IBM China deal faces scrutiny over security

IBM's plan to sell its personal computer business to Lenovo of China hit a political speed bump in the US yesterday when the chairmen of three Government House committees urged the Bush administration to conduct a formal investigation of the deal to determine whether it poses a risk to America's national security.

The New York Times reports (27 Jan.) that in a letter to Treasury Secretary John W. Snow, the Republican committee leaders said they were concerned that the deal could give advanced technology to the Chinese government, and would leave a company controlled by China responsible for handling some United States government contracts.

The Lenovo Group, the parent company of Lenovo, China's biggest maker of personal computers, is owned mainly by public shareholders. But a government institution, the Chinese Academy of Sciences, holds 37 percent of the shares. If the acquisition is completed, the government's holding will fall below 30 percent, while IBM will take an 18.9 percent stake in the company.

The paper reports that in tyhe letter from the House committees, the chairmen said that "given the relationship between so-called private companies in communist states and their government, we believe it is manifestly in the public interest to extend the time for review" of the planned deal".

The letter was signed by the chairmen of the international relations committee, the armed services committee and the small business committee.

The three men also requested a briefing by the administration on the deal's impact on national security, technology licensing and government contracts.

The paper quotes trade specialists as saying that the letter could prompt the administration to conduct an extended investigation of the deal, but after the review, which could last about two months, the administration would almost surely approve the sale.

The NYT says the majority of IBM's personal computers are already made in China, where the company employs more than 4,000 workers.

IBM filed its explanation of the transaction with the foreign investment committee at the end of December, three weeks after the announcement of the proposed $US1.75 billion sale - $1.25 billion in cash and stock, and $500 million in debt obligations Lenovo will assume.

Meanwhile, the NYT & Bloomberg News report that shareholders of the Lenovo Group approved Thursday in Beijing the plan by the company to buy IBM's PC business. As part of the transaction IBM and Lenovo will share the rights to the IBM PC brand for five years and a distribution and sales network in 160 countries.

SBC in talks to buy AT&T

SBC Communications, the second-largest regional phone company in the US, is in talks to buy AT&T for more than $US16 billion, according to executives close to the negotiations.

The New York Times reports (27 Jan.) that a deal, if reached, would be the final chapter in the 120-year history of AT&T, the first technological giant of the modern age and the original model for telecommunications companies worldwide, and result in a reunion of sorts, putting back together some of the largest pieces of the Ma Bell telephone monopoly, which was broken up in 1984.

According to the paper,the talks, which the executives described as "fluid" and "very, very sensitive" would unite SBC, a Baby Bell with some 50 million local-line customers, with AT&T, its much-diminished former parent.

AT&T, which only two decades ago ranked among the US's very largest companies, is a shadow of its former self, focusing almost exclusively on corporate customers, says the NYT.

However, the NYT says that executives have cautioned that the talks could very well collapse. The executives involved in the current talks said that many issues, including a final price, had yet to be resolved.

The paper says that the talks come as the telecommunications landscape has shifted from traditional fixed-line service to faster-growing, higher-margin businesses like wireless, broadband and corporate services. And with pricing wars continuing, telecommunications companies are looking to merge or risk being put out of business.

In theory, says the NYT, SBC and AT&T have complementary technology. SBC has a strong presence in California, Texas and Illinois, although, as with all the Bell companies, its fixed-line business has slid as customers use their cellphones more.

SBC has also made a strong push to sell broadband lines to consumers and is expanding its fiber optic network to provide video services in the coming year or two. The company also resells satellite television service from the DISH Network reports the paper.

AT&T, on the other hand, has the largest international fibre network and the deepest client list of major corporations, which are considered valuable because they buy services in bulk. AT&T is also a major provider to the government and to companies that operate globally.

The paper comments that regulators would be unlikely to block a merger given AT&T's diminished role in the industry, with the company suffering a setback last year when the Bells won the right to raise fees they charge companies like AT&T for access to their local networks. One result of that was the decision last July to no longer market local phone service to residential consumers. AT&T now has about 25 million residential customers and about 3 million corporate customers, reports the NYT.

Amazon adds photos to Yellow Pages

Amazon.com, the online retail giant, plans to immediately introduce a local search service in the United States that can display photos of neighborhood businesses.

The New York Times reports (27 Jan.) that with the service, Amazon joins Yahoo, Google and many other companies in offering the electronic equivalent of the yellow pages. But the Amazon service, developed by its search-focused subsidiary A9, adds a novel twist: 20 million photos of buildings in 10 major United States cities, with more on the way.

To achieve this, reports the NYT, A9 sent out a sport utility vehicle equipped with a digital video camera. In Manhattan, for example, a driver spent more than a week cruising down streets, capturing images and cataloging the location of each business using a global positioning system receiver. Executives of A9 declined to describe specifically how they managed to capture and catalog so many photos in less than four months, but the company's director of programming said the technology they developed would now help them expand the service quickly.

A9, a small subsidiary of Amazon.com, introduced its web search service at www.a9.com in September, says the paper, joining an already crowded market. Google, which remains the dominant provider of search results, recently began offering localised search, as did Yahoo. In addition, a variety of online yellow pages are offered by local newspapers, telephone companies and the like. But none of them offer photos of businesses complete with pedestrians, bad weather and the occasional passing truck.
Initially, the local search service will offer photos from Manhattan, Chicago, Dallas, Boston, Seattle, San Francisco, Los Angeles, Atlanta, Portland and Denver, with the search results having related advertisements provided by Google.

US spectrum sale draws US$1b in bids

Mobile phone carriers and entrepreneurs in the United States bid nearly US$1 billion yesterday on the first day of a government auction of radio spectrum, the airwaves that carry wireless data and phone traffic.

The New York Times reports (27 Jan.) that the auction, for 242 licenses in big and small markets across the country, is scheduled to continue, with 31 of the 35 bidders that were initially eligible still participating, according to the Federal Communications Commission, the regulatory agency that is overseeing the auction.

The paper says that the FCC regularly auctions radio spectrum, as it did six times last year, but industry analysts said the auction that began yesterday was particularly significant because it included a major chunk of spectrum,and was the last time such a big auction was likely to take place until at least halfway through 2006.

Acording to the NYT,the spectrum is an essential asset to mobile phone companies, which can face network congestion - and thus dropped calls or poor reception - if they do not have enough spectrum. Demand for spectrum in the US has become more intense in light of increased use of mobile phones by consumers and of new phone-based services like e-mail messaging and games.

The paper said that the last major auction for this particular type of radio spectrum, commonly known as PCS for personal communications services, began on 12 December, 2000, and ended on 26 January, 2001, raising US$16.8 billion. That auction was for 422 licenses.

Ex - Microsoft worker pleads guilty to software theft

A former Microsoft employee pleaded guilty this week to selling the world's largest software maker's products for more than US$7 million for personal profit, according to federal prosecutors in the United States.

Finn Contini, 36, admitted to ordering software through Microsoft's internal systems under the pretense it was for internal use and using the money to buy real estate, cars and jewelry, the U.S. Attorney's office said, as reported by The New York Times/Reuters (26 Jan.).

The paper says that after similar incidents involving employees selling Microsoft's high-end software for personal gain, the company cracked down on criminal theft in late 2003, hired investigators and made changes to its internal ordering system in order to prevent future incidents.

Contini, an assistant at Microsoft, resigned in February.

Two other individuals who worked with Contini are scheduled for plea hearings later this month, reports the NYT.

AOL to drop direct usenet access

The New York Times/AP report (27 Jan.) that America Online will stop providing direct access to Usenet newsgroups, one of the earliest forums on the internet for people to discuss a large variety of topics from television shows to software to sex.

The move to drop AOL next month comes as usage of the service has shrunk to fewer than 1,000 users a month, says the paper, adding that AOL has some 23 million subscribers in the United States alone.

The paper says dropping Usenet will let AOL focus more on more popular community features such as message boards, chat rooms and online journals.

AOL users still would be able to access Usenet groups from other providers, including Google, which packages the newsgroups for free as "Google Groups".

SBC to cut 7,000 jobs after lower profits

SBC Communications, the United State's second largest local phone service provider, has announced that its earnings fell 16.7 percent in the fourth quarter and that it plans to cut 7,000 jobs this year in a bid to cut costs.

The job cuts for 2005 will be mostly made through attrition and are part of plans announced last November to cut 10,000 or more jobs by the end of this year, reports the New York Times (27 Jan.)

SBC said it earned $US754 million, or 23 cents a share, in the three months ended 31 December, compared with US$905 million, or 27 cents per share, a year earlier.

Revenue in the fourth quarter was US$10.3 billion, up from $10 billion a year earlier.

The paper reports that SBC had said it lost 266,000 lines in its core local-phone operation in the quarter, continuing a trend that began several years ago. Sales in that sector, which represents about half of SBC's revenue, dropped 2.7 percent to US$5.1 billion.

EMC aims 'switcher' campaign at Veritas users

The Register in the UK says (26 Jan.) that EMC is set to officially announce something called the "Safe Switch" program - a program centred on convincing customers to shift from their Vertias data backup products to rival software from EMC.

The online publication says the storage giant is looking to play on potential fears Veritas customers may have about the Symantec merger and is planning to tout upcoming releases of both Legato and Dantz products.

The Register says that while EMC plans to "unveil" Safe Switch, its executives actually started talking up the program earlier this month, telling the market that the idea is to create a complete, programmatic way of giving customers ways to switch to EMC products, and make the total cost of ownership easy for them to move.

EMC has said that specifically, it is going after (Veritas) Net BackUp in the data center with NetWorker, with disk-to-disk types of solutions.

According to The Register, EMC intends to offer support services as part of Safe Switch to customers moving to Oracle's 10g database. The idea being that customers upgrading their database might also be in the market for a new backup product. EMC, however, will have to be very convincing to shift customers from the popular Net Backup software to the NetWorker code acquired in its buy of Legato, reports The Register.

The publication says that this high-end competition between EMC and Veritas isn't terribly new, but what is new is that the Safe Switch campaign will see EMC using its Dantz software to really attack Veritas further down the food chain for the first time. EMC will provide the same type of support services to customers picking up new versions of Microsoft Exchange, and hopes to use the Dantz code to push Veritas' Backup Exec out of the way.

The Register says that this will likely be EMC's hardest sell of all given Backup Exec's dominant position in the Windows backup market. It says EMC might win over the miniscule Mac customer base with Dantz product, but Dantz is hardly the fist name that comes to mind for Windows Server backup customers.

Microsoft mulls charging for anti-spyware application

Microsoft is leaving its options open on charging for full versions of anti-spyware and virus disinfection tools, according to the company's chief security adviser.

The Register reports (27 Jan.) that Microsoft has just revealed to a security conference in London that there will be a second beta of Microsoft Windows AntiSpyware application, although the company remains unsure how the product will evolve from then on. The security chief said it could evolve into a consumer or enterprise product, and Tthere could be a basic and plus version.

The first beta of Windows AntiSpyware is free of charge, as is recently-released Microsoft Windows malicious software removal tool. The Register questions whether users will be prepared to pay extra for tools from Microsoft to clean up the malware mess that is "almost the exclusive preserve of the Windows desktop"

The Register quotes Microsoft's security chief as saying that the most significant information security issue today is presented by botnets, networks of compromised PCs used by professional criminals to spread spam or launch denial of service attacks. He talked up the role of Windows XP SP2 in combating the problem, suggesting the changes to IE made with SP2 (such as a pop-up blocker and download manager) made it a "new browser" that is "more resistant to attack", reported The publication.

The report also says that despite the emergence of Firefox as a serious competitor to IE, Microsoft said it had no plans to release an updated version of IE until the release of the next version of Windows, Longhorn. Longhorn is scheduled to arrive in 2006, but according to The Register, analysts say it is more likely to ship in 2007, and Windows 2000 users can expect one last service pack (SP4) before the product moves out of standard support in June 2005.