn, Peter Galloway and Leslie Gevirtz)

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A neon Google logo is seen as employees work at the new Google office in Toronto, November 13, 2012.

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Attendees sit in front of an Apple logo during the Apple Worldwide Developers Conference 2012 in San Francisco, California June 11, 2012.

NEW YORK | Fri Dec 21, 2012 1:41pm EST

NEW YORK (Reuters) - The nearly 28 percent decline in shares of Apple Inc since mid-September isn't just painful to individual shareholders. It's also being felt by investors who chased hot mutual funds that loaded up on Apple as the stock raced to a record $705 per share.

Apple makes up 10 percent or more of assets in 117 out of the 1,119 funds that own its shares, according to data from Lipper, a Thomson Reuters company. Those big stakes have contributed positively to each fund's annual performance to date, with Apple still up about 32 percent for the year. It was trading at $527.73 soon after the opening on Friday.

But that year-to-date outcome may not accurately reflect the performance of the funds for individual investors. All told, approximately $4.5 billion has been added to funds with overweight stakes in Apple this year, according to Morningstar data. The majority of these dollars were invested after March and after Apple first exceeded $600 per share - meaning many investors have been riding down with the decline.

The $302 million Matthew 25 fund, for instance, holds 17.4 percent of its assets in Apple, according to Lipper. The fund's 31.9 percent gain through Thursday makes it one of the top performing funds for the year.

Most of its Apple shares were bought years ago at a bargain basement price of about $125 per share. But $158.9 million of the fund's assets - or 53 percent - were invested after the end of March, when Apple was trading near $615 per share, according to Morningstar data.

For those investors that bought after March, all that concentration in Apple hasn't led to a stellar gain but rather a drag on the portfolio. Someone who invested in Matthew 25 in early April has seen the value of the fund's Apple stake fall about 19 percent, while someone who invested at the beginning of September has watched that outsized Apple stake drop 27.2 percent.

In turn, the majority of the fund's investors have reaped a much more modest performance than its year-end numbers suggest. Since the end of March, the fund has gained 6.7 percent, according to Morningstar data, far less than its 31 percent year-to-date gain and about two percentage points more than the benchmark Standard & Poor's 500 index.

Since, September the fund is down nearly 3 percent through Thursday's close, compared with a 1.1 percent decline in the S&P 500 in that period.

The impact of Apple's falling stock price shows some of the drawbacks of portfolio concentration, experts say. These stakes can leave the funds overexposed to the ups and downs of one company - counter to what most mutual funds are supposed to do for investors.

"Any time you get over 10 percent of the portfolio in one company it's a red flag," said Michel Herbst, director of active fund research at Morningstar. Many fund managers do have risk management rules that prevent them from devoting more than 5 percent to 6 percent of their portfolio to any one stock, he said.

Then again, some funds purposely invest in just a few stocks. Mark Mulholland, the portfolio manager of the Matthew 25 fund, said that taking concentrated positions in companies is the only way to beat an index over longer periods of time.

'RIGHT-SIZING' PORTFOLIOS

Along with concerns about iPhone sales in China and tax-motivated selling among people who want to avoid potentially higher capital gains taxes in 2013, the wide fund ownership of Apple may be a factor in the size of the stock's recent declines, fund managers said. In addition, with so many funds already heavily invested in the high-priced stock, there may be fewer marginal buyers available to push prices up again when shares begin to dip.

"The stock didn't go from $700 to $520 because people didn't like the new iPad. It's become a favorite short of hedge funds because they know they can get in on this," said Mark Spellman, a portfolio manager of the $300 million Value Line Income and Growth fund with a small position in Apple.

Short interest in the stock rose to 20.6 million shares at the end of November from 15.1 million shares at the end of September, according to Nasdaq.

"Some of my competitors have 12 percent of their assets in Apple, which I think is ludicrous", said Spellman, who said the company is no longer trading on its fundamentals.

Sandy Villere, who has a 2.5 percent weighting of Apple in his $276 million Villere Balanced fund, said that some mutual fund managers are selling shares because of the over-weighting.

"Right now many people who did take huge overweight positions are right-sizing their portfolios to get it in line with their regular weightings," he said.

Still, some bullish investors see the stock's recent declines as a buying opportunity.

Mulholland, the Matthew 25 portfolio manager, continues to say that shares should be priced at over $1,000 per share based on his valuation of the company at 10 times enterprise value divided by earnings before interest, taxes, depreciation and amortization (EBITDA). Apple trades at about 7 times that figure now.

Wall Street analysts' average price target as of Thursday is $742.56, according to Thomson Reuters data. But Mulholland is happy to be more bullish than his peers.

"I'm glad that I'm able to get it at these prices," he said.

(Reporting By David Randall; Editing by Jennifer Merritt)

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Coffee cups with Google logos are seen at the new Google office in Toronto, November 13, 2012.

MILAN | Fri Dec 21, 2012 12:35pm EST

MILAN (Reuters) - An Italy appeals court acquitted three Google executives of 2010 charges of having violated the privacy of an Italian boy with autism by letting a video of him being bullied be posted on the site in 2006.

The court's decision, in a public hearing, overturned a previous ruling in 2010 which had sentenced the executives to jail. Reasons for Friday's decision will be made public in 60 days.

"We are very happy that the earlier decision was not confirmed, and that the court of appeals recognized the innocence of our colleagues," said Google policy manager Giorgia Abeltino after the ruling was read.

"Our thoughts are with the boy and his family for the difficult moments they have endured."

Four students at a Turin school uploaded a mobile phone clip to Google Video in 2006 showing them bullying the boy. The prosecutors accused Google of negligence, saying the video remained online for two months even though some Web users had already posted comments asking for it to be taken down.

In February 2010, a court gave each of the three Google executives, none of whom were based in Italy, a six-month suspended jail sentence. Google has said the executives had nothing to do with the upload.

Senior vice-president and chief legal officer David Drummond, former Google Italy board member George De Los Reyes and global privacy counsel Peter Fleischer had not faced actual imprisonment as the sentences were suspended.

The complaint was brought by an Italian advocacy group for people with Down's Syndrome, Vivi Down, and the boy's father.

Vivi Down was a plaintiff because it was named by the boys in the video, a lawyer for the group said. The boy had autism, not Down's, as widely reported during the three years of the case.

Google had said it had removed the video immediately after being notified and cooperated with Italian authorities to help identify the bullies and bring them to justice.

It said that, as hosting platforms that do not create their own content, Google Video, YouTube and Facebook cannot be held responsible for content that others upload.

(Reporting by Manuela D'Alessandro; Editing by Jennifer Clark and Hans-Juergen Peters)

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A Google carpet is seen at the entrance of the new headquarters of Google France before its official inauguration in Paris December 6, 2011.

PARIS | Fri Dec 21, 2012 2:26pm EST

PARIS (Reuters) - The French government said it would extend to the end of January the deadline for talks between Google Inc and the French press to settle a dispute over the search engine's links to online news articles.

Press associations in France, and other European countries, want Google to pay when it displays links to newspapers in Internet searches.

In reply, Google has threatened to stop indexing articles from the French press.

Talks between the search engine and French publishers, which the government said are advancing, were expected to wrap up by the end of the year.

If no deal were struck, France would press ahead with a law that would force Google to pay for the right to provide links to online news articles.

(Reporting by Elena Berton; Editing by Gerald E. McCormick)

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