Danny Puff

By Tim Kelly and Mari Saito

TOKYO (Reuters) - Super Mario creator Nintendo Co Ltd forecast a return to the black after two years of losses and camera maker Canon Inc raised its profit forecast by nearly 10 percent as a weaker yen, spurred by aggressive deflation-fighting policies, bolstered the outlook of Japan's tech companies.

The two companies, however, show no sign of reciprocating the government's helping hand with fresh job-creating investment. Canon, still worried about a struggling global economy, pared its capital expenditure.

As the first blue-chip Japanese tech companies to report quarterly results, Nintendo and Canon are often seen as a barometer for the sector's earnings. The tech sector directly employs around 2 million workers in Japan.

"We welcome Abenomics," Canon Chief Financial Officer Toshizo Tanaka said at a news briefing, acknowledging the impact of Prime Minister Shinzo Abe's economic stimulus policies.

"The Japanese economy moves on this kind of mood so we value this and hope to find success," he added.

At Canon, a weakening yen is helping to compensate for a squeeze on compact camera sales as consumers switch to photo snapping on their smartphones. And the softer Japanese currency may buy Nintendo more time to plug its Wii game console successor, the Wii U, which has disappointed with dull sales as it also competes with smartphones and tablets.

For the business year to December 31, Canon, which relies on foreign markets for four-fifths of its sales, lifted its operating profit forecast to 450 billion yen ($4.53 billion).

Nintendo, which generates three-quarters of its revenue abroad, forecast an operating profit of 100 billion yen after two years of losses as its Wii boom ebbed.

Canon raised its forecast dollar rate for the year to 95 yen compared with the 85 yen forecast issued just three months earlier.

Nintendo estimated a rate of 90 yen to the dollar for the year to next March. Its president, Satoru Iwata, told a news briefing in Osaka that the figure was "conservative".

Nintendo sold 3.45 million Wii U consoles from its November launch until March 31, far below the 5.5 million it initially predicted. For this business year, it is aiming to sell 9 million.

LONG-HELD WISH

For Japanese business leaders worried about their ability to compete globally, particularly against South Korean rivals such as Samsung Electronics Co Ltd and LG Electronics Inc, the yen decline fulfils a long-held wish.

Fabricating goods worth almost $400 billion a year, Japanese makers of TVs, mobile phones, printers and personal computers account for a sizeable chunk of Japan's $5 trillion economy.

Canon's operating profit in the first quarter dipped 34 percent to $552 million, which the company blamed on a weakened global economy and the hit to its compact camera business from smartphones. Nintendo posted a full-year operating loss of 36.4 billion yen.

Corporate heads who have praised Abenomics include Sony Corp CEO Kazuo Hirai. His company and other Japanese TV makers, Panasonic Corp and Sharp Corp, have struggled to fend off competition from Samsung Electronics as a strong yen bit into profits.

Sony, with its bigger exposure to overseas markets, is the best-placed among TV makers to gain from a weaker yen, particularly versus the euro. A 1 yen drop against the European single currency adds about 6 billion yen to operating profit at the maker of Bravia sets.

At Panasonic, a 1 yen weakening against the euro boosts operating profit by 2 billion yen, while it reaps a 2.5 billion yen gain for declines against the dollar. At Sharp, which more heavily relies on its home market, a 1 yen move is worth around 500 million yen in operating profit against the euro and 700 million yen against the dollar.

More than a third of Japanese companies remain worried about domestic demand stagnating, a Reuters survey of 240 companies released on Friday shows. A quarter said they were likely to increase output in Japan because of the weaker yen.

On balance, however, Wednesday's results produced no signs that Abenomics was encouraging a boost in capital spending.

Canon, which stands to benefit more than most Japanese companies from a weak yen, on Wednesday trimmed its capital expenditure for the business year to 265 billion yen from 270 billion yen.

"Dramatic monetary easing has prompted a revision of the strong yen, but there are still uncertainties surrounding the U.S. budget problems and European debt issues," Tanaka cautioned.

Since mid-November, when an Abenomics-driven stock rally began, Canon's shares have gained 58 percent, in line with a 60 percent gain in the Nikkei 225 benchmark index. Its stock rose 1.3 percent in Tokyo to 3,840 yen on Wednesday.

Nintendo, which has gained 17 percent since November, rose 4.6 percent to 11,950 yen. Quarterly results for both companies were released after the close of trading.

($1 = 99.3600 Japanese yen)

(Editing by Daniel Magnowski and Edmund Klamann)

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By Michael Stott and Samia Nakhoul

DAMASCUS (Reuters) - It might sound absurd to talk about normal life in Syria after two years of civil war which have killed more than 70,000 people and left five million more destitute and homeless.

Yet in the neighborhood of Malki, a tree-lined enclave of central Damascus, a wealthy group of elite, pro-government Syrians still enjoy shopping for imported French cheeses, gourmet hand-made chocolates and iPad minis in the well-stocked, recently built Grand Mall and in nearby boutiques.

Such are the parallel realities of a conflict in which, for all the gains made by rebels and the current chatter about U.S. "red lines" crossed that might ultimately draw in Western might, President Bashar al-Assad is holding his ground in the capital, bulwarked by his own foreign allies and by many Syrians who fear his end could prove fatal for them too. And so life goes on.

In Malki, sprinklers water the manicured lawns outside their blocks of million-dollar apartments. Maids and drivers cater to their every whim and birds sing in the trees. Fuel for their BMWs and electricity for their air-conditioning is plentiful and the well-guarded streets are free of loiterers.

"Look at this display and you feel all is well, life is good and everything is here," said an elegantly dressed Hiyam Jabri, 50, as she placed her order at the delicatessen counter in the mall's main supermarket.

Malki residents continue to enjoy material comforts and abundant supplies of imported goods, even as millions of their compatriots subsist on food handouts.

The United Nations World Food Programme estimates it is feeding 2.5 million people inside Syria - a tenth of the population - and a further million who have fled the country, offering them subsistence rations of flour and rice.

"We are trying to keep up with the enormity of the crisis and the impact of the brutality," the WFP's deputy regional emergency coordinator Matthew Hollingworth said in the capital.

Most of those whom his staff help "haven't been displaced once but sometimes twice, three times". Food is so scarce for those uprooted by the fighting that rations intended to feed a family of five are being shared by three families.

ILLUSIONS

Even in Malki, though, the air of normality is an illusion - as unreal as the oft-repeated assertions of government officials that victory is near and Assad still controls almost all Syria.

Scratch the surface of the illusion and the normality quickly becomes anything but.

Pasted to the lamp-post outside the elegant chocolatier Ghraoui, whose interior boasts award certificates from France, is a wad of black and white fliers. They are printed by families and they mourn sons and husbands killed in the war.

It is a war, however, that seems to be going nowhere fast.

Recent days have shown again the reluctance of the United States and its allies, in the face of evidence Assad's troops may have crossed President Barack Obama's "red line" by using chemical weapons, to intervene militarily against him - not least as some rebels have espoused the cause of al Qaeda.

Among the few independent outsiders seeing at first hand the mosaic of opinion and suffering in Syria, many aid workers lament that international discourse has become a monotone debate on supplying weapons, with little push for a negotiated peace.

"We need a political solution for this conflict," said Marc Lucet, the local emergency coordinator for UNICEF, whose fellow humanitarian workers recount grim tales of hungry refugees found cowering in half-built apartment blocks or idle factories.

The surface serenity of Malki contrasts with what aid groups say is a country splintered by ever shifting frontlines and a fragmenting opposition; many fear violence will spread beyond Syria's borders and are baffled by the debate in the West over how far to arm rebels, saying this will only make matters worse.

Stressing the need for a political settlement, however, unpalatable and, so far, unattainable, UNICEF's Lucet said: "The solution is certainly not to give more weapons to either side."

Attempts to bring Assad down by diplomatic means have failed to break the impasse, even if they do make life less comfortable in Malki.

Inside the Ghraoui chocolate boutique, as everywhere else in Syria, sales are strictly cash only - sanctions have forced international credit card networks to boycott transactions here.

Prices on restaurant menus in local currency, the Syrian pound, have been hastily updated with stickers multiple times - a tell-tale sign of rapid inflation.

At the luxury mall supermarket, Eyad al-Burghol says he is selling fewer imported foodstuffs than before because many wealthy customers have left the country.

FIGHTING TALK

A distant thump of artillery fire serves as a reminder that, just a few kilometers (miles) away, fierce street-to-street battles are being fought between government and rebel forces. Some days, Russian-made MiG fighter jets streak across the sky on their way to bomb insurgent positions.

The abundant security in Malki, residents say, is provided by men who speak the Iranian tongue of Farsi, rather than Syrian Arabic. Tehran has long been Assad's sponsor against his fellow Arab leaders and the word on the street - impossible to verify - is that this heavily guarded area of town may be home to the Syrian president himself and to his immediate family.

Assad is not seen in public these days and officials refuse to comment on his movements or whereabouts.

Senior Syrian officials try hard to show visiting reporters a picture of normality in which the government is firmly in control. But even the cocoon in which they live and work is starting to be punctured by the facts of war.

Syria's central bank governor Adeeb Mayaleh gave Reuters an interview last week at a headquarters building bearing the scars of a car bomb attack earlier in the month. Blinds hung twisted and useless in front of warped window-frames without glass. A palm tree outside had been reduced to a charred skeleton.

The bank chief insisted that the government had plenty of foreign currency available to guarantee imports and enough cash to pay public employees' wages in advance each month. For how long? Iran and Russia, he said, were about to agree fresh funds.

Deputy Foreign Minister Faisal Mekdad gave an upbeat assessment of the war in an interview - but a Syrian who works nearby told us that the complex housing the ministry had been attacked four times by rebels in the past few months.

UNICEF regional coordinator Youssef Abdul-Jalil estimated that at least three million children inside Syria now needed humanitarian assistance because of the war: "There is a crisis of the children of Syria," he said. "They are paying a terrible price in their lives, in their surroundings, in their health, in their education and in their lack of protection".

REALITY INTRUDES

Cars still choke central Damascus and traffic police still issue tickets for speeding and even clamp badly parked vehicles. But armed checkpoints snarl progress to a snail's pace.

Travel agents still offer flights and holidays. But the road to the city's airport is considered too dangerous by many and flights are available only to a few, friendly, destinations.

Telephones still work and officials still show up for work in neatly ironed shirts and well-pressed suits - but many scuttle off early to be home before nightfall.

One resident spoke of a distant relative, a Christian from a prosperous family of car dealers, who was kidnapped. Accused of supporting Assad, he was beaten while hanging upside down. His captors then they injected fuel into his veins. Released for a ransom worth over $20,000, the man died a few days later.

While the Syrian elite continue to insist that the military campaign against the rebels is succeeding, aid workers in Aleppo say that the area of the country's biggest city that is now controlled by the government is very small.

The main north-south highway which connects Aleppo to Damascus via the major cities of Homs and Hama now features some 38 checkpoints, about nine of which are manned by various groups of rebels, NGO workers who have traveled along it recently say.

In the capital, the government says it guarantees a "Square of Security" in the center; some locals joke that rebel gains have shorn it to a rather smaller "Security Triangle".

Damascus's walled Old City, a UNESCO World Heritage site and home to the 7th-century Umayyad mosque, retains its beauty. But these days it is eerily empty. Tourists have long gone and the souvenir sellers have all but given up hope of selling anything.

Inside the mosque's main prayer hall, featuring a shrine said to contain the head of St. John the Baptist, mournful guides tell of how the imam was recently murdered.

At a jewelry shop in the al-Hamidiyeh bazaar, Anas Hallawi, 25, sat looking bored: "People are selling their gold not buying these days," he said. "Our business thrived on foreign tourists and Syrians buying gold for their brides.

"Now the tourists are gone. And nobody is getting married."

At the Al-Naranj restaurant in the Christian Quarter, one of Damascus's finest eateries, diners discussed the relative risks of car bombings versus random mortar attacks and kidnap. Little wonder that so many with the means have left for Lebanon, as life in the capital becomes a kind of ghoulish Russian roulette.

Across the room, a smartly dressed family group celebrated a betrothal with a lavish spread of traditional Syrian food on a table decorated with red roses.

As the strains of the old songs died away and a festive cake was eaten, a fighter jet roared across the sky. Artillery fire thudded in the distance. The family looked upwards through the restaurant's glass roof, eyes suddenly fearful. (Editing by Alastair Macdonald)

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By Malathi Nayak

SAN FRANCISCO (Reuters) - Microsoft Corp will unveil its much-anticipated next-generation Xbox on May 21 following months of speculation the company is gearing up to announce a new video game console this summer.

The company sent out media invitations on Wednesday, hinting it would be announcing the successor to its seven-year old Xbox 360. A new console from the software company will come on the heels of rival Sony's announcement in February that it will launch the PlayStation4 this holiday season.

Microsoft's May event will be held at its Xbox campus in Redmond, Washington, just a month before the Electronic Entertainment Expo (E3) in Los Angeles, the gaming industry's largest annual convention, where next-generation consoles will be spotlighted.

"On May 21, we'll mark the beginning of a new generation of games, TV and entertainment," the company said on its official blog.

The Xbox 360 is the market-leading console that has an installed user base of 76 million. Gaming blogs have been afire with speculation about what features a next-generation console might offer, but Microsoft has been tight-lipped so far.

The current version of the Xbox sports voice- and gesture-command capabilities.

Shares in Microsoft were up 3.1 percent at $31.53 in the afternoon.

(Reporting By Malathi Nayak; Editing by Kenneth Barry)

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By Elaine Porterfield

SEATTLE (Reuters) - Seattle's interim police chief has apologized for appearing in a 1986 video that showed him and other officers mocking the homeless in what the city's police department this week called an "ugly piece" of its history.

Interim Chief Jim Pugel, who is implementing sweeping reforms in the wake of a 2012 U.S. Department of Justice report that found the city's police routinely used excessive force, appeared in the video when he was a 26-year-old officer.

In the roughly five-minute clip, which officials say was part of a training video and which they released this week, Pugel and a few colleagues are seen wearing fake beards, dancing with bottles of alcohol under a freeway overpass and singing parody lyrics to the 1964 song "Under the Boardwalk" by The Drifters.

Some of the officers sport blacked-out teeth as they croon lyrics such as, "We'll be drinking Thunderbird (wine) all through the day, under the viaduct. Who could ask for anything more?"

"Even by 1980s standards, the Seattle Police Department considered the video to be insensitive and inappropriate," Pugel, who was appointed to his position earlier this month, said in a statement late on Thursday. "I regret my participation and have professionally apologized for my role in it. I do so now publicly. I am truly sorry."

He takes over a department that has at times experienced a troubled history with minority communities and is in the first year of a reform plan overseen by the U.S. Department of Justice to revise the use of force by officers.

The Seattle Times reported in a story posted on its website on Friday that the newspaper and other media outlets had received several tips about the video's existence before it was made public late on Thursday by police.

Seattle police spokesman Sean Whitcomb said Pugel, who has not said whether he will seek to lead the department on a permanent basis, disclosed the existence of the video to other city officials and homeless groups when he was appointed interim chief.

"It's not a problem but an opportunity to showcase who Chief Pugel is," Whitcomb said. "For him it was a leadership moment."

Police say all existing copies of the video have been destroyed, except for a single copy retained for their records.

Pugel said in his statement that he had the video released because he felt it was "important to show where this department has been and where it is going" and that he discussed it with Mayor Mike McGinn and several Seattle-based homeless groups.

(Writing by Alex Dobuzinskis; Editing by Paul Simao)

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LOS ANGELES (Reuters) - Oscar-winning actress Gwyneth Paltrow on Wednesday was named the world's most beautiful woman for 2013 by People magazine, knocking pop singer Beyonce out of the top spot.

The 40-year-old mother of two credits a five-day-a-week exercise regimen for keeping her in shape as she grows older.

"It makes me look younger and feel strong," Paltrow told the magazine. "When I first started, I thought, 'I'll never be good at this. This is a nightmare!' But now it's like brushing my teeth, I just do it."

It is the fourth time Paltrow, who is married to Coldplay singer Chris Martin, has been named to the magazine's annual beautiful people issue, but the first time landing the coveted cover as most beautiful woman.

She joins the likes of fellow actresses Jennifer Lopez, Julia Roberts, Halle Berry and Jennifer Aniston to top the list.

Paltrow reprises her starring role as Pepper Potts in the action film "Iron Man 3," which opens next month.

The actress has cut back her film work after giving birth to children Apple, 8, and Moses, 7, and released her second cookbook, "It's All Good," this month.

She is also the founder of lifestyle and clothing website Goop.com.

Paltrow won an Oscar for her role as William Shakespeare's muse in the 1998 film "Shakespeare in Love."

The full list of People's "World's Most Beautiful People" can be found on www.people.com/mostbeautiful

(Reporting by Eric Kelsey; Editing by Sandra Maler)

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By Gerry Shih

SAN FRANCISCO (Reuters) - Zynga Inc said on Wednesday the number of people playing its online games dropped dramatically in the first quarter, a development that overshadowed better-than-expected revenues and sent its stock tumbling in after-hours trade.

Shares fell 10 percent to $2.99 in extended trading.

The San Francisco-based publisher behind games like "FarmVille" and "Words With Friends" said its number of monthly players continued its decline to 253 million, the lowest figure since the number peaked at 331 million at the end of the third quarter of 2012.

On an adjusted basis, Zynga reported earnings of 1 cent per share, beating analyst expectations of a loss of 4 cents per share. But the company also projected that its second-quarter loss would be between 3 to 5 cents per share, exceeding the 1 cent per share loss analysts had expected.

"The second quarter guidance is light," said Sterne Agee analyst Arvind Bhatia. "We continue to think that any hope for real growth for this nebulous company really depends on what it can do in real-money gaming."

Zynga has struggled to keep users, who once flocked to its games on Facebook Inc's website. In recent months, Zynga and Facebook have revised their business partnership, as Zynga has sought to establish itself as a more independent gaming network at the risk of receiving less visitor traffic from Facebook.

Zynga has promised investors that it could tap into a potentially lucrative new revenue stream by launching real-money casino games around the world.

The company reported revenues of $263.6 million, down 18 percent from the year-ago quarter but above Wall Street's depressed expectations as the online game maker wrung more sales than expected out of its shrinking user base.

Zynga's quarterly bookings of $229.8 million also topped estimates but represented a 30 percent decline from a year ago.

(Reporting By Gerry Shih; Editing by Leslie Adler and David Gregorio)

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NEW YORK (AP) Zynga Inc.'s surprise profit in the first three months of the year got overshadowed by a revenue decline, a drop in the number of users and a lower-than-expected second-quarter forecast.

The online game maker's stock fell more than 10 percent in extended trading Wednesday after the first-quarter results came out.

Zynga, which makes "FarmVille" and other games, said Wednesday that it earned $4.1 million, which was breakeven per share. A year earlier, it lost $85.4 million, or 12 cents per share. Adjusted earnings were 1 cent per share in the latest quarter, compared with expectations for a loss of 3 cents.

Revenue fell 18 percent to $263.6 million, from $321 million.

Analysts, on average, had expected revenue of $264.5 million, according to FactSet.

As demand for its Facebook games fades, Zynga has cut jobs, closed game studios and shut down games to reduce expenses and focus only on popular titles. The quarter's expenses fell 34 percent to $268.5 million, from $406.6 million.

The number of people who play Zynga games at least once a month fell 13 percent to 253 million, from 292 million a year earlier. The number of daily players dropped 21 percent to 52 million, from 65 million.

CEO Mark Pincus said in a statement that 2013 will "continue to be a transition year." Zynga, whose games are played mainly on Facebook's website, is working on shifting to mobile games and to its own site off of Facebook.

For the current quarter, Zynga is forecasting an adjusted loss of 3 cents to 4 cents per share on revenue of $225 million to $235 million. Analysts were expecting a loss of 1 cent per share on revenue of $258.1 million.

Shares of San Francisco-based Zynga fell 34 cents, or 10.1 percent, to $3.01 in after-hours trading. The stock had closed up 17 cents, or 5.3 percent, at $3.35 before the results came out.

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TORONTO (Reuters) - BlackBerry said on Wednesday it plans to fill one of the biggest gaps in the app line-up on its new BlackBerry 10 devices with a long-awaited Skype application.

Skype, which was acquired by Microsoft Corp in 2011, allows its users to communicate via voice, video or chat over the Internet, by-passing traditional telephone networks. The service has hundreds of millions of users across the globe.

The announcement comes a day after BlackBerry said its new Q10 smartphone will be available in Canada on May 1, and in the United States before the end of May. The Q10, which comes with the physical keyboard that many of BlackBerry's core fan base cherish, is the second device to be powered by the company's new BB10 operating system.

Skype will be available on the Q10 on launch day. Users of the existing Z10 touchscreen device will have to wait a few weeks more to get Skype, after a software upgrade on the operating system, BlackBerry said.

A smaller app base than Apple's iOS and Google Inc's Android platforms has been one of the biggest criticisms of the new BlackBerry system. It has yet to offer some big-name apps like Netflix and Instagram.

(Reporting by Euan Rocha; Editing by Bernard Orr)

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SAN FRANCISCO (Reuters) - Amazon.com Inc will release a set-top TV box later this year that will stream video over the Internet, challenging Apple Inc's Apple TV device and a similar gadget sold by start-up Roku, BloombergBusinessweek reported on Wednesday.

The box will plug into TVs and give viewers access to Amazon's digital video content, which the company has been expanding, BloombergBusinessweek said, citing three unidentified people familiar with the project.

An Amazon spokeswoman declined to comment.

Amazon's video content is already available on other devices, including Roku, Microsoft Corp's Xbox and Sony Corp's PlayStation 3. However, it is not available on Apple TV.

Having its own gadget will help Amazon put its content more directly in front of consumers and give developers another reason to create apps for Amazon's digital platform, BloombergBusinessweek said.

"Amazon has a good content distribution strategy but not a great one," said Ron Josey, an analyst at JMP Securities. "Doing their own box maybe them admitting that it's a little bit harder to get embedded in all these different devices and platforms."

Amazon has been investing heavily in licensing, distributing and even creating its own digital content such as video, music, apps and games. The company has focused on getting that content on as many devices as possible, rather than building a lot of its own hardware.

However, the company has designed its own gadgets in situations where it believes it can bring a different approach to a market. When it launched its Kindle Fire tablet computer in 2011, for instance, the device's screen was 7 inches which at that time was not a popular size.

JMP's Josey, who said he was not privy to any Amazon plans in this area, speculated on Wednesday that any Amazon set-box device could include the ability to stream music, play games, access other apps and even shop through TVs, rather than just watch videos.

The set-top box is being developed by Amazon's Lab126 division, based in Cupertino, California, near Apple's headquarters. It's being run by Malachy Moynihan, a former vice president of emerging video products at Cisco Systems Inc, BloombergBusinessweek added.

BloombergBusinessweek also said that while Netflix Inc's video streaming service will likely be available on Amazon's TV box, Amazon's own video and music services will be more prominently integrated.

A Netflix spokesman declined to comment.

(Reporting by Alistair Barr; Editing by Carol Bishopric)

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LONDON (AP) The director of award-winning film "Senna" is making a documentary about the late soul singer Amy Winehouse.

Focus Features International says the movie will feature unseen archive footage to tell the story of the art and life of the musician, who died at age 27 in London in 2011 from accidental alcohol poisoning.

The Winehouse family said in a statement Thursday that it had been approached with many documentary proposals, but "Senna" director Asif Kapadia and producer James Gay-Rees presented a vision that would "look at Amy's story sensitively, honestly and without sensationalizing her."

"Senna," the acclaimed 2010 film, focused on the life of Brazilian F1 driver Ayrton Senna. The champion racer was killed in an accident in 1994.

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