Apple iPad 3 To Launch At March

Apple ipad 3

SAN FRANCISCO (Reuters) - Apple Inc plans to introduce its latest iPad tablet at an event in the first week in March, the website AllThingsD reported, citing unnamed sources.

The event will be held in San Francisco, likely at the Yerba Buena Center for the Arts, which is Apple's preferred site for product launches, the website said.

An Apple spokeswoman declined to comment.

Apple has typically introduced the latest versions of its iPad in the first few months of the year. The current iPad 2 was introduced on March 2, 2011. The original iPad was introduced at the end of January 2010.

Apple's iPad dominates the nascent market for tablets even though deep-pocketed rivals are taking aim at the lucrative segment. Amazon.com Inc's Kindle Fire, which sells at half the cost of an iPad, has chipped away at the lower end of the tablet market.

Apple iPad tablet sales doubled in the December quarter to 15.43 million units from a year earlier.

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Egypt soccer violence kills 74, fans turn on army

Egypt soccer violence kills 74

(Reuters) - Seventy-four people were killed when supporters clashed at an Egyptian soccer match, prompting fans and politicians on Thursday to turn on the ruling army for failing to prevent the deadliest incident since Hosni Mubarak was ousted.

At least 1,000 people were injured in the violence on Wednesday when soccer fans invaded the pitch in the Mediterranean city of Port Said, after local team al-Masry beat visitors from Cairo, Al Ahli, Egypt's most successful club.

Angry politicians denounced the lack of security at the match and accused military leaders of allowing, or even causing, the fighting. The Muslim Brotherhood, the Islamist group that dominates parliament, saw an "invisible" hand at work.

The city's streets were quiet at dawn, with few police or army officers in sight.

"The military council wants to prove that the country is heading towards chaos and destruction. They are Mubarak's men. They are applying his strategy when he said 'choose me or choose chaos'," said Mahmoud el-Naggar, 30, a laboratory technician and member of the Coalition of the Revolutionary Youth in Port Said.

"Down with military rule," thousands of Egyptians chanted at the main Cairo train station where they met injured fans returning from what one minister said was the scene of Egypt's worst soccer disaster.

Hundreds of protesters gathered outside the state television building and marches across the capital were planned.

Field Marshal Mohamed Hussein Tantawi, 76, who heads the ruling military council, took an unusual step of speaking by telephone to a television channel, the sport broadcaster owned by Al Ahli, vowing to track down the culprits. The army announced three days of national mourning.

"I deeply regret what happened at the football match in Port Said. I offer my condolences to the victims' families," Tantawi said in comments broadcast on state television.

It did little to assuage the anger of fans, who, like many Egyptians, are furious that Egypt is still plagued by lawlessness and frequent bouts of deadly violence almost a year after Mubarak was driven out and replaced by an army council.

As with past flare-ups, it quickly turned political. Parliament will hold an emergency session later on Thursday to discuss the violence.

"The people want the execution of the field marshal," fans chanted at the station. "We will secure their rights, or die like them," they said as covered bodies were unloaded from the trains.

ENRAGED

The post-match pitch invasion provoked panic among the crowd as rival fans fought. Most of the deaths were among people who were trampled in the crush of the panicking crowd or who fell or were thrown from terraces, witnesses and health workers said.

Television footage showed some security officers in the stadium showing no sign of trying to stop the pitch invasion. One officer was filmed as people poured onto the field, talking on a mobile phone.

"The rush caused a stampede, people were pushing each other against the metal door and stepping on each other," said one witness who attended the match, 23-year-old Ossama El-Zayat.

"We saw riot police firing shots in the air, and then everyone got scared and kept pushing against the locked door. We didn't know whether police were firing live rounds or not. People were crying and dying," he said.

Several enraged politicians and ordinary Egyptians accused officials who are still in their jobs after the fall of Mubarak of complicity in the tragedy, or at least of allowing a security vacuum that has let violence flourish in the past 12 months.

"The security forces did this or allowed it to happen. The men of Mubarak are still ruling. The head of the regime has fallen but all his men are still in their positions," Albadry Farghali, a member of parliament for Port Said, screamed in a telephone call to live television.

Some saw the violence as orchestrated to target the "Ultras," Al Ahli's dedicated fans whose experience confronting police at soccer matches was turned with devastating effect against Mubarak's heavy-handed security forces in the uprising.

They played a significant role in defending Cairo's Tahrir Square, the heart of the uprising against Mubarak, when men on camels and horses charged protesters last year. Thursday is the anniversary of the notorious February 2 camel charge.

"All that happened is not for the sake of a game. It's political. It was orchestrated by the military council to target the Ultras," said Abdullah el-Said, a 43-year-old driver in Port Said. "The military council wanted to crush the ultras because they sided with protesters ever since the revolution began."

Yet many Egyptians still see the army as the only guarantor of security. When one activist in group outside a hospital accused the army of sowing chaos, a man chimed in blaming the youths: "Security has to return to the streets. Enough with all those protests that caused this security vacuum," he yelled.

The Brotherhood, whose Freedom and Justice Party won the biggest bloc in parliament, blamed an "invisible" hand for causing the violence and said the authorities were negligent.

"We fear that some officers are punishing the people for their revolution and for depriving them of their ability to act as tyrants and restricting their privileges," it said.

'THUGS'

Others blamed "thugs," the hired hands or plain clothes police officers in Mubarak's era who would often emerge from police lines to crush dissent to his rule.

"Unknown groups came between the fans and they were the ones that started the chaos. I was at the match and I saw that the group that did this is not from Port Said," said Farouk Ibrahim.

"They were thugs, like the thugs the National Democratic Party used in elections," he said, referring to Mubarak's former party and the polls that were routinely rigged in its favor.

The two soccer teams, al-Masry and Al Ahli, have a history of fierce rivalry. Witnesses said fighting began after Ahli fans unfurled banners insulting Port Said and one descended to the pitch carrying an iron bar at the end of the match.

Al-Masry fans poured onto the pitch and attacked Al Ahli players before turning to attack rival supporters.

"I saw people holding machetes and knives. Some were hit with these weapons, other victims were flung from their seats, while the invasion happened," Usama El Tafahni, a journalist in Port Said who attended the match, told Reuters.

Many fans died in a subsequent stampede, while some were flung off their seats onto the pitch and were killed by the fall. At the height of the disturbances, rioting fans fired flares straight into the stands.

Television footage showed fans running onto the field and chasing Al Ahli players. A small group of riot police formed a corridor to protect the players, but they appeared overwhelmed and fans were still able to kick and punch players as they fled.

Hospitals in the Suez Canal zone were put on alert and dozens of ambulances were sent from the cities of Ismailia and Suez, said an official in the zone's local ambulance service.

Tantawi said a fact-finding committee would be set up and pledged that the army's plan to hand over power to civilians would not be derailed. The army has promised to go back to barracks by the end of June after a presidential election.

"Egypt will be stable. We have a roadmap to transfer power to elected civilians. If anyone is plotting instability in Egypt they will not succeed," he told Al Ahli's channel.

Interior Minister Mohamed Ibrahim said 47 people were arrested. Egypt's football federation said it was indefinitely delaying matches for the Egyptian premier league. Al Ahli club said in a statement it was suspending all sports activities and holding three days of mourning.

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Pentagon budget cuts will reshape U.S. military

The Pentagon

(Reuters) - The Pentagon unveiled a 2013 budget plan that would cut $487 billion in spending over the next decade by eliminating nearly 100,000 ground troops, mothballing ships and trimming air squadrons in a bid to create a smaller, agile force with a new strategic focus.

The funding request, which includes painful cuts that will be felt across the country, comes at a historic turning point for the military as it winds down 10 years of war in Afghanistan and Iraq and shifts its strategic focus to the Asia-Pacific region and the Middle East.

The budget plan, sharply criticized by some lawmakers, sets the stage for a new struggle between President Barack Obama's administration and Congress over how much the Pentagon should spend on national security as the country tries to curb its trillion-dollar budget deficits.

"Make no mistake, the savings that we are proposing will impact all 50 states and many districts, congressional districts across America," Defense Secretary Leon Panetta told a news conference at the Pentagon on Thursday.

"This will be a test of whether reducing the deficit is about talk or action."

Panetta, previewing a budget to be made public February 13, said he would ask for a $525 billion base budget for the 2013 fiscal year, the first time since before the September 11, 2001, attacks that the Pentagon has asked for less than the previous year. That compares with $531 billion approved this year.

Panetta said he would seek $88.4 billion to support overseas combat operations, primarily in Afghanistan, down from $115 billion in 2012 largely due to the end of the war in Iraq and the withdrawal of U.S. forces there at the end of last year.

Congress ultimately controls the Pentagon's purse strings and regularly intervenes to change the size and detail of military spending as it sees fit. The Defense Department's budget accounts for about 20 percent of total federal spending.

Republican lawmakers who oversee military affairs on Capitol Hill sharply criticized the plan.

Senator John McCain said it "ignored the lessons of history" by imposing massive cuts on the military, and Representative Buck McKeon said it reflected "Obama's vision of an America that is weakened, not strengthened, by our men and women in uniform."

MORE CUTS TO COME?

The 2013 budget is Panetta's first as defense secretary and is the first to take into account the Budget Control Act passed by Congress in August that requires the Pentagon to cut $487 billion in projected spending over the next decade.

The budget plan does not take into account an additional $600 billion in defense cuts that could be required after Congress failed to pass a compromise agreement to cut government spending by $1.2 trillion. The Pentagon could face cuts of another $50 billion a year, starting in 2013, unless Congress changes the law.

Panetta said he hoped once lawmakers understood the sacrifice involved in reducing the defense budget by almost a half a trillion dollars, they would make sure to avoid another $500 billion in additional cuts that would "inflict severe damage to our national defense for generations."

The budget begins to flesh out a new military strategy announced by the Pentagon earlier this month that calls for a shift in focus from the ground wars of the past decade towards efforts to preserve stability in the Asia-Pacific region and the Middle East.

"To ensure an agile and ready force, we made a conscious choice not to maintain more force structure than we could afford to properly train and equip," Panetta said.

The budget plan would provide new challenges for the Pentagon's top suppliers, such as Lockheed Martin, Boeing, General Dynamics, Northrop Grumman and Raytheon. The Arca index of defense stocks closed Thursday down 0.7 percent.

The plan retains but slows the purchase of weapons like Lockheed's F-35 Joint Strike Fighter, the Pentagon's largest procurement program, as well as submarines, amphibious assault ships and other vessels. It would retain a fleet of 11 aircraft carriers.

The Pentagon would boost its emphasis on special operations forces like those who carried out the raid in Pakistan that killed al Qaeda leader Osama bin Laden last year and rescued two aid workers this week from kidnappers in Somalia.

It would also increase its emphasis on cyber operations, expand its work on drone aircraft, go ahead with a long-range bomber and proceed with other weapons that would allow it to project power from a greater distance.

Those capabilities are needed as countries like Iran and China develop arms that could threaten U.S. aircraft carriers in international waters near their shores.

General Martin Dempsey, the top U.S. military officer as chairman of the Joint Chiefs of Staff, warned against "parsing through each cut, each change, to look for a winner or loser," saying the plan should be judged for how it adapts the military to a changing security environment.

While the cuts announced on Thursday would affect all major defense contractors, consultant Loren Thompson said shipbuilders would be hit particularly hard because of the plan to cut 16 vessels from the total planned for the next five years.

The plans could affect work flow at Huntington Ingalls' shipyards in Pascagoula, Mississippi, and Newport News, Virginia.

The size of the active-duty Army would be trimmed to 490,000 over five years from its wartime peak of 570,000 in 2010 and the size of the Marine Corps would fall to 182,000 from its high of about 202,000.

Military pay increases would begin to slow after two more years of growth, and fees would be increased on healthcare benefits for military retirees, those who served more than 20 years, both above and below the age of 65.

In addition, the Pentagon would:

- Delay development of a new ballistic missile submarine by two years.

- Eliminate six of the Air Force's tactical-air fighter squadrons and retire or divest 130 aircraft used for moving troops and equipment.

- Retire seven Navy cruisers and two smaller amphibious ships early, postpone the purchase of a big-deck amphibious ship by one year and postpone the planned purchase of a number of other vessels for several years.

- Eliminate two Army heavy brigades stationed in Europe and compensate by rotating U.S. based units into the region for training and exercises.

- Study the possibility of further reducing the size of U.S. nuclear arsenal.

- Begin a new round of talks on closing bases made unnecessary by the smaller force.

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48 hours in Dallas/Fort Worth

Dallas-Fort Worth

(Reuters) - Got 48 hours to spend in Dallas-Fort Worth? There is plenty to see and do in this metropolitan area featuring two cities with distinctly different vibes.

Rich in Texas heritage, the DFW area is the place to sample the full gamut of distinctively Texas cuisine, from chicken-fried steak, barbecue and Tex-Mex to high-end fusions like lobster or sea bass tacos.

When it comes to entertainment, there is plenty to appeal to either urban sophisticates or wannabe cowboys. The possibilities range from pro sports to cultural arts to world-class shopping to the world's largest honky tonk.

Reuter correspondent with local knowledge help visitor make the most out of short visit.

FRIDAY

4 p.m. - Rent a car at Dallas-Fort Worth International Airport and make the trip to downtown Dallas.

5:30 p.m. - Have a cocktail and early dinner at Nosh, celebrated chef Avner Samuel's restaurant and bar, noted for European and Mediterranean food such as crispy duck confit or pan-roasted Alaskan halibut served with Spanish chorizo, spicy peppers and black olives.

7:30 p.m. - Love sports? Dallas has you covered. Head to the American Airlines Center (www.americanairlinescenter.com) to watch the world-champion Dallas Mavericks on the basketball court. If the Mavs are away, watch the Dallas Stars hockey team on the ice.

If sports aren't your thing, the nearby arts district has many cultural offerings. The AT&T Performing Arts Center (www.attpac.org) has multiple venues, including the sleek new Winspear Opera House, so there is almost always a concert, play or dance performance to see. Or, cross the street to the Morton H. Meyerson Symphony Center to see the Dallas Symphony Orchestra in concert.

11 p.m. - Take the elevator to the 33rd floor of the W Hotel in Victory Park, across the street from the American Airlines Center, for a night cap and the best view of Dallas.

SATURDAY

9 a.m. - Dream Café in the trendy Uptown area north of downtown is a Dallas institution known for its eclectic mix of down-home and Tex-Mex breakfast selections. There are also lots of meatless options, including vegetarian sausage.

10 a.m. - The Sixth Floor Museum and Dealey Plaza(www.jfk.org) pay tribute to Dallas' most tragic event: the assassination of President John F. Kennedy. Examine the life and legacy of JFK at the museum and spot where the presidential motorcade passed when the shooting occurred at Dealey Plaza.

Noon - Head back to the arts district and tour the Nasher Sculpture Center (www.nashersculpturecenter.org), an architectural gem in the downtown arts district. The center houses the extensive collection of Dallas developer Raymond Nasher and his wife, Patsy. Works by artists such as Matisse, Calder and Rodin are displayed in indoor galleries and the outdoor garden.

1 p.m. - Drive a few miles north to Rafa's, an authentic Tex-Mex eatery with lots of lunch specials featuring tacos, enchiladas and fajitas. This popular local spot draws the occasional celebrity, including former President George W. Bush, a Dallas resident.

3 p.m. - Dallas is known for shopping and there is no shortage of places to explore across the city, from funky vintage shops to high-end boutiques. Highland Park Village (www.hpvillage.com) boasts stores of premiere designers such as Stella McCartney, Hermes and Dallas native Lela Rose. Be sure to stop by the flagship Neiman-Marcus store downtown at least to grab a signature chocolate-chip cookie.

8 p.m. - Get dressed up and splurge on dinner at the Mansion Restaurant in the Rosewood Mansion on Turtle Creek ( www.rosewoodhotels.com) in Oak Lawn, north of downtown. Chef Bruno Davaillon's creations such as seared snapper and rack of lamb, have kept this Dallas institution at the top of fine dining lists for more than 30 years.

11 p.m. - On the east end of downtown is Deep Ellum, Dallas' hippest nightlife area, with dozens of clubs for listening to music and dancing. Local favorites include the Lizard Lounge and House of Blues. Or, check out PM Nightlife in the downtown Joule hotel. This artistic, underground club is the place for celebrity sightings.

SUNDAY

10 a.m. - Check out of the hotel, load the car and head over to the Dallas Farmers Market (www.dallasfarmersmarket.org) for a light breakfast of fresh-picked fruit or a homemade pastry from one of the many stalls.

11 a.m. - Head west on Interstate 30 for a 30-minute ride to downtown Fort Worth. About halfway there, you can catch of glimpse of the new Cowboys Stadium and nearby Rangers Ballpark in Arlington.

Noon - Lunch at Reata Restaurant in downtown Fort Worth's Sundance Square (www.sundancesquare.com). This is a true Cowtown experience, featuring tenderloin tamales, chicken-fried steak and pan-seared, pepper-crusted tenderloin.

2 p.m. - If you visit in late January or early February, hit the Fort Worth Stock Show & Rodeo (www.fwssr.com) and catch a rodeo matinee in the Will Rogers Memorial Center. Check out the exhibit halls to pick up a cowboy hat, a pair of boots or a western belt buckle.

If you can't make the stock show, head to the Fort Worth Stockyards for a taste of the Old West. Catch a rodeo at the Cowtown Coliseum or learn about Fort Worth's storied history at the Stockyards Museum. Try on a pair of handmade boots at M.L. Leddy's or head to Billy Bob's, the world's largest honky-tonk, for a longneck, a little two-stepping and some live professional bull-riding action.

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Fears of mutant virus escape halt bird flu study

Bird Flu

(Reuters) - Researchers studying a potentially more lethal, airborne version of the bird flu virus have suspended their studies because of concerns the mutant virus they have created could be used as a devastating form of bioterrorism or accidentally escape the lab.

In a letter published in the journals Nature and Science on Friday, 39 scientists defended the research as crucial to public health efforts, including surveillance programs to detect when the H5N1 influenza virus might mutate and spark a pandemic.

But they are bowing to fear that has become widespread since media reports discussed the studies in December that the engineered viruses "may escape from the laboratories" -- not unlike the frightful scenario in the 1971 science fiction movie "The Andromeda Strain" -- or possibly be used to create a bioterror weapon.

Among the scientists who signed the letter were leaders of the two teams that have spearheaded the research, at Erasmus Medical College in the Netherlands and the University of Wisconsin, Madison, as well as influenza experts at institutions ranging from the U.S. Centers for Disease Control and Prevention to the University of Hong Kong.

The decision to suspend the research for 60 days "was totally voluntarily," virologist Ron Fouchier of Erasmus told Reuters. The pause is meant to allow global health agencies and governments to weigh the benefits of the research and agree on ways to minimize its risk.

"It is the right thing to do, given the controversies in the U.S.," Fouchier said.

The U.S. National Science Advisory Board for Biosecurity in December had asked Science and Nature to censor details of the research from the Erasmus and Wisconsin teams that was submitted for publication.

Biosecurity experts fear that a form of the virus that is transmissible through airborne droplets--which the Erasmus and Wisconsin teams independently created--could spark a pandemic worse than the 1918-19 outbreak of Spanish flu that killed up to 40 million people.

"There is obviously a controversy here over the right balance between risk and benefit," says virologist Daniel Perez of the University of Maryland, who signed the letter supporting the moratorium. "I strongly believe that this research needs to continue, but that doesn't mean you can't call a time out."

The researchers' decision shifts the focus of debate from whether the studies should be made public to whether they should have been done at all, given the theoretical possibility that a highly infectious virus could be stolen or escape from a lab. Some of the studies were funded by the U.S. National Institutes of Health.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases at NIH, told Reuters that the decision to fund the research was justified.

"The proposal the investigators put forth to do this research was appropriate," said Fauci, who was "actively involved" in the decision to call a moratorium on the research. "The value of the research is clear, as even the biosecurity board unanimously agreed."

CONTAGIOUS AMONG HUMANS

In its current form, people can contract H5N1 only through close contact with ducks, chickens, or other birds that carry it, and not from infected individuals.

But when H5N1 acquires mutations that allow it to live in the upper respiratory tract rather than the lower, it can travel via airborne droplets between infected ferrets, which are considered good models of how flu viruses behave in people.

The teams at Wisconsin, led by Yoshihiro Kawaoka, and Erasmus induced as few as three mutations that allow the virus to be transmitted through the air between ferrets. It is not known whether the mutant H5N1 can be spread between people in a similar way, by coughing or sneezing, since such experiments would be unethical.

But the fear is that the mutations that allow H5N1 to spread via the air between ferrets would allow it to do in people, making it exponentially more contagious.

To give the scientific community and governments time to determine whether the research can be conducted safely, the scientists write, "We have agreed on a voluntary pause of 60 days on any research involving highly pathogenic avian influenza H5N1 viruses" that produce easily contagious forms of the virus.

In particular, they wrote, no experiments with live, mutant viruses "already shown to be transmissible in ferrets will be conducted during this time."

Fouchier noted in an essay published Thursday in Nature that other laboratories around the world may also be close to an airborne bird flu virus, and may not even be aware of it.

HOW SAFE ARE THOSE LABS?

Critics have more recently raised concerns over the safety of the physical environment in which the experiments were being conducted, in addition to the question over whether details of the research should be made public. For now, Science and Nature are withholding publication of the studies.

Nature reported last month that both experiments on mutant viruses were carried out in labs rated "biosafety level 3 (BSL-3) enhanced," which "require scientists to shower and change clothes when leaving the lab, and include other safety features such as negative air pressure and passing exhaust air through high-efficiency particulate air filters."

That is widely believed to protect against an accidental release of the virus. But some virologists argue that the more stringent BSL-4 precautions are needed. BSL-4, which is required for research on, among other microbes, the Ebola virus, includes full-body positive air-pressure suits like astronauts use. In the past, the SARS (severe acute respiratory syndrome) virus has escaped from BSL-3, and possibly BSL-4, labs.

"It's a responsible decision to suspend work on these viruses while agreement is being reached," said Peter Openshaw, Director of the Centre for Respiratory Infection at Imperial College London. "I hope that these issues can be resolved and that this vital work will continue under appropriate conditions and not be driven underground."

Scientists and government officials are expected to meet in Geneva in February at the World Health Organization, to decide how research on mutant H5N1 should proceed.

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Gingrich angrily rejects marital question at debate

Newt Gingrich

(Reuters) - Republican presidential candidate Newt Gingrich angrily defended himself on Thursday against allegations that he had asked his ex-wife for an open marriage, lashing out in perhaps the most crucial debate yet in the 2012 campaign.

The CNN-sponsored debate got off to a raucous start when moderator John King asked Gingrich to respond to charges put forth by his ex-wife Marianne that he had sought an "open marriage" while having an affair.

The impropriety charges have dogged Gingrich for years and threaten to slow his momentum in South Carolina as he seeks to upset front-runner Mitt Romney in the first primary vote in the South on Saturday.

"I think the disruptive, vicious, negative nature of the news media makes it harder to govern this country," Gingrich fumed. "I am appalled that you would begin a presidential debate on a topic like that."

The Republican crowd roared its approval of Gingrich.

The was the final chance for rivals to chip away at Romney's lead in South Carolina and Gingrich, the former speaker of the U.S. House of Representatives, had perhaps the best shot.

Romney came into the debate under strong pressure to turn back Gingrich, who received the endorsement of Texas Governor Rick Perry who dropped out of the race early Thursday.

Romney, a former private equity executive, insisted the company for whom he worked did in fact help create more than 100,000 jobs despite doubts about that expressed by experts.

Romney's experience at Bain Capital, which bought companies and restructured them sometimes resulting in job losses, has hurt him in South Carolina where unemployment remains around 10 percent. Gingrich lobs frequent attacks at him on this.

Romney said Bain helped nurture companies that created 120,000 jobs while business failures cost about 10,000 jobs for a net increase of 100,000.

"People have evaluated that since I ran four years ago," said Romney, who lost the Republican presidential race in 2008 to Senator John McCain.

Romney will take a huge step toward claiming the Republican nomination if he wins on Saturday.

Fighting for their political lives at the debate were former Pennsylvania Senator Rick Santorum and libertarian Congressman Ron Paul of Texas.

GINGRICH GETS CLOSER

A strong performance in a debate in South Carolina on Monday helped him get within touching distance in the polls of Romney, who has struggled to explain why he has not released his tax forms.

But Gingrich has faced troubling questions that could halt his momentum. His second wife, Marianne, told ABC News that Gingrich had sought an open marriage while having an affair with current wife Callista. She said he should not be considered electable in the race to find a Republican challenger to Democratic President Barack Obama in next November's election.

A new Reuters/Ipsos poll conducted of 656 likely South Carolina voters showed Romney with 35 percent support, Gingrich with 23 percent support, and former Senator Rick Santorum with 15 percent support.

Romney was looking for a rebound to boost his momentum after the surprise news from Iowa on Thursday that he did not receive the eight-vote victory that he had believed on January 3.

A formal count by Iowa election officials gave the nod to Santorum by a mere 34 votes, puncturing the aura of inevitability that Romney's campaign has sought to portray.

Santorum went on the attack on Thursday night against Romney and Gingrich over healthcare. He attacked Romney's healthcare plan in Massachusetts that Democrats say was a model for Obama's unpopular overhaul, and Gingrich for prior support for a provision that individuals be required to buy health insurance.

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Wikipedia to shut for 24 hours to stop anti-piracy act

Jimmy Wales, Wikipedia

(Reuters) - Wikipedia, the popular community-edited online encyclopedia, will black out its English-language site for 24 hours to seek support against proposed U.S. anti-piracy legislation that Wikipedia founder Jimmy Wales said threatens the future of the Internet.

The service will be the highest profile name to join a growing campaign starting at midnight Eastern Time on Wednesday that will see it black out its page so that visitors will only see information about the controversial Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA).

The information will urge Wikipedia readers to contact their local congressman to vote against the bills. Other smaller sites leading the campaign include Reddit.com and Cheezeburger.

"This is a quite clumsily drafted legislation which is dangerous for an open Internet," said Wales in an interview.

The decision to black out the site was decided by voting within the Wikipedia community of writers and editors who manage the free service, Wales said. The English language Wikipedia receives more than 25 million average daily visitors from around the world, according to comScore data.

The bills pit technology companies like Google Inc and Facebook against the bill's supporters, including Hollywood studios and music labels, which say the legislation is needed to protect intellectual property and jobs.

The SOPA legislation under consideration in the House of Representatives aims to crack down on online sales of pirated American movies, music or other goods by forcing Internet companies to block access to foreign sites offering material that violates U.S. copyright laws. Supporters argue the bill is unlikely to have an impact on U.S.-based websites.

U.S. advertising networks could also be required to stop online ads, and search engines would be barred from directly linking to websites found to be distributing pirated goods.

Google has repeatedly said the bill goes too far and could hurt investment. Along with other Internet companies such as Yahoo, Facebook, Twitter and eBay, it has run advertisements in major newspapers urging Washington lawmakers to rethink their approach.

White House officials raised concerns on Saturday about SOPA saying they believe it could make businesses on the Internet vulnerable to litigation and harm legal activity and free speech.

"We're happy to see opposition is building and that the White House has started to pay attention," said Wales.

News of the White House's comments prompted a prominent supporter of the bill News Corp Chief Executive Rupert Murdoch to slam the Obama administration.

"So Obama has thrown in his lot with Silicon Valley paymasters who threaten all software creators with piracy, plain thievery," he posted on his personal Twitter account Saturday. News Corp owns a vast array of media properties from Fox TV, the Wall Street Journal to Twentieth Century Fox studios.

Wales said the bill in its current form was too broad and could make it difficult for a site like Wikipedia, which he said relies on open exchange of information. He said the bill also places the burden of proof on the distributor of content in the case of any dispute over copyright ownership.

"I do think copyright holders have legitimate issues, but there are ways of approaching the issue that don't involve censorship," Wales said.

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24 million customer accounts hacked at Zappos

Zappos

(Reuters) - Online shoe retailer Zappos told customers this weekend that it has been the victim of a cyber attack affecting more than 24 million customer accounts in its database.

The popular retailer, which is owned by Amazon.com, said customers' names, email addresses, billing and shipping addresses, phone numbers and the last four digits of credit cards numbers and scrambled passwords were stolen.

But it said the hackers had not been able to access servers that held customers critical credit card and other payment data.

"We were recently the victim of a cyber attack by a criminal who gained access to parts of our internal network and systems through one of our servers in Kentucky," Zappos chief executive Tony Hsieh said in an email to staff which was posted on the company's blog on Sunday.

"We are cooperating with law enforcement to undergo an exhaustive investigation," he added.

Zappos said it was recommending that customers change their passwords including on any other website where they use the same or similar password.

The company, which is well known for its customer service, said due to the high volume of customer calls it is expecting it will temporarily switch off its phones and direct customers to contact via email.

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Yahoo co-founder Yang resigns

Yahoo Co-Founder Yang

(Reuters) - Yahoo Inc co-founder Jerry Yang has quit the company he started in 1995, appeasing shareholders who had blasted the Internet pioneer for pursuing an ineffective personal vision and impeding investment deals that could have transformed the struggling company.

Yang's abrupt departure comes two weeks after Yahoo appointed Scott Thompson its new CEO, with a mandate to return the once-leading Internet portal to the heights it enjoyed in the 1990s.

Wall Street views the exit of "Chief Yahoo" Yang as smoothing the way for a major infusion of cash from private equity, or a deal to sell off much of its 40 percent slice of China's Alibaba, unlocking value for shareholders.

Shares of Yahoo gained 3 percent in after-hours trade.

"Everyone is going to assume this means a deal is more likely with the Asia counterparts," Macquarie analyst Ben Schacter said. "The perception among shareholders was Jerry was more focused on trying to rebuild Yahoo than necessarily on maximizing near-term shareholder value.

"It certainly seems things are coming to a head as far as realizing the value of these assets."

Yang, who is severing all formal ties with the company by resigning all positions including his seat on the board of directors, has come under fire for his handling of company affairs dating back to an aborted sale to Microsoft in 2008.

Yang's exit comes roughly a month before dissident shareholders can nominate rival directors to Yahoo's board.

The remaining nine members of Yahoo's board, which includes Hewlett-Packard executive Vyomesh Joshi and private investor Gary Wilson, are all up for reelection this year.

Yang's departure could be part of a broader board shakeup, said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which owns Yahoo shares.

"If they don't move quickly on these things, they run the risk of a proxy battle and they are doing everything they can to avoid that."

The company did not say where Yang was headed or why he had suddenly resigned. CEO Thompson offered few clues in a memo to employees obtained by Reuters following the announcement.

"I am grateful for the support and warm welcome Jerry provided me in my early days here. His insights and perspective were invaluable, helping me to dig deeper, more quickly than I could have on my own, into some of the key elements of the company and how it operates.

Yang and co-founder David Filo, both of whom carried the official title "Chief Yahoo," own sizable stakes in the company. Yang owns 3.69 percent of Yahoo's outstanding shares, while Filo owns 6 percent as of April and May 2011.

CHIEF YAHOO NO LONGER

In a letter to Yahoo's chairman of the board, Yang said he was leaving to pursue "other interests outside of Yahoo" and was "enthusiastic" about Thompson as the choice to helm the company.

Yang, 43, is also resigning from the boards of Yahoo Japan and Alibaba Group Holdings.

Respected in the industry as one of the founding figures of the Web, Yang has come under fire over the years from investors and to some extent within the company's internal ranks.

"Lots of people think he holds up innovation there with old ideas and (is) slow to decide and that he's not an innovator himself for being at such a high level," said one former Yahoo employee.

"People have very high expectations for founders. Everyone wants a Steve Jobs," the employee said, referring to Apple's co-founder who brought the company back from near death and transformed it into the world's most valuable tech company.

Some analysts say the Yahoo board's indecision stems in part from Yang's sway in the company. Disillusioned by the company's flip-flopping, they warn that the rest of the board remained much the same as the one that rejected Microsoft's unsolicited takeover bid when Yang was CEO.

"Jerry Yang was certainly an impediment toward anything happening," said Morningstar analyst Rick Summer. "This is a company that's been mired by a bunch of competing interests going in different directions. It was never clear what this board's direction has been."

Microsoft's bid was worth about $44 billion. Its share price was subsequently pummeled by the global financial crisis and its current market value stands at about $20 billion.

More recently, Yang and Yahoo chairman Roy Bostock have incurred the wrath of some major Yahoo shareholders for their handling of the "strategic review" the company was pursuing, in which discussions have included the possibility of being sold, taken private or broken up.

Yang's efforts to seek a minority investment in Yahoo from private equity firms enraged several large shareholders, including hedge fund Third Point, which accused Yang of pursuing a deal that was in "his best personal interests" but not aligned with shareholders' interests.

Yahoo has also been exploring a deal to unload most of its prized Asian assets in a complex deal involving Alibaba, valued at roughly $17 billion, sources told Reuters last month.

Alibaba Group's founder, Jack Ma, whose personal relationship with Yang led to Yahoo buying a 40 percent stake in Alibaba in 2005, said he looked forward to continuing a "constructive relationship" with Yahoo.

Susquehanna analyst Herman Leung said: "I had thought that Jerry Yang was a lifer at Yahoo.

"Without him on the board, this could smooth a potential transaction. What that transaction is, is any of our guesses right now."

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Hacker says to release full Norton Antivirus code on Tuesday

Symantec Security Operations Centre

(Reuters) - A hacker who goes by the name of 'Yama Tough' threatened Saturday to release next week the full source code for Symantec Corp's flagship Norton Antivirus software.

"This coming Tuesday behold the full Norton Antivirus 1,7Gb src, the rest will follow," Yama Tough posted via Twitter.

In the past week Yama Tough has released fragments of source code from Symantec products along with a cache of emails. The hacker says all the data was taken from Indian government servers.

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Romney eyes New Hampshire win despite late attacks

Romney in talking

(Reuters) - Mitt Romney was poised to take a big step toward the Republican U.S. presidential nomination on Tuesday by capturing New Hampshire, hoping to ride out last-minute attacks labeling him a corporate raider who enjoyed firing workers.

The former governor of neighboring Massachusetts carried a sizeable lead in polls into voting day, a sufficient cushion that should force rivals Ron Paul, Jon Huntsman, Newt Gingrich and Rick Santorum into a battle for second place.

Romney, 63, would be the first Republican who is not an incumbent president to win the first two early voting states, after his slim eight-vote victory over former Pennsylvania Senator Santorum a week ago in the Iowa caucuses.

A more resounding win would provide momentum going into South Carolina on January 21 and Florida on January 31. He leads in polls of both states and victories there could all but sew up his nomination to face Democratic President Barack Obama in the November 6 general election.

A Suffolk University/7 News tracking poll on Tuesday showed Romney with 37 percent support among New Hampshire voters, versus 18 percent for Paul, 16 percent for Huntsman, 11 percent for Santorum, 9 percent for Gingrich and 1 percent for Texas Governor Rick Perry.

Seven percent of voters were undecided in the telephone survey on Sunday and Monday, which had an error margin of 4.4 percentage points.

The same poll on Monday had Romney at 33 percent, Paul at 20 percent, Huntsman with 13 percent, Gingrich at 11, Santorum 10 and undecided at 12 percent.

"You're going to make a big statement tomorrow, let's take it to the next step, give me the boost I need, I hope," said Romney in Bedford on Monday night at his final rally of the day.

It was unclear how much damage had been done by a mess of his own making in which Romney declared "I like being able to fire people who provide services to me," in discussing the need for greater competition between health insurance companies.

Romney's opponents seized on the comment as evidence that the former venture capitalist is an out-of-touch politician and coupled it with attacks over his record at Bain Capital, a firm that bought companies and restructured them.

"Governor Romney enjoys firing people. I enjoy creating jobs," Huntsman said.

In a sharp departure for a party known as friendly to business, Republicans seeking to slow Romney sounded more like populists as they bashed his work as a venture capitalist.

Former House Speaker Gingrich, brooding over negative attacks from Romney and his backers that knocked him out of the front-runner position, has launched the toughest onslaught.

"Mitt Romney was not a capitalist during his reign at Bain. He was a predatory corporate raider," a video produced by a pro-Gingrich group said.

New Hampshire voting stations close at 7 p.m. EST (midnight GMT). About 250,000 people are expected to vote in the Republican primary while 75,000 are likely to vote to endorse Obama's re-election.

In Dixville Notch, the tiny village that traditionally votes at midnight to kick off New Hampshire first-in-the-nation primary, the nine voters were split at two votes each for Romney and Huntsman.

WHO CAN DEFEAT OBAMA?

Some voters expressed strong support for Romney.

"I saw him work as a businessman, he sees what needs to be done and gets it done," said nurse Dennis Hamson, 58, who was voting in Londonderry early on Tuesday.

But not everyone was happy about voting for him.

Eli Haykinson of Bedford said he did not want to vote for Romney but might have to because he could have the best chance to defeat Obama. "I personally don't like his huge campaign style. You don't really get to feel him at all," Haykinson said.

Romney's rivals were mostly waging a fierce battle to sway undecided voters their way and win second place. "He's a homeboy. He's been here for a whole lot of years... you serve in the neighboring state as governor, you've got a lot of advantages in terms of name recognition," Huntsman said on MSNBC.

Both libertarian U.S. Representative Paul and Huntsman, a former Utah governor who was the U.S. ambassador to China, have been on the rise in recent days.

Santorum, who nearly won Iowa by appealing to social conservatives, has not seen that message resonate in New Hampshire.

Voter Luke Breen, 52, a financial analyst voting in Londonderry, where many residents commute to Boston, said he would not support a candidate who seemed intolerant and had backed Huntsman.

"He seemed to be more worldly," he said. "I know gay people and everyone has to have gay rights under our constitution."

Santorum and Perry, along with Gingrich, are looking ahead to South Carolina to challenge Romney.

Romney leads there for now but Gingrich backers have launched $3.4 million worth of ads in South Carolina to try to slow him down in the more conservative southern state.

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Iran to launch nuclear work in bunker in "near future"

Nuclear plant in Tehran, Iran

(Reuters) - Iran will in the "near future" start enriching uranium deep inside a mountain, a senior official said, a move likely to further antagonize Western powers which suspect Tehran is seeking nuclear weapons capability.

A decision by the Islamic Republic to conduct sensitive atomic activities at an underground site - offering better protection against any enemy attacks - could complicate diplomatic efforts to resolve the long-running row peacefully.

Iran has said for months that it is preparing to move its highest-grade uranium refinement work to Fordow, a facility near the Shi'ite Muslim holy city of Qom in central Iran, from its main enrichment plant at Natanz.

The United States and its allies say Iran is trying to build bombs, but Tehran insists its nuclear program is aimed at generating power and for medical purposes.

"The Fordow nuclear enrichment plant will be operational in the near future," the head of Iran's Atomic Energy Organization, Fereydoun Abbasi-Davani, said.

Uranium refined to purity levels of both 3.5 percent and 20 percent can be produced at the site, he added in comments carried by Iran's Kayhan newspaper on Sunday.

One Western official said with the start-up of Fordow, Iran would send a political signal to show it will not bow to international demands to suspend uranium enrichment, activity which can have both civilian and military uses.

The West has imposed increasingly tight economic sanctions on Tehran over its nuclear program, culminating with a new law signed on New Year's Eve by President Barack Obama aimed at preventing buyers from paying for Iranian oil.

"I would see it as another escalatory step on the Iranian side," the official, who declined to be named, said.

As the sanctions pressure mounts on the major oil producer, Iran has called for fresh talks on its nuclear program with the permanent members of the Security Council and Germany (P5+1), which have been stalled for a year.

CLOSER TO WEAPONS MATERIAL

Western powers have repeatedly made clear they are also ready for renewed diplomacy, but stress that Iran must show it is willing to engage in meaningful discussions and start addressing growing international concerns about its work.

"They have to demonstrate they are going to be serious," the Western official said, speaking prior to Iran's latest announcement on Fordow's planned inauguration.

Diplomats in Vienna, home to the International Atomic Energy Agency (IAEA), the U.N. nuclear watchdog, told Reuters on Friday that Iran was believed to have begun feeding uranium gas into centrifuges in Fordow in late December as part of final preparations to use the machines for enrichment.

The centrifuges and other equipment needed to start enrichment were installed at Fordow last year.

Iran is already refining uranium to a fissile purity of 20 percent - far more than the 3.5 percent level usually required to power nuclear energy plants - above ground at Natanz.

The country said last year it would move this higher-grade enrichment to Fordow, which like other Iranian nuclear sites is regularly inspected by the IAEA, and also sharply boost output capacity.

The United States and Israel, Iran's arch foes, have not ruled out strikes against the Islamic state if diplomacy fails to resolve the dispute.

Iran disclosed the existence of Fordow to the IAEA only in September 2009 after learning that Western intelligence agencies had detected it.

Tehran says it will use 20 percent-enriched uranium to convert into fuel for a research reactor making isotopes to treat cancer patients, but Western officials say they doubt that the country has the technical capability to do that.

In addition, they say, Fordow's capacity - a maximum of 3,000 centrifuges - is too small to produce the fuel needed for nuclear power plants, but ideal for yielding smaller amounts of high-enriched product typical of a nuclear weapons program.

Centrifuges spin at supersonic speeds, which enriches uranium by increasing the concentration of fissile isotopes.

Nuclear bombs require uranium enriched to 90 percent, but Western experts say much of the effort required to get there is already achieved once it reaches 20 percent purity, shortening the time needed for any nuclear weapons "break-out."

They give different estimates of how quickly Iran could assemble a nuclear weapon if it decides to do so - ranging from as little as six months to a year or more.

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World's biggest tech show searching for "wow"

Biggest tech show

(Reuters) - The world's biggest technology trade show will feature razor-thin laptops, powerful new smartphones and fancy flat-screen TVs, but talk in the cavernous halls of the Consumer Electronics Show, which kicks off on Monday night, may focus on whether the show itself has a long-term future.

Apple Inc, which has set the agenda in consumer electronics for the past decade, does not even attend the show. Microsoft Corp, desperately trying to catch up, is making this show its last. It has been a few years since Las Vegas-based CES had the "wow" factor.

"There's a lot of hype. The promise exceeds the deliverable a lot," said Todd Lowenstein, portfolio manager at HighMark Capital Management, which owns several technology stocks. "I take an interest in it only to the extent that there's market-moving information that comes out of there, which I find is rare."

Steve Jobs' stylish and dramatic product launches came to dominate the popular tech world, and rivals are looking to copy that outside of the hubbub and razzmatazz of CES in Las Vegas.

"A lot of companies are trying to imitate Apple's success in a lot of areas, and one area where Apple has been extremely successful is in controlling its message by controlling the event and the timetable of its announcements," said Avi Greengart, research director for consumer devices at Current Analysis, a business intelligence firm.

Microsoft, which is trying to win back its technology crown from Apple and newcomer Google Inc, has long said that CES in early January does not fit its product release timetable, meaning it has little new to share in the opening keynote, which has for years been given by Chief Executive Steve Ballmer, and before him by co-founder Bill Gates.

"Microsoft can do this on their own, they don't need CES," said Hanson Hosein, a specialist in technology and media at the University of Washington in Seattle. "It's a lot of money. These shows are generally declining in popularity anyway."

WHAT'S NEW?

This year, the buzzwords look similar to last year, including "connected," "always on" and "voice recognition," whether in new, more powerful phones and tablets or in cars or even watches.

"This year there's going to be a focus on connectivity and mobility that continues the momentum we've seen for the past few years, even though we may not see quite so many big announcements by (mobile) carriers as we did last year," said Ross Rubin, executive director, Connected Intelligence, at retail research firm NPD Group.

The latest crop of light and thin laptops, which Intel Corp has dubbed "Ultrabooks," is set to dominate the hardware displays, from the likes of Toshiba Corp, Asustek Computer Inc and Lenovo Group Ltd.

On the other side of the floor, the latest high-definition, Internet-enabled TVs from Sony Corp, Panasonic Corp, Sharp Corp and LG Corp will also draw crowds.

Wireless carriers AT&T Inc and Verizon Wireless are expected to unveil devices to take advantage of their new high-speed networks, and phone-maker Nokia is preparing to reintroduce itself to a U.S. audience with new handsets running Microsoft's latest Windows software.

Tablets may take a backseat after dominating the show last year, as hardware makers lick their wounds after failure to match Apple's all-conquering iPad.

Some suspect tablet makers are not fully committing to Google's Android as a tablet platform, knowing that Microsoft's tablet-friendly Windows 8 system is likely set to hit the market in the next 12 months. Microsoft showed off a flashy Samsung Electronics tablet running a prototype of Windows 8 in September, and more up-to-date demo versions are expected to be circulating at CES.

Somewhere in between the phone and tablet is the "phablet," the tag applied to Samsung's new 5.3 inch- (13.5 cm-) screen Galaxy Note.

So far available only in Europe and Asia, there is talk that AT&T will announce plans to launch the Android-based device in the United States at CES.

Sensor-laden, low-power devices with a constant connection to the Internet -- whether a phone, or smaller device hidden in your car or on your wrist -- will be the theme of the show, tech-watchers seem to agree. That allows users to move digital content around or get real-time feedback on where they are and what they are doing.

"The CPU is in your pocket, the data is all in the cloud," said John Elliott, senior executive at consulting firm Accenture's Mobility practice.

STILL HEAVING

CES, which started in 1967 in New York, was the launchpad for the VCR, camcorder, DVD, HDTV and many other pivotal home tech developments. It grew rapidly in importance after the COMDEX tech show folded a decade ago.

It has been a while since CES showcased such game-changing inventions, but it is still popular with technology exhibitors and buyers, although it may suffer a dip in overall attendance this year.

The 2012 International CES -- to state its full title -- is set to be the second-biggest on record, with more than 2,700 exhibitors taking up over 1.8 million square feet of show floor. The largest-ever CES was in 2008, with 1.85 million square feet of paid-for exhibition space.

The organizers said they are expecting 140,000 to 150,000 attendees this year, but acknowledge it will be tough to beat last year's 149,000.

Exhibitors tend to make reservations on next year's space while at the show, or shortly afterward, so CES will soon find out if its waning influence, or hard economic times, will take a bite out of next year's show.

CES is "a good opportunity to discuss the Intel products and technologies that consumers want to hear about," said Robert Manetta, a spokesman for the world's biggest chip maker.

The show is also still popular with smaller companies looking for a big stage to show off their wares.

"CES is hands-down the best venue to debut cutting-edge hardware and software to the world," said Michel Tombroff, CEO of Softkinetic, a Belgian firm which designs motion-sensing technology for controlling TVs and computers with your hands.

Technology buyers also like it.

"We are always looking for new, new, new," said a buyer at an upscale retailer focusing on teens. "For electronics, we wouldn't even bother with anywhere else."

Ultimately, CES still sets the pace in technology for retailers, said Rubin at NPD.

"CES has become the place where the expectations for the year are set in terms of the state of the art."

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Unemployment near three-year low

Employed People in USA

WASHINGTON (Reuters) -

U.S. employment growth accelerated last month and the jobless rate dropped to a near three-year low of 8.5 percent, the strongest evidence yet the economic recovery is gaining steam.

Nonfarm payrolls increased 200,000 in December, the Labor Department said on Friday. It was the biggest rise in three months and beat economists' expectations for a 150,000 gain.

The unemployment rate fell from a revised 8.7 percent in November to its lowest level since February 2009, a heartening sign for President Barack Obama whose re-election hopes could hinge on the state of the labor market.

"The labor market is healing, but we still have a long way to go to recoup the losses we have endured. We may be close to a tipping point where gains can become more self-feeding," said Diane Swonk, chief economist at Mesirow Financial in Chicago.

A string of better-than-expected U.S. data in recent weeks has highlighted a contrast between the recovery in the world's biggest economy and Europe, where the economy is widely believed to be contracting.

The jobs data was overshadowed in financial markets by concerns over Europe's debt crisis. U.S. stocks ended mostly down, while Treasury debt prices rose on safe-haven bids.

The dollar rose to a near 16-month high against the euro.

Republican presidential hopefuls have blasted Obama's economic policies as doing more harm than good.

The latest economic signs, however, could offer him some political protection.

The economy added 1.6 million jobs last year, the most since 2006, and the jobless rate, which peaked at 10 percent in October 2009, has dropped 0.6 percentage point in the last four months.

Obama welcomed the news and urged Congress to extend a two-month payroll tax cut through 2012 to help sustain the recovery.

"We're moving in the right direction. When Congress returns they should extend the middle-class tax cut for all of this year, to make sure we keep this recovery going," he said.

LONG ROAD BACK

Employment remains about 6.1 million below its pre-recession level and at December's pace of job growth, it would take about 2-1/2 years to win those jobs back. There are roughly 4.3 unemployed people for every job opening.

Unseasonably mild weather last month helped fuel a hefty gain in construction employment. Courier jobs also rose sharply, a move the Labor Department pinned on strong online shopping for the holiday season.

Those jobs could be lost in January and the unemployment rate might rise as Americans who had abandoned the hunt for work are lured back into the labor market.

The drop in the jobless rate was mostly due to strong hiring. The labor force shrank only modestly.

A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, dropped to an almost three-year low of 15.2 percent from 15.6 percent in November.

Still, all told, 23.7 million Americans are either out of work or underemployed.

With the labor market still far from healthy, the debt crisis in Europe unresolved and tensions over Iran threatening to drive up oil prices, the U.S. economy faces stiff headwinds.

FED STILL IN PLAY

Economists predict the recovery will lose a step early this year after expanding in the fourth quarter at what is expected to be the fastest pace in 1-1/2 years.

While the prospect of a further easing of monetary policy was damped a bit by the jobs data, the shaky outlook means a third round of asset purchases by the Federal Reserve remains an option.

"The Fed will be watching for further credible evidence that this improving trend is gaining traction," said Anthony Karydakis, chief economist at Commerzbank in New York.

New York Federal Reserve Bank President William Dudley on Friday suggested the U.S. central bank was still leaning toward buying more bonds to pull borrowing costs lower, describing the recovery as "frustratingly slow" and the unemployment rate as "unacceptably high."

"I believe it is also appropriate to continue to evaluate whether we could provide additional (policy) accommodation," said Dudley.

GOVERNMENT A DRAG

All the job gains in December came from the private sector, where payrolls rose 212,000 - the most in three months.

Government employment contracted 12,000, with most of the drag coming from local government layoffs. However, the pace of government job losses is moderating as some states report revenue growth after years of being in the red.

For all of 2011, the private sector added 1.9 million jobs, while government employment fell 280,000. A measure of the share of industries that showed job gains during the month rebounded to a five-month high in December after diving in November.

Construction payrolls increased 17,000 after falling 12,000 in November as mild weather has boosted groundbreaking for new homes.

Transportation and warehousing employment jumped 50,200. The bulk of the rise came from the messenger industry, which added 42,000 jobs, reflecting an increase in deliveries of online purchases made during the holiday season.

Manufacturing jobs rose 23,000, the largest increase since July. Factory employment rose 225,000 last year, sustaining gains for the first time since 1997.

But there were soft spots in retail, where payrolls growth slowed to 27,900 after hefty gains in November as retailers geared up for a busy holiday shopping season.

Temporary hiring, seen as a harbinger of future hiring, fell for the first time June, dropping 7,500 in December after gaining 11,200.

Hourly earnings rose a modest four cents, indicating that most of the jobs being created are low paying.

This is a potentially troubling sign for consumer spending, which has been largely supported by a reduction in savings, although it also signals a lack of inflation pressure.

"Firms need to grow wages faster if consumption is to accelerate. There is not a lot of appetite to give raises," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

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Yahoo names PayPal's Thompson as CEO

Thompson, CEO, Yahoo

Jan 4 (Reuters) - Yahoo named PayPal President Scott Thompson as its chief executive on Wednesday, hoping the well-regarded Internet technology and e-commerce expert will replicate his success at eBay Inc and turn around the struggling company.

Thompson, credited with driving growth at eBay's online payments division PayPal, joins Yahoo during a period of turmoil, as the company plows ahead with a strategic review in which discussions have included the possibility of being sold, taken private or broken up.

Shares of Yahoo were down about 2 percent in mid-morning trading, as Wall Street assessed how Thompson's hiring would affect the hopes of some investors that Yahoo would be sold or spin off its Asian assets, as well as how Thompson's background fits in with Yahoo's core online media business.

"It's a positive outcome, but not as positive as a sale of the company," said Lawrence Haverty, a fund manager with GAMCO investors, which owns Yahoo shares.

"The risk element is that his background was in payments. And this is not a payment company; it's a marketing, technology company," he said.

Thompson, a former Visa payments software platform designer, joins the company four months after the firing of previous CEO Carol Bartz as the one-time Web powerhouse Yahoo struggles to compete with newer heavyweights Google Inc and Facebook.

"I'm from Boston, we're the underdogs since the beginning of time. Hopefully that spirit has held through. I like doing complicated, very difficult, very challenging things," Thompson said in an interview.

Thompson, who takes over on January 9, will also join Yahoo's board. He ran eBay's PayPal since early 2008, and was previously its chief technology officer. Under his leadership, Yahoo said PayPal increased its user base from 50 million to more than 104 million active users. PayPal processed $29 billion in payments in the third quarter of 2011.

EBay's shares fell 3.5 percent as analysts said the online retailer would miss the respected Internet executive.

EBay Chief Executive John Donahoe told staff in an internal memo that Thompson's move was a "shock."

"Scott informed me Tuesday afternoon, saying that despite his passion for PayPal, this was an opportunity he felt he had to take," Donahoe said.

At PayPal, Thompson was known as a leader who was not afraid to make bold strategic bets. He came up with the idea of taking PayPal beyond its online stronghold and into the physical world by allowing PayPal payments in retail stores -- an opportunity analysts believe could prove much bigger than its existing business.

That kind of strategic risk-talking could be particularly useful at Yahoo. The Sunnyvale, California-based company, whose services include mail, search, news and photo-sharing, was a Web pioneer that grew rapidly in the 1990s. But in recent years, Yahoo has struggled to maintain its relevance and advertising revenue in the face of competition from rivals Google and Facebook.

"They really need that push to the next level," said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which includes the Jacob Internet Fund and counts Yahoo as one of its largest positions.

"Ideally what they would do is rather than just follow where today's Internet leaders are moving, try to really be on that front edge," he said, citing Yahoo's need be better positioned in mobile, social networking and other fast-growing technology trends.

During a conference call on Wednesday, Thompson cited mobile as a key area that he expected to focus on at Yahoo, and he said he viewed the company's treasure trove data about its users as one of Yahoo's key assets. But he said it was too early to comment on his overall vision for the company.

Yahoo Chairman Roy Bostock told analysts on the joint conference call with Thompson that Yahoo has no intention of being taken private.

Bostock also said Thompson would not be distracted by decisions related to the Asian assets.

Yahoo recently has been discussing slashing its stakes in China's Alibaba Group and its Japanese affiliate as part of a share deal worth about $17 billion, according to sources familiar with the situation.

Alibaba has also hired a Washington lobbying firm in a sign that the Chinese e-commerce company would be willing to make a bid for all of Yahoo in the event that talks to unwind their Asian partnership fail.

Several Yahoo investors said they believed the plans to spin off the Asian assets would remain on track with Thompson at the helm.

"If they can successfully complete the Asian asset transactions, in a way that is beneficial to Yahoo shareholders, I think it will buy them some time and they'll have a chance to build for growth," said Jacob, of the Jacob Funds.

"The sale of the Asian assets is what happens first and what happens afterwards is just a question of how they deploy the cash they get from the sale," said Jordan Rohan, an analyst at Stifel Nicolaus.

In 2008, Yahoo rejected an unsolicited takeover bid from Microsoft worth about $44 billion. Its share price was subsequently pummeled during the global financial crisis and its current market value is about $20 billion.

Co-founder Jerry Yang stepped down in late 2008 after being severely criticized by investors for his handling of the bid. The company cut thousands of jobs and later agreed to an advertising and search partnership with Microsoft.

Thompson said in an interview that Yahoo was in a strong position with its large user base of more than 700 million people.

"The traffic itself that these sites generate is a very big number, the collection of assets that sit below this core business I think are not well understood and clearly have tremendous opportunity to be leveraged as we look forward to the future."

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U.S. to unveil "more realistic" plan for military

Barack Obama, US President

(Reuters) - The Obama administration will unveil a "more realistic" vision for the military on Thursday, with plans to cut tens of thousands of ground troops and invest more in air and sea power at a time of fiscal restraint, officials familiar with the plans said on Wednesday.

The strategic review of U.S. security interests will also emphasize an American presence in Asia, with less attention overall to Europe, Africa and Latin America alongside slower growth in the Pentagon's budget, the officials said.

Though specific budget cut and troop reduction figures are not set to be announced on Thursday, officials confirmed to Reuters they would amount to a 10-15 percent decline in Army and Marine Corps numbers over the next decade, translating to tens of thousands of troops.

The most profound shift in the strategic review is an acceptance that the United States, even with the world's largest military budget, cannot afford to maintain the ground troops to fight more than one major war at once. That is a move away from the "win-win" strategy that has dominated Pentagon funding decisions for decades.

The move to a "win-spoil" plan, allowing U.S. forces to fight one campaign and stop or block another conflict, includes a recognition that the White House would need to ramp up public support for further engagement and draw more heavily on reserve and national guard troops when required.

"As Libya showed, you don't necessarily have to have boots on the ground all the time," an official said, explaining the White House view.

"We are refining our strategy to something that is more realistic," the official added.

President Barack Obama will help launch the U.S. review at the Pentagon on Thursday, and is expected to emphasize that the size of the U.S. military budget has been growing and will continue to grow, but at a slower pace.

Obama has moved to curtail U.S. ground commitments overseas, ending the war in Iraq, drawing down troops in Afghanistan and ruling out anything but air power and intelligence support for rebels who overthrew Libyan leader Muammar Qaddafi.

The number of U.S. military personnel formally assigned to bases in Europe - including many now deployed in Afghanistan - is also set to decline sharply, administration sources said, while stressing that the final numbers have not been set.

'BASICALLY DISAPPEAR'

"When some army brigades start coming out of Afghanistan, they will basically disappear," one official said.

Many of the key U.S. military partners in the NATO alliance are also facing tough defense budget cuts as a result of fiscal strains gripping the European Union.

The president may face criticism from defense hawks in Congress, many of them opposition Republicans, who question his commitment to U.S. military strength.

Defense Secretary Leon Panetta and General Martin Dempsey, chairman of the military's Joint Chiefs of Staff, are set to hold a news conference to flesh out the contents of the review after Obama's remarks, which are also expected to stress the need to rein in spending at a time when U.S. budgets are tight.

White House spokesman Jay Carney said that the defense cuts stemming from an August debt ceiling deal - worth about $489 billion over 10 years - need to be enacted carefully.

"The president made clear to his team that we need to take a hard look at all of our defense spending to ensure that spending cuts are surgical and that our top priorities are met," Carney told reporters this week.

The military could be forced to cut another $600 billion in defense spending over 10 years unless Congress takes action to stop a second round of cuts mandated in the August accord.

Panetta spent much of Wednesday afternoon briefing key congressional leaders about the strategic review. Representative Adam Smith, the senior Democrat on the House of Representatives Armed Services Committee, said after speaking to Panetta that the review was an attempt to evaluate U.S. strategic priorities for the future rather than identify specific budget reductions.

Maintaining a significant presence in the Middle East and Asia, especially to counter Iran and North Korea, was a leading priority in the review, Smith said. So was making sure that military personnel are sufficiently cared for to guarantee the effectiveness of the all-volunteer force. Reductions in the size of U.S. forces in Europe and elsewhere are a real possibility, he said.

Pentagon spokesman Navy Captain John Kirby said with the military winding down a decade of war in Afghanistan and Iraq, it is appropriate to re-evaluate the role of U.S. forces abroad.

"From an operational perspective it's ... an opportune time to take a look at what the U.S. military is doing and what it should be doing or should be preparing itself to do over the next 10 to 15 years," he said on Wednesday.

"So, yes, the budget cuts are certainly a driver here, but so quite frankly are current events," Kirby said.

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