NEW YORK (TheStreet) — The Apple iPhone continued to drive wireless growth for AT&T, helping the telco post record subscriber growth for the third quarter.

Ma Bell activated 3.2 million new iPhone customers in the quarter, and netted a total of 2 million new mobile phone customers including 1.4 million post-paid contract customers. And despite the high cost of subsidizing between $300 and $500 of each iPhone sale, AT&T managed to widen its wireless operating margin to 24.6%, up from 23.8% in the second quarter and much fatter than the 18.9% margin in the year-ago quarter.

The strength of the wireless business, with an 8% revenue increase, helped offset the 7% sales decline in AT&T’s wireline unit.

AT&T posted an adjusted profit, excluding one-time items, of 54 cents a share, down from 55 cents a year ago and better than the analysts’ consensus target of 50 cents.

Sales for the third quarter were $30.8 billion, down 1.6% from $31.3 billion in the year-ago quarter and in line with analysts’ expectations.

“We delivered a terrific wireless quarter, IP data growth was strong, and execution across the business continues to be solid,” CEO Randall Stephenson said in a press release.

AT&T shares rose 84 cents, or 3%, to $26.78 in premarket trading Thursday.

While the popularity of the iPhone is great for AT&T while it lasts, the other players in the sector are feeling the squeeze.

Verizon is expected to have added about 1 million net new subscribers, and other players like Sprint and Deutsche Telekom’s T-Mobile are expected to have lost customers in the third quarter.

This have-and-have-not scenario is expected to kick off a brutal price war when T-Mobile launches its “Project Black.”

A big part of the T-Mobile plan, according to industry speculation, is the introduction of unlimited calling plans that could be as low as $40 a month, and unlimited everything plans — calling, text and data — for as low as $60 a month.

A price war would be damaging to AT&T and Verizon, which have equivalent plans priced at $130 a month.

* Fund to focus on technological development

* GE making changes to employee healthcare plan (Adds details)

NEW YORK, Oct 21 (Reuters) – General Electric Co (GE.N) is launching a $250 million investment fund intended to spur development of new technologies in the healthcare industry, the chief executive of the largest U.S. conglomerate said on Wednesday.

GE is in the midst of a major push in healthcare intended to “improve access and drive technologies that would improve access not just for the U.S., but globally,” said CEO Jeff Immelt at a press event in New York.

The company is also making changes to the healthcare plan it offers its employees, Immelt said.

GE Healthcare makes medical imaging equipment like ultrasound and CT-Scan machines and provides consulting services to hospitals.

GE’s healthcare arm, once one of its fastest-growing businesses, has slowed in the past few years, in part due to U.S. regulatory changes that made its pricey medical imaging devices less profitable for hospitals.

The Fairfield, Connecticut-based company has responded by focusing on developing lower-priced gear, with an eye towards boosting its presence in emerging economies such as China and India, which the company expects to grow more quickly in the coming years.

Arms race: firm says new Cortex chip maintains edge over Intel’s upgraded Atom

Computerworld – Arm Holdings PLC today introduced a processor for smartphones and other devices that it says will be cheaper, and more powerful and energy-efficient than the two ARM processors it will supplant. The company expects that the new chip will also help it ward off incursions from Intel Corp’s rival Atom chip.

ARM announced the chip Wednesday at its annual ARM TechCon3 conference in Santa Clara, Calif.

The new Cortex-A5 processor will come with one to four processor cores running at up to 1GHz. Based on an efficient 40-nanometer design, the Cortex-A5’s cores will run up to 3 times faster than each core in the company’s low-end ARM9 product, according to the Cambridge, England-based firm.

The Cortex-A5 also consumes one-third the power of ARM’s mid-range ARM11 processor, meaning that it can extend a device’s battery life “by at least double, if not more,” said Travis Lanier, a product manager at Arm. The manufacturing cost of the new chip is about one-fifth what it costs to make the ARM9, which has been installed in more than 5 billion cellphones and other devices, or the ARM11, which is used in Apple’s iPhone and iPod Touch.

The Cortex-A5 is due to be released to ARM’s 600-plus manufacturing partners in December, the company said.

Meanwhile, Intel is readying a 32-nanometer version of the popular Atom netbook processor. The 32nm chip will be the first “low-leakage” version of the Atom, and is expected to be similar to the current Arm CPUs in terms of compactness and power efficiency, making it suitable for mobile phones and tiny devices.

Arm says that the company expects the Cortex-A5 to maintain its edge over the Atom. “This is a very, very tiny processor,” Lanier said. “It will be many generations before the Atom can compete with it.”

The Cortex-A5 will be able to run all of the software that runs on the other Arm Cortex processors — the Cortex-A8 and the Cortex-A9, Lanier said. The supported software includes Ubuntu Linux, Android and the Firefox browser.

The Cortex-A5 also supports technology from Neon multimedia technology that can be used to improve video performance.

Arm expects the Cortex-A5 to be used in low-end to mid-range cellphones, smart appliances such as refrigerators, washing machines and clothes dryers and digital picture frames. Such devices should begin to appear with Cortex-A5 chips in 2011, Lanier said. At that point, the ARM9 and ARM11 chips will begin phasing out.

The Cortex-A8 and Cortex-A9 will continue to be Arm’s mid-range and high-end processors. The company recently announced that its dual-core Cortex-A9 will be able to run as fast as 2 GHz, enabling it to run in ARM-based netbooks, or smartbooks, laptops and even desktop PCs, says Lanier.

Lanier said that the Cortex-A5 will come in two flavors: a general-purpose processor running at 1 GHz that consumes about 80 milliwatts; and a low-power, very efficient chip that runs at 500 MHz.

“There’s almost no [electrical] leakage,” Lanier said. That is more suitable for phones, as battery life tends to be key.

Jeff Smith is a diligent social-networking user, but he doesn’t own a PC.
“I prefer a cellphone and a service for a cellphone,” says Smith, 40, a postal worker in Detroit who served as an Army Ranger in Desert Storm and Somalia.

For about a year, Smith has used MocoSpace (for “mobile community space”) to chat, meet people, search the Web and play games. “Anything else feels like too much.”

The majority of people who participate on social networks do so from their PCs. Yet a growing number — many of whom can’t afford a PC or would rather not use one — are using mobile devices to tell their friends where they are and what they’re up to and for sharing pictures.

Mobile users are an important part of the mix for behemoths Facebook, Twitter and MySpace. But many folks are migrating to a new crop of mobile-only social networks such as MocoSpace, Mig33 and Peperonity. MocoSpace has emerged as a favorite in the U.S., where it is available in 22 cities, including New York, Seattle and Los Angeles. It offers chat, instant messaging, photo- and video-sharing, and games.

The number of people who use social networks from their smartphones skyrocketed 187%, to 18.3 million unique users, in July, compared with the same month a year earlier, says Nielsen. Social networking is among the fastest-growing activities on mobile devices, along with search and checking news, says Jon Stewart, Nielsen’s research director for technology and search.

With so many eyeballs increasingly fixated on mobile devices, opportunities for advertisers abound. Visiongain Research predicts mobile-social-network-related revenue will reach about $60 billion in 2012. Gobs of money is to be made from consumers buying virtual gifts when playing mobile games, for example, says Doug Bewsher, Mig33’s chief marketing officer.

A potentially fertile opportunity is with users of iPhones and Google Android-enabled devices, who have shown an affinity to view ads from large screens.

“There is an enormous opportunity” for display and banner ads promoting movies, TV shows, autos and restaurants in specific areas, says Jason Spero, general manager of North America for AdMob, a mobile-advertising network.

Advertisers are smitten by the prospect of reaching millions of twentysomethings worldwide who are smartphone devotees. Many of those users have shown a willingness to view online ads.

These users tend to be more tech savvy and younger, says David Berkowitz, senior director of emerging media and innovation at digital-marketing agency 360i. He predicts that as all-you-can-eat data plans become more widespread and affordable, mobile Internet use will explode, especially for social networking.

“It’s more convenient: My cellphone is always with me. It’s part of my lifestyle,” says Courtney Collins, a 23-year-old hair stylist who lives near Detroit. She does not own a PC but is a religious user of MocoSpace and Facebook from her cellphone.

Social games

About 65 million of Facebook’s 300 million members are mobile users. Eight months ago, it was 20 million. Of MySpace’s estimated 125 million members worldwide, about 25 million use mobile devices. A year ago, it was 6 million.

A significant slice of the growth is taking place in urban settings and developing countries, among young people who cannot afford PCs. “Mobile social networks have become a way of life for young people, especially for those who like to play social games,” says Mig33’s Bewsher. He says Mig33 is adding more than 500,000 users a month in Asia, Africa and the Middle East. The international service, with 25 million members, blends free and low-cost services, including VoIP calls, chat and instant messaging, e-mail, text messaging, photo sharing and social-networking features.

Forrester Research analyst Charles Golvin predicts that the next huge wave of Internet users — potentially billions of people in developing countries — will predominately use smartphones instead of PCs. In the USA, younger, economically challenged people in urban areas will “follow the same pattern,” he says.

“This might be the best way to bridge the digital divide,” says Justin Siegel, CEO of MocoSpace, a 4-year-old start-up that has a large following of young, non-white city dwellers who cannot afford PCs and use mobile devices instead. The free service is also popular among military members.

Often, it is a lifestyle choice. According to a Sprint survey, 80% of young adults (18-34) cite their wireless phone as their “lifeline” to others.

“Lots of people, particularly younger ones, don’t want to be tethered to a desktop or even a netbook,” says Michael Osterman, an independent analyst.

Kevin Lomax, a 29-year-old singer/songwriter/producer in New York, notes, “These days, who carries a laptop unless you are a businessman?” He uses an iPhone and Palm Pre to post songs on his MocoSpace page, where he has 4,000 fans.

But with any nascent technology, promise doesn’t necessarily guarantee profitability, venture capitalists and executives caution.

Actual ad revenue has been fleeting, says Tim Chang, a partner at venture-capital firm Norwest Venture Partners: “It has been a failure until now.”

“Ads on small cellphone screens can be a turnoff, ” says Frank Meehan, CEO of INQ, a London-based maker of handsets for social-networking use in Europe and Asia. He thinks search-related ads hold more promise.

Barnes & Noble knows that if you want something done right, you have to do it yourself.

Launched Thursday and shipping in November, the retailer’s highly anticipated e-reader, known as “Nook,” certainly seems to have been done right–even compared to the two other reading devices that have recently been announced as selling books from Barnes & Noble’s ( BKS – news – people) digital bookstore. The thin, paperback-sized device features an AT&T ( – news – people) 3G connection, a wi-fi connection that allows users to browse through books in Barnes & Noble’s stores, as well as two screens–one LCD touch screen for easy navigation and one energy-efficient electronic ink screen for long-form reading.

That touch screen in particular is a flashy upgrade to the e-reader format. Running Google’s ( GOOG – news – people) Android operating system, it switches between a virtual keyboard and an iPhone-like scrollable display of titles. The operating system will allow Barnes & Noble to introduce new applications for Nook over time, though the company hasn’t revealed whether third-party developers will also be invited to develop applications for the device.

“This is Nook,” Barnes & Noble Chief Executive Steve Riggio told a crowd at the device’s New York launch, as he held up the slim gadget. “This is the most full-featured, fun, stylish and easy to use e-reader on the market.”

But Forrester analyst Sarah Rotman Epps says that the impressive set of capabilities combined with a $259 price tag adds up to another Nook feature that is less favorable for Barnes & Noble: a thin, or possibly non-existent profit margin. “With two screens and a built-in wireless subscription, they’re offering more than Amazon for the same price,” says Epps. “They’re not making any money off this device.”

Over the last year, the price of e-readers has been dropping dramatically. In June, e-book maker Interead released the Cool-ER, a $249 device that undercut the $300-plus offerings from Amazon ( AMZN – news – people) and Sony ( SNE – news – people). Sony responded with a $199, five-inch screen reader known as the Pocket Edition, and Amazon cut its price twice, now offering its second-generation Kindle for $259.

In matching that barely profitable price, Barnes & Noble aims to do what it’s always done: profit from selling books. Over the last month, the retailer has announced partnerships with two other e-reader companies, Mountain View, Calif.-based Plastic Logic and Dutch firm IREX, to offer their collection of more than a million digital books on the new devices. (See “A Credible Kindle Killer.”) That partnership strategy contrasts with Amazon’s history of selling its books only on the Kindle and through its Kindle-for-iPhone application–not competing e-reader devices.

Barnes & Noble’s e-book foray represents an attempt to take its own share of the wave of customers shifting from brick-and-mortar stores to digital reading. Amazon owns much of that trend today, with around 60% of the digital reader market, and Forrester expects Amazon to sell 1 million more Kindles in just the fourth quarter of 2009. Nook seems poised to grab a major chunk of Amazon’s lead, given its competitive price and slick features.

But while Nook, along with the Plastic Logic and IREX deals, could help Barnes & Noble take back some of those digital-trending customers, it also cannibalizes the company’s profitable retail business. To compete with Amazon, Barnes & Noble will have to sell its books for around $10 each, far less than the price of a typical hardcover in its brick-and-mortar outlets.

As bookselling moves to Kindle- and Nook-like devices, that means Barnes & Noble faces a quandary similar to the print media: How to maintain its high, brick-and-mortar operating expenses in the midst of digital disruption. “Ask any veteran of the digital media wars,” Forrester’s Epps wrote Tuesday in a blog post. “It’s hard to compete for digital dimes when you pay your brick-and-mortar rent in analog dollars.”

If you were wondering what Motorola (NYSE: MOT)’s third Android handset will look like, wonder no longer. New images have appeared that show a simpler handset that won’t match the CLIQ or DROID when it comes to specs.

This Android handset from Motorola has been masquerading under the codename “Calgary” for some time now. The Boy Genius (who else) managed to get some hands on with the device.

Similar to the CLIQ and DROID, it is a sideways slider with a touch screen and full QWERTY keyboard. According to the Boy Genius, other specs include a 3 megapixel camera, 3.5mm headset jack, GPS, digital magnetometer, Wi-Fi, and microSD card slot. Other hardware features include three touch-sensitive buttons on the front face of the phone and an optical trackpad.

If you’re thinking this will be a killer smartphone, think again. Compared to the specs we know the DROID will have, the Calgary is definitely a step down. Remember, the DROID has a 5 megapixel camera and the Calgary has a 3 megapixel shooter. In all respects, this looks like a mid-market device aimed more at the messaging crowd than a high-end smartphone for power users.

Another interesting move is that the Calgary will run MOTOBLUR, but as far as we know, the DROID will not.

None of this information is official and some of it is subject to change, but the Boy Genius says the device runs well and is pretty decent.

If you’re a foreign infrastructure vendor looking to gain ground in the highly competitive 4G market, the thing to do is open up up a long-term evolution (LTE)–preferably somewhere on the outskirts of Dallas. ZTE is the latest equipment supplier to do just that, joining Nokia Siemens Networks (NYSE:NOK, NYSE:SI), Huawei and Fujitsu in building new 4G R&D facilities or expanding their current labs in the technoburb of Richardson, Texas.

ZTE’s new lab is focusing on the CDMA side of North American equation, promoting a dual-mode CDMA-LTE platform for operators looking to migrate from the former to the latter. How well that strategy will work depends on how many operators out there are still looking to deploy CDMA networks. Established operators like Verizon Wireless (NYSE:VZ, NYSE:VOD) have no qualms with selecting separate CDMA and LTE vendors, both having tapped Ericsson (NASDAQ:ERIC) to build their radio networks. But while the CDMA build is largely completed in this country, occasionally a new entrant does emerge. The most notable example would be Cox Communications, which did indeed pick a ZTE’s compatriot Huawei to design its new CDMA network.

All of this LTE activity in the US should come as no surprise. North America has become a hotbed of LTE activity since both VZW and AT&T (NYSE:T) have committed to deploying commercial networks in the next two years. Even smaller providers like MetroPCS (NYSE:PCS) have jumped on the bandwagon. NSN has been particularly aggressive in seeking a foothold in the US, bidding first on Nortel’s CDMA and LTE assets, and–after failing to win them at auction–launching a new LTE development center which it is staffing with 500 people.

And where is Ericsson in all of this? By winning the Nortel assets NSN originally bid on, Ericsson got the biggest lab of them all, acquiring not only Nortel’s wireless HQ in Dallas, but its R&D facilities in Canada.

arnes & Noble, which has long left open the possibility of introducing its own electronic reader, is expected to unveil on Tuesday at a news conference in Manhattan what it is calling the Nook.

The device features color touch-screen controls and a gray-and-white reading display. It will cost $259, matching Amazon.com’s most recent price cut for its latest edition of the Kindle.

According to an advertisement that Barnes & Noble placed in the Oct. 25 issue of The New York Times Book Review and which was distributed to publishers on Monday, the Nook will permit readers to lend their digital books to friends and download books wirelessly.

A spokeswoman for Barnes & Noble declined to comment.

Barnes & Noble is jumping into a crowded market dominated by the Kindle. The Reader from Sony is the next most popular such device, but there are several others in the works, including electronic readers from iRex and Plastic Logic.

In July, Barnes & Noble created an e-bookstore on its Web site, BN.com, and it sells digital editions that can be read on the iPhone from Apple and the BlackBerry, as well as on computers and laptops.

The advertisement for the Nook says that consumers will be able to “access over one million e-books, newspapers and magazines.” About 500,000 of the books available at BN.com can be downloaded free, through an agreement with Google to provide electronic versions of public domain books that Google has scanned from university libraries. These editions are currently not available on the Kindle.

The Nook will feature the same kind of electronic ink technology used by Kindle and other devices. It will be sold in Barnes & Noble stores as well as on a Web site, nook.com.

The market for e-books is still small but growing fast. According to the Codex Group, a consultant to the publishing industry, the number of people who own e-readers is expected to roughly double to about 3.8 million by the end of this year, from about 1.6 million in August.

Exclusive: Google Plans Its Own Android Phone
Scott Moritz

NEW YORK (TheStreet) — Move over Apple (AAPL Quote), Research In Motion (RIMM Quote) and Motorola, (MOT Quote) Google (GOOG Quote) is jumping into the smartphone market with a Android phone of its own.

In what is likely to be seen as disruptive to the wireless status quo, Google is working with a smartphone manufacturer to have a Google-branded phone available this year through retailers and not through telcos, according to Northeast Securities analyst Ashok Kumar, who has talked to Google’s design partners about the plan.

The move would fulfill Google’s pledge to bring a new generation of open-standard mobile Internet devices to consumers. By bypassing the carriers, who keep tight controls over the features and applications that are allowed on phones, Google will presumably offer a device that lets users determine the functions.

Google also has plans with computer maker Quanta to build its own netbooks that will run on a Linux-based Google Chrome operating system and be available next summer, says Kumar.

Both the Chrome netbook and the Android phone will use Qualcomm (QCOM Quote) chips, with the netbook running on Qualcomm’s Snapdragon platform, says Kumar, who has discussed the plan with original design manufacturers working with Google.

If talk of the Google phone plan is true, the entrance of a unlocked, low-cost, Web-friendly touchscreen device will probably undercut other Android phone efforts by players like Motorola, Samsung and Dell (DELL Quote).

Motorola’s entire turnaround strategy is based on the Android operating system. The company is expected to announce a ultra-thin Droid phone at Verizon (VZ Quote) next month. Both Verizon and Motorola expect the Sholes/Droid phone to be a significant challenger to Apple’s iPhone.

Dell is also working on an Android smartphone, which is expected to be ready early next year at AT&T (T Quote).

Skeptics point out that Google might have a hard time getting the phone out in time for the holidays, since it typically takes a year or more to bring a phone from design to production.

Industry analysts also argue that the move would be an affront to the U.S. carriers like Verizon, AT&T, Sprint (S Quote) and Deutsche Telekom’s (DT Quote) T-Mobile, outfits that have been supporting the Android effort by selling or planning to sell subsidized devices.

“It’s a bit of a departure from Google’s strategy, but I think the speculation is valid,” says Michael Cote of the Cote Collaborative. And as for getting the phone to the market quickly, Google “would probably use a partner they are familiar with.”

HTC, the first developer of an Android phone, is also a no stranger to Qualcomm chips and would be the most likely manufacturer able to give Google what it wanted fast.

If Google goes through with the plan, it would point to how eager the Internet ad giant is to get Android in as many hands as possible so it can extend its search business beyond desktop computers to mobile devices. Going around phone companies to reach consumers is a bold move, but Google no doubt sees the wireless Internet market as a land-grab race with Apple, Nokia (NOK Quote) and Microsoft (MSFT Quote).

Google also has plans with computer maker Quanta to build its own netbooks that will run on a Linux-based Google Chrome operating system and be available next summer.

There are rumors that the PC maker plans to enter the smartphone market, but it may have a hard time muscling its way into the crowded field
By Roger L. Kay

Now that Dell is signaling its intention to vault into the smartphone market, industry watchers are asking whether the company can make a serious run. Don’t bet on it.

In August, Dell (DELL) announced plans to release a smartphone in China. In early October, it hinted at plans to enter the U.S. smartphone market, without going into detail.

Dell is nothing if not conservative, and it continues to waffle about exactly what it has planned. The company appears to have chosen to enter the smartphone market in as low-risk way as possible, partnering with established industry giants AT&T (T) and Google (GOOG). But it won’t say when its products will arrive or how they’ll work. Part of the reason for this tentative stance is that the stakes are extremely high.

Fallen From Its Perch
Dell was once a formidable rival to other PC makers, and a Wall Street darling, thanks to its ability to produce more cheaply, and sell more plentifully, than competitors. Now it has fallen from its perch.

When PC industry growth shifted from business desktops to notebooks sold to consumers, Dell was out of its element. It had trouble managing the notebook supply chain and making the kind of smartly designed machines consumers wanted. The company has taken steps to remedy those ills in recent years. Its computer designs now rival even those of Hewlett-Packard (HPQ), the industry leader in consumer notebooks.

But it’s still playing catchup in the handheld computer market. It might be asking too much for a company known for making boring business PCs to leap to the front of the pack in the smartphone market. Dell may not have the DNA for this kind of reinvention.

Tablets on the Way
A few years ago, mobile computing pretty much meant carrying a notebook computer. Then, Research In Motion (RIMM) put the office in our pockets with its hit BlackBerry device, and Apple (AAPL) opened the smartphone market to a whole new class of consumers with the iPhone. The iPhone lets it users read Web pages, send e-mail and text messages, talk on the phone, and run a huge number of productivity and entertainment applications. Pretty much the only thing it doesn’t let users do is create documents, and that idea was always a nonstarter in handheld computing anyway.

I saw these developments coming in 2005, when I formed Endpoint Technologies. I had been the PC analyst at market researcher IDC, but I suspected the PC’s heyday was drawing to a close. At Endpoint, I decided to consult on computing trends that encompassed all manner of computing devices, including smart phones, netbooks, tablet computers, and even home theater systems.

The smart phone may not be the pinnacle of handheld computing’s evolution. Even now, Microsoft (MSFT) and Apple are said to be creating new kinds of tablet machines. But for now, phones are where the action is in personal computing. The PC industry sells about 250 million to 300 million units a year, but the overall cell-phone market is at least twice as large.

No Zing After All
And while PC prices continue to fall, the prices of popular smartphones are rising, and so are the carriers’ average revenues per subscriber. Data plans make up an ever greater percentage of smartphone revenue, and nearly everyone in the computer industry is trying to get in on it.

Which brings us back to Dell. It’s tried to enter new markets, including mobile music, and had hired ex-Apple executive Tim Bucher, who has since departed Dell. The Round Rock (Tex.) company has planned to bring out a portable music player called the Zing to compete with Apple’s iPod, but it never made it to market.

In 2007, Dell hired Ron Garriques, the force behind Motorola’s (MOT) Razr cell phone. Two and a half years later, all we’re getting is rumors of Dell phones.

Adding Something to the Mix
This is a big, important market, and Dell can ill afford to get it wrong. By agreeing to sell phones that run Google’s Android operating system, Dell wants to leverage Google’s software development expertise and winning brand name. By partnering with AT&T, Dell sets itself up with an experienced operator.

Yet unlike Apple, Dell doesn’t bring its own flair to the phone market. Dell is good at assembling and distributing hardware. But unless it can add some interesting intellectual property to the mix, it’s hard to see how it can muscle its way into a meaningful place in the smartphone market.