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Volume 3, Issue 180:  Friday, March 23, 2001

  • "NSC Chief Urges U.S. Tech Firms to Protect Computer Networks"
    Wall Street Journal (03/23/01) P. B2; Bridis, Ted

    National Security Adviser Condoleezza Rice, speaking at a technology conference yesterday, said the private sector must shoulder much of the burden of protecting critical U.S. IT infrastructure. Rice noted that infrastructure is so interconnected that one attack could bring down a wide array of essential systems, including utilities, telephone networks, and financial systems. The prevention of such attacks "is not something the government can do alone," she said. Often, observers note, IT infrastructure is independent of government regulation, meaning that the private sector must take it upon itself to provide protection. Until recently, many private-sector firms have been loathe to do so, actively trying to stop legislation that would force them to impose higher security standards. However, pressure from investors and others are now forcing many firms to upgrade their IT security systems. Still, many in the industry are not ready to follow the recommendation of some in government, including Sen. Robert Bennett (R-Utah), who say firms should disclose their IT security status as part of their filings with government regulators

  • "Tech Firms Gather in Gadget Heaven"
    BBC News Online (03/21/01)

    CeBIT 2001, Europe's premier IT showcase, will open to the public today in Hanover, Germany. Some 700,000 people are expected to attend. On Wednesday, Hewlett-Packard CEO Carly Fiorina and German Chancellor Gerhard Schroeder officially opened the conference, which is now 15 years old. This year's trade fair will feature 8,000 exhibitors displaying the latest advances in PCs and applications, handhelds, mobile phones, and networking technology. Among the most anticipated technologies to be displayed this year are the new GPRS system, which provides always-on Internet connections for mobile phones, and the Bluetooth wireless networking standard. Several Linux vendors will be showing their latest versions of the open source operating system, and several hardware devices such as Sharp's new PDA and Ericsson's Bluetooth server to be displayed at CeBIT run on Linux. Intel will show off its new 64-bit Itanium chip, and Microsoft will be there in full force, highlighting its .Net Web-based software platform, its Windows CE PDA operating system, and its Office XP suite.

  • "Warning From Microsoft on False Digital Signatures"
    New York Times (03/23/01) P. C6; Markoff, John

    On March 22, Microsoft revealed that an unknown individual pretending to be a Microsoft executive tricked VeriSign into issuing false digital certificates that carry Microsoft's name. These fraudulent certificates might be sent through email attachments or available on Web pages in order to trick unwary users. VeriSign officials assumed responsibility for the mishap. VeriSign has distributed over 500,000 digital certificates, and this instance was the first time VeriSign has seen a fraud attempt, according to the company. "To be forthcoming, this was a failure of the human part of our verification process," says Mahi Desilva, vice president and general manager for applied trust services at VeriSign. VeriSign notified the Federal Bureau of Investigation and Microsoft as soon as it noticed the fraud during its verification process. Customers should be wary of programs from Microsoft that are verified through VeriSign, and keep an eye out for digital signatures dated Jan. 29 or Jan. 30, as no Microsoft digital signatures were issued on those days. Due to a procedure that permitted the certificates to be used in a test mode, VeriSign is unable to prove the certificates have not been used. However VeriSign believes that the certificates remain unused. On March 9, one of the certificates was revoked, while a second was revoked on March 12, according to information on VeriSign's Web site. "These trust issues are slippery because you, the consumer, don't realize when you're trusting Microsoft you're actually trusting VeriSign's certification procedures," says Securify fellow Mark Seiden. The automatic revoking procedure was turned off due to compatibility issues, according to both companies. A security patch is in the works, but it could be a week or two before it is available, according to Microsoft executives.
    (Access to this site is free; however, first-time visitors will need to register.)

  • "ICANN: New Domains Won't Lead to Cybersquatting"
    Reuters (03/22/01); Sullivan, Andy

    The companies that will oversee the seven newly approved top level domain names will take measures so that domain names registered in these domains will be given to legitimate copyright holders, ICANN vice president and general counsel Louis Touton told the intellectual property subcommittee of the House Judiciary Committee. By the end of this summer, four of the domains ought to be up and running, said Touton. There might be a small number of mishaps, but the implementation process is moving forward cautiously, and should take care of most of the problems, said Touton. Copyright holders might have to acquire domain names in each of the new domains to keep cybersquatters at bay, noted concerned subcommittee members. All .biz applicants will be examined against a trademark database to make sure no trademarks are being violated, said Jeff Neuman, director of law and policy at NeuStar. The .pro domain will only be available to qualified professionals and will limit cybersquatting opportunities, said Elana Broitman of Register.com. "You're not giving me the comfort level I would expect out of witnesses of your caliber," said Rep. John Conyers (D-Mich.).
    For information regarding ACM's Internet governance work related to ICANN, visit http://www.acm.org/serving/IG.html.

  • "Europe Flinches at USA's Tech Troubles"
    USA Today (03/22/01) P. 3B; Kessler, Michelle; Swartz, Jon

    A growing number of industry executives and analysts are saying that the European tech sector will be subject to the same economic downturn that the U.S. tech sector is currently experiencing. "I am not optimistic about Europe's immunity from slowdown," Hewlett-Packard CEO Carly Fiorina told a conference in Germany on Wednesday. "Nor am I optimistic about a quick recovery in the second half of 2001." Fiorina was one of numerous executives who had been counting on Europe to pull the industry through the U.S. downturn. In the first quarter of fiscal 2001, for example, Hewlett-Packard saw U.S. revenue fall 6 percent while European revenue rose 7 percent. However, that optimism has quickly faded. "No one is immune," says Banc of America Securities analyst Bob Austrian. In recent weeks, Oracle has said its European sales growth was only 3 percent in the third quarter, down from 92 percent the quarter before, and Computer Sciences has said Europe is partly to blame for a fourth-quarter revenue downturn. Intel has also reported a sales slowdown in Europe. International Data (IDC) estimates that overall IT sales growth in Europe will only decrease 1 percent this year from last year. However, IDC chief research officer John Gantz says the actual figures may fall even further, as current projections are based on rapidly changing economic realities.

  • "Internet Layoffs May Test Federal Statutes"
    NewsFactor Network (03/19/01); Mahoney, Jerry

    Federal law protecting employees of large businesses from abrupt mass layoffs is being put to the test as over 80,000 workers in the telecom, e-commerce, and tech industries have been dismissed in January and February, a Challenger, Gray and Christmas report shows. The Worker Adjustment and Retraining Notification Act was meant to give employees time to seek out and prepare for a new job, but it also contains exemptions for "faltering companies" looking for capital infusions and firms struck by sudden economic downturns. Lawyers representing laid-off employees say they are the only enforcement this legislation has, since no government agency is responsible for its enforcement. Many computer-related companies that have laid off workers in recent months have claimed protection under the provisions. Dell, when it cut 1,700 jobs last month, paid workers the equivalent of 60 days' pay and gave bonuses to those that signed agreements not to sue. ConnectSouth, a high-speed ISP serving Southern businesses, let go 225 workers with little notice last month but excused itself in a letter to the Workforce Commission, saying the company had been seeking to raise cash and that announcing the layoffs would have hurt its efforts. ConnectSouth filed for bankruptcy protection last week, giving credence to its "faltering business" claim.

  • "Venturing Back to Capital Basics"
    Washington Post (03/23/01) P. E5; Johnston, Nicholas

    A panel of venture capitalists told a gathering of Washington, D.C.-area entrepreneurs yesterday that a solid business plan, not starry-eyed dreams of Internet-fueled wealth, was the key to receiving funding in the current sour economic climate. The panel discussion, entitled "I'm OK, You're OK, but We're Not Investing," was sponsored by Netpreneur, a networking program of the Morino Institute, a nonprofit group. Zim Putney of NextGen Capital told the gathered entrepreneurs that the Internet is "just another communication medium." Just identifying a market that the Internet could tap is no longer sufficient for attracting investment, he said. The panelists said venture capitalists would still back Internet-related ventures, but only if they had strong fundamentals grounded in sound business strategies. Those that lack target customers and a source of initial revenue will struggle to get backing, the panelists warned.

  • "Chipmakers Supercharge Gadgets"
    Investor's Business Daily (03/22/01) P. A4; DeTar, James

    Sony, IBM, and Toshiba are partnering to develop the next-generation processor chip for non-PC devices, slated to begin production in 2002. Dubbed "the Cell" because it mimics biological function in linking to other chips nearby, the chip promises supercomputer speeds for consumer devices such as the Sony Playstation and handheld devices. The Cell will use silicon-on-insulator technology that will set the price 5 percent to 10 percent higher than standard chips but will reduce energy consumption and move electricity faster. The three companies' engineering team also plans to build the chip on 12-inch wafers as compared to regular eight-inch wafers, maximizing space and saving costs. Additionally, Cell chips, at 0.10-microns, will be thinner than the fast 0.18-micron chips currently in production. Despite the advances, analysts say AMD and Intel are aiming for the same non-PC market in the future. Many experts predict that the center of Internet connectivity and computing will drift away from the PC, and Intel and AMD, known for their relentless pace of chip development, pose a serious threat to Sony, IBM, and Toshiba's efforts as they also move in that direction. IBM Microelectronics' Bijan Divari says the Cell group expects full production by 2005.

  • "AMD Throws Down the Gauntlet"
    Wired News (03/22/01); Gartner, John

    AMD unveiled its 1.3 GHz Athlon chip at the CeBIT tech trade fair in Hanover, Germany, on Thursday. The chip, which AMD claims has features to make it as fast as a 1.7 GHz chip, is seen as a direct attack on Intel. The company claims the chip's DDR (double data rate) memory is quicker than Intel's Rambus memory. Unlike the leading chipmaker, which has forecast at least a 25 percent revenue shortfall, AMD says the economic downturn has yet to hurt its business. However, the real battle between AMD and Intel will not occur until later this year, when the two companies are expected to release 64-bit chips. In a risky move, AMD is making its Hammer chip incompatible with Intel's Itanium chip. Hardware and software vendors will have to build separate systems for each chip. AMD has already begun talks with Linux developers to encourage systems that will run on Hammer. Among its Linux partners is Europe's biggest Linux developer, SuSE. However, analysts say AMD's ambitious plan will not succeed unless it gets industry giant Microsoft to develop Windows products that will run on the chip. AMD officials at CeBIT had no comment on whether they were in talks with Microsoft. Intel officials said they were also working with Linux developers, including SuSE and the U.S. firm Red Hat. Intel is also working with Microsoft on an Itanium-based version of its next operating system.

  • "After Spam, Baloney to Swallow"
    Los Angeles Times (03/22/01) P. T1; Wilson, Dave

    The tech-industry heavyweights asking lawmakers to let them regulate themselves rather than have laws protecting consumer privacy online imposed on them actually have little interest in protecting consumer privacy, contends columnist Dave Wilson. Wilson says the battle over spam, unwanted commercial email, is a perfect example of how the tech industry is seeking to manipulate the language of the law to continue invading consumers' lives. Many consumer-advocacy and privacy groups, as well as some lawmakers, support an "opt-in" approach to online privacy. In this approach, consumers must offer their clear consent before a company can do anything with their personal information. The tech industry, as represented by the Online Privacy Alliance, a consortium of Microsoft, IBM, AOL Time Warner, and other big-name firms, wants an "opt-out" approach, in which consumers must make a specific request that companies stop using their personal data. The problem with an opt-out policy, Wilson argues, is that it plays right into tech companies' hands. For example, if a consumer clicks on a link to opt out of a spammer's list of email addresses, the company spamming that consumer now knows that user is a valuable commodity--someone who took the time to read a spam message, if only to find the opt-out link, rather than someone who merely deletes spam without opening it. The spammer can then sell this user's email address to other spammers. An opt-out policy would also allow companies to continue to use HTML bugs that let them know when a consumer has opened an email message and give them access to information on that user's hard drive. Wilson concludes that any laws that follow the tech industry's advice on privacy regulation could make the situation worse for consumers, not better.

  • "Experts Differ on How Flaw Will Affect Coded E-Mail"
    New York Times (03/23/01) P. A13; Glanz, James

    Since two Czech cryptologists earlier this week found a vulnerability in the PGP (Pretty Good Privacy) encoding used for email encryption, security experts have used the episode to stress the inherent weakness of the Internet as a secure medium. PGP was and still is seen as unbreakable. The new technique does not try to decrypt the message but instead works through the sender's computer to reveal the descrambling key. Dr. Vlastimil Klima and Tomas Rosa, the researchers who discovered the flaw, say hackers could use the method to pose as a trusted associate. Network Associates' Mark McArdle argues that although the method works, it is virtually impractical because it would require access to special disks or the hard drive of the sender's computer. Klima and Rosa counter that many PGP users leave their PGP files on networks and computers connected to the Internet. PGP inventor Philip Zimmermann says users have more important things to worry about if a hacker has access to their computer. Others note that a determined, technically astute digital assailant can successfully hack almost any average Internet user, leaving little to assure people of any chance of absolute security on the Web. The digital signatures bill signed by President Clinton last year emphasized the importance of the PGP vulnerability amongst security experts.
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  • "Patents Are Your Friends"
    Salon.com (03/21/01); Cave, Damien

    Although the open source software movement and the U.S. Patent Office would seem to be irreconcilable opposites, a new joint venture wants to provide an opportunity for open source programmers to use intellectual-property law to their advantage. Internet publisher IP.com and nanotechnology think tank The Foresight Institute will allow open source programmers to publish software code in a database that the Patent Office will search when verifying applications for new software patents. The point, says author Bruce Perens, is to allow open source programmers to "write a patent claim without getting a patent." IP.com and The Foresight Institute want to centralize open source software programs, many of which now languish in obscure databases, making it difficult for the developers to claim infringement should a commercial developer attempt to patent a similar or even identical idea. "An aggregated, centralized and 'normalized' database is better than 10,000 disparate ones," says consultant David Kline. IP.com will charge programmers $20 for publication and will provide a digital fingerprint that says when the software was published and ensures that it has not been modified since then. Critics are not optimistic about the database's potential. Greg Aharonian, a patent expert who works to expose bogus patents, says patent examiners face too much trouble trying to sort through claims of prior art. The new database, he says, will simply be one more drop in an ocean of similar databases.

  • "Talk Is Cheap"
    Wall Street Journal (03/23/01) P. A1; Angwin, Julia

    The instant messaging war is intensifying as America Online battles to stay "king of the hill" against rivals Yahoo! and Microsoft. Already, AOL is losing ground in the business space--where companies can actually sell their Internet services instead of giving them away--to the likes of Lotus' instant messaging service. Additionally, Microsoft's new HailStorm initiative worries AOL executives, as many HailStorm services will be tied together with the new Windows XP operating system due out this fall. Tim O'Reilly, who sold his pioneering Internet directory Global Network Navigator to AOL in 1995, warns that unless AOL leverages its dominance in instant messaging, it could lose strategic ground. He explains that since AOL did not promote his Global Network Navigator while it could, it lost the space to Yahoo!, now the leading Web directory. Although instant messaging is a relatively simple concept, AOL brought it popularity by adding the Buddy List, a real-time compilation of friends and associates online. This feature has proved to be AOL's continued strength in the instant messaging market. Because it was the first service to feature the Buddy List, current users represent a critical mass that is unlikely to switch services because they would risk losing an established screen name and community of friends. Microsoft and Yahoo! are fighting vigorously for AOL to open up its service to other providers, and AOL has said it plans to test a new system for release this summer. One open source alternative has already registered 60,000 downloads. Called Jabber, the software allows users to participate in instant messaging across proprietary lines. Jeremie Miller, the creator of the Jabber program, claims that the effort has already surmounted AOL efforts to block Jabber users and that his coalition of online programmers aims to "build an open network to give control back to the people who want to do instant messaging."

  • "Study: High-Speed Net Access to Transform E-Biz"
    E-Commerce Times (03/19/01); Saliba, Clare

    An Ernst & Young and Cap Gemini Ernst & Young report issued Monday forecasts a dramatic shift in e-business models in the coming year due to broadband access proliferation and growing rivalry between technology, communications, and entertainment companies. According to a survey of 128 CEOs, high-speed Web access is opening up new sources of revenue for content producers, such as time-specific pricing, content subscription, and pay-per-use. "The winning companies will take advantage of the unprecedented opportunities these changes create," the report states. The study identifies trends such as market globalization, deregulation, enabling technologies, and technology-compressed product life-cycles as key drivers of "unprecedented competitive intensity." The report estimates that broadband-connected households spend 20 percent more time focused on Web entertainment then those without broadband access. Web advertising is expected to bounce back from its limbo state because "Consumers will have a choice to either remain anonymous and receive content for a premium, or surrender some personal information and receive the content with some personally targeted ads." The report anticipates online advertising revenues to more than quadruple last year's earnings of $8 billion and reach $33 billion by 2004, yet believes traditional firms, not dot-coms, will dominate the online ad market.

  • "Government IT Spending on Rise"
    Civic.com (03/20/01); Sarkar, Dibya

    Market research firm Federal Sources predicts that IT spending at the state and local government level will grow to $45.3 billion by 2004, which would be a 5.3 percent compounded annual growth rate. Despite the current economic environment, IT chiefs may be able to make convincing arguments to legislatures and department heads as to the potential savings technology initiatives could bring, says Federal Sources CEO Jim Kane. Kane says partnerships between the private sector and different levels of government would lessen risks to both parties and expand the knowledge base and capabilities of government agencies. Ten states make up 55 percent of state-level spending, Kane reports, with California, Pennsylvania, New York, Texas, and Michigan leading the way. This uneven distribution of spending shows that there are many markets yet to be tapped, he added.

  • "More Dot-Com Carnage"
    Bloomberg (03/22/01); Whitestone, Randy

    The research firm Webmergers.com reports that 106 dot-coms have closed in the first two months of this year, a pace of 12 failures per week. Since the beginning of last November, 203 dot-com startups have failed. A Webmergers.com press release states, "February's shutdowns represented well over $1.5 billion in investment." Webmergers.com also reports that venture-capital investment was down 18 percent for the fourth quarter, the third consecutive quarter in which the investment rate has declined. In addition, Webmergers.com noted $945 million in corporate buyouts in the dot-com sector in February, compared to $20 billion during February of last year.

  • "Positive Thinking"
    InformationWeek (03/19/01) No. 829, P. 52; Rosen, Cheryl

    A recent survey of 300 IT and business executives by InformationWeek magazine reveals mixed feelings about which direction the economy will take in the coming months. Looking at the next three months, 47 percent of respondents predicted their sectors of the economy would stagnate or decline, while under 50 percent saw their IT budgets increasing. With many companies' IT budgets having already begun to shrink, CIOs are taking a hard look at their short- and long-term spending plans. Many CIOs and analysts agree that IT projects that favor short-term cost savings and productivity gains will win out over the long-term, often expensive IT projects of the boom years. "You'll like see less long-term, vision-type projects and more emphasis on things like enterprise application integration that can provide an immediate return," says Answer Financial's George Szabo. KPMG consultant Mike Surface adds that focusing on customer service and supply-chain optimization are other ways to reduce costs through IT. Other analysts suggest that companies look at their IT staff before they cut potentially beneficial projects. Howard Rubin of Meta Group says relocating work to areas where labor is less expensive is one possible solution. In a few cases, CIOs are taking drastic measures--budgeting only enough to keep day-to-day IT operations running and laying out money for other items on a case-by-case basis.

  • "Canada's High-Tech Sector Still Growing"
    EBN (03/19/01) No. 1254, P. 14; Lewis, Nicole

    Analysts predict that Canada's high-tech sector will face a short-term slowdown, as shown by recent layoffs at Toronto's Nortel Networks and Ottawa's JDS Uniphase, but will regain its momentum in 2002 and continue growing until at least 2005. However, the growth will not match the intense pace the sector has experienced over the last several years. Among the 1 million new jobs expected to be created in Canada by 2005, 20,000 will be in the high-tech and electronics industry, bringing the sector's total employment figures to 160,000.

  • "That Falling Feeling"
    Economist (03/17/01) Vol. 358, No. 8213, P. 59

    Until a few weeks ago, high-tech companies truly believed that they were protected from boom-and-bust cycles. Firms such as Intel insisted that they were doing well and that there was no need to reduce profit estimates drastically. However, in the last several weeks, all of the major Silicon Valley firms have admitted that they are not immune to the forces pulling the rest of the economy down. Cisco recently announced that it was slashing 8,000 employees from its payroll, while Intel announced a cut of 5,000 jobs only the day before. As each company reduces staff and lowers profit estimates, Wall Street has responded by lowering the stock of not just the company announcing bad economic news, but also the stock of its biggest rivals, which means that analysts and investors believe that the entire high-tech industry has had an unrealistic belief in its ability to fight bad economic times. The incredible growth rate in the industry over the last several years, as much as 500 percent annually for some companies, has also led Wall Street to believe that when good times do return to Silicon Valley, the growth rate will be at a much lower rate than before.

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