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Cisco to Cut 4,000 Jobs Despite Growth in Revenue

Cisco's revenue guidance for the current quarter was weaker than Wall Street expected, and shares fell sharply in extended trading.

The company's stock fell $2.51, or 9.5 percent, to $23.87 in extended trading after the results were released. The stock closed up 6 cents at $26.38 in the day's regular trading session.

Cisco Systems Inc. earned $2.27 billion, or 42 cents per share, in the three months that ended on July 27. That's up from $1.92 billion, or 36 cents per share, a year earlier.

Adjusted earnings were 52 cents per share in the latest quarter, squeaking past Wall Street's expectations by a penny. This figure excludes charges stemming from a patent settlement with TiVo and other one-time items.

Revenue rose 6 percent to $12.42 billion from $11.69 billion.

Analysts, on average, had expected revenue of $12.41 billion, according to a poll by FactSet.

Cisco's performance is widely regarded as a bellwether for the technology industry. That's because the San Jose, California, company cuts a broad swath, selling routers, switches, software and services to corporate customers and government agencies. Cisco's fiscal quarters end a month later than most other major technology companies, giving it additional time to assess economic conditions.

Cisco's product orders grew 4 percent year-over-year, the same as in the third quarter of this year. Orders in the Americas region grew 5 percent, while Asia declined 3 percent due to economic challenges in the region, Chambers said. Europe, the Middle East, Africa and Russia increased 6 percent. On its own, Europe was up 9 percent.

Chambers said that economic conditions in Europe still "vary significantly" by region, with the north and the U.K. showing "very positive progress."

"We remain cautious, however, given the instability of the southern region," he added.

The caution is evident in Cisco's guidance. For the current quarter, the company said that said it expects revenue to grow 3 percent to 5 percent year-over-year. Analysts are expecting $12.72 billion, a 7 percent increase from last year's $11.9 billion.

Over the long term, Chambers said that the company still expects revenue to grow 5 percent to 7 percent, and added that Cisco is in a "better position in the market today than ever before."

Bits Blog: BlackBerry Posts Loss, Despite New Phone

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Time Warner Revenue Is Flat, Despite Cable Gains

The parent company of HBO, CNN, TNT and TBS reported revenue of $6.9 billion in the quarter that ended March 31, down 1 percent from the same period last year. Net income grew 23.5 percent to $720 million, or 75 cents a share, compared with $583 million and 59 cents a share in 2012.

“We’re off to a strong start in 2013, making us even more confident in our full-year outlook,” Jeffrey L. Bewkes, chairman and chief executive of Time Warner, told analysts. He specifically pointed to the success of the company’s cable TV business, driven this quarter by an average nightly audience of 10.7 million for the N.C.A.A. basketball tournament broadcast on several Turner channels.

But Time Warner’s legacy businesses continued to lag. Later this year, the company is expected to complete the spinoff of its Time Inc. publishing unit into a separate, publicly traded company. Revenue at Time Inc., which publishes Time, People, Sports Illustrated and InStyle, fell 5 percent to $737 million, reflecting an 11 percent dip in subscription revenues.

Time Inc. eliminated roughly 6 percent of its total worldwide staff of 8,000 in the first quarter, resulting in $53 million in restructuring and severance charges. “We remain very focused on taking costs out of the business,” said John K. Martin, chief financial and administrative officer at Time Warner. Cost cutting, he added, is “an important step in preparing Time Inc. to function as a stand-alone public company.'’

Revenues at the Warner Brothers studio fell 4 percent to $2.7 billion, while operating income increased by 23 percent to $263 million. “Both ‘Gangster Squad’ and ‘Jack the Giant Slayer’ fell below our expectations,” Mr. Bewkes said.

He remained optimistic about the studio’s slate of upcoming films, including “The Great Gatsby” and “The Hangover Part III.” Warner Brothers had a strong television season with “Revolution,” an apocalyptic drama on NBC, and “Game of Thrones,” the HBO fantasy series that averages 13.4 million viewers per episode.

Mr. Bewkes defended CNN under the leadership of Jeff Zucker, the recently named president of CNN Worldwide. But, he said, the channel still needed to evolve from a trusted source of breaking news to a more regularly watched outlet. “CNN can’t just be politics and wars,” Mr. Bewkes said.

He rebuffed questions about whether the HBO Go on-demand app would be made available on an à la carte basis through a broadband connection, making the premium cable channel more like the streaming service Netflix. “We would do it if we thought it was in our economic best interest,” Mr. Bewkes said. “At this point, we don’t think it makes sense.”

Despite Sales Growth, Ericsson Profit Plunges

But shares in Ericsson, based in Stockholm, rose 3.4 percent on Wednesday to close at 79.60 kronor. Investors focused on underlying operating profits and comments by the chief executive, Hans Vestberg, who said he expected demand for new networks, its most lucrative business, to accelerate this year.

In the first three months of the year, 30 percent of Ericsson’s network equipment sales were made to the four big American network operators, a record for the Swedish company. Those companies are Verizon Wireless, AT&T Mobility, Sprint and T-Mobile U.S.A., which are expanding or planning to expand their mobile broadband networks.

“The networks division is going in the right direction,” said Hakan Wranne, an analyst with Swedbank in Stockholm. “This is being driven of course very much by the U.S market, which is basically the four big customers. That is also a risk.”

Net profit fell to 1.2 billion kronor, or $180.7 million, in the three months through March from 8.8 billion kronor a year earlier, when profit was inflated by a one-time gain of 7.7 billion kronor from the sale of a 50 percent stake in SonyEricsson to Sony.

Sales in the first quarter rose 2 percent, to 52 billion kronor, led by a demand in North America and Southeast Asia, where sales rose 23 percent and 22 percent, respectively. That offset a 34 percent sales decline in China, Japan and South Korea, where the weakening Swedish currency and slowing network investments weighed on results.

Excluding these and other one-time effects, Ericsson’s operating income rose 50 percent in the period, to 2.1 billion kronor from 1.4 billion kronor a year earlier.

Ericsson’s biggest rival, Huawei of China, has been effectively blocked from selling equipment to American operators because of national security concerns by U.S. lawmakers, fears that the Chinese company says are unfounded.

The intense competition between Huawei and Ericsson has turned to Europe, pushing down equipment prices and profits for both companies.

In the European market, which Ericsson defines to include Russia and some of the former Soviet republics, quarterly sales rose 6.3 percent, to 11.9 billion kronor.

“What we have been seeing for several years now, particularly in Europe with the modernization and huge swap-outs of networks, is that those contracts have been taken by Ericsson and Huawei at very low margins,” said Mr. Wranne, the analyst.

Mr. Vestberg, the Ericsson chief executive, said during an interview that he expected operators in Europe, North America and parts of Asia to accelerate their equipment purchases in the second half of this year, as carriers upgraded networks to accommodate the demands of their new Long Term Evolution technology, which delivers the fastest mobile broadband speeds on the market.

Equipment purchases intended to raise the capacity of networks, like replacing routers and updating network software to improve the efficiency of networks, are typically among the most lucrative types of sales for Ericsson.

“You have a new technology push, a rollout of a lot of coverage, you start upgrading and then you begin putting capacity in the networks,” Mr. Vestberg said.

“In the way we are approaching this mobile broadband technology right now, it will have a major impact on our society. And it is definitely being driven by data and networks.”

Weighing on Ericsson’s results was a one-time charge in the quarter of 1.4 billion kronor to eliminate jobs for 919 employees in Sweden, or about 5 percent of its domestic work force of roughly 17,200, and the costs of reducing staffing at its global network management business. Its global work force was about 110,000 at the end of last year.

In Latin America, Ericsson’s sales fell 9 percent, to 4.4 billion kronor, in the quarter as operators postponed building new networks amid delays in auctions of radio-frequency spectrum.

PC Sales Still Slumping, Despite New Offerings

But not only have the new offerings failed to stop the downward slide in PC shipments that has been going on for the last year, they appear to have made it worse.

On Wednesday, the research firm IDC reported that worldwide PC shipments declined 13.9 percent during the first three months of the year compared with the same period a year earlier.

To put those numbers into perspective, that is the most severe decline in the PC market since IDC began tracking the business almost two decades ago and almost double the rate of decline that the firm was expecting for the quarter.

Gartner, another research firm, had estimates that were only slightly better, showing an 11.2 percent decline in PC shipments for the first quarter.

This is the fourth consecutive quarter of year-over-year declines in shipments for the PC.

Many of the challenges facing the PC business have not changed during the last year. Smartphones and tablets, while not perfect substitutes for PCs, are pulling dollars out of consumers’ wallets that might have otherwise gone to laptop or desktop computers. People are simply more excited about those mobile technologies, with their touch-screens, than they are about buying conventional computers.

In this environment, Microsoft introduced Windows 8 last October. The software, a bold redesign of the company’s flagship operating system, is tailored to run on tablets, traditional keyboard-and-mouse computers and hybrid devices that combine elements of both. But it seems that the changes Microsoft made with Windows were so extreme that they scared off buyers.

“At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” Bob O’Donnell, program vice president for clients and displays at IDC, said in a statement. He said that “radical changes” to elements like the user interface and higher costs had made PCs less attractive compared with tablets and other devices.

“Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market,” Mr. O’Donnell added.

The severity of the decline in the market is further evidence that the “post-PC era” heralded several years ago by Steven P. Jobs, Apple’s former chief executive, was not an empty slogan. Mr. Jobs, who died in 2011, predicted that PCs would endure, but that smartphones and tablets would become the devices people favored for most of their computing needs.

That shift has big implications for the balance of power in the tech business. Last week, Gartner estimated that by 2017, the dominant operating system for all computing devices, including smartphones, computers and tablets, would be Google’s Android, with software from Microsoft and Apple far behind.

DealBook: Little Accountability for Directors, Despite Poor Performance

Harry Campbell

Aficionados of good corporate governance shouldn’t get too excited about the fact that two Hewlett-Packard directors are leaving the board and a third, Raymond J. Lane, is stepping down as chairman.

The reason is that directors are still rarely if ever held responsible for their poor conduct.

The latest evidence comes from a study of bank directors and whether shareholders held them accountable for their – let’s face it – horrific performance after the financial crisis.

The study, co-authored by me, Andrew Lund of Pace University School of Law and Robert Schonlau of Brigham Young University‘s Marriott School of Management, analyzed director turnover at financial institutions in the Standard & Poor’s 1,500-stock index from 2006 to 2010. The idea is that the financial crisis was particularly salient — and if anything would ever push directors to act, it was likely the financial crisis.

Financial institutions are also unique; the possibility of shareholder activism is quite limited because Federal Reserve regulations serve to entrench boards of directors and damp activism in this arena. According to Factset Sharkrepellent, only seven national commercial banks in the S.&P. 1,500 were the focus of activist campaigns in the period covered by the study. Not surprisingly, these were the largest institutions, including Bank of America, Citigroup, JPMorgan Chase, Wachovia and Wells Fargo.

If directors are going to be unseated or pushed out at financial institutions, it is going to have to be because of market pressure and not direct shareholder action. In other words, shareholders will have to express their disapproval of directors by cutting their investments rather than actively seeking to unseat them. Banks are also highly regulated, and the government can urge the firms to overhaul boards in times of trouble, as the government did with Bank of America and Citigroup.

But despite some notable changes, bank directors faced little consequences for their poor decisions, before and after the financial crisis. Director turnover at financial institutions was 5.6 percent a year from 2006 to 2007 and 6.27 percent from 2008 to 2010, the postcrisis period. This means that director turnover increased by less than a percentage point during this time.

Director turnover is also not materially higher if the financial institution performs particularly poorly. For directors at most financial firms, the chance of being replaced is only about 1 percent greater than for their counterparts at better performing firms. This is an almost negligible amount and means that even during the financial crisis, directors faced little penalty for poor performance.

In fact, the biggest determination of director turnover at banks during this time was age. Directors who reached the age of 70 left their positions because of mandatory retirement policies.

The study also examined those financial institutions that received help from the Troubled Asset Relief Program. It found that receiving a bailout from the program did not increase director turnover. Again, the biggest driver of turnover at banks in the program was reaching the mandatory retirement age of 70.

At the same, the compensation of directors in this period — an average of $134,000 in cash and incentives a year — appeared to be unrelated to the performance of the company. Instead, compensation for directors appeared to be largely a function of the size of the bank. The bigger the bank, the larger the compensation package, regardless of performance.

For those who were hoping that financial institutions were an outlier, the study also examined nonfinancial companies in the S.&P. 1,500. The results were largely the same. For directors at those companies, the chance of being replaced for poor performance was only 0.6 percent, or approximately three-fifths the probability at banks and financial firms. In either case, this is very small. As with banks, the largest driver of director turnover appears to be age.

For those who advocate consequences for poor performance, the results are head-shaking. Last week, James B. Stewart, a columnist for The New York Times, wrote about the few consequences for the Hewlett-Packard directors and the reasoning.

Shareholders did not succeed in ousting the two H.P. directors and demoting Mr. Lane, the chairman, at the shareholder meeting, but were able to exert pressure that eventually led to this outcome. These types of campaigns typically work only in the most egregious and visible circumstances, as happened at Yahoo and H.P. And even then it can take years.

But as this study and the H.P. experience shows, it’s rare that shareholders or chief executives push directors out. Even in the most extreme circumstances – like the financial crisis — directors bore little consequence for their poor decisions. As it stands, directors have more to fear about getting old than about doing a lousy job.

For those who ascribe to kindergarten principles, this is disheartening. These principles would say that if you do something wrong, there should be consequences. But these basic rules we all are taught in childhood don’t appear to apply in the boardroom.

Bits Blog: H.P.’s Board Wins Re-election Despite Opposition

Members of Hewlett-Packard’s board dodged a bullet Wednesday.

Despite opposition from two shareholder advisory services and several prominent institutional investors, all of the company’s 11 board members were re-elected at the company’s annual meeting in Mountain View, Calif., on Wednesday, receiving at least the minimum 50 percent of shareholder votes.

But in a few cases, the margins of victory were unusually narrow. And one highly visible and active board member, Ralph Whitworth, indicated that changes to the board would be coming soon.

“This board is among the best I’ve seen,” said Mr. Whitworth, who runs the Relational Investors fund, and owns $800 million in H.P. stock. “Having said that, all boards should evolve, certainly when they’ve had the recent past this one does. You can expect some evolution of the board over the coming years — months maybe.”

H.P. has had three chief executives in as many years, and last November took an $8.8 billion accounting charge in conjunction with its 2011 acquisition of Autonomy, a British software company, incurring shareholder wrath.

Mr. Whitworth did not say who might be going, but several members of the board have been criticized in the run-up to Wednesday’s vote.

John Hammergren, the chairman and chief executive of McKesson Corporation, and G. Kennedy Thompson, the former chief executive of Wachovia, who are the board’s longest-serving members, have come under particular fire. Raymond Lane, the board’s chairman, and Marc Andreessen, a prominent Silicon Valley investor, were also the target of critics because of their significant roles in the Autonomy acquisition.

In Wednesday’s voting, Mr. Hammergren was re-elected with a plurality of only about 54 percent of total votes cast, while Mr. Thompson got 55 percent. Mr. Lane received a 59 percent majority, while Mr. Andreessen got 70 percent.

One other board member, Rajiv Gupta, the former C.E.O. of Rohm and Haas and a board member since 2009, received a positive vote of about 80 percent. Everyone else, including Meg Whitman, H.P.’s chief executive, received a majority of 90 percent or higher.

Mr. Whitworth was extremely positive about H.P.’s prospects, echoing early comments by Ms. Whitman that the company was well along in its rebuilding plan and would have accelerated growth in 2014.

Ms. Whitman’s comments were almost a play-by-play repeat of earlier roadmaps for H.P. – get the finances under control, rebuild customer relationships, build better products, and teach the sales force to offer more profitable packages of H.P. products.

As earlier, she framed it in the context of making H.P. a leader in a technology world of cloud computing, mobile devices, data analytics and security.

While Ms. Whitman said things were proceeding according to schedule, Mr. Whitworth was even more positive.

“There are things going on under the surface here, maybe out of the spotlight, that are just incredible,” he said.

Amazon Reports Loss Despite Higher Sales

If Amazon were an ordinary company, investors would long ago have strapped its management to a rocket ship and sent it far, far away.

Amazon said Thursday that it lost money in the third quarter, continuing a trend of unimpressive earnings reports for the retailer. Similar disappointments are causing carnage at some of Amazon’s land-based electronics competitors. But Amazon’s many fans seemed largely unfazed.

The earnings report, released after the market closed, sent Amazon shares down as much as 9 percent in after-hours trading, but they quickly recovered. The stock hit a record high earlier this year, and it trades at an astronomical price/earnings multiple.

What separates Amazon from the competition is that it is not trying to make money. It is instead trying to grow as fast as it can, something it has been doing successfully for 15 years. What was once a cute start-up is now one of the country’s biggest retailers.

Third-quarter revenue was $13.8 billion, a little less than the $13.9 billion that analysts expected but up 27 percent from 2011.

Despite all those customers snapping up Kindles and “50 Shades of Grey,” the company had warned that a loss was coming. Amazon said it lost 60 cents a share in the third quarter, but more than half of that was from its investment in the daily deals site Living Social. The consensus estimate was a loss of 8 cents. Amazon earned 14 cents a share in the third quarter of 2011.

In a conference call with analysts, Tom Szkutak, Amazon’s chief financial officer, declined as usual to shed much light on the company’s plans. With regard to the persistent rumor that Amazon will open some pop-up stores during the holidays to sell Kindle devices, for instance, he said that the company’s current practice of selling through other retailers is “not really a driver of our business.”

Amazon’s strategy of selling as cheaply as it can may be tough on its margins but it is tougher on competitors. Radio Shack missed its earnings forecasts this week, prompting doubts about its viability. The specialty home appliance and electronics retailer H. H. Gregg, which operates 200 stores in the Midwest and Southeast, saw its shares drop 13 percent Thursday. Shares of Best Buy fell 10 percent as the store warned that third-quarter profit would be “significantly lower.”

“Amazon is having a major impact on a number of businesses,” said Jason Moser, who covers Amazon for the Motley Fool investment site and owns shares in the retailer. “We know that chief executive Jeff Bezos is quite patient and has plenty of financial resources. It appears his strategy is working. The third-quarter loss was modest and the long-term implications here are as strong as ever. My faith isn’t dented in the least.”

There are Amazon skeptics. Colin Gillis of BGC Partners published a haiku before the earnings report: “So much revenue, and with all those shipping costs, so little profit.” What his verse lacked in poetry it made up in cogent criticism.

Amazon’s operating margins have been about 2 percent or less for the last year. “Amazon has the lowest operating margin and the highest valuation in our technology company coverage,” Mr. Gillis wrote, adding that “the company is not likely to achieve material leverage off its revenue growth as costs associated with investments into its digital platforms build.”

Furthermore, “the nature of Amazon’s core business is that of a discount retailer, which limits margin upside.” In the second quarter, the analyst noted, Amazon increased revenues by $2.9 billion but income from operations declined by $95 million to $107 million.

The third quarter is mere preamble to the fourth quarter, where Wall Street expects significant revenue growth powered by new Kindle tablets and associated downloads. New warehouses are coming, bringing physical goods to customers so quickly that they will, in theory and no doubt in practice, order more.

Asked about same-day delivery, Mr. Szkutak said on the conference call that the warehouses have “helped improve our delivery speed to customers.” He added, “What I would expect moving forward would be more of the same.”

Video Games: Video Game Retail Sales Decline Despite New Hits

More than 200 million Wii, Xbox 360 and PlayStation 3 systems were sold worldwide. Sales of portable gaming machines surged as well. Upward of 12 million subscribers were paying $15 a month to play the online game World of Warcraft, and competitors were plotting to develop worthy rivals. The motion-sensing Kinect system from Microsoft generated considerable buzz, with its promise of freeing players from having to push buttons and wave wands.

And yet the gaming world has found itself teetering at the edge of a financial cliff. In the first eight months of this year retail sales of video games plummeted 20 percent in the United States. That followed a lackluster performance in 2011, when sales fell 8 percent. An analysis on the Web site Gamasutra this year said it was possible that 2012 would be the worst year for retail video game software and hardware sales since 2005.

The struggling economy has certainly been a factor in the decline, especially considering that young men — long a core audience for games — were hit so hard during the recession. Another development will sound familiar to anyone who once had a groovy record collection: the democratizing, disrupting effect of less expensive digital downloads has changed the business model. Nearly everywhere, it seems, people have been sharing Words With Friends, slinging Angry Birds at pigs or springing their creatures through a precarious Doodle universe. All those games, made for smartphones, sure are popular, and the financial picture improves when their sales are included, but they can be had for pennies and seemingly become disposable almost as fast as they are released.

The video-game industry barely survived the brutal recession of the early 1980s: 29 years ago this fall Atari buried millions of unsold video games — believed to be mostly copies of Pac-Man and E.T. The Extra-Terrestrial — in a New Mexico landfill. Are video games facing another devastating crash? Have developers been putting out inferior work, or is something beyond their control going on? What should they do to adapt? The company credited with saving the industry last time was Nintendo, which finally plans to introduce its new Wii U, the successor to the 2006 Wii, next month. Can Nintendo lead the way again?

To try to get a handle on some of these issues, two video-game critics — Chris Suellentrop, deputy editor of Yahoo News, and Stephen Totilo, editor in chief of the gaming site Kotaku.com — recently discussed the challenges facing the industry.

STEPHEN TOTILO This has been a year of underachievement for many of gaming’s top achievers. How very 2012 it was for a game like Draw Something to capture the world’s attention in February; attract about 14 million players a day in April; seduce the FarmVille company Zynga to buy the game’s maker, Omgpop, for $180 million; and by the end of the month have its daily player base fall to 10 million daily. How very 2012 it was for the vaunted hit-maker Blizzard to release a game, Diablo III, that was 11 years in the making and then have to repeatedly apologize for its shortcomings. The Kinect might be selling Xboxes, but it isn’t helping sell that many games, because there are hardly any Kinect games that anyone talks about and very few that sell. It’s just a watered-down repeat of the Wii phenomenon.

This has been the year of sinking game company stocks, stagnating console sales, creative miscues from some of the medium’s best creators and a lack of many blockbuster games — from big companies. Note those last three words. It has been a very bad year for corporate video games. You know, gaming’s elite.

CHRIS SUELLENTROP Yes, it’s been a bad year for games that require the purchase of a physical disc with cover art and liner notes — I mean, an instruction booklet — an oddly retro aspect of the medium. And to take the baton you’re offering, yes, 2012 has been a remarkable year for downloadable titles, many of them created by independent developers working outside the traditional studio system. I wouldn’t call three of the year’s best games — the downloadable Journey, Fez and Papo & Yo — representative of gaming’s peasant class. Still, I don’t envision the next title from thatgamecompany, the developer behind the artful, downloadable PlayStation games Flower and Journey, making up for the industry’s 30 percent revenue decline.

Besides, do you really think that the quality of individual titles is the cause of this collapse? The nation is facing nothing less than a fiction crisis. Four of the five best-selling books last year on Amazon were works of nonfiction, and the fiction title, “Mill River Recluse,” was a Kindle download. The theatrical box office recently saw its worst weekend in 10 years. Narrative television — the quality of shows like “Breaking Bad” and “Mad Men” notwithstanding — is in decline. The most-watched shows are sports and reality spectacles. Anyone who has engaged in the make-believe required for most video games to work their magic knows that games are fiction too. Why would games be immune?

TOTILO Because video games aren’t all narrative fiction. Apologies to fans of the interactive storytelling pioneers of BioWare, the studio behind Mass Effect, and to those still searching for Bowser’s motivation for repeatedly kidnapping Princess Peach, but few people play video games for the story. Or for the acting. Or for many of the other cinematic aspects that can’t mask a bad game.

On the subway I ride daily the only video-game-related decline is the tilting down of heads so people can see the narrative-free games on their cellphones. These people could, of course, be reading books or watching movies. Many of them are not. They have an appetite for the interactivity of a game. They want to poke at a system and have it, or an opposing gamer, respond. They want to play.

Chris Suellentrop, the deputy editor of Yahoo News, and Stephen Totilo, the editor in chief of the gaming Web site Kotaku.com, write about video games for The New York Times.

Despite a Slowdown, Smartphone Advances Are Still Ahead

The iPhone 5 that Apple introduced last week with only incremental changes seemed to signal that the industry has entered an era of technological bunny hops.

Faster chips, bigger screens and speedier wireless Internet connections are among the refinements smartphone users can count on year after year in new models, most of them in familiar rectangular packages. They are improvements, to be sure, but they lack the breathtaking impact the first iPhone had, with its pioneering fusion of software and touch screens.

“Since then, it has been kind of incremental,” said Chetan Sharma, an independent mobile analyst. “It does not feel like there is a big shift.”

But big innovations in smartphones are not a thing of the past. Incremental improvements can add up over a span of years, providing the computing horsepower to enable big advances in software. Breakthroughs in smartphone materials, software and even batteries could lead to substantial changes in how smartphones look and function in the years ahead.

One of Apple’s most intriguing recent efforts to redefine the iPhone is Siri, the voice-activated virtual assistant that it introduced in October with the iPhone 4S. The feature has the potential to change how consumers retrieve information on their iPhones, giving them the ability to find information on the Web with natural voice commands and to perform other tasks. The product, though, has been criticized for its inaccuracies.

As Apple continues to improve Siri, Google, the maker of the Android phone operating system, improves on its voice search products. Google and some of its mobile phone partners have also moved toward replacing the credit card with the smartphone using a technology called near-field communications that lets users make payments wirelessly at cash registers.

That system has been slow to take off because most merchants do not support it yet. Apple is taking a more cautious approach to new mobile payment systems, offering a feature in its new iPhone software called Passbook for storing electronic versions of store payment, gift and loyalty cards.

Technology analysts say smartphones could again see big changes akin to the one Apple introduced in 2007. Wearable computers are a source of fascination among many Silicon Valley companies, especially at Google. The company has put tremendous effort behind Project Glass, eyeglasslike frames that can display texts, e-mails and other information from a smartphone on a miniature screen in front of the wearer’s eye.

Google has said it plans to release a version of the technology for developers that would cost $1,500 in the first half of next year and a consumer version sometime after that.

Although it could take years of work before the technology reached mass market prices, researchers and some intrepid technology companies said they believe wearable computers could be crucial to unlocking a new category of applications called “augmented reality.” Virtual objects and information could be overlaid on the real world. Imagine visiting ancient ruins and seeing, through a pair of glasses connected to a smartphone, how the site looked before its decay. People could eventually play augmented reality games that could involve laying virtual ambushes around corners in the real world.

“A lot of people are thinking about augmented reality as a possible game changer in mobile computing,” said Tobias Hollerer, a computer science professor at the University of California, Santa Barbara, who is researching the field.

Changes in materials could also allow for more radical designs for smartphones and peripherals that connect to them. Corning, a company that makes the glass used in iPhone and other smartphone screens, has developed a flexible product called Willow Glass. Paul Tompkins, director of commercial technology at Corning, said the thin and strong glass could give designers a way to make devices that have more curves conform to a part of the body. A wrist device, for example, could display much of the information that’s now on a smartphone.

“We’re really working hard on that with a couple of companies,” he said. “You can achieve more organic designs.”

Then there are seemingly mundane technical breakthroughs that could take away some of the more vexing aspects of smartphones, like the need to worry constantly about keeping them charged. In 2010, Apple filed a patent application for a small fuel-cell power supply that could potentially give the iPhone and iPad enough juice to last for weeks without the need to plug them in.

Facebook’s Slide Continues Despite the Market’s Hopes

It has been a tough week for Facebook. Last Thursday, the company’s shares declined 8.5 percent in regular trading, as investors reacted to the weak earnings report the day before of Zynga, the social gaming site that is a major Facebook partner. Then last Friday, the stock was down again, to slightly under $23 a share in after-hours trading, after Facebook’s own earnings report.

This week the stock declined steadily each day.

“In this market environment, investors have little appetite for speculative opportunities, and unfortunately for Facebook, the stock will remain in the penalty box until they can demonstrate improving growth trends,” said Colin Sebastian, an analyst with Robert W. Baird & Company.

“That said,” he added, “Facebook is a powerful platform with enormous potential to change display advertising.”

Facebook made its Wall Street debut in May at a spectacular $104 billion, or $38 a share. Its assets seemed obvious: nearly a billion users, rich data about their tastes and friends, and potentially a variety of ways to make money from them, principally through advertising.

But the stock fell from its offering price almost immediately and except for part of June, never gained much ground. At $20.88, it has nearly lost half its value.

Another reason for the stock slide could be that Facebook employees will be allowed to start selling shares this month, although the bulk of the shares will be unlocked in November, raising fear on Wall Street of a glut of shares on the market.

Facebook declined to comment.

Still, the company is making money, acquiring other companies and expanding its work force. Its second-quarter revenue was $1.18 billion, which exceeded the expectations of analysts. And Facebook gained users, reporting 955 million, up from 901 million in the previous quarter.

But advertising revenues have not grown as fast as Wall Street would have liked. In the second quarter, these revenues grew 32 percent. That was a slowdown from the previous quarter, when advertising grew by about 45 percent, and far slower than in 2011.

Part of the problem, analysts say, is that users are migrating to the mobile platform faster than anyone anticipated — more than half are using Facebook on their smartphones and tablets — and the company has only recently started offering advertisements on the mobile platform.

The market research firm eMarketer said Wednesday that companies were expected to spend $6 billion on mobile advertising this year, with the United States and China making up the two largest markets.

Mobile advertising poses a fundamental challenge for Facebook, because it must be careful not to crowd the small screen with too many endorsements that could alienate users. On the other hand, the mobile platform offers Facebook a new way to collect rich data, from the location of the users to the applications downloaded.

Facebook has been experimenting with all sorts of ways to increase its advertising.

Morningstar, in a report issued last Friday after the company reported its second-quarter results, commended Facebook for its potential to refine its ad targeting but flagged several risks, including stepped-up regulation on whether the company would be allowed to track its users across the Web in a bid to serve up relevant advertising.

Morningstar warned investors that shares would continue to slide for the “next several quarters.” It said, “We would expect further near-term disappointment and would encourage investors to consider an even wider margin of safety before making an investment.”

Facebook’s Slide Continues Despite the Market’s Hopes

It has been a tough week for Facebook. Last Thursday, the company’s shares declined 8.5 percent in regular trading, as investors reacted to the weak earnings report the day before of Zynga, the social gaming site that is a major Facebook partner. Then last Friday, the stock was down again, to slightly under $23 a share in after-hours trading, after Facebook’s own earnings report.

This week the stock declined steadily each day.

“In this market environment, investors have little appetite for speculative opportunities, and unfortunately for Facebook, the stock will remain in the penalty box until they can demonstrate improving growth trends,” said Colin Sebastian, an analyst with Robert W. Baird & Company.

“That said,” he added, “Facebook is a powerful platform with enormous potential to change display advertising.”

Facebook made its Wall Street debut in May at a spectacular $104 billion, or $38 a share. Its assets seemed obvious: nearly a billion users, rich data about their tastes and friends, and potentially a variety of ways to make money from them, principally through advertising.

But the stock fell from its offering price almost immediately and except for part of June, never gained much ground. At $20.88, it has nearly lost half its value.

Another reason for the stock slide could be that Facebook employees will be allowed to start selling shares this month, although the bulk of the shares will be unlocked in November, raising fear on Wall Street of a glut of shares on the market.

Facebook declined to comment.

Still, the company is making money, acquiring other companies and expanding its work force. Its second-quarter revenue was $1.18 billion, which exceeded the expectations of analysts. And Facebook gained users, reporting 955 million, up from 901 million in the previous quarter.

But advertising revenues have not grown as fast as Wall Street would have liked. In the second quarter, these revenues grew 32 percent. That was a slowdown from the previous quarter, when advertising grew by about 45 percent, and far slower than in 2011.

Part of the problem, analysts say, is that users are migrating to the mobile platform faster than anyone anticipated — more than half are using Facebook on their smartphones and tablets — and the company has only recently started offering advertisements on the mobile platform.

The market research firm eMarketer said Wednesday that companies were expected to spend $6 billion on mobile advertising this year, with the United States and China making up the two largest markets.

Mobile advertising poses a fundamental challenge for Facebook, because it must be careful not to crowd the small screen with too many endorsements that could alienate users. On the other hand, the mobile platform offers Facebook a new way to collect rich data, from the location of the users to the applications downloaded.

Facebook has been experimenting with all sorts of ways to increase its advertising.

Morningstar, in a report issued last Friday after the company reported its second-quarter results, commended Facebook for its potential to refine its ad targeting but flagged several risks, including stepped-up regulation on whether the company would be allowed to track its users across the Web in a bid to serve up relevant advertising.

Morningstar warned investors that shares would continue to slide for the “next several quarters.” It said, “We would expect further near-term disappointment and would encourage investors to consider an even wider margin of safety before making an investment.”

Despite a Loss, Nokia Reports a Windows-Based Lift

Shares of Nokia, based in Espoo, Finland, closed 12 percent higher in Helsinki after the company said it had sold four million new Lumia smartphones running Windows in the second quarter, more than analysts had expected and double their sales in the first quarter.

The loss in the three months through June was €1.4 billion, or $1.7 billion. Sales revenue from cellphones and services rose 45 percent in North America, to €128 million, the first such increase in at least a decade.

The Nokia chief executive, Stephen Elop, said the coming release of Windows Phone 8 software in October, which promises better coordination and more features for computers and smartphones running Microsoft software, would further lift sales of Lumia devices.

“I think this shows that as consumers get a Lumia in their hands, they are very happy with what they have,” Mr. Elop, a former Microsoft executive, said during an interview.

Since January, Mr. Elop has disclosed plans to cut a third of Nokia’s work force, or 21,000 jobs, providing savings to weather the transition to a Windows-centric business. Nokia has amassed €3.5 billion in combined losses since announcing its Microsoft alliance in February 2011 as demand has dried up for its old in-house Symbian-based phones.

Benefits from the cost savings were reflected in Nokia’s net cash at the end of June, which rose 8 percent to €4.2 billion even after a €742 million dividend payment.

Francisco Jeronimo, an analyst with International Data Corp. in London, said Nokia’s non-smartphone business, which makes up 60 percent of sales, had also performed strongly in the quarter, demonstrating its ability to fend off lower-cost rivals. Nokia sold 73.5 million such phones, up 2 percent from a year earlier.

The company also said that its unprofitable network equipment venture, Nokia Siemens Networks, had generated an operating profit in the quarter, turning a corner in its two-year restructuring plan.

“Nokia’s quarterly loss was less than expected, and the volumes of its basic feature phones are increasing, which is a good sign,” Mr. Jeronimo said. “The results on Lumia show that the company’s turnaround strategy, which is a long-term project, could succeed.”

The results provided a rare bit of good news for Nokia, the onetime leader of the mobile phone business, now fighting for survival in an industry dominated by Apple, Samsung and the makers of handsets running Google’s Android operating system.

Mr. Elop said rising U.S. sales were being lifted by demand for the newest models, the Lumia 900 and Lumia 610, sold by AT&T and T-Mobile U.S.A. He said the release of Windows Phone 8, and Microsoft’s plans to aggressively promote it, would provide a “halo effect” that benefited Lumia phones.

Windows Phone 8, Mr. Elop said, will include new features like mobile payment software based on near-field communication, a short-range wireless technology, and enhanced security features.

During a conference call with analysts, Mr. Elop said he did not expect sales of the four existing Lumia handset models, which run on an earlier version of Windows and cannot be fully upgraded to Windows 8, to be adversely affected. He said Nokia was prepared to cut prices on older Lumia devices if necessary to sustain demand.

Consumers do not seem concerned or confused by the software upgrade, he said. The number of U.S. consumers activating Lumia devices for the first time rose after Microsoft announced plans for its Windows Phone 8 release, Mr. Elop said. That, he said, suggests that consumer demand for Lumia phones will remain unbroken through successive upgrades.

The positive response to Lumia overshadowed continued negative financial results 18 months into Nokia’s transition to Windows, as declining sales of Symbian devices weigh on the company’s financial results.

Sales in the second quarter declined 19 percent, to €7.54 billion. The quarterly loss of €1.4 billion followed a €929 million loss in the first quarter and compared with a €368 million loss in the year-earlier period.

Pete Cunningham, an analyst at Canalys in Reading, England, said the introduction of Lumia handsets running Windows Phone 8 software could help Nokia cement its turnaround.

“Nokia has been in free fall in recent quarters, and while it is not out of the woods yet, it does seem as if it is pretty close to the bottom,” he said.

Despite a Loss, Nokia Reports a Windows-Based Lift

BERLIN — Nokia said Thursday that its loss in the second quarter had more than tripled, but it posted the first tangible gains in its turbulent transition to a Windows-based smartphone business as sales rebounded in the U.S. market.

Shares of Nokia, based in Espoo, Finland, rose as much as 18 percent in Helsinki after the company said it had sold four million new Lumia smartphones running Windows in the second quarter, more than analysts had expected and double their sales in the first quarter.

The loss in the three months through June was €1.4 billion, or $1.7 billion. Sales revenue from cellphones and services rose 45 percent in North America, to €128 million, the first such increase in at least a decade.

The Nokia chief executive, Stephen Elop, said the coming release of Windows Phone 8 software in October, which promises better coordination and more features for computers and smartphones running Microsoft software, would further lift sales of Lumia devices.

“I think this shows that as consumers get a Lumia in their hands, they are very happy with what they have,” Mr. Elop, a former Microsoft executive, said during an interview.

Since January, Mr. Elop has disclosed plans to cut a third of Nokia’s work force, or 21,000 jobs, providing savings to weather the transition to a Windows-centric business. Nokia has amassed €3.5 billion in combined losses since announcing its Microsoft alliance in February 2011 as demand has dried up for its old in-house Symbian-based phones.

Benefits from the cost savings were reflected in Nokia’s net cash at the end of June, which rose 8 percent to €4.2 billion even after a €742 million dividend payment.

Francisco Jeronimo, an analyst with International Data Corp. in London, said Nokia’s non-smartphone business, which makes up 60 percent of sales, had also performed strongly in the quarter, demonstrating its ability to fend off lower-cost rivals. Nokia sold 73.5 million such phones, up 2 percent from a year earlier.

The company also said that its unprofitable network equipment venture, Nokia Siemens Networks, had generated an operating profit in the quarter, turning a corner in its two-year restructuring plan.

“Nokia’s quarterly loss was less than expected, and the volumes of its basic feature phones are increasing, which is a good sign,” Mr. Jeronimo said. “The results on Lumia show that the company’s turnaround strategy, which is a long-term project, could succeed.”

The results provided a rare bit of good news for Nokia, the onetime leader of the mobile phone business, now fighting for survival in an industry dominated by Apple, Samsung and the makers of handsets running Google’s Android operating system.

Mr. Elop said rising U.S. sales were being lifted by demand for the newest models, the Lumia 900 and Lumia 610, sold by AT&T and T-Mobile U.S.A. He said the release of Windows Phone 8, and Microsoft’s plans to aggressively promote it, would provide a “halo effect” that benefited Lumia phones.

Windows Phone 8, Mr. Elop said, will include new features like mobile payment software based on near-field communication, a short-range wireless technology, and enhanced security features.

During a conference call with analysts, Mr. Elop said he did not expect sales of the four existing Lumia handset models, which run on an earlier version of Windows and cannot be fully upgraded to Windows 8, to be adversely affected. He said Nokia was prepared to cut prices on older Lumia devices if necessary to sustain demand.

Consumers do not seem concerned or confused by the software upgrade, he said. The number of U.S. consumers activating Lumia devices for the first time rose after Microsoft announced plans for its Windows Phone 8 release, Mr. Elop said. That, he said, suggests that consumer demand for Lumia phones will remain unbroken through successive upgrades.

The positive response to Lumia overshadowed continued negative financial results 18 months into Nokia’s transition to Windows, as declining sales of Symbian devices weigh on the company’s financial results.

Sales in the second quarter declined 19 percent, to €7.54 billion. The quarterly loss of €1.4 billion followed a €929 million loss in the first quarter and compared with a €368 million loss in the year-earlier period.

Pete Cunningham, an analyst at Canalys in Reading, England, said the introduction of Lumia handsets running Windows Phone 8 software could help Nokia cement its turnaround.

“Nokia has been in free fall in recent quarters, and while it is not out of the woods yet, it does seem as if it is pretty close to the bottom,” he said.

Despite Cuomo’s Promises of Transparency, His E-Mail Trail Is Elusive

When he ran for office, Gov. Andrew M. Cuomo vowed to operate the most transparent administration in New York State history. And his aides argue that he has: they say that their communication methods differ little from those of other elected officials, and that Mr. Cuomo will preserve more documents than any of his recent predecessors.

But while Mr. Cuomo has taken steps to improve citizen access to the State Capitol, literally as well as digitally, he and his aides have also set up an executive chamber that prides itself on leaving few footprints.

“It communicates a culture of — I don’t know if paranoia is the right word; maybe it’s control,” said Bill Samuels, a Democratic activist and the founder of the New Roosevelt Initiative, a government-reform group. “But it’s not healthy long-term.”

The Cuomo administration’s sensitivity to sunlight is well known. Aides in the governor’s office have been warned about discussing work matters at Albany haunts. On one occasion, Mr. Cuomo’s spokesman worried publicly that someone was rummaging through the office’s trash. And the administration has been aggressive in redacting documents before sharing them with the public; in June, when it turned over months of Mr. Cuomo’s schedules to The New York Times, even the daily weather forecast was blacked out. (The office has since pledged to release the forecasts.)

Mr. Cuomo has struck a pragmatic tone on the issue. “You can always have more transparency,” he said in a radio interview in March. But at the same time, he added, “you can’t live your life in a goldfish bowl.”

The governor and his aides occasionally joke about their reputation for secrecy. A humorous video they produced for the annual dinner of the Albany press corps in May included a scene in which the governor’s communications director, Richard Bamberger, frantically stuffed documents into a shredder.

Yet even in poking fun at their reputation for stealth, Mr. Cuomo’s aides would only go so far: they did not post the video on the Internet and would not immediately provide a copy to The Times. Responding to a request under the Freedom of Information Law, one of Mr. Cuomo’s lawyers wrote that the administration would need to conduct a “diligent search” for the video.

Mr. Cuomo, a Democrat, is no stranger to the consequences of a paper trail. Before becoming governor, he spent four years as state attorney general, a perch from which he witnessed how long-forgotten e-mails could become pivotal during investigations. In 2008, he even accused a top official at the New York Power Authority of “extremely troubling conduct” for deleting e-mails from his BlackBerry as word leaked that he was likely to be investigated by the attorney general’s office.

And he has mused aloud about the potential evidentiary value of electronic communication. “You get into trouble with your significant other, you give them your BlackBerry,” Mr. Cuomo told a newspaper editorial board in 2010. “You want it? Here it is. Ask me anything, I’ll show you.”

In recent years, government reformers have encouraged the move toward so-called proactive disclosure: the White House posts its visitor logs online, Senator Kirsten E. Gillibrand, Democrat of New York, publishes her daily meetings, and Gov. Rick Scott of Florida, a Republican, gives access to his office’s e-mail correspondence in almost real time.

But in the age of sending text messages and posting on Twitter, when government documents can circulate widely on social media in minutes, balancing competing demands for transparency and discretion can be difficult.

“The laws don’t keep up with technology,” said Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington, a government watchdog group. “If they didn’t want a paper trail before, you used to just call. But now you can text message.”

This month, several weeks after receiving questions from The Times about its record-keeping, the Cuomo administration released a policy that lays out what types of documents must be retained and for how long. The policy generally allows Mr. Cuomo’s aides to determine for themselves which of their electronic messages should be kept and which can be destroyed.

Robert J. Freeman, the executive director of the state’s Committee on Open Government, said Mr. Cuomo deserved credit for creating a records policy, because state law places few requirements on what records the governor’s office must preserve, tasking the governor with keeping, in most cases, only what he deems “of sufficient value for preservation.”

Mr. Freeman said: “In all likelihood, governors could pick and choose what they wanted to keep and what they wanted to destroy, and they could have done it more or less on the spot. Here, at the very least, you have something of a framework.”

Written communications between the governor and his aides are often via BlackBerry PIN messages — short transmissions sent from one BlackBerry to another — which are not logged by Research in Motion, the maker of the BlackBerry, or by the governor’s office. The acronym PIN refers to the personal identification number that each BlackBerry is assigned. Aides do not regularly use their government e-mail addresses for substantive correspondence, and some are quite fastidious about deleting the messages they do send.

Mr. Cuomo prefers using the telephone, and does not use e-mail. But in an interview last week, he noted that even when he goes fishing with his brother off Long Island, he takes his BlackBerry. “With the BlackBerry,” he said, “you’re never really away anymore.”

Mr. Cuomo’s office said there was nothing unusual about its use of BlackBerry messaging, which an article in The Daily News described on Monday.

In an e-mail, Mr. Cuomo’s spokesman, Josh Vlasto, said, “The Times has sunk to a new low by suggesting that normal, standard office practices to ensure confidential information is kept confidential is somehow objectionable.”