BY PAUL CARSTEN AND SOHAM CHATTERJEE

(Reuters) – Chinese PC maker Lenovo Group Ltd has agreed to buy International Business Machine Corp’s low-end server business for $2.3 billion in what would be China’s biggest technology deal.

The long-expected acquisition comes nearly a decade after Lenovo bought IBM’s money-losing ThinkPad business for $1.75 billion, eventually becoming the world leader in personalcomputers in 2012.

The sale of the low-end server operation – which still needs U.S. government approval – would allow IBM to focus on its decade-long shift to more profitable software and services.

The deal would increase Lenovo’s share in the server market to 14 percent from 2 percent, said Peter Hortensius, a senior vice-president at Lenovo.

The deal needs clearance from the Committee on Foreign Investment in the United States (CFIUS), which protects U.S. national security.

Chinese companies faced the most scrutiny over their U.S. acquisitions in 2012, according to a CFIUS report issued in December.

Lenovo’s purchase of IBM’s notebook division faced scrutiny before approval, and this time will be easier, analysts said.

“It’s fair to say that this deal is more likely to get through CFIUS without major problems than the 2005 transaction,” said John Reynolds, a partner at law firm Davis Polk & Wardwell in Washington, D.C. who has handled CFIUS issues for 20 years.

Reynolds saw relatively little national security risk in the deal, noting that Lenovo was well-known in the United States.

Maybank Kim Eng analyst Warren Lau noted that the System X server, among the systems to be bought by Lenovo, is based on commoditized technology and components from the United States.

This deal is likely also to win U.S. antitrust approval, perhaps within weeks, said Jonathan Lewis, an antitrust partner with Baker & Hostetler LLP. “Given that Lenovo is likely to take advantage of its lower-cost manufacturing base in China, this deal is likely to be viewed as pro-competitive.”

IBM shares edged 0.2 percent lower to $182.27 at mid-afternoon Thursday. Trading in Lenovo shares was halted before the close in Hong Kong ahead of the announcement.

SEVEN QUARTERS OF LOSSES

The deal with Lenovo marks another step in IBM’s switch away from hardware to softwareand services. IBM said this month it would spend more than $1.2 billion to build up to 15 data centers on five continents to expand its cloud services and reach new clients andmarkets.

The company also said it would invest more than $1 billion to establish a new business unit for Watson – the supercomputer system that beat humans on the TV quiz show “Jeopardy” – to offer cloud services to businesses and consumers.

With Lenovo’s PC business under siege from powerful smartphones and super-fast tablets, the company is remodeling itself as a force in mobile devices and data storage servers.

It would not be easy for Lenovo turn around the server unit, however. IBM’s low-margin server business has posted seven quarters of losses as clients move to the cloud.

“To generate costs synergy, Lenovo will need to move most of the manufacturing from IBM’s existing facility in Virginia to Asia while keeping some R&D in the U.S.,” Lau said.

The server business being sold by IBM, which produced low-cost x86 servers, competes withHewlett-Packard Co and Dell but lags both in market share.

IBM dominates the higher-end server market with a 57 percent share, according to research firm Canalys. IBM will retain its higher-margin server systems and continue to develop software and applications for the x86 platform.

Following closure of the deal, Lenovo will offer jobs to 7,500 IBM employees and assume customer service and maintenance operations.

“We will do a variety of things – improve products, drive improved costs, and couple it with the scale we have and our PC business to improve go-to-market,” said Lenovo’s Hortensius.

Analysts said Lenovo would likely find it easier than IBM to sell the x86 servers to Chinese companies as Beijing tries to localize its IT purchases in the wake of revelations about widespread U.S. electronic snooping.

BIGGEST TECH DEAL

Lenovo said it expected demand for computing power and recovery of global enterprise spending to further drive growth in the x86 server market.

Lenovo has agreed to pay $2.07 billion in cash and the rest with stock of the Hong Kong-listed PC maker.

The deal surpasses Baidu Inc’s $1.85 billion acquisition of 91 Wireless from NetDragon Websoft Inc last year, according to Thomson Reuters data, and underscores the clout of China’s technology firms as they expand overseas.

The unit posted a loss of $26.4 million after tax for the 12 months ended December 31, compared with a profit of $187 million in the 12 months ended March 2013. The x86 unit has annual revenue of $4.6 billion.

Talks between IBM and Lenovo fell apart last year due to differences over pricing, with media reports at the time suggesting IBM wanted as much as $6 billion for the unit.

Analysts said the sale may have been accelerated by IBM’s problems in China following revelations of U.S. electronic spying and ongoing weakness in hardware sales.

The world’s biggest technology services company posted a 23 percent drop in fourth-quarter revenue from China.

Lenovo’s purchase of IBM’s PC business in 2005 became the springboard for its leap to the top of global PC maker rankings, and the market is betting Lenovo will enjoy similar success with its latest acquisition, which is partly reflected in a 9.44 percent rise in its shares this year. The Hang Seng stock index is down 2.5 percent in the same period.

IBM’s server business is the world’s second-largest, with a 22.9 percent share of the $12.3 billion market in the third quarter of 2013, according to technology research firm Gartner.

Hewlett-Packard is the biggest player, while Lenovo does not appear in the top five.

Lenovo said it was advised by Credit Suisse and Goldman Sachs Group.

Google looks set to bring its smart, personal data-fueled assistant, Google Now, to the Chrome browser.

Google’s smart but personality-free assistant Google Now (see “Google’s Answer to Siri”) is embedded in the latest preview, or “Canary”, version of the company’s Chrome browser. That means that people who use Google Now on their smartphone and, via Chrome, on a Windows or Mac computer, will be informed via a desktop notification about things such as flight delays and sports scores. Google Now chooses those “cards” based on what Google knows from a person’s Gmail account, Web search history and the location of their mobile device.

When I installed Chrome Canary on my Windows-running laptop and signed in to my Google account, I saw two cards, one showing the local weather (based on my computer’s location) and another telling me that a package had shipped (gleaned from my email inbox). I didn’t see it happen, but it seems that when new cards appear in that list–for example, to say that your flight is delayed–a Windows notification will pop up to let you know.

Presumably, Google Now is slated to be added to the main Chrome browser, which is estimated by Statcounter to have a 46 percent share of the desktop browsers in use worldwide. Its appearance is a reminder that Google is willing to explore what it can do by drawing together its disparate sources of data on its users’ lives. Some of the data used by Google Now could conceivably also help the smart home devices made by the company’s recent acquisition Nest (see “Nest’s Future Is Like Apple and Google Collaborating”).

Perhaps increasing its availability will also make Google Now seem more essential. My experience with Google Now on my Android smartphone has been one of increasing indifference; I mostly don’t check the list of cards at all anymore, even though they are generally well-chosen. The app occasionally pushes a notification at me that it thinks is important, though, such as when it told me last week that a flight I was booked onto was delayed by several hours. In that case, I was glad Google Now was looking out for me, since I was unlikely to have checked my flight status manually or seen the email from the airline for some hours.

Harvard Bioscience spin-off is stepping up its production of synthetic tracheas to supply clinical trials.

Since 2008, eight patients have been given a new chance at life when surgeons replaced their badly damaged tracheas with man-made versions. This highly experimental technology is now moving from research labs to a manufacturing facility as a Boston-area company prepares to produce the scaffolds for growing the synthetic organs on a large scale.

Harvard Apparatus Regenerative Technology, or HART, is testing its synthetic trachea system in Russia and has plans for similar tests in the European Union this year. The company is working with the U.S. Food and Drug Administration to set up a trial in the United States as well.

The synthetic windpipes are made by growing a patient’s own stem cells on a lab-made scaffold. In the future, this technique could be adapted to create other organs, such as a replacement esophagus, heart valve, or kidney.

If expanded into more body parts, the synthetic organ technology could help meet a dire medical need. Transplant waiting lists for vital organs such as hearts, lungs, livers, and kidneys are distressingly long. Every day, patients die waiting for donor organs. In the U.S. alone, 120,000 people are on waiting lists for an organ, estimates the U.S. Department of Health and Human Services. And waiting lists underestimate the true need, says Joseph Vacanti, a surgeon-scientist at Massachusetts General Hospital and a leader in tissue-engineering research. “The only way we are going to meet that real need is to manufacture living organs,” says Vacanti, who is not affiliated with HART.

Researchers around the globe are finding new ways to create tissues for transplantation. “Over 25 years, the field has gone from fiction and fantasy to science and engineering,” says Vacanti. There are many different approaches, from precise ink-jet printing of cell types into an organized structure (see “Printed Eye Cells Could Help Treat Blindness”) to letting cells spontaneously self-organize into proto-organs (see “A Rudimentary Liver Is Grown from Stem Cells” and “Growing Eyeballs”).

HART’s current approach is to grow a patient’s stem cells on synthetic scaffolds. The four most recent artificial trachea surgeries have been done with these lab-made scaffolds, says David Green, CEO of HART.

Growing a patient’s own cells on a scaffold provides a good environment for bone marrow stem cells that can then develop into various cell types both in the incubator and after they are implanted into a patient.

HART creates the scaffolds by spinning fibers about a hundredth of the width of a human hair into a tube that is made to fit each patient. The result is a customized scaffold “that makes a mesh that’s the right size for the cells,” says Green. “They feel at home there.”

Stem cells taken from a patient’s bone marrow are then “rained down over the top of the scaffold, much like a chicken in a rotisserie,” says Green. The cells grow on the scaffolds in a specialized rotating incubator for about two days before they are transplanted. About five days after the transplant, new cell types appear on the organ, he says, including important cells that line the inner surface and help move mucous from the lungs by coughing. Eventually, blood vessels grow into the synthetic organ, says Green.

By delivering gene therapies to patients before they go blind, doctors may be able to prevent the loss of many important light-detecting cells.

A new kind of gene therapy has reversed some vision loss in people born with a degenerative eye disease for which there is no existing treatment.

In a first for the field, the treatment can be given to some participants who still had 20/20 vision, albeit in a limited field of vision. By delivering gene therapy at an earlier stage, researchers hope to save more light-sensing cells in the retina.

“We need to push gene therapy forward, to apply it before vision is gone,” says Robert MacLaren, an ophthalmologist at the University of Oxford who led the study. “When retinal damage gets to a certain point, it’s beyond repair.”

MacLaren says earlier treatment could also be particularly important for conditions such as retinitis pigmentosa and age-related macular degeneration.

The surgical procedure employed put the precious remaining vision of patients in the trial at risk because it involved detaching delicate retina tissue in one of each participant’s eyes, but so far no problems have occurred since that surgery, the researchers report. Some participants report that they’re now able to detect more light, read more letters and numbers, and even see the stars at night. One patient, who before his treatment could not read any lines on an eye chart with his most affected eye, was able to read three lines with that eye following his treatment.

The condition addressed in the work is choroideremia, an eye disease that affects an estimated one in every 50,000 people. Because the gene that causes this disease is on the X chromosome, it primarily affects males. Starting in late childhood usually, the condition causes progressive narrowing or tunneling of vision and often ends in blindness. The condition gradually wipes out the light-detecting rods and cones in the retina.

The experimental treatment adds a working copy of the culpable gene to the retinal cells of patients born with a defective copy. The trial also involved an experimental way of delivering gene therapy to the eye. Each patient’s retina was first lifted, and the gene therapy was injected into the space created under the retina. MacLaren and colleagues report on the condition of six patients in a study published on Wednesday in the Lancet.

Other groups are also developing gene therapies for retinal diseases. This includes a group at Children’s Hospital of Philadelphia, which recently funded a new company to continue human trials of a treatment for Leber’s Congenital Amaurosis, another inherited form of retinal degeneration (see “New Gene Therapy Company Launches”).

Researchers Hendrik Scholl from John Hopkins University and José Sahel from the Institut de la Vision in Paris write in a commentary accompanying the research paper that since the surgery was performed only six months ago, it is too soon to determine if the therapy has achieved an important goal: to stop the loss of retina tissue.

“It’s going to take a couple of years to be sure,” says MacLaren.

Google is working on electronics-laden contact lenses to monitor glucose levels for diabetics. Welcome to the club.

Google is developing contact lenses with embedded electronics that can track the levels of glucose in a person’s tears and transmit that data wirelessly to a nearby receiver, an official blog post by Babak Parviz, a leader of the Google Glass wearable computing project revealed Thursday. The device is intended to help diabetics track their glucose levels without drawing blood.

Any detail on the activity of the secretive Google X laboratories is news, but this tidbit is not surprising to anyone that has followed Parviz’s career. We covered his work on contact lenses with electronics inside while he was a professor at the University of Washington back in 2008, where he even built one with 16 working LEDs embedded (see “How to Build a Bionic Eye”). Monitoring glucose levels was just one of several applications Parviz imagined for the technology at the time, along with providing a head-up display that could be used for augmented reality applications. That vision doesn’t seem so fanciful now that he’s working on the technology at Google, which is already slated to release its Google Glass wearable computer sometime this year. Parviz’s post about Google’s project indicates that his work on integrating LEDs into the lens also continues at Google.

Re/Code reports that Google’s glucose-sensing lens has been tested in people in a trial carried out in the Bay Area. The company’s blog post says that talks are underway with U.S. regulators:

“We’ve completed multiple clinical research studies which are helping to refine our prototype … We’re in discussions with the FDA, but there’s still a lot more work to do to turn this technology into a system that people can use.”

Another electronic contact lens design, by Swiss company Sensimed, has been tested on people. Several hospitals are trialing it to track pressure levels in a person’s eye over a 24-hour period to help manage glaucoma (see “Glaucoma Test in a Contact Lens”).

One drawback both the Sensimed and Google designs have in common is that they use conventional rigid and opaque wires and electronic components. Last year researchers in Korea, in a collaboration involving Samsung, integrated a working LED built from novel, transparent and flexible nanomaterials into an off-the-shelf contact lens (see “Contact Lens Computer”).

A former hockey player founded a company to give athletes and families a better way to identify brain injuries.

By Susan Young

Kelly Gee knows all too well the devastating effects of concussion. A former minor-league hockey player, he says that repeated concussions cut his playing career short. Then, while he was coaching for theChicago Steel junior-league team, a puck struck him between the eyes—an injury he thinks caused severe depression. “After that my whole life fell apart,” he says. He went to dozens of doctors in a variety of specialties but ultimately found few options for tracking and treating the effects of his injury.

That, he says, pushed him to found Quantum Institute, a company that now offers a mobile brain scan for concussions. Gee hopes it will help athletes and their families better identify brain injuries and track their recovery. Currently, concussions can be identified on the sidelines by physicians and athletic trainers who run through a series of questions like “What’s your name?” and watch for other signs that a player is dazed or disoriented. But these tests can miss some injuries, and not all teams have the budgets to keep medical experts at the ready.

Quantum Institute’s first product is a brain-mapping system based on electroencephalography, or EEG. This test, commonly used to monitor neurological disorders like epilepsy, detects electrical activity in the brain through sensors placed on the scalp. Gee’s company uses quantitative EEG, which includes computer-aided analysis of the wave patterns in the scan.

This technology has a mixed history and is often done incorrectly, says Marc Nuwer, a neurophysiologist with the Brain Research Institute at the University of California, Los Angeles, who is not involved with the new company.

But this kind of brain test is well suited to identifying the often subtle injury of concussion, which are caused when the brain slams against the skull. Though other methods, like CAT scans, can detect anatomical changes that may be associated with more severe brain injury, concussions don’t usually cause those kinds of changes. A test for concussion needs to be able to detect changes in brain function, and quantitative EEG, when done correctly, can provide an objective measure of brain activity. This could be particularly valuable for team doctors or trainers who are under pressure to get a player back in the game after a blow to the head, says Nuwer, who has served as a neurologist for the Los Angeles Kings hockey team. Such a test could help bolster an argument that a player should stay out.

An important key to making the technology suitable for identifying concussion is to have a baseline measurement, says Nuwer, since the brain activity signals picked up in an EEG test can vary greatly from person to person. Quantum Institute’s test does start with a baseline—a three-dimensional map of brain activity made before an athlete’s season starts. Then, if the player later gets hit, he or she could get scanned again to look for changes in brain function. This test could happen on the sidelines, in a training facility, or at a doctor’s office.

The test takes about half an hour or less, says Gee. Twenty electrodes on the scalp measure brain activity while the athlete sits in a chair. The software can then confirm whether there is a concussion and identify its location and severity, he says.

The startup has run about 300 tests on hockey players in the Chicago area since it began offering its concussion-detecting technology to teams there in October, Gee says. He says the company will offer the test nationally late this year.

Gee wants the test to be available to all athletes, even kids, and he believes that at $100 to $150 per scan, it will be readily affordable. “Our mission is to make sure that there is nobody out there that takes a second guess if they could afford to have the test,” he says.

BY PAUL CARSTEN

(Reuters) – Apple Inc is finally launching its iPhone on ChinaMobile Ltd’s vast network on Friday, opening the door to the world’s largest carrier’s 763 million subscribers and giving its China sales a short-term jolt.

Underlining how much the launch means for Apple, Chief Executive Tim Cook was on hand as the carrier’s flagship store opened in Beijing’s financial district. With China Mobile Chairman Xi Guohua alongside, Cook gifted signed iPhones to a handful of customers and posed for pictures.

The long-awaited deal could trigger a limited turnaround for Apple, whose fortunes have wavered in China in the face of stiff competition from market-leader Samsung Electronics Co Ltd and up-and-coming local rival Xiaomi Tech.

Samsung had a 21 percent share of China’s smartphone market in the third quarter of 2013, with Apple trailing in fifth place with just 6 percent, according to research firm Canalys.

But the arrival of the iPhone could be a double-edged sword for China Mobile, with some analysts predicting a costly subsidy war as rival carriers compete to lure customers.

“I don’t see a price war coming where Apple is engaged in the war, but I do think you’re going to see a subsidy war coming,” said Michael Clendenin, managing director of Shanghai-based RedTech Advisors.

“China Mobile, if they’re not making their targets on sales for these phones, they’re going to increase the subsidies… It’s like airlines: the other guys will fall like dominoes, so China Unicom will do it and China Telecom will do it.”

China Mobile’s iPhone sales are expected to reach 12 million in its 2014 fiscal year, but its subsidies will leap 57 percent to 42.4 billion yuan ($7 billion), up from 27 billion yuan in its fiscal year 2013, wrote Cynthia Meng, a Jefferies analyst, in a December note.

For the basic 16GB iPhone 5S, with no subscriber contract, China Mobile is charging 5,288 yuan ($870), the same as on Apple’s China website. The carrier is charging 4,488 yuan ($740) for a basic iPhone 5C, again the same price as on Apple’s China site.

China Unicom Hong Kong Ltd and China Telecom Corp Ltd slashed their iPhone prices by as much as 1,288 yuan ($210) following the announcement that a deal had been struck between Apple and China Mobile. The pair have also offered a range of cut-price deals on contracts.

These offerings and the launch of the iPhone on China Mobile come in the weeks running up to Chinese New Year, when people traditionally exchange gifts of money in red envelopes and retail sales jump.

SALES CANNIBALISATION

After taking years to hammer out a deal with China Mobile, Apple’s sales in China should get a short, sharp boost as subscribers make the most of the double-whammy of the iPhone’s arrival and the rollout of high-speed 4G mobile networks.

Reservations for iPhones had already hit 1.3 million on Wednesday, according to a China Mobile spokeswoman, although Reuters checks showed that there were multiple registrations using fake ID numbers.

But the rewards are expected to be short-lived for the Cupertino, California-based company, which faces a deeper problem in China of having fallen out of favor with consumers who are increasingly opting for domestic offerings.

Another issue is the thriving grey market for iPhones, where users can buy handsets typically smuggled from Hong Kong and then sign up for a China Mobile contract. China Mobile already has 45 million iPhone users in China, according to a company spokeswoman.

“You need to consider the cannibalization for sales to China Unicom, China Telecom and the grey market, so even though there’s an addition from China Mobile it will also impact sales from other channels as well,” said CK Lu, a Taiwan-based analyst with Gartner.

“If we really want to see the expansion of sales we’ll have to wait for the next version of the iPhone. If China Mobile gets first launch and their subsidies are attractive people will probably rush to the iPhone that China Mobile can provide.”

($1 = 6.0557 Chinese yuan)

(Additional reporting by Adam Rose; Editing by Alex Richardson and Kenneth Maxwell)

(Reuters) – IBM Corp said it will invest more than $1.2 billion to build up to 15 new data centers across five continents to expand its cloud services and reach new clients and markets.

The new cloud centers will be in Washington D.C., Mexico City, Dallas, China, Hong Kong, London, Japan, India and Canada, with plans to expand in the Middle East and Africa in 2015.

IBM said the investment will bring up its data center count to 40 this year and double cloud capacity for SoftLayer, which leases online storage space to companies and was acquired by IBM last year for $2 billion.

“This global expansion is aimed at accelerating into new markets based on growing client demand for high-value cloud,” the company said in a statement.

IBM said the global cloud market is estimated to grow to $200 billion by 2020.

More companies are opting for cloud computing, which lets them rent computing power, storage and other services from data centers shared with other customers, which is typically cheaper and more flexible than maintaining their own.

IBM also said it will use web hosting technology from SoftLayer for the delivery of its cloud services.

IBM said since its acquisition of Dallas-based SoftLayer, the business has added 2,400 new clients.

(Reporting by Sruthi Ramakrishnan in Bangalore and Nicola Leske in New York; Editing by Gopakumar Warrier)

BY BILL RIGBY AND CHRISTIAN PLUMB

(Reuters) – Speculation over Microsoft Corp’s succession plans refocused on internal choices on Wednesday, a day after the leading outside candidate, Ford Motor Co CEO Alan Mulally, took himself off the list of potential CEOs at the world’s largest software maker.

A source close to the company said no appointment was likely until the last week of January or in February. The source asked not be identified because they were not authorized to speak publicly about the process to select a successor to long-time CEO Steve Ballmer, who in August announced his plan to retire.

In late January, many Microsoft executives will be focused on the company’s earnings, which are scheduled to be released on January 23. Also, chairman Bill Gates, a key member of the search committee, will be at the World Economic Forum in Davos.

For months, Microsoft watchers had pegged Mulally as the odds-on bet to succeed Ballmer as chief executive at the dominant producer of software for desktops and laptops, which has faltered in making the transition to the fast-growing mobile phone and tablet markets.

But Mulally formally pulled out of the running on Tuesday, telling the Associated Press he would remain at Ford through 2014.

It was unclear whether Mulally’s withdrawal from consideration was his decision or Microsoft’s. While the company’s intentions remained a guessing game, internal candidates now seemed the obvious ones, especially in light of comments by Microsoft about the importance of tech know-how for the top job.

Mulally appeared to be the front runner in the latter part of last year and seemed to be interested in the job, but Microsoft never made him an offer, suggesting that the prevailing mood on the company’s board was that he was not right for the job, two sources familiar with the process said.

The sources have also told Reuters that Microsoft is down to a “handful” of candidates, including insiders Satya Nadella, executive vice president of the Cloud & Enterprise group and Tony Bates, executive vice president of Business Development and Evangelism.

Former Nokia CEO Stephen Elop, a Microsoft veteran before moving to Nokia, whose mobile phone business Microsoft bought last year, has also been cited as a top candidate, as have one or more outsiders from the tech industry.

As a former Microsoft executive who will soon rejoin the company when the takeover is complete, Elop was mentioned as now “front and center” of the CEO race in a research note from FBR analyst Daniel Ives, who cited his “previous Microsoft experience and demonstrable expertise in the mobile space.”

Evercore analyst Kirk Materne saw it differently, naming Nadella and Bates as the leading internal candidates who “could potentially institute organizational change at a more rapid pace given their insider status.”

Microsoft shares, which have gained 36 percent over the past year, were down 1.2 percent, while Ford shares gained about the same amount.

‘DARK HORSE’ IN THE RUNNING?

Nomura’s Rick Sherlund labeled Mulally’s withdrawal as “disappointing” in a research note, echoing the sentiment of some other investors and analysts.

Sherlund said it was unclear who the board would turn to, saying he viewed Bates and Nadella as capable, but “more likely to take direction from Microsoft’s board rather than redirect the board and take the company in a different direction as we prefer.”

If the company does opt to go with an outsider, candidates could include Facebook Inc Chief Operator Officer Sheryl Sandberg, VMware Inc CEO Pat Gelsinger and Pivotal CEO Paul Maritz, Ives said.

Sherlund agreed that Microsoft could still look at a “dark horse” outsider but noted that some tech sector candidates, including Maritz, may have already declined to take the job.

In a blog post on the company’s website in December, Microsoft lead independent director John Thompson emphasized the need for a CEO with good tech bona fides and “an ability to lead a highly technical organization and work with top technical talent.”

Thompson, who leads the four-member CEO search committee, said at the time he expected the panel to reach a decision “in the early part of 2014.”

(Reuters) – France’s data protection watchdog has fined Google 150,000 euros after the U.S. search engine ignored a three-month ultimatum to bring its practices on tracking and storing user information in line with local law.

The privacy watchdog, known as CNIL, has also ordered Google to post the decision on its google.fr homepage for 48 hours within eight days of being officially notified of the ruling.

At issue was the new approach to user data that Google began in March 2012, in which it consolidated its 60 privacy policies into one and started combining data collected on individual users across its services, including YouTube, Gmail and social network Google+.

It gave users no means to opt out.

“The company does not sufficiently inform its users of the conditions in which their personal data are processed, nor of the purposes of this processing,” CNIL said in a statement.

A Google France spokesman told Reuters the company will take note of this decision and consider further action.

“Throughout our talks with CNIL, we have explained our privacy policy and how it allows us to create simpler and more efficient services,” he said.

Spain, Britain, Germany, Italy and the Netherlands have also opened similar cases against Google because the U.S.-based web giant’s privacy policy introduced in 2012 does not conform with local rules protecting consumers on how their personal data is processed and stored.

CNIL said the fine is the highest it has issued until now and is justified by the number and the seriousness of the breaches stated in the case.

But the penalties that France and most other EU countries can impose remain small compared with the $10.7 billion net profit that Google earned in 2012.

Spain can impose fines of up to 1 million euros, while the German Data Protection Act caps penalties at 300,000 euros.

There is no legal framework to levy European-wide fines.

In June, CNIL found Google to be in breach of privacy law on six counts, notably that it posted “insufficient” information for French users about how their private browsing data was collected and used.

Google has said that its privacy policy “respects European law”.