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Volume 3, Issue 189: Friday, April 13, 2001
- "Tech Workers' Stock Options Turn Into Tax Nightmares"
Los Angeles Times (04/13/01) P. A1; Weston, Liz Pulliam; Huffstutter, P.J.; Healey, Jon
Tech workers who exercised stock options last year but did not sell them have seen the value of their shares plummet. Still, according to tax law, they have to pay taxes on the unrealized paper profits. Some tech employees are being saddled with millions of dollars in taxes that they have no way to pay. Jeffery Chou, a Cisco engineer, purchased 100,000 Cisco shares in March 2000 for 5 cents to 10 cents apiece. At that time, Cisco was trading above $60, meaning that Chou made an unrealized taxable profit of $1.8 million. Additionally, he bought the shares under an incentive option plan that encourages people to hold on to their stocks for at least one year instead of selling them immediately. The IRS allows employees who buy under incentive plans to sell their stock by Dec. 31 and pay only the actual profit, instead of the paper one. However, Chou, and many like him, missed the deadline and never considered the situation he is until now. He says his entire net worth still leaves him $700,000 short of his tax bill and protracted negotiations with the IRS will leave his family in financial limbo. For many of these workers, filing bankruptcy is not an option because recent tax debt is exempt from Chapter 7 coverage. Their only hope seems to be legislation pursued by Rep. Zoe Lofgren (D-Calif.), whose constituency includes part of Silicon Valley. His bill would alleviate at least some of the burden for those who bought stock under the incentive options plan.
- "Israel's High-Tech Market Hurting"
Miami Herald (04/12/01) P. 1C; Morris, Nomi
The economic downturn in the United States and the recent violence between Israelis and Palestinians has had a negative impact on Israel's robust high-tech sector. Tech growth could slow from 50 percent to 15 percent, says Amiram Shore of the Israel Manufacturer's Association, while investment in new tech firms could fall by as much as 35 percent. The tech sector has laid off 5,000 employees within the past six months, the Ha'aretz newspaper reports, and many companies have lost as much as 80 percent of their market value because of the Nasdaq's freefall. Analysts fear that the sector's problems could quickly spread to the economy at large, as tech firms are generally credited for lifting Israel out of recession. Before the U.S. economic downturn and the uprising of Palestinians, the Israeli economy was posting 4.5 percent growth. That growth is estimated to be 2.3 percent this year, with some forecasts pegging it as low as 1.9 percent. Analysts say the three areas of the tech sector facing the most significant troubles are those companies listed on U.S. exchanges, those that are branches of U.S. firms, and those that are still considered startups. Tech workers who have already lost their jobs are who want to change their position now face a contracting marketplace--last July, there were 700 openings for every software engineer; within six months, that rate had fallen to 120 openings per engineer.
- "Germany's Nagging IT Problem"
Wired News (04/11/01); Kettmann, Steve
Regulations intended to encourage foreign IT workers to move to Germany have not been as successful as hoped. The "green card" program of Chancellor Gerhard Schroeder has so far signed up some 5,000 IT workers, an increase over the 884 work permits given two years ago, but much less than the 20,000-permit level Schroeder targeted. Most of the work permits were issued to residents of India, followed by Russia, Belarus, the Ukraine, the Baltic states, and Romania. Observers say the reason for the shortfall can be tied directly to Germany's reputation for being unwelcoming toward immigrants. "I have talked to quite a few friends who work in this industry and they say they definitely feel a racism problem here," says Rajesh Agarwal, who has worked in Germany for 20 years. Other reasons for the shortfall, Agarwal suggests, are the barrier of the German language and the country's high tax rates. Simply put, IT workers from India and elsewhere can go to the United States and earn more money. The work-permit program limits foreign workers to five-year stays, a policy that Schroeder wants to change, believing it will encourage more workers to come. Still, popular sentiment in the country seems to oppose any further increases in immigration. Germany currently has 7 million immigrants out of 82.8 million total residents. Recent polls reveal public opinion running two-to-one against greater levels of immigration.
- "Intel Corp. Is Planning to Cut Chip Prices, According to Analyst"
Wall Street Journal (04/13/01) P. B5
Lehman Brothers analyst Dan Niles reports that Intel will reduce the price of its personal-computer chips at the end of this month. On Apr. 29, the cost of the 1.7 GHz Pentium 4 chip will decline by half, from $700 to $350. The cost of the 1.5 GHz Pentium 4 chip will fall 60 percent, from $635 to $250, and the cost of the 1.4 GHz Pentium 4 chip will drop 53 percent, from $425 to $200, Niles says. Intel refused comment on the specific amounts but said price cuts were a routine method of stimulating demand. However, several industry analysts said such drastic cuts could increase pressure on the company's already slimming profit margins. CSFB analyst Charlie Glavin says the rumored cuts would further signify that the PC market was undergoing a "secular change." The cuts, Glavin says, suggest "that these products are not being well received or absorbed by the marketplace."
- "Consumer Watchdog Will Track Standards Groups"
IDG News Service (04/12/01); Evans, James
The Center for Democracy and Technology (CDT) has named attorney John Morris to head a new project that will monitor work at such Internet technical standards groups as the World Wide Web Consortium and the Internet Engineering Task Force (IETF) and how developments at these organizations might affect the public interest. Morris, who helped defeat the 1996 Communications Decency Act, will also be charged with bringing together coalitions of academics, advocates, and technology experts to address certain issues. CDT associate director Alan Davidson says the new project is necessary because of the impact that standards groups can have on privacy and other issues of concern to the general public. He notes that the IETF recently considered Internet Protocol telephony standards that would have allowed wiretapping capabilities. Although the IETF rejected wiretapping, Davidson says new issues continue to arise. For example, the IETF also considered basing revised IP address specifications on the Ethernet cards of individual PCs, a standard that Davidson says would create "one number that follows you everywhere on the Internet." Davidson says Morris will lead mainly research efforts at the project's outset. The project will eventually generate public reports.
- "Tech Industry Aims to Render MP3 Obsolete"
Wall Street Journal (04/12/01) P. A3; Bridis, Ted
New proprietary recording formats are encroaching on the popular MP3 format that has been made ubiquitous on the Internet by illegal file-sharing. Microsoft, RealNetworks, and others have introduced their own enhanced formats that offer better sound quality for consumers and digital rights management technology for the music industry. Observers say Microsoft has a distinct advantage in cajoling new users to its format because of its lock on operating systems, such as the new Windows XP. Microsoft's new Windows XP media software limits the fidelity of downloaded MP3 files to only 56 Kbps but has "optimized" Windows XP for its own proprietary format, Windows Media Audio. RealNetworks' audio media software runs all formats, including MP3 and Windows Media Audio, but its Real Audio 8 format also puts digital locks on files prohibiting free file-sharing. The new formats, if successful, are a boon to the recording industry, which needs secure formats to be able to corner users into paying for what they listen to. However, supporters of the new formats acknowledge that the widespread use of the MP3 format will be hard to curtail. Even if Windows XP's listening software limits the quality of MP3 files, other software can be installed that will play MP3s satisfactorily. Real Networks general manager Steve Banfield compares the MP3 format to the VHS tape, saying, "DVD is great, but VHS is ubiquitous and it isn't going away anytime soon."
- "U.S. Government Will Examine How Adding Top-Level Domains Will Affect Web Searches"
IDG News Service (04/12/01); Johnston, Margret
The U.S. government is funding a study to analyze the impact of technology and policy changes on the Domain Name System, including the impact of ICANN's seven new gTLDs. The study is being conducted under the aegis of the Computer Science and Telecommunications Board of the National Research Council (NRC). To set a gTLD threshold number that can be sustained without harming or overloading the Internet's primary operating systems is one of the study's main objectives. Electronic Frontier Foundation executive director Shari Steele waxed enthusiastic about the NRC-backed study as having the potential to present independent findings. "Government influence at the National Research Council is not real heavy," said Steele. On the other side, OpenNIC founder Robin Bandy wished the study focused on issues vital to the "fringe" Internet community, such as the issue of alternative root server systems. The study, which will ultimately be sent to ICANN, Congress, and the Commerce Department, will investigate search engine technologies, the effect of new and foreseeable technology on the Web, and permanent personal and object identifiers. The study is set for completion by the third quarter 2002.
For information regarding ACM's Internet governance work related to ICANN, visit
- "Chinese Suspected of Hacking U.S. Sites"
Washington Post (04/13/01) P. A13; Cha, Ariana E.
Since an American spy plane and a Chinese jet fighter collided on April 1, there have been at least nine attacks by hackers on U.S. government and business sites. Chinese portals such as Sina.com and Sohu.com give hacking instructions and possible targets, and encourage citizens to vandalize American sites in retaliation for the death of the Chinese pilot. Users who tried to access a site for artists in Marin County, Calif., were greeted yesterday by a Chinese flag and an audio recording of their national anthem. Pa.-based Intelligent Direct's site's home page was also replaced by a flag, as well as the message "China have bomb, too," and some "profane comments about someone's mother." Many of the computer attacks were signed by the Hackers Union of China, who calls itself a "network security organization." Last year, after the president of Taiwan expressed the desire to speak with Chinese officials on a "state-to-state" level, Chinese residents launched more than 100,000 attacks on Taiwanese sites. Chinese hackers differ from most others because they are generally motivated by politics, and not the desire for monetary profit.
- "Banned Code Lives in Poetry and Song"
Wall Street Journal (04/12/01) P. B1; Hamilton, David P.
The movie industry is antsy to stem a file-sharing free-for-all of its copyrighted works on the Internet. Hackers have already written succinct code, called DeCSS, to descramble the code protecting DVDs from being copied, but a recent legal ruling makes distribution of this code illegal despite hackers' claims to First Amendment protection. However, the global hacker community is making sure that DeCSS lives on in haiku, bar code, blueprints, games, graphics, and a number of other forms, a ploy to emphasize the free speech protection software code should have. For example, two programmers translated the letters and numbers in DeCSS into musical notes that can be played in a weird song. Another determined free speech advocate wrote a 456-stanza haiku that gives the details for the code. The hackers and libertarians are fighting against a ruling last August from U.S. District Judge Lewis Kaplan that said DeCSS was an illegal decryption "device" and not subject to free speech protection. Hollywood not only fears a Napster-like attack on its industry, but wants to maintain strict control over the distribution and release of its movies. For example, a DVD sold in the U.S. has protections preventing it from being viewed in foreign countries because the movie industry keeps specific release dates for marketing purposes.
- "Laid-Off H-1B Visa Holders Face U.S. Immigration Limbo"
Reuters (04/12/01); Hepinstall, Sonya
H-1B holders are losing their jobs along with other domestic tech workers, but laid-off H-1B holders must face questions as to their legal status in the United States. Demand for overseas skilled technology workers drove Congress to approve dramatic increases in the numbers of H-1B visas approved, up to 195,000 each year until 2003. However, the recent economic downturn has placed foreign workers and the INS in a strange situation. INS' Eyleen Schmidt says her agency encountered few problems with laid-off tech workers before last year because market demand was so strong. However, now the INS is unsure how to deal with the masses of foreign workers looking for new employment. The existing standard gives H-1B visa holders 10 days to find new work, but officials at the INS seem to agree that is an unrealistic time frame. Accordingly, they are reviewing cases individually, although an official stance is expected in May. Many attorneys representing foreign workers say their clients have had success in finding new work, as demand for skilled work remains strong, and 72,000 H-1B visas have been granted between March 7 and Sept. 1, 2000, when the new fiscal year began. Currently, 66,000 visas are pending at the INS, although that does not take into account switched employment that takes advantage of a recent "portability" clause that allows H-1B holders to move their visa from job to job.
- "Internet-Content Filtering Gains Foothold in the Corporate Market"
Wall Street Journal Online (04/11/01); Favell, Andy
Internet-content filtering will present huge financial rewards for high-tech companies in the coming years. Initially demanded by parents who wanted to protect their children from undesirable Internet content, filtering technology has become a staple for corporations that want to protect themselves from any potential liability related to an employee's distribution of sexual or racist material. Moreover, companies now view filtering technology as a way to monitor employee productivity, to protect against outside attacks from beyond their firewalls when employees use email or instant messaging, and to ensure that sensitive company information is not being passed on to competitors. International Data projects that the filtering market will reach $636 million by 2004, which would represent growth of about 50 percent per year. Analysts say corporate demand for the technology will be more than two times higher than the rest of the market, and companies can expect substantial business from Europe and Asia. There are more than 30 companies that produce filtering software.
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- "Centuries-Old Scribble Sparks Computer Revolution"
Reuters (04/12/01); Meares, Richard
High-tech companies are increasingly finding more uses for Bayes' theory on probability. These days, detecting a submarine, recognizing fingerprints, DNA sequencing, credit checking, and weather forecasting all have a basis in the mathematical formula in Thomas Bayes' "Essay Toward Solving a Problem in the Doctrine of Chances." Banks are now using the theorem of the English Presbyterian reverend and part-time mathematician who died in 1761 to determine their best customers. Britain's Autonomy is recognized as being the company that brought Bayesian inference to the attention of the high-tech community. CEO Mike Lynch studied Bayesian inference at Cambridge University, and the top executive has made Bayesian techniques the foundation of Autonomy's Dynamic Reasoning Engine software. Essentially, Bayes' theory uses math for determining how likely something is, and experts say computers can use it to recognize patterns of information or learn from examples instead of following the set rules of programmers. As a result, computers can analyze past events and new information, sifting through such chaos to find meaning. Bayesian inference has its critics, however. They say it can be inaccurate and insist that ethical conclusions are always made after data is observed.
- "The Ultimate Device"
Wireless devices will fulfill many individuals' dream of the ultimate convenience gadget as soon as software and services develop to take advantage of new technologies. Already, hardware such as modems and GPS receivers are easily plugged into many PDAs, and new digital-signature software for cell phones facilitates more wireless e-commerce. The Industry Standard recently surveyed techies from around the country to get a glimpse of what the new applications taking advantage of these tools might do. One Web developer and student said a GPS receiver would enable his PDA to track his daily movements and help him retrace his steps to find lost items. Air2Web CEO Sanjoy Malik points to pervasive use of mobile e-commerce for things as mundane as buying a Coke or as convenient as transferring small funds to family members. One San Francisco-based technical design director said his PDA would help him in the bar scene by instantaneously exchanging phone numbers and personal information with a prospective date.
- "Bytes and Bits Meet Biotech"
U.S. News & World Report (04/16/01) Vol. 130, No. 15, P. 32; Sherrid, Pamela
As PCs, Web routers, and other Internet-related products experience reduced demand, tech firms have turned their attention to biotech, realizing that there is now a huge need within the life sciences for supercomputers and other tools. With supercomputers, scientists will be able to sort the rapidly increasing amount of information that they are gathering on genes and proteins. Scientists have been using new automated machines to sequence genes for the past five years. Biochips promise to make patient diagnosis even more precise. IBM, which says the life sciences could offer the tech industry a $43 billion market in three years, plans to sell supercomputers, e-commerce tools, and many other products to life sciences companies, while Hewlett-Packard spinoff Agilent is focusing more on biochips. Oracle sees proteomics, the study of proteins, as a market for its database management tools, and EMC expects to reap a bounty for its computer storage products. "This market isn't just growing, it's exploding," says Bill Blake of Compaq, which is investing in supercomputers.
- "Doing the Content Shuffle"
Network World (04/09/01) Vol. 18, No. 15, P. 1; Mears, Jennifer
Content delivery networks (CDNs) are challenging traditional Web hosting formulas as major Internet players move their data over to advanced CDN services. Whereas CDNs had been regulated to static content before, new technology such as Akamai's EdgeSuite can deliver dynamic content--stock quotes, sports stats--with CDN speed and reliability. Because the data is distributed over a number of servers [Akamai has 8,000 worldwide], it is both geographically near to the user as well as more insulated from spikes in traffic. McAfee.com CIO Doug Cavit uses Akamai's CDN service to host 60 percent of his site's traffic--800,000 hits on a normal day, but up to 1.3 million following new virus outbreaks like last month's Anna Kournikova virus. Although it would seem CDN providers such as Akamai and Adero compete directly with Web hosting firms such as Exodus and Digex, those in industry say the two actually complement one another. Akamai product manager Signe Furlong says that his company's CDN service is more a value-add for Web hosters looking to offer their customers more options. Digex, IBM Global Services, and NaviSite all resell Akamai CDN service. Digital Island chief marketing officer Tim Wilson says his company anticipated the blurring of the two services, an expectation that lead to the Digital Island merger with CDN provider Sandpiper Networks in 1999. Wilson adds that customers do not care what goes to the data center and what gets put on the networks, but want the performance and cost benefits of a mixed solution. Exodus product marketing director Scott Emo says that the CDN service it resells for Mirror Image frees up space in data centers and also draws customers for Exodus' more lucrative managed services.
- "Blind Faith"
Industry Standard (04/16/01) Vol. 4, No. 15, P. 56; Boslet, Mark; Krause, Jason
None of the tech industry's most prominent executives foresaw the current economic downturn. In fact, as late as last November, executives such as Nortel CEO John Roth and Hewlett-Packard CEO Carly Fiorina were predicting that 2001 would see strong, double-digit growth. Agilent CEO Edward Barnholdt says, "Nobody wanted to flinch. Everybody was building for 50 percent market growth. We didn't want to miss the opportunity on the upside if business was to go for another six months." Analysts say new software designed to project the rise and fall of consumer demand did not foresee that consumers would, almost as one, stop purchasing. However, hindsight allows many analysts to say the signs of a slowdown were already building last summer. Chip-testing equipment was beginning to idle as early as August, VLSI Research reports, with chip prices already falling by October. Many businesses that had been buying technology left and right in 2000 realized that they had fulfilled most of their needs. Still, firms continued to trumpet their ambitions for future growth, fearful of letting down investors. By the time reality sank in, most major tech firms were facing inventory increases. Palm, for example, misjudged demand and prepared two new product lines for launch. Now, it has $102 million in inventory, a 200 percent increase. Industry observers note that few executives are making any predictions for the year 2001. The only thing that anyone can now say with any certainty is that the tech industry is no more immune to market pressures and cycles than any other sector of the economy.
- "Critics Assail Loopholes in Rules on IT Access"
Federal Times (04/02/01) Vol. 37, No. 9, P. 4; Robb, Karen
The draft rule for making computers accessible to federal employees with disabilities has come under fire because it places government agencies in the position of having to evaluate IT products for compliance even though their purchasing agents and contracting officers have no technical expertise. John Pavlick, chairman of the Commercial Products Committee for the Federal Bar Association in Washington, D.C., says the General Services Administration (GSA), the broker of commercial products and services for federal agencies, should be required to inform agencies which IT products meet the requirements of the 1973 Rehabilitation Act. Under Section 508 of the law, government agencies must buy IT products that the disabled can use. Government agencies were given until Jun. 21 of this year to comply with the law. Pavlick is concerned that makers of IT products will not provide government agencies with all of the information needed to make the proper decisions on purchases. He says the GSA's Federal Supply Service has expertise in acquiring technology and could serve as a clearinghouse of compliance information.