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Volume 3, Issue 192:  Friday, April 20, 2001

  • "PC Market in U.S. Contracts by 3.5%, Shrinking for First Time in Seven Years"
    Wall Street Journal (04/20/01) P. B6; Tam, Pui-Wing

    The U.S. PC market shrank 3.5 percent in the first quarter of this year compared with the same period last year, according to a new report from Gartner Dataquest. It is the first contraction in the domestic PC market in seven years. Gartner analysts said PC saturation was the likely cause of the contraction, as most who need PCs either own one or have access to one at work. Reduced personal spending on account of the global economic picture was also to blame. The Gartner report found that, of the major PC makers, only Dell showed explosive growth in the first quarter, growing 34 percent and overtaking Compaq as having the greatest share of the global market. Compaq saw only .3 percent growth during the first quarter, Gartner said, while Hewlett-Packard shrunk by 3.5 percent, NEC contracted by .5 percent, and IBM grew by 7 percent.

  • "Tech Firms See Rate Cut as Possible Catalyst for Growth, Investment"
    Los Angeles Times (04/19/01) P. C1; Piller, Charles

    The tech sector's continuing struggles may have been the impetus for the Federal Reserve Board's unexpected half-point rate cut Wednesday, analysts speculated. Indeed, Monday's news that network equipment maker Cisco planned to lay off more than 8,000 workers may have been an immediate spur for the action, which the Fed attributed to a fall in corporate profits and capital investment. In general, tech firms and their investors were greatly pleased by yesterday's cut, saying it should stimulate capital investment, thus leading to a greater demand for Internet equipment and, eventually, consumer products. However, not all analysts were so optimistic, noting that the causes of the tech downturn may have little to do with the federal interest rate. The real reason, argue these analysts, is that consumers have reduced their tech spending and that many firms have realized that they overspent on technology in recent years, factors that rate cuts are unlikely to change. In related news, the tech sector received an additional boost Wednesday on news that Apple, recently in rather dire straits, would post a profit for its most recent quarter and that IBM would also post a profit.

  • "Technologically Like Achilles?"
    Washington Post (); Irwin, Neil

    The "Metropolitan New Economy Index," a Progressive Policy Institute study of how U.S. cities rate as centers of the Internet age, ranks Washington, D.C., fifth overall. In each city, the study measured such factors as Internet use, the workforce's education, and the growth of new businesses. Although the nation's capital has one of the most educated workforces and has a very high rate of overall Internet access, the study found that it is lacking in growth and innovation. For example, Washington D.C., has only .34 patents per 1,000 workers, compared with 2.33 patents per 1,000 workers in Rochester, N.Y. Only 9.4 percent of the city's jobs are in new, quickly growing companies, compared with 16.2 percent of jobs in Orlando. The study cites the Washington region's infrastructure problems as a main reason for the lack of growth. In addition, the study says the city has a definite digital divide in how it provides tech-related opportunities to minorities and the poor.

  • "Tech Industry's Loss of Clout Is Evident in Bush Agenda"
    Wall Street Journal (04/19/01) P. A20; VandeHei, Jim

    As the value of tech companies drops on the stock market, so does their apparent influence in the White House, where President Bush has taken a laissez-faire approach to spurring IT growth. Some have accused Bush, who received more than $1 million of $10.6 million in campaign donations from the tech sector, of moving too slow and being oblivious to the current situation. Other observers see the disparity between what the tech sector is asking for and what it is getting as a result of its fallen financial fortunes. For example, research and development funding in the president's budget is meager compared to expectations, and Bush has been sluggish in filling advisory and other staff positions in the White House's tech team. However, venture capitalist Floyd Kvamme, the newly appointed chair of the President's Council of Advisers on Science and Technology, says the tech industry will not be fixed by scrambling for short-term legislation. Later this year, Bush plans to support a continued moratorium on Internet taxes, ease restrictions on tech exports, and demand that any education bill include provisions for high-tech training. However, the tech industry's wish list also includes tax breaks for out-of-date or unusable computer equipment, tax credits to spur PC buying among lower-income groups, and tax credits to encourage high-speed services development in rural areas.

  • "Ruling Could Be a Boon to H-1B Workers"
    CNet (04/17/01); Konrad, Rachel

    H-1B workers farmed out by recruitment firms under restrictive agreements may receive more legal rights if a California judge decides to stand by a tentative ruling issued earlier this week. In that case, an Indian programmer sued his former employer, the contract recruitment firm Compubahn, over its enforcement of contract stipulations. Compubahn's contract prohibited Dipen Joshi from leaving the firm for 18 months, signing with a Compubahn client for a year after leaving the company, and levied a $25,000 "finder's fee." After working as a temporary employee at Oracle, Joshi joined the software giant in 1999 and subsequently received a letter from Compubahn requesting $77,085 in fees and penalties as detailed in the terms of the contract. Joshi's attorney, Mike Papuc, contends that such contracts amount to "indentured servitude" and that many foreign workers are intimidated by the legal challenges and fear endangering their visa status. Judge Phrasel Shelton's tentative ruling, if made official, could set a new standard for H-1B recruitment practices, which have become a forefront issue in overseas tech circles.

  • "Internet Security Alliance Debuts"
    Reuters (04/19/01); Wolf, Jim

    The Internet Security Alliance (ISA), which stems from a joint effort between the Electronic Industries Association and the Software Engineering Institute at Carnegie Mellon University, will leverage the knowledge of the institute's CERT Coordination Center to provide updated reports on Internet security threats and information on standards and risk management strategies, among other things. Through April 19, ISA had brought on board 10 founding members, including VeriSign, Exodus Communications, Mellon Financial, NASDAQ, Redleaf Group, Tata Consultancy Services, and TRW. Sponsor members will receive total access to ISA resources for $70,000 annually, while regular members will pay between $2,500 and $50,000 annually to obtain CERT warnings and limited access to CERT's data bank. ISA intends to be more international than competing "information-sharing and analysis centers" located in the United States, according to ISA executive director Dave McCurdy. Likewise, CERT will "cut across industries and market sectors" in order to offer a more international grasp of e-commerce and communications issues, the ISA says.
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  • "A Dip in Silicon Valley"
    Financial Times (04/19/01) P. 14; Luce, Edward; Kehoe, Louise

    IT-related productivity sustained the economic boom of the late 1990s, but now the economic slump may stem productivity. In cutting the federal funds rate this week, the Federal Reserve cited the dramatic decrease in corporate IT spending as a threat to the economy. Implicitly, the hope is that IT-related productivity gains will again revive the economy and bring back the cycle of investment and growth. As innovations in business software and processes increased from 1997 to 2000, productivity grew 2.9 percent annually, compared with 1.9 percent annual growth between 1990 and 1997. Analysts attribute this growth to the 20 percent growth rate in IT spending from 1996 onward and fear that a decline in IT expenditures--expected to be down 10 percent the first half of this year--will entail a decrease in productivity. Moreover, the economic atmosphere has led to a dearth of venture-fund capital, which in turn has stymied the efforts of startups to produce the innovations needed to fuel productivity gains. Some gloomy analysts interpret the situation to mean that IT technology has neared its potential and liken the growth of the past few years to the decade after World War I, when electricity and the combustion engine became widespread.
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  • "Making HAL Your Pal"
    Wired News (04/19/01); McCullagh, Declan

    A small band of futurists are predicting that computers will one day design themselves rather than be designed by humans. Eliezer Yudkowsky and his compatriots at the Singularity Institute argue that humanity needs to design frameworks to ensure our safety once technological innovation culminates in a computing epiphany--a point they call "Singularity." In his treatise "Friendly AI," released this week, Yudkowsky gives advice he has mulled over for the past 10 years, including policy and design principles that should help set the stage for friendly artificial intelligence. However, academics are not impressed with the Singularity Institute's predictions. Alon Halevy of the University of Washington's computer science department says creating AI is such a large task that once it is completed, factoring in benevolence will be a relatively easy matter. He says, "The challenges we face are so enormous to even get to the point where we can call a system reasonably intelligent, that whether they are friendly or not will bill an issue that is relatively easy to solve." Still, Yudkowsky says AI is on the way and guidelines need to be set now. He says, "The Singularity Institute is not just in the business of predicting it, but creating it and reacting to it. If AI doesn't come for another 50 years, then one way of looking at it would be that we have 50 years to plan in advance."

  • "CERT Plans to Sell Early Warnings on Web Threats"
    Wall Street Journal (04/19/01) P. B6; Bridis, Ted; Simpson, Glenn

    The CERT Coordination Center, the government's main resource for early warnings on new threats to computer networks, will announce on Thursday plans to sell its information to corporations. CERT will charge firms as much as $70,000 to receive warnings on new cyberthreats 45 days before the information is given to the public. CERT will continue its practice of providing the government with information on new cyberthreats as soon as it becomes available--each year, CERT receives $3.5 million in government funding--but, because of the rising costs of its research, CERT has found it necessary to turn its warnings into a commercial product. The new effort also comes as CERT and an electronics trade association plan to form an "Internet Security Alliance." Officials from CERT's partner, the Electronics Industries Alliance, admit that it and CERT intend the security alliance as a way to head off new government regulations that would force firms to strengthen their defenses against cyberattacks. The new plan would provide, in addition to early warnings, information on defending networks against new threats and, in the near future, some form of "seal of approval" that a network was safe.

  • "Corporate IT Nonplussed by Intel's Optimism"
    eWeek Online (04/18/01); Popovich, Ken

    Many corporate IT users do not seem to share the optimism of Intel, which on Tuesday announced that its profits had fallen 82 percent for its most recent quarter but added that PC-related sales should rise in the year's second half. Intel executive vice president Paul Otellini told investors on Thursday that overseas markets, while not growing as fast as they previously had, would still be strong enough to drive PC-related growth in upcoming quarters, although he did warn that second-quarter revenue would likely remain flat. Despite these comments, many corporate IT users say they are not planning further purchases of PCs or related items this year. Bob Cancilla, Republic Indemnity's director of corporate systems planning, says his company will likely not invest in PCs or related items for the next three years. "We have millions of dollars invested in this equipment," he says. "Until something really revolutionary hits that brings in new and different applications from what we're doing, I think that you are going to see the whole Intel-based world come to a screeching halt." Other corporate users point out that Intel has been notably inaccurate in its recent projections and has had to issue profit warnings in each of the previous three quarters. In fact, in a March conference call, Intel CFO Andy Bryant said the world economic picture did not give him a basis for hope.

  • "Workers Mired in E-Mail Wasteland"
    CNet (04/20/01); Mariano, Gwendolyn

    The average worker needs 49 minutes each day to handle work-related emails, according to a new survey by Gartner. The survey found that nearly a quarter of workers, 24 percent, need more than an hour to read and respond to work-related emails. Gartner analyst Maurene Caplan Grey says this has resulted from workers using email for what they think are productive purposes. "In reality, [workers] are cluttering email in-boxes, filling up servers, and sapping productivity with the volume of these messages," she says. She argues that reducing the volume of unnecessary email can have an immediate benefit for productivity and costs. The survey found that workers classified 34 percent of their work-related emails as unnecessary, with only 27 percent of it demanding immediate response.

  • "Words Felt Large"
    Philadelphia Inquirer (04/19/01) P. F1; Woodall, Martha

    Scott Stoffel, a Temple University student majoring in electrical and computer engineering, has developed a computer-automated Braille system. The 32-year-old Stoffel, who is legally blind and deaf, got the idea for the device after considering how difficult it was for him and others with similar sensitivity problems to read Braille and how people who are unable to move their hands back and forth had no other options for reading Braille. Stoffel's computer-aided Braille system makes use of large-print Braille six pins, which are raised and lowered to represent the dots of Braille combinations, and a stationary monitor that scrolls in place. The system's software moves the six pins, which are push-type tubular solenoids, in the proper sequence to create the individual Braille letters. Stoffel, with the assistance of the chair of the electrical and computer engineering department at Temple, John J. Helferty, is completing a prototype of the device, and the Helen Keller National Center for Deaf-Blind Youths and Adults in Sands Point, N.Y., plans to test it this summer. He plans to create another version of the computer-automated Braille system and sell it to a company that makes Braille devices. The current version is designed for use with a PC or laptop, but the next version could be wireless and could work with personal digital assistants. Stoffel says the system could sell for less than $1,000, including labor, compared to the $10,000 cost of electronic Braille readers that attach to PCs.

  • "Cheney Calls for R&D Tax Credit, Internet Tax Ban"
    Reuters (04/18/01); Sullivan, Andy

    Speaking before a gathering of high-tech executives in Virginia on Wednesday, Vice President Dick Cheney said the Bush administration supports a renewal of the moratorium on Internet sales taxes and a continuation of the ban on Internet access taxes, both due to expire this October. Cheney also said the administration wants to make permanent the temporary tax credit for research and development spending by businesses, which currently extends through 2004. The temporary nature of the tax credit has caused some businesses to withhold their research and development spending, Cheney claimed. Cheney's proposals enjoy wide Congressional support. Cheney also said the administration plans to increase by 6 percent the government's research and development outlay.

  • "Operating-System Firm Be Looks for Another Chance"
    SiliconValley.com (04/17/01); Gillmor, Dan

    Operating-system vendor Be is emblematic of much of the tech sector as it struggles to find capital and a profitable application of its technology. Shut out of the operating-system market by Microsoft, Be has given up trying to sell its centerpiece BeOS product and is instead focusing its multimedia technology on Web appliances. Sony recently licensed the company's software for its new eVilla "Network Entertainment Center," due out this spring. Other than that, Be has been at loss with what--and to whom--to sell. It desperately wants to please its shareholders, whose stock share values have fallen 90 percent to under $1. Be is still running low on cash and plans to lay off nearly a quarter of its workforce in order to stretch the $9 million it had at the end of March.

  • "Last Boom in Town: Demand Still Grows for Online Security"
    New York Times (04/18/01) P. E13; Schwartz, John

    The Internet as both information-sharing tool and e-commerce platform has become increasingly complex, propelling the computer security business and especially managed security services into a boom of growth. And when the Internet becomes as much a wireless network in the future as it is a grounded PC network now, even more will be demanded of security services, whether outsourced or in-house. Venture capital investment funds have poured more than $500 million into about 75 security solution companies this past year, reports Bear, Stearns analyst Olivia Golden. A recent Gartner Group report on the online security industry noted both its promising future as well as an inevitable future of sorting out--when only security firms grounded on profits rather than promise will continue to survive. An online future that calls for wireless access to databases by employees, or financial e-commerce transactions--whether B2B or consumer to business--is being met by increasingly sophisticated security techniques that go beyond firewalls into areas of managed 24-hour monitoring and behavior-pattern identify checks. However, some companies, especially financial companies, are hesitant to contract outside security services because of the need to protect sensitive financial data. Others have turned to managed security to obtain expertise and reduce cost.
    (Access to this site is free; however, first-time visitors will need to register.)

  • "Peer-to-Peer Isn't Dead"
    Industry Standard (04/23/01) Vol. 4, No. 16, P. 58; Roberti, Mark

    Music lovers are no longer the only ones enjoying the benefits of peer-to-peer technology. The technology popularized by Napster is now being used by law firms such as Baker & McKenzie, major investment banks such as Bear Stearns and J.P. Morgan, and the federal government. The corporate version of the file-sharing technology resembles Napster with a lock and key. Employees store files on password protected servers, and they are alerted when files are added and when files become accessible. The Environmental Protection Agency is using the technology so that users can sort and combine government statistics with other data. In addition to making swapped information more useful, peer-to-peer technology improves the cumbersome process of collecting data because, in the case of the EPA, county representatives can enter data on a handheld computer and copy the file to a local server--everyone on the system and in the public will be able to see it, and every time the file is changed, they will be able to see the update. Groove Networks last week launched peer-to-peer technology for companies that want their employees to collaborate by viewing files at the same time and changes to files immediately. Wider acceptance of the technology may take some time because of security concerns.

  • "Delivering on the Electronic-Paper Promise"
    InfoWorld (04/16/01) Vol. 23, No. 16, P. 38; Battey, Jim

    Electronic ink, paper embedded with microcapsules that alternate from black to white when given an electric charge, could be the next big step in the field of display technology and revolutionize the publishing industry. Two companies, E Ink and Gyricon Media, a spinoff of Xerox's Palo Alto Research Center, are the field's leaders. E Ink's Russ Wilcox notes that electronic ink is brighter, more energy-efficient, more portable, and thinner than traditional LCD displays and also has a higher resolution. Early tests of electronic ink have focused on retail signage, with E Ink providing electronic displays in supermarkets for the Arizona Republic newspaper to broadcast headlines, and Gyricon working on signs for Macy's. Retailers hope that electronic ink will be the key to a much sought capability--the ability to change a product's floor price instantaneously from a central location. However, developers note that electronic ink could have many other uses, from newspapers that generate a new edition each day without having to be thrown away to product manuals that update themselves when new information becomes available. Gyricon's SmartPaper is the result of more than 20 years of research. Gyricon interim CEO Bob Sprague says in the future SmartPaper could be used for wallpaper, construction drawings, maps, and clothing.

  • "Design Darwinism"
    Economist (04/14/01) Vol. 359, No. 8217, P. S-20

    The tech industry will need to come up with smart, easy-to-use devices if it expects computers and the Internet to become ubiquitous. Consumers have complained about user interfaces for a long time and are tired of having to click through dozens of Web pages or menus on their mobile devices to find the information they want. In addition to poor design, consumers are encountering poor service. A survey by the design consultancy Creative Good, in which 50 consumers each visited eight of the top Web sites, reveals that the inability to figure out how to complete transactions resulted in the failure of nearly half of all purchasing attempts. Although most industry observers lay blame for the dot-com crash on impatient venture capitalists and shareholders or on the inexperience of Internet executives, Jakob Nielsen of the Nielsen Norman Group believes that consumers grew disgusted with Web sites because they were too difficult to use. The industry has made some progress in making technology easier for consumers to use, but consumers have not embraced programs that organize computer files, for example, because people are largely creatures of habit. In looking at the Palm handheld and its one-button access to basic features, the industry is now prepared to make big improvements to present wireless application protocol (WAP) browsers, which are likened to going through an entire deck of cards to find the right card. Likewise, the industry is considering voice and different kinds of sensors as ways to improve the technology.

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