U.S. Chamber of Commerce Executive Vice President for Government Affairs Bruce Josten gestures during remarks to the Reuters Washington Summit in the Reuters newsroom in Washington, November 7, 2011.

WASHINGTON | Thu Jan 10, 2013 8:12pm EST

WASHINGTON (Reuters) - As Republicans in the Congress struggle to find a strategy for forcing big spending cuts on President Barack Obama, some conservative voices are warning against taking the country to the brink of a debt default as the strategy for winning the budget wars.

"We would encourage the administration and the Congress of the United States, first and foremost, don't default. That's a bad idea," said U.S. Chamber of Commerce Executive Vice President Bruce Josten on Thursday.

An historic U.S. government default could send global financial markets reeling as the world's biggest economy would not be able to borrow money needed to operate its federal government or pay certain creditors - many of them in Beijing and Tokyo.

The matter will come to a head in mid- to late-February, when the Treasury Department will run out of ways to finance the country's debt without breaching a $16.4 trillion debt limit set in law.

A showdown between Democrats and Republicans is looming after Obama warned that he will not negotiate on the debt limit.

House of Representatives Speaker John Boehner, politically weakened by recent budget battles including the "fiscal cliff," has different ideas. He is insisting that any debt increase be accompanied by spending cuts and government reforms of a greater amount than the debt ceiling hike.

Republicans want those savings to be mainly achieved by reforming huge "entitlement" programs such as the Social Security retirement plan and the Medicare and Medicaid healthcare programs for the elderly, disabled and poor.

In each of the past four years, Washington has piled an additional $1 trillion onto its mountain of debt. "It's a big damn deal," said Josten's boss, Chamber of Commerce President Thomas Donohue, during a Thursday press conference.

And while the nation's largest business group does not like the idea of even flirting with default, it does think that Washington needs to "focus" on its debt problems, Donohue said, telling reporters that entitlement program savings were its highest priority in 2013.

Earlier this week, former House Speaker Newt Gingrich, a conservative firebrand who unsuccessfully ran in 2012 for the Republican presidential nomination, issued his own warning of peril for fellow Republicans.

Engaging in a debt limit fight, he told MSNBC, was "frankly, a dead loser." In the end, he predicted, Republicans would face so much pressure that "they'll cave."

That was followed by an op-ed column in Thursday's Wall Street Journal in which conservative Republican operative Karl Rove warned his party that it likely will have to "support a debt increase all Republicans wish" was not necessary and that Republicans should not hold out for the "perfect."

The Republican goal of winning structural changes to entitlement programs, Rove also said, may be beyond reach for now. "That's the cost of losing the 2012 election," he wrote.

MULLING THEIR OPTIONS

Democrats and Republicans are still gauging how best to position themselves for the upcoming debt limit fight, as well as additional battles over steep automatic government spending cuts due to begin on March 1. That will be followed by a March 31 deadline for either enacting additional funding measures or shutting down government agencies.

Boehner's House Republicans will hold a retreat next week in Williamsburg, Virginia, to try to map out a strategy. House Democrats will do the same in early February in Leesburg, Virginia outside of Washington, D.C.

Spokesmen for Boehner and Senate Republican leader Mitch McConnell would not comment directly when asked whether either leader was willing to chance a government default in their quest to trim spending.

In an interview with the Wall Street Journal published on Monday, Boehner said that the debt limit is "one point of leverage" but not the "ultimate leverage." That, he was quoted saying, is the automatic spending cuts known as the "sequester."

Boehner spokesman Kevin Smith did not comment directly when asked whether the Speaker was signaling that he would step away from the default "cliff."

But Smith said: "The American people simply won't support an increase in the nation's debt limit unless it is accompanied by real spending cuts and reforms."

As U.S. government debt races toward the $16.4 trillion limit, both parties are looking at their options for dealing with the problem. Here are some of them:

- The Wall Street Journal speculated that monthly debt ceiling increases could be the best Congress can agree to. That is a solution that likely would give the Treasury a gigantic headache in managing the debt;

- Democrats, according to a Senate Democratic aide, are weighing whether to bring back a mechanism that McConnell devised for 2011 and 2012: Giving Obama the power to raise the debt ceiling. If a super-majority of Congress voted against the move, it could stop it;

- Obama has rejected the idea in the past, but some Democrats nonetheless are considering using the 14th Amendment to the U.S. Constitution as a way out. It states that the "validity of the public debt ... shall not be questioned." So, they reason, Obama on his own authority could raise the debt limit. This could stir up a huge legal fight that likely would unsettle financial markets.

- Minting a $1 trillion platinum coin. It's an oddball idea, but there has been some discussion of Treasury using the coin to back additional borrowing;

- A legal scholars' solution: The Senate Democratic aide said some are wondering whether a determination could be made that appropriations bills enacted to provide government funding would supersede the debt limit law, implicitly allowing continued borrowing.

Amid the warnings against a default, some Republican lawmakers nonetheless argue that now is the time to take a stand on the debt limit.

If Obama is unwilling to reduce spending, Senator Jeff Sessions of Alabama told Reuters, "Republicans should use, will have to use, for the sake of the country, any leverage they have to accomplish that goal. And the debt ceiling is one of the things that can be effective in helping to reduce spending."

(Additional reporting by David Lawder Editing by Fred Barbash and Eric Walsh)

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Apple CEO Tim Cook speaks about the iPhone 4S at Apple headquarters in Cupertino, California October 4, 2011.

SAN FRANCISCO | Thu Jan 31, 2013 3:38pm EST

SAN FRANCISCO (Reuters) - Apple Inc Chief Executive Tim Cook's prediction that tablets would one day outsell personal computers appears to be coming true.

Holiday season shipments of tablet computers touched a record 52.5 million, up 75 percent from a year ago, as consumers snapped up a wide range of the touch-enabled mobile devices and lower priced offerings, according to International Data Corp (IDC), which tracks both markets.

Growth of the tablet market handily outpaced that of personal computers, with PC shipments sliding 6.4 percent to 89.8 million in the October-December period.

In another sign of the rise of tablets, Apple, the No. 1 seller of tablets, shipped 22 million of them in the fourth quarter, compared with 15 million personal computers shipped by No. 1 PC seller Hewlett-Packard Co during the same period.

But increasing competition means that Apple's one-time stranglehold on the tablet market continues to loosen. The market share of its iPad fell to 43.1 percent in the fourth quarter from 51.7 percent the previous year, IDC said.

Samsung Electronics, the No. 2 seller of tablets with its flagship Galaxy brand, captured 15.1 percent of the market, more than double its 7.3 percent share a year earlier.

Software maker Microsoft Corp, which launched its Surface with Windows RT tablet during the holidays, shipped about 900,000 units, IDC said.

Microsoft has been banking on Surface to showcase its new Windows 8 software to compete with Google Inc's Android-based tablets and the iPad.

Amazon.com Inc, despite having a wider range of products for the holidays, saw its share slip to 11.5 percent from 15.9 percent. Asian manufacturer Asus, which makes the Google-branded Nexus 7 tablet, saw a its share increase to 5.8 percent from 2 percent, IDC said.

IDC's figures underscore the sliding fortunes of PC makers such as HP and Dell Inc, which is now in the process of taking itself private.

"New product launches from the category's top vendors, as well as new entrant Microsoft, led to a surge in consumer interest and very robust shipments totals during the holiday season," said Tom Mainelli, research director, tablets, at IDC.

"The record-breaking quarter stands in stark contrast to the PC market, which saw shipments decline during the quarter for the first time in more than five years," Mainelli said.

(Reporting By Poornima Gupta; Editing by Steve Orlofsky)

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U.S. President Barack Obama announces that White House Chief of Staff Jack Lew (R) will be his nominee for U.S. Treasury Secretary, replacing Timothy Geithner (L), in the East Room of the White House in Washington, January 10, 2013.

WASHINGTON | Thu Jan 10, 2013 7:53pm EST

WASHINGTON (Reuters) - President Barack Obama broke the mold on Thursday by choosing a budget wonk to serve as U.S. Treasury secretary, leaving gaps on the international and financial side that could make for a rocky transition.

Jack Lew, Obama's chief of staff, was chosen to lead the Treasury Department as the White House heads into another round of difficult talks with Congress on how to put the nation on a sound fiscal path.

By tapping a two-time White House budget director, Obama signaled the importance he places on the ongoing budget battles.

If the Senate confirms Lew, as widely expected, the budget expert's most pressing task will be to ensure that Congress raises the nation's debt ceiling in time for the United States to avoid a damaging default and credit-rating downgrades.

In selecting a Washington insider, Obama has potentially left the Treasury Department with holes in crucial areas: financial markets, regulation and international economics.

Obama's outgoing Treasury secretary, Timothy Geithner, was previously president of the New York Federal Reserve Bank, where part of his job was to liaise with Wall Street and regulate big banks. He also had held top positions in President Bill Clinton's Treasury Department and at the International Monetary Fund.

Geithner's immediate predecessor, former Goldman Sachs CEO Hank Paulson, was also deeply steeped in the ways of Wall Street, as was Geithner's boss during the Clinton administration, then-Treasury Secretary Robert Rubin.

"Jack Lew is by all accounts highly qualified to be secretary of the Treasury," said Dennis Kelleher, the chief executive of the left-leaning group Better Markets, which supports tougher financial regulation.

"The one area of concern is whether or not he is sufficiently committed to quickly and thoroughly implementing financial reform and re-regulating Wall Street."

WALL STREET SHORT-TIMER

Bankers and other financial services executives privately expressed concern that Lew lacked financial markets experience, even though he worked on Wall Street for two years. Sheila Bair, a former bank regulator, told CNBC television on Wednesday that "someone with a little broader perspective would be good."

Lew, who is known as a strong administrator, admitted his financial experience was scant when he was vetted by the Senate to serve as a State Department deputy secretary and then as Obama's budget chief.

At a Senate Budget Committee hearing in September 2010, he was pressed by Senator Bernie Sanders for his views on whether deregulation contributed significantly to the 2007-2009 financial crisis.

"I don't consider myself an expert in some of these aspects of the financial industry," Lew responded. "My experience with the financial industry has been as a manager, not as an investment adviser."

"I don't personally know the extent to which deregulation drove it, but I don't believe that deregulation was the, you know, proximate cause," he added.

Those comments upset Sanders, a political independent who supports tougher regulation. Sanders voted against Lew's selection as budget chief, and on Thursday said he was prepared to vote against him again.

While Lew is expected to win confirmation, he could face a fair amount of opposition from a combination of left-leaning, pro-regulation lawmakers like Sanders and Republicans who have clashed with the nominee in past budget talks.

During his time on Wall Street, Lew was the chief operating officer of Citigroup's global wealth management division. He later became COO for Citi Alternative Investments, a largely administrative role that was apart from investment decisions that portfolio managers would have made.

"I found that things he was responsible for doing worked better after he joined," said Todd Thomson, who headed Citigroup's wealth management unit in 2006 and hired Lew. "He's very good at working across an organization, and bringing people together to resolve issues."

Lew joined Citi on the recommendation of former Treasury Secretary Robert Rubin, who was then chairman of Citigroup's executive committee. Rubin knew Lew from their time together in the Clinton administration.

LEW WHO?

Outside of Washington policy circles, Lew is little known. A number of financial officials in Asia and Europe drew a blank when asked by Reuters for their appraisal.

"People in the know should know a person who has served as OMB (Office of Management and Budget) chief. To me he is a total stranger," said one official of a Group of 20 nation.

As Treasury secretary, Lew will not only have to represent the United States on the global stage, but he will have to deal with a host of tricky international economic problems from the challenges presented by China's growing economic clout to Europe's debt crisis.

One euro zone official involved in fighting the region's debt problems said he was encouraged by Obama's pick.

"The sign it sends is that (the United States) will be serious about the deficit and fiscal policy since (Lew) is an experienced fiscal policy specialist," the official said.

If confirmed, Lew would come to the Treasury Department at a critical time for regulation. The Treasury secretary is essentially a regulator-in-chief who chairs the relatively new Financial Stability Oversight Council, a panel comprised of the country's top banking and market regulators.

As chairman, he would have the authority to veto any FSOC initiative, even if all of the other members disagree.

The council is currently receiving comments on a controversial framework that proposes stringent new regulations on money market funds. It is also close to imposing additional rules on a handful of large, complex financial institutions meant to ensure they never threaten the stability of the financial system.

Both initiatives could be put on hold as Lew gets up to speed, or a top deputy could be required to play a bigger role.

QUICK STUDY

The 57-year old Lew is considered a quick study.

He was a rising star when he served as a top policy adviser to then-House of Representatives Speaker Tip O'Neill in the 1980s, a Democrat who worked with Republican President Ronald Reagan to reform the tax code and put the Social Security retirement program on more solid footing.

Former Securities and Exchange Commission Chairman Arthur Levitt said Lew could handle any issue and that his lack of regulatory experience was not a problem.

Levitt said Lew was a strong defender of the SEC when Republicans once threatened to cut the agency's budget over rules Levitt pushed to reduce auditor conflicts of interest. "I would say Jack Lew is probably a better person from an investor's point of view than anyone I could think of," he said.

The Chamber of Commerce, the country's biggest business lobby, and other influential trade and lobby groups also said Lew has the skills for the top U.S. economic post.

Lew's selection could put pressure on the Obama administration to find a deputy with business and financial experience to help round out Lew's deep knowledge of Congress and the budget. Current Treasury No. 2 Neal Wolin is expected to depart once he assures a smooth transition is in place.

"It's important (Lew) has people around him who understand the markets," said Tom Quaadman, a vice president with the Chamber. "So I think it will be more telling, to a degree, who he brings with him into the department itself."

(Additional reporting by David Henry, Dan Wilchins, Jan Strupczewski, Tetsushi Kajimoto and Andrew Quinn; Editing by Tim Ahmann and Will Dunham)

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U.S. President Barack Obama delivers remarks at the White House in Washington November 28, 2012.

WASHINGTON | Thu Jan 31, 2013 6:19pm EST

WASHINGTON (Reuters) - The chief of a group of more than 200 CEOs said on Thursday that President Barack Obama had told the business community last month he might back a territorial tax system, a regime that would exempt offshore corporate profits from U.S. taxation.

Corporate America is pushing for the United States to move to such a regime to make businesses more competitive against foreign rivals that pay no taxes on overseas earnings. The United States currently taxes corporate profits earned abroad only when they are brought into the country.

In 2011, then Treasury Secretary Timothy Geithner privately agreed to move to such a regime in failed talks with Republicans to secure a major budget deal, according to aides present.

During last year's presidential election campaign, Vice President Joe Biden criticized a territorial tax system, employing populist rhetoric to blast companies that shift their business and jobs abroad.

John Engler, president of the Business Roundtable, a CEO lobbying group, said that in meetings during last month's budget standoff between the White House and Congress, Obama was moving back in the business community's direction on the issue.

"He reaffirmed his support for corporate tax reform and he was acknowledging the importance of ... a territorial system, which I think had been a little bit of a question," Engler said.

A White House official on Thursday said Obama is eager to "pursue corporate tax reform that lowers the rate ... but does not believe that a pure territorial system is the best way to achieve this goal."

A territorial system is seen as having a chance of winning approval in Congress only if it were to be coupled with a major budget deal, where Obama could win some of his priorities.

The Business Roundtable is composed of chief executives from marquee companies ranging from mega-retailer Wal-Mart Stores Inc to Wall Street's JPMorgan Chase & Co.

TAX REVAMP UNCERTAIN

Lawmakers in Congress have been working on a tax code overhaul for more than a year, though its prospects are unclear given a crowded legislative agenda and disputes over revenue.

Obama last year pitched a corporate tax revamp that included cutting the top corporate tax rate to 28 percent from 35 percent and closing a number of business tax breaks to pay for the cut.

Pam Olson, assistant treasury for tax policy under Republican President George W. Bush and now chief of PricewaterhouseCooper's Washington tax practice, said Obama's plan carefully opposed a "pure" territorial tax system, but left the door open for hybrid systems that might, for instance, exempt some but not all offshore profits from U.S. taxation.

"The use of the term 'pure' I think, was a signal that they were willing to consider it," Olson said.

Critics of moving to a territorial system say it will cause further U.S. jobs and business to move offshore.

A report by the Congressional Research Service, a nonpartisan think tank for lawmakers, this month said U.S.-based global companies are increasingly shifting profits into tax havens like Bermuda and Switzerland.

Critics say this proves companies are aggressively skirting the law to avoid U.S. tax. Business groups say the trend is the result of the relatively high U.S. tax rate.

TOUGH CHOICES

The notion of trimming the top corporate tax rate is a rare area of agreement between Democrats and Republicans on tax policy, though Republicans want to lower the rate more.

A major hurdle in any tax code revamp would be how to "broaden the base" of taxpayers, which both sides say is needed to help fund a tax rate cut. That would mean making hard choices about scrapping tax deductions, credit and loopholes that some companies hold dear.

Engler said his CEOs would be willing to give up some perks if it meant the corporate tax rate could be cut to 25 percent.

"There are credits for the way you handle depreciation, there are credits on R&D (research and development), there are credits on this type of manufacturing or this type of manufacturing product," he said. "They have to be on the table."

(Editing by Kevin Drawbaugh, Howard Golle, M.D. Golan and Andrew Hay)

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U.S. Defense Secretary Leon Panetta speaks about a suicide bombing near a NATO base, during a joint news conference with Afghan President Hamid Karzai at the Presidential Palace in Kabul December 13, 2012.

WASHINGTON | Thu Jan 10, 2013 6:41pm EST

WASHINGTON (Reuters) - Defense Secretary Leon Panetta said on Thursday he had ordered the U.S. military services to freeze civilian hiring, delay maintenance work and reduce other spending as fears grow the Pentagon will likely face another huge budget cut in March.

Speaking at a Pentagon news conference, Panetta acknowledged for the first time that across-the-board cuts he had said would be "devastating" to national security were increasingly possible and "we simply cannot sit back now and not be prepared for the worst."

The Pentagon is facing some $500 billion in cuts to defense spending over the next decade under a procedure known as sequestration. That comes on top of $487 billion in cuts over a decade that the department began implementing last fiscal year.

The new round of cuts, ordered by Congress as part of the effort to reduce the massive U.S. deficit, were due to go into effect on January 2, but lawmakers reached a deal on New Year's Day delaying the spending reductions until March 1.

The White House had told the Pentagon until recently not to plan for the across-the-board budget cuts. Those cuts had been approved by the Obama administration and Congress to try to force lawmakers to reach a compromise spending deal. But they were never expected to take effect because they hit almost everything equally, regardless of strategic importance.

Under the new law, the Pentagon faces $45 billion in cuts this year unless Congress can agree on an alternative package of spending reductions. Analysts say that even if Congress approves an alternative deal, that could include hundreds of billions of dollars in additional cuts to projected defense spending.

"My fear in talking to members of Congress is that ... this issue may now be in a difficult place in terms of their willingness to confront what needs to be done to detrigger sequester," Panetta said.

'PRUDENT MEASURES'

"Regardless of what Congress does or fails to do, we still have an obligation to protect this country," he added. "So for that reason, I have asked the military services and the other components to immediately begin implementing prudent measures that will help mitigate our budget risk."

Panetta, who will leave office once his replacement is confirmed by the U.S. Senate, said he had asked the military services to freeze civilian hiring, curtail non-critical facilities maintenance, delay awarding certain contracts and take other steps to reduce spending.

He said he also had asked the services as a precautionary measure to begin planning how they would implement unpaid leave for the department's nearly 800,000 civilian employees if that became necessary.

The department's civilian workers can be placed on unpaid leave for up to 22 work days - about a calendar month - but the Pentagon must notify Congress of the intended step 45 days in advance.

A top defense analyst said on Wednesday that sequestration would probably require all 791,000 civilian defense employees to take the full amount of furlough possible in order to achieve the savings that would be required in the personnel accounts.

A defense official said the services also were directed to curtail travel, training and conferences; to reduce expenses on things like supplies, business information technology and ceremonies; and to cancel ship and aircraft maintenance in the third and fourth quarters as necessary.

Army General Martin Dempsey, chairman of the Joint Chiefs of Staff, said that if the budget cuts hit: "We'll continue to resource those who are next to deploy. ... It would be unconscionable to do otherwise. Likewise, we'll continue to care for our wounded warriors and their families."

"But for the rest of the force, operations, maintenance and training will be gutted. We'll ground aircraft, return ships to port and sharply curtail training across the force," he said. "Within months, we will be less prepared. Within a year, we'll be unprepared."

Panetta said the Pentagon's budget crisis was compounded by the fact that Congress had not approved the department's spending plan for the 2013 fiscal year, instead extending funding under a continuing resolution that keeps it at 2012 levels, which represents a 5 percent cut.

He said that resolution was to expire on March 27 and if Congress failed to pass the 2013 appropriations bill, it could end up extending spending at 2012 levels for the rest of the fiscal year, which ends on September 30. That would take a further $11 billion out of the Pentagon's operations and maintenance budget.

"If you take the total sum of all these cuts, we're looking at a 19 percent to 20 percent reduction in the base budget operating dollars for active units, including what looks like a cut of almost 30 percent for the Army," Panetta said.

(Editing by Peter Cooney)

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

BRUSSELS | Fri Feb 1, 2013 4:37am EST

BRUSSELS (Reuters) - Google has presented detailed proposals to allay anti-competitive concerns about its business practices, the EU antitrust regulator said on Friday, in a move which brings the company a step closer to resolving a two-year investigation.

The European Commission has been investigating the world's most popular search engine following complaints from more than a dozen companies, including Microsoft, that Google has used its market power to block rivals.

Asked if he had received Google's proposal to resolve the matter, EU Competition Commissioner Joaquin Almunia told Reuters: "Yes."

He declined to provide details on the proposal, adding only: "We are analyzing it."

The Commission, which acts as competition regulator in the 27-member European Union, is now expected to seek feedback from Google rivals and other interested parties.

Almunia told Google Executive Chairman Eric Schmidt in December his company had until this month to present a comprehensive offer to allay regulatory concerns and stave off a possible fine.

Such a penalty could be as much as 10 percent of global turnover if a company is found to be in breach of EU rules. That could mean $4 billion if there is no satisfactory resolution in Google's case.

The Commission has said Google may have favored its own search services over those of rivals, and copied travel and restaurant reviews from competing sites without permission.

The EU executive is also concerned the company may have put restrictions on advertisers and advertising to prevent them from moving their online campaigns to competing search engines.

Earlier this month, Google won a major victory when U.S. antitrust regulators ended their investigation, saying the company had not manipulated its web search results to block rivals.

(Reporting by Foo Yun Chee; editing by Rex Merrifield)

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Japan Airlines' (JAL) Boeing Co's 787 plane which encountered the mishap of a fuel leak arrives at New Tokyo international airport in Narita, east of Tokyo, in this photo taken by Kyodo, January 9, 2013.

TOKYO/WASHINGTON | Fri Jan 11, 2013 4:56am EST

TOKYO/WASHINGTON (Reuters) - Boeing Co's 787 Dreamliner jet suffered a cracked cockpit window and an oil leak on separate flights in Japan on Friday - the latest in a series of incidents to test confidence in the sophisticated new aircraft.

All Nippon Airways Co said a domestic flight from Tokyo landed safely at Matsuyama airport in western Japan after a crack developed on the cockpit windscreen, and the plane's return to Tokyo was cancelled.

The same airline later said oil was found leaking from an engine of a 787 Dreamliner after the plane landed at Miyazaki airport in southern Japan. An airline spokeswoman said that return flight to Tokyo's Haneda airport was also cancelled while the leak was investigated. No one was injured in either incident.

The Dreamliner, the world's first carbon-composite airliner, which has a list price of $207 million, has been beset by problems this week.

U.S. transportation officials will hold a press conference in Washington at 0930 EDT (1430 GMT) to discuss issues related to recent electrical problems on the new plane, one person familiar with the matter told Reuters. Bloomberg News said the U.S. Federal Aviation Administration would announce a review into the jet's power system at that news conference.

U.S. regulators have raised questions about the plane's reliability on long transocean routes, the Wall Street Journal reported.

The 787 Dreamliner made its first commercial flight in late-2011, after a series of production delays put deliveries more than three years behind schedule. By the end of last year, Boeing had sold 848 Dreamliners, and delivered 49.

Earlier this week, a battery fire caused damage to an empty 787 jet operated by Japan Airlines while it was on the ground at Boston airport. The next day, another JAL 787 spilled 40 gallons of fuel onto the taxiway at the same airport after a problem that caused a valve to open, forcing the plane to delay its departure. [ID:nL1E9CA4BU] On Wednesday, ANA cancelled a domestic Dreamliner flight due to a brake-control computer glitch.

Boeing's top Dreamliner engineer, Mike Sinnett, was rolled out midweek to defend the 787, saying the plane's problem rates were no higher than with Boeing's successful 777 jet.

SPIDER WEB CRACK

ANA said crew noticed a spider web-like crack in a window in front of the pilot's seat about 70 minutes into Friday's flight, which was close to its destination.

"Cracks appear a few times every year in other planes. We don't see this as a sign of a fundamental problem" with Boeing aircraft, a spokesman for the airline said.

On the later flight, the ANA spokeswoman said she could not specify how much oil leaked from the engine.

The latest incidents came just hours before ANA was due to launch its maiden service between Tokyo and San Jose, California with the Dreamliner. That flight was due to leave Tokyo at 0830 GMT, returning to Japan after an around 90-minute turnaround in the United States.

ANA and JAL together fly 24 of the 49 Dreamliners delivered to end-December.

In India - where state-owned Air India has taken delivery of six Dreamliner jets and has more on order - a senior official at the aviation regulator said there was concern at the recent spate of Dreamliner glitches. The Directorate General of Civil Aviation has not ordered any Dreamliner checks for now, but is waiting for a safety report from the U.S. National Transportation Safety Board, the official said.

Air India spokesman K. Swaminathan told Reuters that the airline's debut Dreamliner flight from India to Paris on Thursday went without a hitch.

FUEL SAVINGS

One of Boeing's chief innovations with the 787 is its use of electrical power to run on-board functions such as hydraulics and air conditioning, instead of relying on heavier pneumatic systems used on other planes. The weight savings make the 787 more fuel efficient, a big advantage for airlines battling high jet fuel costs.

To power the electrical system, the 787 uses generators attached to the plane's engines, which produce about 1.5 megawatts of power, enough to power about 300 hot water heaters. The system uses high-voltage distribution panels and powerful batteries, such as the one that caught fire in Boston on Monday.

Makoto Yoda, president of Japanese battery maker GS Yuasa Corp, which makes the Dreamliner batteries, said his company was looking into Monday's fire, and was sending a team of engineers to cooperate with the U.S. investigation.

(Reporting by Kentaro Sugiyama, James Topham, Mari Saito, Mayumi Negishi and Maki Shiraki in TOKYO, Anurag Kotoky in NEW DELHI, Deborah Charles in WASHINGTON, Ernest Scheyder in NEW YORK and Aman Shah in bangalore; Writing by Ian Geoghegan; Editing by Alex Richardson)

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1 of 6. Ben Stephens (R), a Blackberry sales manager demonstrates a new Blackberry Z10 to prospective customer Shevek (C), as store manager Alejandra Escobar watches at a branch of UK retailer Phones 4U in central London, January 31, 2013. Blackberry's new Z10 model went on sale in the UK today. Research In Motion Ltd's glitzy unveiling of the long-delayed line of BlackBerry smartphones on Wednesday and a new corporate name failed to impress Wall Street analysts, with at least three downgrading the company's stock.

NEW YORK | Thu Jan 31, 2013 1:52pm EST

NEW YORK (Reuters) - The afterglow of Research In Motion Ltd's BlackBerry 10 unveiling faded on Thursday as a flurry of lukewarm reviews signaled the company's struggle to regain momentum in the hyper-competitive smartphone market was just beginning.

Shares of BlackBerry, RIM's new corporate name, fell almost 10 percent early on Thursday, after a 12 percent decline the previous day, as some tech analysts questioned whether the new BB10 devices the company launched on Wednesday were the sure-fire hit that BlackBerry needs to get back into the game.

While New York Times reviewer David Pogue gushed that BlackBerry's new Z10 model is "lovely, fast and efficient, bristling with fresh, useful ideas," other reviewers were more tentative in their appraisals.

"The problem with the Z10 is that it doesn't necessarily do anything better than any of its competition," said Joshua Topolsky of technology news website the Verge. "No one could argue that there's a 'killer app' here. Something that makes you want or need this phone because it can do what no other phone can do. That's not the case."

Such lukewarm reviews - combined with disappointment around a later-than-expected and still unspecified date for the U.S. sales debut - spooked investors and prompted analysts to cut their price targets and forecasts.

BlackBerry, which is making a big push to win back the all-important U.S. market with a Super Bowl ad this weekend, said the new Z10 touch-screen device would not go on sale in the United States until sometime in mid-March, saying U.S. carriers need more time to test the model.

"The shine from the Super Bowl ad will be a fading memory by the time U.S. customers can buy in March," said TD Securities analyst Scott Penner, who has a "hold" rating on the stock.

Samsung Electronics Co may also steal some of BlackBerry's thunder as buzz around its Galaxy IV device heats up before the Z10 hits U.S. store shelves, Penner pointed out.

Making matters worse for BlackBerry, it has been not been very specific about how soon it will be before many of its most loyal fans across the globe can get their hands on the Q10 - its new qwerty keyboard model. The company has only said that it aims to release this version of the smartphone in April.

"While later-than-expected availability of the Z10 and Q10 devices shouldn't impact the longer-term potential success of the BB10 platform, we believe it does mitigate one of the near-term catalysts for the stock," said Paradigm Capital analyst Gabriel Leung, who trimmed his price target on the stock to $16 from $19.50.

RIM shares were down 5.2 percent at $13.05 at 12:15 EST (1715 GMT) Thursday on the Nasdaq, while its Toronto-listed shares were down 5.8 percent at C$13.06.

HIGH-END TARGET MARKETS

Initially at least, the BlackBerry 10 is aimed squarely at the North American and European markets, where consumers and businesses alike are eager to snap up high-end devices.

In countries like India - the world's second-largest mobile phone market - the premium cost of the new Z10 handset will restrict sales. Even so, the new device, which sources said will likely enter the key Indian market in mid-February, could help the Canadian company compete with premium rivals such as Apple Inc there.

"The Z10 launched yesterday is obviously a high-end product and India is not a market at that price point," said Anshul Gupta, industry analyst at Gartner, a technology advisory firm.

BlackBerry is the third-largest smartphone player in India after Samsung and Nokia, due mainly to its low-cost handsets that allow young people to communicate for free on its BlackBerry Messaging Service.

RIM launched its first BlackBerry more than a decade ago, as a way for busy executives to stay in touch with both clients and their offices.

BlackBerry quickly cornered the market for secure corporate and government emails, but its star has faded in recent years as competition heated up and RIM failed to keep pace.

The BlackBerry is now an also-ran in the race for market share, with a 3.4 percent global showing in the fourth quarter, down from some 20 percent three years ago.

RIM's new smartphones are considered a make-or-break attempt to save the company and claw back market share that it has lost to the likes of Apple's iPhone and Samsung's Galaxy devices.

"BlackBerry has demonstrated truly unique software innovation within BB10," wrote Raymond James analyst Steven Li in a note to clients. "However, convincing the many BlackBerry users who have abandoned the platform for iOS and Android over the last few years to return will be a difficult challenge as Microsoft and Nokia can surely attest to."

(Editing by Frank McGurty; and Peter Galloway)

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1 of 5. U.S. Vice President Joe Biden speaks during a meeting on curbing gun violence at the White House in Washington January 10, 2013.

WASHINGTON | Thu Jan 10, 2013 9:07pm EST

WASHINGTON (Reuters) - Vice President Joe Biden butted heads with the powerful National Rifle Association on Thursday in his drive to reduce U.S. gun violence, drawing complaints from the lobby group that the White House is trying to limit constitutionally protected gun rights.

Biden sat down for about an hour and a half of talks with an NRA representative and officials from other gun owners' groups after telling reporters he is likely to recommend background checks for all gun buyers and a ban on high-capacity ammunition clips.

"It is unfortunate that this administration continues to insist on pushing failed solutions to our nation's most pressing problems. We will not allow law-abiding gun owners to be blamed for the acts of criminals and madmen," the NRA said in a statement after the meeting.

Biden is heading a task force on reducing gun violence formed after a gunman shot dead 20 children and six adults last month at a Connecticut elementary school. Biden said he will make recommendations to President Barack Obama by next Tuesday.

The strong reaction by the NRA, a lobbying organization known for its influence with many lawmakers of both parties, illustrated the difficulty of changing gun laws in a country long accustomed to being able to purchase firearms under relatively loose regulations.

The U.S. Constitution's Second Amendment guarantees the right to bear arms.

The Biden task force is trying to reach a consensus on a set of recommendations quickly while there is still a mood for action in Congress after the shootings in Newtown, Connecticut.

Adding urgency to the gun debate, a student armed with a shotgun opened fire at a California high school on Thursday, critically wounding a fellow student before two adult staff members talked the boy into giving up his weapon.

Moving quickly for Washington, Biden plans to turn over recommendations to Obama after only a few weeks of work. Biden said there is only a "tight window" for action.

"There is nothing that has pricked the consciousness of the American people (and) there is nothing that has gone to the heart of the matter more than the image people have of little 6-year-old kids riddled - not shot, but riddled, riddled - with bullet holes in their classroom," Biden said.

Attorney General Eric Holder also held talks on Thursday with major retailers including Wal-Mart Stores Inc, the largest U.S. gun seller, as well as Bass Pro Shops and Dick's Sporting Goods.

The Biden task force is grappling with elements that go beyond gun control measures, also looking into aspects of American popular culture.

The group held talks on Thursday with representatives of the movie industry and will also hear on Friday from the video game business. Both industries routinely feature gun violence.

BACKGROUND CHECKS

Meeting earlier with hunting and outdoor sports groups, Biden said two of his task force's recommendations are likely to be universal background checks for gun purchasers and a ban on high-capacity ammunition clips like the ones used in the Connecticut massacre.

The background check requirement would extend to all gun purchasers. This would close the "gun show loophole" in which vendors at open-air gun sales events can sell without a background check on the purchaser. It would also extend to private sales such as those conducted over the Internet.

The task force might also propose a ban on assault weapons like the Bushmaster AR-15 rifle used by the gunman in Newtown.

"There's an emerging set of recommendations not coming from me, but coming from the groups we've met with," Biden said.

Biden's office had no substantive reaction to the NRA statement, issued less than an hour after the talks ended.

"We were disappointed with how little this meeting had to do with keeping our children safe and how much it had to do with an agenda to attack the Second Amendment," the NRA said.

"While claiming that no policy proposals would be 'prejudged,' this task force spent most of its time on proposed restrictions on lawful firearms owners - honest, taxpaying, hardworking Americans," the NRA added.

The NRA, which proposed after the Newtown shootings that armed security officers be stationed at U.S. schools, vowed to take "our commitment and meaningful contributions to members of Congress of both parties who are interested in having an honest conversation about what works - and what does not."

Obama will review the Biden group's ideas, decide which ones he wants to keep and then announce "a package of actions and proposals," the White House said. Obama will seek legislative action by Congress but may also try to get some of his objectives done through presidential executive orders.

U.S. lawmakers have not approved a major new gun law since 1994. A U.S. assault weapons ban lapsed in 2004.

More than a hundred scientists from virtually every major U.S. university told Biden's task force in a letter that research restrictions pushed by the NRA have stopped the United States from finding solutions to gun violence.

The U.S. Centers for Disease Control and Prevention has cut gun safety research by 96 percent since the mid-1990s, according to one estimate. Congress, pushed by the gun lobby, in 1996 put restrictions on CDC funding of gun research. Restrictions on other agencies were added in later years.

Biden said he would like federal agencies to have the ability to get information on what kind of weapons are used most to kill people and what kind of weapons are the most trafficked.

"I'm no great hunter - it's mostly skeet shooting for me - I don't quite understand why everybody would be afraid of whether or not we determine what is happening," he said.

Some journalists were allowed in for part of Biden's meeting with hunting groups such as Ducks Unlimited and Pheasants Forever. No such news coverage was arranged for the NRA meeting.

(Additional reporting by Roberta Rampton; Editing by Alistair Bell and Will Dunham)

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WASHINGTON | Thu Jan 31, 2013 9:29pm EST

WASHINGTON (Reuters) - Republican lawmakers attacked Chuck Hagel on Thursday at a contentious hearing over his nomination to become the next U.S. defense secretary, questioning his judgment on war strategy and putting him broadly on the defensive.

In one of the most heated exchanges, Senator John McCain aggressively questioned Hagel, interrupting him and talking over him at times. He voiced frustration at the former Republican senator's failure to say plainly whether he was right or wrong to oppose the 2007 "surge" of U.S. troops in Iraq.

"Your refusal to answer whether you were right or wrong about it is going to have an impact on my judgment as to whether to vote for your confirmation or not," McCain said.

Hagel, who like McCain is a decorated Vietnam War veteran, declined to offer a simple yes or no answer, responding, "I would defer to the judgment of history to sort that out."

As President Barack Obama's choice to lead the Pentagon in his second term, Hagel could clinch Senate approval thanks to help from majority Democrats. But he appeared to pick up little new Republican support as his hours-long hearing wore on.

Although Republicans could create procedural hurdles to block him, there were no overt promises at the hearing to do so.

"Unless the Republicans filibuster him, the nomination is going to go through," said Bill Galston, a former adviser to President Bill Clinton.

Ford O'Connell, a Republican strategist, said, "It's been a tough day for Chuck Hagel overall."

"I think the Republicans are trying to decide whether they really want to push the pedal to the floor with Hagel," he said.

The Senate Armed Services Committee's Democratic chairman, Carl Levin, praised Hagel's performance after the nearly eight-hour hearing ended. "I thought he did very well. I thought he was responsive. He kept his cool. His experience was both modestly and eloquently described," the Michigan senator said.

The earliest the committee will vote on Hagel's nomination is next Thursday, Levin added.

Hagel's fellow Republicans dredged up a series of his past controversial statements on Iran, Israel and U.S. nuclear strategy, trying to paint him as outside mainstream security thinking. Even in polarized Washington, the grilling was highly unusual for a Cabinet nominee.

Senator Lindsey Graham of South Carolina laid into Hagel for once accusing a "Jewish lobby" of intimidating people in Washington, comments Hagel repeatedly said he regretted. Asked whether he could name one lawmaker who had been intimidated, Hagel said he could not. It was one of the many times he appeared uncomfortable.

"I can't think of a more provocative thing to say about the relationship between the United States and Israel and the Senate or the Congress than what you said," Graham said.

SEEKING TO SET RECORD STRAIGHT

If he is ultimately confirmed, Hagel will take over the Pentagon at a time of sharp reductions in defense spending, and with the United States still facing major challenges, including China, Iran and North Korea.

Hagel, speaking publicly for the first time since the attacks against his nomination began, seemed cautious and halting at times. He sought to set the record straight, assuring the panel that he backed U.S. policies of preventing Iran from obtaining a nuclear weapon and supporting a strong Israel.

"No one individual vote, no one individual quote, no one individual statement defines me, my beliefs, or my record," Hagel said in opening remarks to the packed hearing room.

"My overall world view has never changed: that America has and must maintain the strongest military in the world."

In an unusual reversal of partisanship, Democrats, more than Republicans, gave Hagel sympathetic support and time to air his views, which adhered broadly to Pentagon policy.

"I feel like I want to apologize for some of the tone and demeanor from today," said Senator Joe Manchin, a Democrat from West Virginia.

Galston said Thursday's hearing appeared to sap some of the momentum Hagel had going into the session after weeks of pushback by his allies against criticism.

He added, "It's going to be harder to present Hagel's confirmation now as a victory for bipartisanship - overcoming doubts, or coming together around sensible mainstream policies."

Despite the harsh tone from many Republicans, some senators from the party approached Hagel more collegially.

Senator Saxby Chambliss of Georgia called Hagel by his first name and exchanged jokes with him during his testimony. He served alongside Hagel in the Senate.

But Hagel years ago angered many Republicans by breaking with his party over the handling of the Iraq war.

It was one of several contentious chapters of modern U.S. history that surfaced during the session, from the Vietnam War, where Hagel served as an infantryman and was wounded, to former President Ronald Reagan's call for nuclear disarmament.

Hagel, who would be the first Vietnam veteran to serve as Pentagon chief, also was questioned on his view of the Pentagon budget. He is known as an advocate for tighter spending controls.

'WRONG' MAN FOR THE JOB

Even before Hagel started speaking, James Inhofe, the panel's senior Republican, called him "the wrong person to lead the Pentagon at this perilous and consequential time."

"Senator Hagel's record is deeply troubling and out of the mainstream. Too often it seems he is willing to subscribe to a worldwide view that is predicated on appeasing our adversaries while shunning our friends," said Inhofe of Oklahoma.

McCain's harsh attitude toward Hagel - whom he also singled out for opposing Obama's increase of forces in Afghanistan - was a far cry from their past, warm ties. McCain campaigned for Hagel in his Nebraska U.S. Senate race in 1996, and Hagel was national co-chairman of the Arizona Republican's unsuccessful 2000 presidential bid.

On Thursday, McCain said concerns about Hagel's qualifications ran deep.

"Our concerns pertain to the quality of your professional judgment and your world view on critical areas of national security, including security in the Middle East," he said.

In the entire Senate, which would vote on Hagel if he is cleared by the committee, only one of the 45 Republicans - Mississippi's Thad Cochran - has said he backs Hagel.

Senators Marco Rubio of Florida and Dan Coats of Indiana on Thursday joined the list of Republicans who said they would vote against Hagel.

(Additional reporting by David Alexander; Editing by Warren Strobel, Jackie Frank and Peter Cooney)

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1 of 6. U.S. President Barack Obama announces his nomination of White House chief of staff and budget expert Jack Lew (R) as his next treasury secretary, in the East Room of the White House in Washington, January 10, 2013.

WASHINGTON | Thu Jan 10, 2013 8:22pm EST

WASHINGTON (Reuters) - The first black U.S. president is coming under fire from some of his own Democratic Party for naming a stream of white men to key cabinet and leadership posts in his second administration.

President Barack Obama on Thursday named Jack Lew as his Treasury secretary, the fourth white male he has named to the most prized cabinet posts in recent weeks.

Lew's nomination follows Obama's pick of Senator John Kerry to replace Hillary Clinton as secretary of state. He has also named former Senator Chuck Hagel to be defense Secretary and John Brennan to head the Central Intelligence Agency.

Against this, he lost the first Hispanic woman in the cabinet when Labor Secretary Hilda Solis announced her resignation on Wednesday. And last month Lisa Jackson, who is black, announced she was stepping down as head of the Environmental Protection Agency.

"It's embarrassing as hell," New York Democrat Charles Rangel, one of the most senior black members of Congress, said of the Obama appointments.

New Hampshire Democratic Senator Jeanne Shaheen, whose state has the only all-female delegation in Congress, described the appointments as "disappointing."

"We need a government that looks like America so we can address the concerns that we hear from across the spectrum," she said.

Republicans joined in the criticism with former presidential candidate Mike Huckabee accusing Obama of waging a "war on women," using the same words Democrats coined to criticize Republican presidential candidate Mitt Romney during the election campaign last year.

"Now a lot of those females who supported Barack Obama are scratching their heads, and they're saying, ‘Whoa! How come there is so much testosterone in the Obama Cabinet and so little estrogen?'" the former Arkansas governor said on his radio show.

Obama beat Romney 55 percent to 43 percent among women, according to Reuters/Ipsos exit polling on Election Day. He also won large majorities of the African-American and Hispanic vote.

DIVERSITY AND DEMOGRAPHICS

Diversity in the United States is usually defined as including women and racial minorities, especially Hispanics and African-Americans. U.S. political pundits parse polling data of women, Hispanics, African Americans and other groups for signs of voting patterns.

They track the "gender gap," which is the percentage difference between Democratic and Republican support among women. Since Obama's re-election in November, many analysts have noted the rising percentage of U.S. ethnic minorities and described his victory as a reflection of changing demography.

The criticism of Obama is surprising because Republicans usually are the party accused of insensitivity to diversity.

Former President George W. Bush deflected this by pointing to the two secretaries of state during his eight years in office -- African-Americans Colin Powell and Condoleezza Rice. They were followed by Hillary Clinton.

If confirmed by the Senate, Kerry will be the first white male to hold the top U.S. diplomatic post in more than a decade.

Almost overlooked in the criticism is that the White House announced this week that Attorney General Eric Holder, who is black, will stay on as the nation's senior legal officer.

Obama also was widely reported to be considering an African-American woman, United Nations Ambassador Susan Rice as Secretary of State. She pulled her name from consideration because of Republican objections to her statements about the attack on the U.S. consulate in Benghazi, Libya.

White House spokesman Jay Carney urged critics on Wednesday to make their judgments only after Obama had completed his team.

"Women are well represented in the president's senior staff," he told reporters, noting that his team included Homeland Security Secretary Janet Napolitano and Health and Human Services Secretary Kathleen Sebelius.

Debbie Walsh, director of Rutgers University's Center for American Women in Politics, which tracks women in elective office, said Obama's choices were a missed opportunity to put women into powerful jobs such as heading the Pentagon.

"A case could be made that Barack Obama won on the strength of the support that he had with women, given the gender gap," she told Reuters.

With women filling 36 percent of Cabinet posts in his first term, Obama had the highest percentage of women in top jobs of any president other than fellow Democrat Bill Clinton, she said.

(Reporting by Ian Simpson; Editing by Greg McCune)

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Thu Jan 31, 2013 1:57pm EST

n">(Reuters) - Take-Two Interactive Software Inc said on Thursday it has pushed back the launch of the latest game from its hit "Grand Theft Auto" franchise to September 17 from its previously announced release window of spring 2013.

Shares of Take-Two were down six percent at $12.31 in early afternoon trading on the Nasdaq.

The delay was to allow Take-Two's Rockstar Games studio, which develops "Grand Theft Auto" games, additional development time, the video game company said.

"Grand Theft Auto V" will be released worldwide for Microsoft Corp's Xbox and Sony Corp's PlayStation3 game consoles on September 17, the company said.

The action-adventure game lets players complete criminal missions in urban settings. The franchise's last title "Grand Theft Auto IV" has sold over 25 million units since its release in 2008.

Grand Theft Auto V is set in a fictional city inspired by present-day Southern California.

The delayed launch pushes earnings from Grand Theft Auto V sales from June to September, Sterne Agee analyst Arvind Bhatia said. The new title of the massively popular franchise has the potential to rake in close to $1 billion in retail sales and sell 15 to 20 million units, according to Bhatia.

"It adds to their development cost and it's launching closer to what we think is going to be a period where new consoles will be coming out and there will be more competition from other titles," Bhatia said.

The video game industry has been struggling to cope with flagging sales over the last year. Analysts say consumers are holding back from buying hardware and software as they wait for rumored next-generation versions of Sony Corp's PlayStation and Microsoft Corp's Xbox, expected later this year.

The delay could mean Take-Two is possibly creating a "cross-generation" title that could work on current and next-generation consoles, said analyst Mike Hickey of National Alliance Capital Markets.

"Remember, Xbox signed an exclusive deal with Rockstar at the beginning of the prior cycle for episodic content, and Sony provided exclusive resources for the completion of Grand Theft Auto IV," Hickey said.

(Reporting by Malathi Nayak in San Francisco; Editing by Leslie Adler and Alden Bentley)

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