IBM surpasses estimates as tech spending improves

IBM delivered a solid quarterly performance yesterday with earnings exceeding Wall Street's expectations, suggesting that corporate spending on information technology is continuing to pick up modestly, rteporets The New York Tinmes (18 October).

The newspaper reports that IBM., the world's largest information technology company, is closely watched as a barometer of business spending on technology. About one dollar of every US$10 spent by corporations worldwide on technology is spent on IBM hardware, software or services.

The company's quarterly performance reflects broader trends beyond a general improvement in technology spending, says the NYT. For example, technology services companies, including IBM and Accenture, are shifting toward higher-profit services, taking over and automating business processes like procurement, finance and human resources.

The NYT says the sharply improved profits are also attributable to IBM itself. Earlier this year, for example, the company trimmed its payroll by 14,500 workers and reported a strong quarter from its microelectronics unit, which is the sole supplier of the chips that power Microsoft's new Xbox video console.

According to the newspaper, Samuel J. Palmisano, IBM's chief executive, said the company had a "good quarter" that demonstrated "the strength of our business model across hardware, software and services."

IBM reported after-tax profit of 94 cents a share, including a one-time charge of 32 cents, or US$525 million. The tax bill is on the US$9.5 billion the company previously said it planned to bring back to the United States, taking advantage of a new law intended to encourage American corporations to bring investment funds back into the country this year at a fraction of the normal tax rate.

The newspaper said that IBM reported revenue of US$21.5 billion in the quarter, about US$200 million less than analysts had projected. Revenue for the quarter was 8 percent less than the year-earlier quarter, but the 2004 quarter included IBM's personal computer business, which was sold earlier this year to Lenovo of China. Excluding the PC business, overall revenue rose 4 percent.

The NYT says that as IBM seeks new growth, its challenge mirrors that of the technology industry as a whole. The industry has become a huge business with worldwide sales of more than US$1 trillion, though growth is far slower than the double-digit rates of the 1990's.

Two technology research firms, IDC and Gartner Dataquest, estimate that sales of information technology - hardware, software and services - will grow by slightly more than 5 percent this year.

The newspaper says that many lines of hardware and software are subject to relentless price-cutting, and in services IBM must compete against aggressive Indian outsourcing companies like Infosys, Wipro and Tata Consulting.

Worldwide shipments of personal computers rose more than 17 percent in the third quarter as consumers flocked to lower-cost and portable PCs, two technology research firms reported Monday.

The Associated Press reports in The New York Times (18 October) that Dell maintained its position as the world's leading PC maker, posting growth that roughly matched the industrywide gains reported by IDC and Gartner.

Worldwide shipments grew 17.1 percent in the July-September period to 52.8 million, according to preliminary data from IDC. That compared with 13.5 percent growth in the same quarter a year ago and an 18.2 percent increase in this year's second quarter.

AP says that Gartner, which uses slightly different methods to measure the activity, put third-quarter growth at 17.2 percent, and shipments at roughly 55 million.

The growth remained stronger in overseas markets than in the United States, where IDC put the increase at 11 percent and Gartner at 10.5 percent.

AP reported that both firms cited strong demand for portable PCs and an increasingly broad range of low-cost laptop and desktop models.

IDC, which in August predicted third-quarter growth of 13.3 percent, said the gains came despite climbing interest rates and oil prices that have clouded the economic outlook.

IDC said Dell and No. 2 PC maker Hewlett-Packard posted roughly equal growth in PC shipments: 17.8 percent for Dell, and 17.9 percent for H-P.

But Gartner reported an even wider margin between the two, with 18.5 percent growth for H-P and 17.6 percent for Dell, says AP.

Cisco Systems is adding security features to its network switches and wireless products, in the networking gear maker's latest push to sell software to help corporations combat spyware, worms and viruses.

Reuters reports in The New York Times (17 October) that Cisco already sells security software for its routers, which allows businesses to add a layer of security to their web-based networks, which are often used by far-flung workforces. On Monday, Cisco said it is now selling the software for its switches, which companies often use in simpler local area networks within their own buildings.

The expansion of the security features to business' internal networks also includes wireless access points, which corporations are increasingly installing on their campuses.

Reuters says that the software is designed to protect corporations from computers and mobile devices which may have been infected through use outside of the office, as well as from outside attacks against the network itself.

According to Reuters in the NYT report, the software, which Cisco sells under the brand name Network Admission Control, has proven to be a popular add-on for Cisco's corporate clients, who are wrestling with a wide range of security threats. The technology has also allowed Cisco to expand into the lucrative area of security software.

Reuters reports that the market for network security software and appliances will reach US$4.3 billion by the end of 2005 and could grow to US$6.3 billion by 2009, according to the Synergy Research Group. Overall security spending will compose 7.9 percent of the US IT budget in 2005, or US$59.6 billion, according to Forrester Research.

This growth is being spurred by the constant assault on corporate and home networks by worms, viruses and other harmful programs, says Reuters.

Virus writers are targeting Skype users with a new Trojan that poses as the latest version of the popular VoIP software.

The Register reports (18 October) that net security firm MessageLabs has detected and blocked more than 800 copies of a new variant of the MyTob (AKA Fanbot) Trojan, which is being distributed by email. References and nicknames contained in the code lead MessageLabs to conclude that the malware was probably created by a well known Chinese black hat hacker and not the original author of the malware strain.

According to The Register, Maksym Schipka, a senior antivirus researcher at MessageLabs, said the malware is the first he's aware of that mentions Skype and as such represents a new theme for social engineering attacks.

The publication says that the malware arrives in an attachment in messages posing as the latest (v1.4) release of Skype. Legitimate downloads of the software only came out last week, so the attack is timely. If users open the infected payload on a vulnerable Windows machine they will find their PCs transformed into zombie clients (theoretically at least) under the control of computer hackers.

Americans are more worried than Europeans about identity theft and online fraud.

The Register reports (17 October) that overall transactions are still increasing and mid-price purchases are the most popular, but spending in some areas is shrinking.

Research carried out in Germany, France, the UK and US found that almost half US consumers have little or no confidence that their private information is adequately protected. The government, industry alliances setting security standards, hardware and software companies, ISPs and credit checking agencies were all mentioned.

The Register says that online spending is also falling in some areas, which researchers suggest could be linked to increasing worries about security.

According to the publication, although overall transactions are increasing 16 per cent of those questioned in the US are spending less and 13 per cent of Brits also cutting spending. RSA believes this may be linked to increased awareness of identity theft. In the US nine out of ten consumers are aware of identity theft while in France and Germany one in three is not aware of it. Less than half of respondents had heard of phishing.

The survey was carried out by Momentum Research and spoke to 603 consumers with one or more active online accounts.

If you're in the market for a US$1million server, then Sun Microsystems has a new system for you, according to a rerport in The Register (18 October).

The Register reports that Sun on Monday began selling its highest-end Unix servers - the E20K and E25K - with new 1.5GHz UltraSPARC IV+ chips. Customers have already been able to buy lower-end systems with the UltraSPARC IV+ chip and to replace existing UltraSPARC III and IV Uniboards with fresh ones running on the new processor, says The Register, adding that now, however, they can purchase brand spanking new entire systems.

Sun used the release of its speedier 36-way and 72-way giants as an opportunity to go after IBM, says the publication.

Google said Monday that it had begun operating local-language sites in eight European countries for its Google Print program, its closely watched effort to make all of the world's books searchable online, expanding into territories where it has drawn fierce criticism.

The New York Times reports (18 October) that the Google Print sites - for France, Italy, Germany, the Netherlands, Austria, Switzerland, Belgium and Spain - enable users to search books provided by publishers in each country as well as English-language books in the Google library for which the company has secured local rights.

Susan Wojcicki, a vice president for product management at Google, said in an interview Monday that the new sites currently could be used to search only a relatively small number of books. Many of those have been scanned since August, when the company, seeking to expand its online book program, began approaching European publishers.

According to the NYT., Google is planning to discuss the new sites this week at the Frankfurt Book Fair, one of the largest annual gatherings of publishers, agents and authors. A Google executive is also scheduled to take part in a three-hour panel discussion on Friday about the numerous competing efforts to digitise books.

The newspaper says that the European sites work much the same as the main Google Print site (print.google.com). A user searching the German site, print.google.de, for a word will receive links to books containing that word.

Nintendo of America is expected to announce today that it will offer free wireless internet access for its Nintendo DS portable game system at McDonald's restaurants. Customers will be able to play select DS games with other players around the world.

The New York Times reportsa (18 October) that McDonald's offers wireless internet, or Wi-Fi, access to laptop users for a fee in 6,000 restaurants nationwide, but the free Nintendo arrangement will permit the DS machines to play without a laptop.

The DS is the latest game system to offer online play. Both Sony and Microsoft have long promoted the online game-playing features of their game consoles., reports the newspaper.

Sony's PlayStation Portable, the main competitor to the Nintendo DS, also offers wireless online play.

Released in November, the Nintendo DS has sold 2.2 million units in the United States, NPD says. Sony's PlayStation Portable, available since March, has sold two million.

Nortel Networks, a telecommunications equipment maker mired recently in an accounting scandal, named a former president of Motorola as its chief executive on Monday.

The New York Times reports (18 October) that Nortel said the executive, Mike S. Zafirovski, will take the positions of chief executive and president on 15 November, succeeding William Owens, who took the jobs 18 months ago when an accounting scandal led to changes in Nortel's executive suite.

Mr. Zafirovski resigned as president and chief operating officer of Motorola in January after being bypassed for the job of chief executive of that company in 2003. While he is widely credited with restoring Motorola's wireless handset business, he faces challenges at Nortel that go beyond improving its operating performance, says the newspaper.

The newspaper reports that Nortel, which is based Ontario, only recently sorted out its books after revelations of improper accounting that led to the firing of many executives, including the chief executive, Frank Dunn, in April 2004. Law enforcement officials and securities regulators in both Canada and the United States are investigating Nortel and several of its former executives.

In the US., VeriSign said on Monday it has acquired Moreover Technologies, a web-based distributor of news and online material such as web logs, in a long-anticipated deal valued at about US$30 million in cash.

Reuters reports in The New York Times (17 October) that VeriSign said the deal combines privately held Moreover's links to more than 12,000 news sources and millions of blogs, or web logs, with VeriSign's own information delivery technology. Moreover's customers include MSN, AskJeeves and BBC.

The deal follows VeriSign's US$2.3 million purchase last week of Weblogs, which alerts subscribers each time new material is posted to a blog, reports Reuters.

Reuters said that, together, the two deals position VeriSign to target mobile phone users, Merrill Lynch said in a research note published on Monday before the widely anticipated deal was announced.

Twentieth Century Fox film studio on Monday said it will supply digital copies of its movies for new digital projection systems offered by a venture called Christie/AIX that is at the forefront of the fledgling digital cinema business.

Reuters reports in The New York Times (17 October) that Fox becomes the second major Hollywood studio to commit to digital movies for Christie/AIX, which is a venture of projector maker Christie and technology provider Access Integrated Technologies Inc (AIX.A).

Last month, The Walt Disney Co.'s movie studio division also committed to Christie/AIX. Fox is owned by News Corporation.).

Reuters says in the NYT report that having major Hollywood movies to screen is a much needed incentive for theatre owners to install the expensive digital systems that promise audiences sharper pictures and possibly new forms of entertainment like updated three-dimensional movies or satellite telecasts of music concerts.

A New York man was sentenced Monday for sending more than 9 million spam advertisements in online instant messages to members of a networking web site in a hearing that was closed to the public. The sentence is under seal and the session was closed at the defense attorney's request.

The Associated Press reports in The New York Times (17 October) that Anthony Greco, 18, agreed earlier this year to plead guilty in a deal that would result in a sentence of 18 months to two years in prison, according to federal court documents. Greco admitted sending messages to the Los Angeles-based web site MySpace.com, threatening to share his spamming techniques with others.

The federal public defender's office declined to comment on the reason for the closed session and would not confirm if Greco had received the sentence outlined in the plea deal.

AP says that MySpace.com provides a free forum for members interested in such things as chatting online, meeting others with similar interests, keeping in touch with family members and finding old friends.

According to the plea agreement, MySpace hired Greco to write a computer program that would send its users instant message ads for adult and mortgage refinancing web sites. He then created 27,000 fake MySpace accounts through which he sent the spam last fall, according to the plea deal.

After sending the spam e-mails, Greco contacted MySpace and requested permanent employment to guard against more spam and to get exclusive rights to send commercial e-mail through the site. When his request was ignored, prosecutors said, Greco threatened to tell others how to spam MySpace users.

According to AP., the company, whose parent agreed in July to be acquired by media giant News Corporation, spent more than US$20,000 deleting unopened messages from its computer servers, fortifying its system and addressing customer complaints, authorities said.

Federal regulators in the US have ordered banks to tighten their internet security procedures by the end of 2006 to help thwart identity theft, one of the fastest-growing types of consumer fraud.

Reuters reports in The New York Times (17 October) that, in a letter sent to banks last week, the Federal Financial Institutions Examination Council said it is not sufficient that banks permit online access with a single form of authentication, such as a password or personal identification number, when the risks of a breach are too high.

In such cases, banks will be expected to require at least two forms of authentication. The second form can include such things as tokens that generate unique numeric passwords every 60 seconds, smart cards that people insert into computers, or biometrics that can identify fingerprints or handwriting, reports Reuters.

Reuters reports that the council is composed of the FDIC, the Federal Reserve, the US Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration. Earlier this year, the FDIC ordered banks to warn customers of suspected identity theft.

A common form of identity theft at banks is ``phishing,'' derived from computer thieves who ``fish'' for private data.

Phishers typically send e-mails telling prospective victims there is a problem with their accounts, and ask them to verify personal information through a link to a real-looking web site. Many phishing e-mails contain return addresses at sites such as Yahoo.com, or typographical or grammatical errors, says Reuters.

Reuters reports that according to the Anti-Phishing Working Group, there were 13,776 unique phishing attacks in August, and at least 12,845 in each of the year's first eight months.

In the US., BellSouth, the nation's third-largest phone company, said yesterday that it would offer customers of its high-speed internet service a free internet portal developed in conjunction with Yahoo.

The New York Times reports (18 October) that the announcement follows similar deals Yahoo has struck with Verizon Communications and SBC Communications, which are fighting with cable companies for high-speed internet customers.

Like SBC, Verizon and other carriers, the NYT says that BellSouth hopes the exclusive content available on its co-branded portal with Yahoo will attract new DSL customers and deter current subscribers from switching.

By using Yahoo's customised portal, BellSouth customers will be able to get additional storage for their e-mail, music with better audio quality, higher-resolution photos and stronger security features.

The newspaper reports that in the US, phone companies have tried to appeal to customers by cutting prices for their broadband services. BellSouth's cheapest service costs US$24.95, while SBC and Verizon offer introductory services for US$14.95 a month, about US$20 less than a typical cable broadband subscription.

Cable companies, by contrast, have generally tried to win subscribers by offering more online services and higher connection speeds, reports the NYT.