Microsoft's Windows 8 sales are big -- just not big enough

NEW YORK (CNNMoney)

Windows sales rose 24% to $5.8 billion in the quarter that ended Dec. 31. Microsoft unveiled its years-in-the-making Windows overhaul on Oct. 26.

The gain ended a streak of four straight quarters in which Windows sales declined year-over-year. But it pales in comparison to prior launches of the operating system: Windows sales soared 76% during the quarter that Windows 7 launched, and rose by 65% when Windows Vista debuted.

Lisa Nelson, Microsoft's investor relations director, said Windows 8 sales should be put into perspective. PC sales have slumped lately, and the computer market is very different now than it was when previous versions of Windows launched.

Nelson said that a more apples-to-apples comparison would be to measure how much Windows sales have outpaced overall PC sales. The gap between those figures was roughly the same during Windows 8's launch as it was during the debuts of Windows 7 and Windows Vista.

But there's another way to look at it: PC sales have been dreadful for more than a year, and Windows 8 is not doing anything to turn the tide.

Related story: Microsoft is risking an $18 billion empire on Windows 8

Last quarter's Windows sales included some deferred revenue for upgrade-eligible Windows PCs sold earlier in the year. Stripping those upgrades out, Windows sales rose by just 11%. When Windows 7 launched, Microsoft offered similar upgrades. Even with those stripped out, Windows sales jumped 28%.

A different PC market indeed.

Last quarter's Windows revenue includes sales of the Surface tablet -- Microsoft's first PC of its own design. The tablet received mixed reviews and has not sold well, according to analysts. Most estimate that fewer than 1 million units have sold so far.

Microsoft said it would not be breaking out Surface sales -- typically not a sign that a product is a hit.

Shares of Microsoft (MSFT, Fortune 500) fell 2% after hours.

Microsoft also debuted Windows Phone 8 during the past quarter, but sales in that division slipped 11% from last year. Excluding some $380 million in video game sales deferrals, revenue fell by just 2%. The division also includes the Xbox 360 and Kinect entertainment systems.

Office sales slipped 10% ahead of this month's launch of Office 2013.

The Redmond, Wash.-based software giant said net income for its fiscal second-quarter fell 4% to $6.4 billion, or 76 cents per share. Analysts polled by Thomson Reuters forecast had earnings of 75 cents per share.

Sales -- which includes about half a billion dollars of deferred revenue for Windows, Office and Xbox promotions -- rose 3% to $21.5 billion, meeting analysts' forecasts.

First Published: January 24, 2013: 4:48 PM ET

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AT&T reports record iPhone sales

An iPhone display at an AT&T cellular store in Houston, Texas.

NEW YORK (CNNMoney)

The company sold 10.2 million smartphones in the fourth quarter, which it said was the most ever for a U.S. carrier. Ma Bell activated a record 8.6 million iPhones, though AT&T said it also had its best-ever quarter for sales of Android phones.

The news comes on a day when Apple shares sold off sharply, sinking 12% following the release of the company's quarterly results Wednesday afternoon.

Apple (AAPL, Fortune 500) reported a record quarter, boosted by strong iPhone and iPad sales, but the popularity of cheaper versions of its mobile devices pinched profits.

AT&T's overall fourth-quarter smartphone sales topped the previous record of 9.4 million from the fourth quarter of 2011.

Ironically, strong smartphone sales are bad for carriers' profit margins.

A new phone you buy for $199 may cost your carrier two or three times as much when they buy it from the manufacturer. They pay a heavy upfront subsidy to get you hooked on a long-term contract.

AT&T did not break down iPhone activations by model in its press release. But the company noted that its wireless operating margins took a hit in the fourth quarter, a possible sign that it sold a large number of newer iPhone 5s as well as older iPhone 4S and iPhone 4 models.

AT&T rival Verizon (VZ, Fortune 500) said Tuesday that it sold a record 6.2 million iPhones in the fourth quarter, making up two thirds of its total smartphone sales.

Overall, AT&T (T, Fortune 500) reported earnings per share, excluding special items, of 44 cents, on $32.6 billion in revenue. Analysts surveyed by Thomson Reuters expected the company to post earnings of 45 cents a share on $32.2 billion in revenue.

Shares rose 0.4% in after-hours trading.

CNNMoney's David Goldman contributed reporting.

First Published: January 24, 2013: 4:42 PM ET

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Vine is Twitter's attempt to become the 'Instagram of video'

Twitter's new Vine app is a standalone social network for video.

NEW YORK (CNNMoney)

Living (for now) on the Internet and the iPhone as a separate social network, Vine will integrate closely with Twitter and Facebook (FB), delivering video snippets that behave like an animated GIF with sound.

Videos are kept short to simplify the creative process and facilitate sharing, but some clever tricks prevent these limitations from becoming too overbearing.

Instead of using a typical "record" button to capture footage that you then have to trim down or stitch together, you simply touch the Vine app's screen to record and let go to stop. While you capture video, a progress bar along the top fills up as you approach the six-second mark.

When you finish, no editing is necessary.

The iPhone app itself is solid. Its clean design and easy-to-use interface make it something anyone can pick up.

But it doesn't seem like a visionary solution to making video creation fit into our lives, the way Instagram instantly tapped into our shutterbug-and-share instincts. Vine is more of a lofty attempt to see what sticks.

If you've spent any time following technology and the Internet, you've heard nerds, pundits, analysts, investors and entrepreneurs all droning on about the "Instagram of video." Viddy, Socialcam and even ill-fated Color tried to claim the crown.

It's an idea that seems great on paper, but in actual reality is probably best left untouched.

Dealing with video begs for devices with more storage space, faster Internet connections, more powerful processors and bigger batteries. Those are just the teeny problems, though. The big one is that it's unbelievably hard to make bad video remotely appealing.

The biggest virtue of Instagram -- and before that, Hipstamatic -- isn't the sharing aspect. It's that it makes our horrible, banal photography appear skilled and intriguing. Haphazardly capturing lightning in a bottle is easier because you only have to grab a single moment and pancake it in digital makeup.

With Vine, we're tasked with capturing 180 consecutive moments, exposed bare to the world.

And in turn, we're expected to spend a minimum of six seconds consuming every video in our feed. This could get laborious.

Well-made as Vine is -- this is a service people will probably use -- it just doesn't have the metal to become a cultural craze that demands our participation.

First Published: January 24, 2013: 7:22 PM ET

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Japan spurs talk of currency war

NEW YORK (CNNMoney)

The political rhetoric became heated after the Bank of Japan announced plans to make open-ended asset purchases in an effort to re-inflate the Japanese economy, which recently slipped into recession.

Jens Weidmann, president of Germany's central bank, criticized the BoJ for caving under pressure from newly elected prime minister Shinzo Abe. Weidmann warned that the bank risks losing its independence, which could lead to a "politicization of exchange rates."

Akira Amari, Japan's economy minister, quickly pushed back.

In an interview with the Financial Times Wednesday, Amari said Germany has benefited from the fixed exchange rate maintained by the European Central Bank. "He's not in a position to criticize," said Amari of Weidmann.

The Japanese yen has lost about 12% of its value versus the U.S. dollar since October as investors in the currency market anticipated more easing from the BoJ. But the yen has rebounded in the days since the BoJ's announcement, which wasn't as drastic as some had feared.

"The Japanese yen is continuing to trade higher following the outcome of the BoJ meeting, which seemingly gave the appearance of easing without really doing very much," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

Related: Europe is like Japan, only worse

Central banks have to walk a fine line. Their policies, which are aimed at boosting economic growth, effectively weaken domestic currencies.

Japan has stressed that it's not deliberately trying to devalue its currency, saying the yen's decline has more to do with a market correction following a period of strength.

But the fact remains that a weaker yen, which makes Japanese goods more competitive on the global market, is a boon for Japan's export-driven economy.

By the same token, Germany's economy is struggling and German exporters could feel the pinch if the euro appreciates, hence the shot across Tokyo's bow.

"The main reason why the Europeans are worried is because of the slowdown in growth," said Kathy Lien, director of currency strategy for BK Asset Management.

Beyond that, there's concern that other nations could take similar steps, leading to so-called competitive devaluation, also known as a currency war.

Some analysts say a mild currency war has been underway for years.

"We have been in the midst of a currency war for some time, with some central banks devaluing their currencies through quantitative easing and others responding with intervention," said Lien.

Related: Japan's Abe makes economy top priority

But not every QE move has led to weak currencies. In the United States and Europe, central banks have maintained record low interest rate policies and instituted various bond-buying programs, yet the dollar, pound and euro have been relatively resilient.

"Japan is trying to use monetary policy to spur demand for its exports. But as long as it's limited to Japan, I don't think it's a serious problem," said Jeffrey Bergstrand, University of Notre Dame finance professor and an expert on international trade

Still, the push to lower interest rates and devalue currencies has set off alarm bells in emerging markets.

Officials in Korea and Thailand were the latest to voice concern over the rapid appreciation of their currencies as easing in Japan and the United States boosts demand for higher yielding assets.

Brazil has also complained about the flood of money that has driven up the value of the real and raised concerns about asset bubbles. In March, Brazil's finance minister blasted the "monetary tsunami" unleashed by interest rate cuts in the United States, Japan and Europe.

This trend could lead to more outright intervention in the currency market, and maybe even capital controls in some emerging economies, said Julian Jessop, an economist at Capital Economics. But given the dim outlook for global growth, he added, officials in the developed world may not have any other choice but to continue weakening their currencies.

"This might simply be part of the price that has to be paid for a sustained global recovery," said Jessop.

First Published: January 23, 2013: 7:07 PM ET

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The truth behind Mickelson's taxes

Phil Mickelson doesn't pay as much taxes as he thinks.

NEW YORK (CNNMoney)

The champion golfer said this week he might have to move out of the Golden State because of recent hikes in federal and state taxes on the wealthy.

"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent," he was quoted as saying in Yahoo Sports. "So I've got to make some decisions on what I'm going to do."

California recently became the state with the highest top marginal tax rate thanks to voters passing in November a temporary tax hike on wealthy residents.

"California is beautiful, but we do have high taxes," said Gregg Wind, a partner at Wind & Stern, an accounting firm in Los Angeles. "That is a consideration for some folks."

Mickelson's tax rate, however, is closer to 51%, according to the Tax Foundation and California tax experts. His winnings and endorsements, which Sports Illustrated pegged at nearly $61 million in its most recent annual estimate, subject him to the highest marginal rates for married couples. Here's what they consist of:

-- A 39.6% top federal tax rate, up from 35%, on income above $450,000, thanks to the fiscal cliff deal passed by Congress on New Year's Day.

-- A 12.3% top state tax rate, up from 9.3%, on income above $1 million.

-- A 1% state mental health surcharge levied on incomes above $1 million.

-- A 3.8% Medicare tax rate, which includes a new 0.9% Medicare surcharge on earnings above $250,000.

But you have to consider that his state taxes are deductible from his federal taxes, which would leave him with a top rate of roughly 51%.

So where did he get the higher figure? It may be that he's adding in Social Security, disability and unemployment taxes. But those are levied only on a relatively tiny portion of his income and don't factor into his marginal tax rate.

Mickelson would have to fork over 15.3% in payroll taxes on the first $113,700.

And if he's self-incorporated, he may pay an additional:

--1% of the first $100,800 in state disability insurance taxes.

-- Up to 6.2% of the first $7,000 for state unemployment taxes.

-- 1.2% in federal unemployment taxes.

-- 0.1% in state employment training taxes.

Regardless of Mickelson's top rates, his actual tax bill isn't anywhere near one-half of his income. While it's hard to tell what the golfer really pays without seeing his tax returns, millionaires pay roughly 26% of their income in federal taxes, on average, according to William McBride, chief economist at the Tax Foundation.

First Published: January 23, 2013: 5:44 PM ET

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China manufacturing at 2-year high

NEW YORK (CNNMoney)

Global bank HSBC said its "flash" index of purchasing managers' sentiment rose to 51.9 in January from December's final reading of 51.5. Any reading above 50 signals expansion in the manufacturing sector.

It was the fifth straight month that the index has risen.

The report showed a quickening pace of employment and output.

"Thanks to the continuous gains in new business, manufacturers accelerated production by additional hiring and more purchases,: Hongbin Qu. HSBC's chief economist for China, said in a statement. "Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in the coming months."

The fate of manufacturing is considered a barometer of the global economy because of the nation's role as a powerhouse exporter. Because it makes up a large part of China's economy, manufacturing plays an important role in shaping domestic policy.

Related: China growth points to gradual recovery.

China's economy has grown at an average of around 10% a year for the past three decades, allowing the nation to rocket past competition to become the world's second-largest economy. While the growth slowed in 2012 to 7.8%, that figure topped government targets and analyst expectations, signaling an exit to the slowdown that had worried economists.

First Published: January 23, 2013: 9:40 PM ET

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Groupon suspends gun deals

This deal for a concealed-handgun training course was canceled midway through after Groupon suspended all gun-related deals.

NEW YORK (CNNMoney)

Julie Mossler, a representative for Groupon, said the company "has been testing firearm-related deals including shooting ranges and concealed weapons courses for the last eight months. Based on performance and customer and merchant feedback, it's clear they're not a fit right now."

Mossler would not comment on whether Groupon (GRPN) plans to reinstate gun-related deals in the future.

Groupon's public acknowledgment of its policy change, which took effect on Friday, came after Central Texas Gun Shop owner Michael Cargill complained to AOL's Daily Finance that his deal was canceled with no warning.

Cargill's Groupon campaign, which went live last Tuesday, offered a 50% discount on concealed handgun license classes for beginners. Cargill says he successfully ran two previous deals on Groupon for training classes, plus others on rival sites such as LivingSocial.

A Groupon sales rep called Wednesday to say the 600-coupon deal was on track to sell out, Cargill says, so he upped the offer to 1,500 Groupons. Two days later, the rep called back to cancel the deal, saying the company had decided to suspend all gun-related offers immediately.

"I said, 'I don't understand; we're in a contract,'" Cargill told CNNMoney. "He said, 'Well, we can suspend it.' I said, 'I'm going to talk to my lawyer about that.'"

Cargill says he's looking into his legal options and calling on supporters of gun rights to boycott Groupon. He says the company hasn't yet paid him for his share of the vouchers sold before the deal was canceled, and that he didn't know if he would receive any funds.

Groupon typically pays merchants in stages, with the first payment coming 7 to 10 days after a campaign ends. Mossler, the Groupon rep, said the company is "not canceling Groupons that were already sold. We expect each merchant to honor them, and as long as they do, they'll be paid."

Groupon isn't the only tech company to rethink its gun policies after the recent U.S. shootings. Last month, 3-D printer company MakerBot ramped up its enforcement of an existing policy banning downloadable designs for printable gun parts.

Groupon's move is an about-face, which is what bothers Cargill.

"They never should have begun [gun deals] in the first place," he said. "If you're not going to go through with it, don't even start it."

Also, he wonders why Groupon is banning firearm-related offers while continuing to hawk what he considers more scandalous wares.

"Executives at Groupon are not concerned about selling a tour of a porn studio," Cargill says, referring to the kerfuffle over a Kink.com deal last April, "but they want to shut down [deals related to] gun safety and proficiency testing."

First Published: January 22, 2013: 5:00 PM ET

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IBM earnings beat expectations

IBM shares are up slightly over the past year. Click the chart for more info.

NEW YORK (CNNMoney)

Tech giant IBM reported strong fourth-quarter results on Tuesday, posting earnings and sales that came in ahead of expectations.

The Armonk, N.Y.-based firm reported net income, excluding special items, of $6.1 billion for the fourth quarter. Earnings per share were $5.39, while sales hit $29.3 billion.

Analysts surveyed by Thomson Reuters had projected that the company would post earnings of $5.25 a share on $29.1 billion in revenue. Shares rose 3.6% in after-hours trading.

IBM's businesses include software and hardware development, along with consulting and IT services. With its vast size and global footprint, investors tend to view the company's earnings as indicative of overall corporate technology spending and demand.

The company is in the process of shifting to "higher-value businesses," including analytics and cloud computing, CEO Ginni Rometty said in a statement Tuesday.

Related: Microsoft buying a chunk of Dell would be smart (for Microsoft)

IBM reported a 3% gain in software sales for the quarter, which helped offset declines in its services business.

The company appears to be feeling the effects of the slowdown in Europe, with revenue from the region down 5%. Sales in the Americas were flat, while Asia-Pacific revenues climbed 4%.

Overall, sales slipped 1% versus a year ago, through profits reached record levels, up 10%. For 2013, the company said it expects earnings of at least $16.70 a share, ahead of the analyst projection of $16.63.

First Published: January 22, 2013: 5:04 PM ET

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Keystone pipeline faces new hurdles

NEW YORK (CNNMoney)

"By elevating climate change, he risks backlash and calls of hypocrisy if he promptly approves the pipeline," said Divya Reddy, an energy and natural resource analyst at the Eurasia Group, a political risk consultancy.

Reedy, like most analysts, still expects the pipeline to be approved, though the chance that it won't is growing.

"We expect the inaugural address will invigorate pipeline opponents," Whitney Stanco, an energy analyst at the Guggenheim Securities' Washington Research Group, wrote in a research note Tuesday.

Related: Exxon's big plans for offshore drilling

The expansion of the Keystone pipeline has touched off an intense debate in the United States. Supporters like it because it will carry 830,000 barrels a day of oil from Alberta, Canada, to the U.S. Gulf Coast -- potentially reducing imports from other, more volatile areas. Its construction is also estimated to create some 5,000 jobs, according to the State Department. The company building the pipeline, TransCanada, estimates even higher job growth.

Opponents hate it because oil from Canada's oil sands region produces between 5% and 30% more greenhouse gases than other types of conventional crude. Extracting the oil sands also uses massive amounts of water and can result in deforestation, and transporting it raises the possibility of spills.

It was the spill concern that derailed the project last year. The pipeline's original route had it going over Nebraska's environmentally sensitive Sand Hills region, and many state lawmakers opposed it. The concerns allowed Obama to delay his decision, especially as it became a hot-button election issue.

On Tuesday, Nebraska Governor Dave Heineman said state officials had concluded that the pipeline's new route poses minimal risk to the environment.

That clears the way for the State Department, which has final say, to move forward with their own environmental review. A State Department official indicated Tuesday that a decision would come shortly, but probably not before the end of March.

As predicted, Obama's focus on climate change during his speech Monday galvanized the pipeline's opponents.

"Approving Keystone XL would make a mockery of the commitment he made at the inauguration to take action on climate change," May Boeve, head of the environmental group 350.org, said in a statement Tuesday.

Opponents are planning a protest at the White House February 17.

Still, analysts think Obama is leaning toward approval.

Reedy noted that the pipeline is strongly backed by the unions -- big Democrat supporters -- and that the presumed incoming secretary of state, John Kerry, "probably won't want to intervene in such a controversial topic so early in his new post."

Others think it could be used as a bargaining chip.

"Approving Keystone, possibly with additional conditions, at the same time that EPA proposes new standards for greenhouse gas emissions from existing power plants would line up with the recent trend of 'give a little, take a little' energy policy," said Kevin Book, managing director of research at ClearView Energy Partners.

First Published: January 22, 2013: 6:49 PM ET

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Atari U.S. files for bankruptcy, but plays on

An error message flashed briefly on the website of Atari U.S. on Monday, the same day the company filed for bankruptcy. The "Centipede" maker wants to break away from its French parent, Atari S.A.

NEW YORK (CNNMoney)

But Atari will live on. The move is aimed at breaking the American branch away from its unprofitable French parent company.

In particular, Atari U.S. is looking to "secure independent capital for future growth, primarily in the areas of digital and mobile games," the company said in a written statement.

Over the next three to four months, Atari U.S. will seek buyers for some of its assets, including the Atari logo and the company's games catalog. Atari as a whole owns or manages more than 200 games and franchises.

The gaming landscape has changed dramatically since Atari was founded in 1972. Atari scored hits with groundbreaking gaming consoles and classic titles like "Pong," "Centipede" and "Asteroid," but later lost its dominance to rivals like Nintendo. The brand has bounced around through several different owners.

France's Infogrames Entertainment acquired a stake in Atari in 2000, then bought out the company in 2008 and changed its name to Atari S.A.

Since then, the rise of casual gaming on PCs and mobile devices has cut into the video game industry as a whole. Atari S.A. has been unprofitable for years, and warned just last month that it will book a "significant loss" for its fiscal year 2013.

The biggest headache for Atari S.A. is the suspension of its credit line with BlueBay Asset Management. Atari owes 21 million euro ($27 million) to BlueBay, with the balance due on March 31. The company says it is "starved for funds" and hasn't found another principal creditor to take BlueBay's place.

The New York-based U.S. arm wants to be free of its French baggage. Atari U.S. said it will "conduct its normal business operations" during the bankruptcy proceedings, and it's been approved for $5 million in debtor-in-possession financing from Tenor Capital, a firm that specializes in distressed lending.

First Published: January 21, 2013: 2:55 PM ET

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