January 26, 2001
Morning
WorldCom May Slash Jobs
Ericsson Hangs Up On Cell Phone Production
12-Year-Old CEO Joins Canada Trade Mission
eBay Hack Suspect Probed On Other Crimes
FBI Probes Attack On Microsoft; Sites Down
NFL Blows Whistle On Super Bowl Ad Campaign
Autobytel.com Loses, But Beats Estimates
Commerce One Lays Off 150 AppNet Staffers
'Toxic Avenger' Hits Wireless Web
SIIA Sues Pirates After Software Auction 'Sting'
Afternoon
FCC Wireless Auction Pulls In $17 Billion
BMG, Napster Face Tough Road To Legitimacy, Says Report
Intersections, nVault Get More Tangled
Privista Soups Up ID Theft Monitoring Service
eToy Eyes Struggling eToys' Domain
E-mail Scammer Targets AOL Users
Hackers Attack Vatican Radio Web Portal
Autodesk Steers Into Automobile Navigation
SEC Report Asks Online Broker-dealers To Reassess
Lawmaker Demands Info-Security Report Status
Morning news stories
WorldCom May Slash Jobs
By Staff, Newsbytes
SAN FRANCISCO (NB) -- Telecommunications giant WorldCom Inc. [NASDAQ:WCOM] is expected to announce layoffs to its 77,000 workforce of between 10 percent and 15 percent.
The Wall Street Journal reported that the move comes in the wake of sluggish revenue growth, and is part of an ongoing plan to restructure and refocus the company, which includes the creation of a tracking stock for its slower-growth businesses, such as consumer long distance.
The cuts reportedly will come mostly in the slower-growth businesses, which will be placed in the tracking stock and have the MCI name. The WSJ said these businesses will include the company's pre-paid calling card and Internet dial-up businesses, as well as its consumer long distance, while the main part of the company will concentrate on data services to business users which shows higher growth potential.
While the company is set to report fourth-quarter earnings in the next week, the cuts will reportedly be the first set of layoffs for the company, which bought MCI in 1998, according to the WSJ.
Return to morning news headlines
Ericsson Hangs Up On Cell Phone Production
By Martin Stone, Newsbytes
STOCKHOLM, Sweden (NB) -- Giant Swedish telecom equipment maker L M Ericsson [NASDAQ:ERICY] announced it was hanging up on making its own mobile phones and casting off thousands of jobs after posting a disappointing fourth-quarter group operating loss of $155 million.
The company in a statement said it would fully outsource mobile phone production to the world's third largest electronics manufacturer, Singapore-based Flextronics International Ltd. [NASDAQ:FLEX], in a deal which will also see it transfer plants and staff in several countries to Flextronics.
Ericsson said that by year's end, it will have reduced the workforce in the Consumer Products Division, which is responsible for mobile phone production, to 7,000 employees from the 16,800 employed at the end of 2000, with about 4,200 staffers tagged to join Flextronics.
The deal with Flextronics includes the sale of cell phone plants in Brazil, Malaysia, Sweden, Britain and parts of the US. Flextronics will take charge of production and supply, with Ericsson maintaining custody of research, design, sales and marketing.
Flextronics already enjoys an outsourcing agreement with Motorola and manufactures phones for German electronics titan Siemens. The company said that production of Ericsson-branded phones will eventually take place primarily, but not exclusively, in low-cost locations, and is expected to begin around Apr. 1. Initially, Flextronics will acquire certain working capital and equipment and will assume management responsibility for certain manufacturing operations. Revenue to Flextronics is expected to be substantial, the company said.
"Flextronics will take responsibility for more than just manufacturing. We are being asked to manage our customer's operations, including new product introduction, supply chain management and logistics," said Flextronics Chairman and CEO Michael E. Marks, who added that his company has expanded its ability to conduct Internet-based order management and production control, design and industrialization, global manufacturing, and logistics management.
Ericsson said it expects to break even in the first quarter and has cut its forecast for global mobile phone demand this year. It expects group sales to rise by roughly 15 percent in Q1, with strong growth in its profitable mobile telecom network systems, but lower demand for handsets, estimating its market share at 500-540 million units.
Additonally, Ericsson said it has signed an agreement with Taiwanese electronic manufacturer GVC to complement outsourcing of product development and production.
Return to morning news headlines
12-Year-Old CEO Joins Canada Trade Mission
By Martin Stone, Newsbytes
LONDON, Canada (NB) -- A 12-year-old Web whiz kid reportedly will join about 300 business and political leaders accompanying Canadian Prime Minister Jean Chretien on a trade mission to China.
Keith Peiris, founder of the award-winning Web site design company Cyberteks Design in June 1999, said he is "just like any other kid," according to a Reuters report. But the company he heads lists about 25 clients in North America and he is presently faced with deciding whether to sell out to US or Hong Kong investors for several million dollars. Cyberteks has grown about 600 percent over the last seven months, Reuters said.
The eighth-grader, whose Web sites are dominated by music and animation, is cited by Reuters as saying one of his biggest headaches is convincing prospective clients that doing business with his firm is a sound move, despite his tender age. He and his father, Deepal, vice president of operations, are slated to spend nine days on the Team Canada trip to Beijing, Shanghai and Hong Kong, where Canada hopes to showcase the best of Canadian business.
Return to morning news headlines
eBay Hack Suspect Probed On Other Crimes
By Staff, Newsbytes
SAN JOSE, Calif. (NB) -- Jerome Heckenkamp, a recent probationary Los Alamos National Laboratory employee who is charged with hacking into a number of Web companies, including eBay, pleaded innocent to 16 federal charges.
The Associated Press reported that the 21 year-old is also being investigated for computer crimes while he was at the University of Wisconsin. One of the 16 federal counts already filed involves witness tampering. The Los Alamos lab didn't hire him until last June, where he worked for a time in the computing and network division where, reportedly, he had "no access to sensitive or privileged information."
The AP reported that Heckenkamp was ordered by the judge to post a $50,000 bond within the next week and to stay off the Internet. He is due in a San Diego federal court on Friday on 10 separate hacking-related counts.
Companies involved in his hacking exploits cited in the indictments reportedly include eBay Inc., Exodus Communications Inc., Juniper Networks Inc., ETrade Group Inc., Lycos Inc., Cygnus Support Solutions and Qualcomm Inc., where the AP said he installed codes that were intended to intercept user names and passwords.
Return to morning news headlines
FBI Probes Attack On Microsoft; Sites Down
By Dick Kelsey, Newsbytes
REDMOND, Wash. (NB) -- Microsoft Inc. [NASDAQ:MSFT] says a distributed denial of service (DDoS) attack brought down several of its Web sites Thursday, and access remained blocked early today.
The software giant said in a statement that it has notified the FBI. The Bureau headquarters in Washington, D.C. referred a Newsbytes call to the Seattle office, which had no comment.
"It is unfortunate that an individual or group of individuals would engage in this kind of illegal activity," Microsoft said in a news release issued tonight.
Microsoft.com, MSNBC.com, MSN.com and Hotmail.com remained blocked early Friday, EST.
The attack comes one day after Microsoft corrected a staffer's configuration error that led to a 23-hour outage that started Tuesday evening. The snafu prevented Microsoft's domain name servers (DNS) from communicating with the rest of the Internet, leaving access to company sites intermittent or blocked altogether.
Microsoft said the staffer's misconfiguration and Thursday's attack were unrelated.
A DDoS attack is carried out by hackers using special software, flooding a network and denying access to legitimate traffic.
All the safeguards and technological expertise will not protect a Web site from a denial of service attack, said Ryan Russell, an incident analyst with SecurityFocus.com. Even Microsoft.
"These are really hard to defend against," Russell told Newsbytes. "They can nail some of the best prepared companies on the Internet."
Russell said Microsoft technicians told him Thursday evening that they had found a way to block the attack. But the sites were inaccessible again late Thursday and early today.
"Some attacks are done well enough that you can't tell them apart from normal traffic, so you don't know what to block and what to let through," said Russell.
Microsoft said its servers were running normally throughout the event, but the attack prevented access to company Web sites.
Earlier this week a hacking group known as the "Prime Suspectz" took credit for defacing the New Zealand Microsoft site, which was altered to read: "Another Micro$oft was hacked?" and "Security wuz broke'n."
Microsoft officials said Wednesday that the New Zealand defacement was not related to the technician's error.
Last October a hacker broke into Microsoft's corporate networks through a security hole in the company's access system.
Return to morning news headlines
NFL Blows Whistle On Super Bowl Ad Campaign
By Michael Bartlett, Newsbytes
MINNEAPOLIS, Minn. (NB) -- Subjex.com, a Web portal owned by PageLab Network Inc. [OTCBB: PGBN], was forced to abandon its attempt to garner free airtime during CBS Sports' broadcast of Super Bowl XXXV Sunday from Tampa, Fla., the company said.
Subjex.com announced its "Super Bowl Sneak" contest Dec. 19, 2000. It offered game attendees a prize of $1,000 per second, up to $5,000, if they could get the company's Web address, along with their contestant number, to be shown by CBS television cameras when they panned the crowd. Michelle Angerhofer, vice president of business administration for Subjex.com, said attorneys for the National Football League responded immediately.
"We had the contest on our Web site on Dec. 20. On the afternoon of the 21st, they faxed us a letter," she said. "On the 22nd, we received the letter by express courier."
Angerhofer said the NFL first asked Subjex.com to modify or abandon the contest because it contended the contest infringed on the league's trademark by use of the registered phrase "Super Bowl."
"We tried to comply, we modified," she recalled. "We changed the name of the contest and put a disclaimer in the rules to let people know that they might be kicked out."
The NFL said that the nature of the contest was a violation of its rules, Angerhofer said, because spectators are not allowed to engage in advertising. The league said people wearing the Subjex.com Web address on their clothing would be barred from entering the stadium, and anyone seen holding up a sign would be ejected without a refund, she added.
Subjex.com posted an excerpt from one of the letters the NFL's attorneys sent regarding the conditions of use printed on the back of a ticket for the Super Bowl. "This ticket is a revocable license and … the NFL may refuse admission to, or eject, any ticket holder without refunding any portion of this ticket purchase price if the holder fails to comply with the terms and conditions contained herein, or is deemed by the NFL to be disorderly."
"We put the excerpt on our Web site to let people know that they should not try to participate in the contest," said Angerhofer. "The NFL threatened to hold Subjex.com liable for damage or losses as a result of the contest because the advertisers pay to have exclusive rights at the Super Bowl."
Subjex.com officially cancelled the contest Jan. 5, but Angerhofer said the flap has generated more publicity than if it had occurred.
"There was an article in the Star Tribune, one of the two local newspapers in Minneapolis," she said. "A reporter from Sports Illustrated magazine also called this week, and Andrew Hyder, our CEO, has done interviews for one of the local television stations."
Angerhofer said she researched NFL guidelines on signs when she prepared to stage the contest. She said the league allows handheld signs, as does Raymond James Stadium, the site of the game, as long as the placards do not obstruct the view of other spectators.
"We were originally planning to sign people up in the parking lot at the game and give them signs," she said.
Representatives of CBS Sports and the NFL did not return calls for this story.
Return to morning news headlines
Autobytel.com Loses, But Beats Estimates
By Dick Kelsey, Newsbytes
IRVINE, Calif. (NB) -- Motor vehicle sales site Autobytel.com Inc. [NASDAQ:ABTL] Thursday reported fourth-quarter revenues of $16.8 million for a loss of 22 cents per share, four cents less than analysts predicted.
While up 35 percent over the year-ago quarter, revenues were down four percent from the third quarter. Operating expenses were down nearly 9 percent, from $25.3 million in the third quarter to $23.1 million in the fourth quarter.
For all of 2000, Autobytel lost $29 million, or $1.45 per share, 5 cents more than analysts' estimates, FirstCall/Thomson said. Revenues for the year were $67 million, 65 percent greater than $40 million in 1999.
"Profitability in the third quarter of 2001 remains our consuming goal," Autobytel.com president and CEO, Mark Lorimer, said in a news release. "Despite an economic slowdown in the latter part of the year, our revenue remains strong."
Return to morning news headlines
Commerce One Lays Off 150 AppNet Staffers
By Michael P Bruno, Washtech
BETHESDA, Md. (NB) -- E-commerce software and services company Commerce One Inc. last week laid off roughly 150 workers, including about 75 employees who joined the company last fall as part of Commerce One's acquisition of Bethesda, Md.-based AppNet Inc.
Of those fired, only "a handful" likely were cut from Bethesda or other Washington, DC-area Commerce One offices, company spokesperson Andrew McCarthy said in an interview. "We don't have the details to provide," he said, adding that Commerce One was not planning on announcing the cutbacks.
AppNet's former headquarters in Bethesda were converted into Commerce One's Global Services headquarters after the acquisition, which closed Sept. 14. At that time, the newly combined group had 44 offices worldwide - including Maryland facilities in Columbia and Laurel, and Virginia branches in Arlington, Charlottesville, McLean and Winchester - and more than 2,900 total employees.
Three Commerce One representatives told Washtech.com that the "trimming" action, which cut around 4 percent of the firm's total workforce, was aimed at culling inefficiency from the Pleasanton, Calif.-based e-commerce services provider after it closed several acquisitions. AppNet was bought in a stock swap worth around $2 billion.
A count of remaining Commerce One employees, especially those in the Washington area, was not immediately available from company representatives. McCarthy said there are no expectations of further layoffs, though Commerce One will continue to respond to market conditions, as it deems necessary.
Return to morning news headlines
'Toxic Avenger' Hits Wireless Web
By Michael Bartlett, Newsbytes
PARK CITY, Utah (NB) -- In what's being called a first and a Web-entertainment milestone, cult movie "The Toxic Avenger" soon will be made available for viewing on wireless, Internet-enabled portable devices.
Independent film studio Troma Entertainment and Kanakaris Wireless [OTC: KKRS] announced at this week's Sundance Film Festival a partnership that will result in the wireless movie release..
After it is released, Toxic Avenger fans will be able to access the film via laptops, desktop PCs or Internet-enabled television sets, the two companies said. It will be available some time in the next seven to 14 days on the Kanakaris Web site, www.CinemaPop.com.
Lloyd Kaufman, president and co-founder of Troma Entertainment and creator of the Toxic Avenger series, characterized the movie's release on the wireless Web as a victory for freedom of expression.
"This is one small step for mutants, and one giant leap for independent cinema," Kaufman said. "People do not get to see the movies they want because movies are controlled by devil-worshipping, giant conglomerates. Toxic Avenger and other independent films are blacklisted by the five giant cartels. You cannot rent Toxic Avenger at Blockbuster because it is owned by one of the cartels."
Kaufman praised Kanakaris Wireless' technology, saying that it is "unlike anything else" on the market today.
"How does the public get new stuff? Through the Internet and new technology," he said. "Kanakaris Wireless' technology will give art back to the people. This wonderful technology will help give people art they want to see."
Alex Kanakaris, CEO of Kanakaris Wireless, said wireless viewing on portable devices is possible because of the company's encoding process, which it calls CinemaWEAR. The last four letters are an acronym for "wireless entertainment asynchronous remotely," as well as a reminder people can "wear" the device, he explained.
"CinemaWEAR improves the frames per second rate that people can use to download video on anything, from a PocketPC to a TV," Kanakaris said. "We already had three encoding levels, for 56K users, 100K users, which would be DSL (digital subscriber line) and 300K users, for people that have a T1 line. We developed a fourth level for the PocketPC. As far as I know, we are the only company that has it, so I cannot say what the number is," he added.
Kanakaris said CinemaWEAR is fully compatible with Microsoft's WindowsMedia and the Windows operating system in the pocket PC. He praised Troma Entertainment as a studio with the "exact same demographics" as his company. Kanakaris also said he would like to collaborate with all studios to encode films for wireless distribution.
"I am on a mission to digitally encode the movies of Hollywood. I want to make them available anywhere there is a virtual theater of a wireless device. I will encode $1 million of work and front the costs against future revenues," he said.
Troma Entertainment had another announcement for Toxic Avenger fans. The company said a new film, "Citizen Toxie - The Toxic Avenger IV" is coming soon.
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SIIA Sues Pirates After Software Auction 'Sting'
By David McGuire, Newsbytes
WASHINGTON, D.C. (NB) -- The Software & Information Industry Association (SIIA) sued a pair of alleged software pirates after snaring the defendants in an e-mail "sting" operation, an SIIA official said Thursday.
Upon being alerted by a tipster that the alleged pirates were offering illegally copied software to online auction participants, SIIA took matters into its own hands, arranging and completing a transaction with the eventual defendants in the case, Peter Beruk, SIIA's vice president in charge of anti-piracy told Newsbytes.
The mini-sting operation was the first of its kind for SIIA, but it won't be the last, Beruk said. "We are not going to be sitting around waiting for this to happen, we will pursue you and pursue you vigorously," Beruk warned potential pirates.
One of the high-tech industry's most ardent piracy watchdog groups, the SIIA released a study last year claiming that more than 90 percent of all software sold on online auction sites was pirated.
While Beruk said that major online auctioneers such as eBay and Yahoo have taken some steps to address the problem of pirated goods sold on their sites, the defendants in the case SIIA filed may represent a new breed of software pirate.
Rather than attempt to sell their goods on recognized online auction sites, the defendants monitored legitimate online auctions and then sent unsolicited e-mails to auction participants offering to sell them pirated versions of the programs for which they were bidding, Beruk said.
After "data-mining" the auction sites for bidders' names and e-mail addresses, the defendants would attempt to underbid the auctioneers, Beruk said.
Beruk said that the SIIA is publicizing the case largely in an attempt to alert consumers to this latest form of solicitation.
The defendants in the case Julian Kish and Michael Chu sold pirated copies of software worth thousands of dollars to SIIA, Beruk said.
SIIA will file more cases like this one shortly, Beruk said.
Return to morning news headlines
Afternoon news stories
FCC Wireless Auction Pulls In $17 Billion
By Brian Krebs, Newsbytes
WASHINGTON, D.C. (NB) -- Bidding on some of the nation's most coveted wireless telecommunications licenses came to a standstill today, bringing an end to a month-long auction that has earned the government a record $17 billion.
Partnerships of smaller wireless carriers backed by a few well-heeled telecom companies are walking away with a majority of the licenses for the most populous and lucrative urban areas, according to the Federal Communications Commission (FCC).
Cellco Partnership, a group backed by Verizon Wireless - itself a partnership between Verizon Communications and Vodafone PLC - spent nearly $9 billion to win 113 licenses. Cellco won the highest bids in 9 of the top 15 US markets, including two licenses in New York City for which it paid more than $2 billion apiece. The partnership also claimed licenses in Los Angeles and Chicago for a half-billion each, another pair in Boston, as well as key licenses in San Francisco, Philadelphia and Washington, D.C.
Alaska Native Wireless, a company backed by AT&T Corp. paid a total of nearly $3 billion for 44 licenses, including one in New York City for $1.5 billion, and another in Los Angles, for which it paid more than $430 million.
Salmon PCS, a partnership supported by SBC Communications, spent nearly $2.4 billion for 79 spectrum licenses, including $400 million for one in Los Angeles, and $200 million for another in Dallas.
In all, the three groups backed by the nation's largest phone companies gobbled up roughly 55 percent of the 422 licenses on the auction block.
The block of C and F class licenses put up for sale in the auction originally were won at auction back in 1996 by NextWave Communication Inc., which eventually was forced to give up the airwave licenses after it missed several payment installments and filed for bankruptcy protection.
After lengthy court battles with NextWave, the FCC won the right to re-auction the licenses, with an eye toward creating more competition in the wireless market by gearing the auction toward some of the nation's smaller carriers.
The FCC had originally intended to leave open the licenses only to so-called "entrepreneurs." These smaller wireless companies - defined as having less than $125 million in revenues and less than $500 million in assets - could then qualify for a 25 percent bidding credit.
After heavy lobbying by the larger phone companies, the FCC opened bidding on two-thirds of the licenses to all parties, and reserved a third of the licenses in larger markets and two-thirds of the licenses in smaller markets for entrepreneurs.
Yet, in order to compete for the scarce airwaves in some the most expensive markets, many of these smaller companies partnered with some of the largest players in the telecom industry, including Verizon, AT&T, SBC, VoiceStream, and Cingular, a joint venture between SBC Communications Inc. and BellSouth Corp.
With all the heft of the heavy hitters behind them, however, many of these smaller "entrepreneurs" claim to have few - if any - assets in order to qualify for the 25 percent credit and a chance to bidding on the licenses restricted to smaller bidders.
Alaska Native Wireless, for example, told the FCC it had no revenues and assets of little more than $1,000. Yet, according to the FCC, AT&T holds nearly a 40 percent interest in the company. Salmon PCS, for instance, is 85 percent owned by Cingular, according to FCC documents. DCC PCS, a company in which AT&T has expressed buying a 10-15 percent interest, was the high bidder on 14 of the licenses, including a $172 million Top 15 license for Washington, D.C.
While larger partners are permitted to have a majority ownership in the partnership, they may not have a controlling stake in the smaller company, according to FCC rules.
But that hasn't stopped larger partners from in effect begetting smaller companies to take advantage of the FCC's revised rules, said Eugene Signorini, a wireless analyst with the Yankee Group.
"A lot of these companies were probably created to be a bidder in this marketplace and to win spectrum, so they exist because of the larger partner," Signorini said.
Indeed, a cursory investigation into many of the lesser-known names of eligible bidders in the wireless auction turned up many that established their business operations within the past year. Few, if any, even have a presence on the Web.
Still, Signorini said, the FCC designed the rules, and the commission has only itself to blame if the auction did not turn out to be a huge power play for the smaller companies.
"There's been a lot of criticism that this was designed to give small businesses more opportunities, but the fact is that the rules were designed in such a way that they allowed some larger companies to partner with smaller competitors," Signorini said. "Whether or not this really goes against what the FCC had envisioned, the market simply took advantage of the rules the way they were laid out."
Now that the auction is over, it will be up to FCC officials to determine whether license winners will be qualified to keep the spectrum, as each winner must prove that they control the company and that their revenues and asset claims were not far off the mark.
Return to afternoon news headlines
BMG, Napster Face Tough Road To Legitimacy, Says Report
By Kevin Featherly, Newsbytes
BONN, Germany (NB) -- The possibilities are almost unfathomably complex and varied, and the outcome stands to transform the face of the music industry. But Germany's media empire Bertelsmann AG and its new partner Napster face tough times ahead in their efforts to turn the outlaw music-swapping service into a legitimate business.
So says Frank Luby, a senior consultant with Bonn, Germany-based market strategists Simon-Kucher & Partners. Luby is one of three authors of a new 13-page report, "Selling Online Music," that outlines the travails Bertelsmann's BMG Entertainment music label and Napster face - along with the rest of the music industry - as they try to make digital music the industry's next-generation enterprise. Luby spoke with Newsbytes today by phone from Germany.
"Our point is," Luby said, "that none of the labels - not even Bertelsmann - knows what that (model) is going to be, or how to make a business out of it. They're going to start from scratch."
Napster gained fame - and some 45 million users - by making music free to the masses. With a simple software download, music fans 18 months ago became capable of swapping tunes with what quickly become a gigantic community of fellow music lovers.
Suddenly without poring over catalogues or hunting through Music-Go-Round bins, the most obscure live or bootleg recordings of John Lennon were available instantly, along with the most recent Radiohead offerings, to anyone who wanted them. Recordings by Sinatra, Santana and Sonic Youth all could be obtained at once, without paying, just by dialing into Napster.
It was Nirvana, so to speak, to music fans. But it was Poison to a music industry that saw the upstart as a threat to its core business - and as an illegal enterprise facilitating the wholesale violation of copyrights belonging to labels, artists and publishers. Retaliating quickly, five major labels, a number of independents, and many publishers all took the company to court.
Bertelsmann was among those. But in October, recognizing a possible boon and the opportunity to commercialize a service that had already proven a massive popular success, the German media company did an about-face, invested in Napster and purchased options on the company that it would cash in if Napster and Bertelsmann could work together to turn the file-swapping service into a legal, money-making company.
It's a big if, according to Luby.
For one thing, he said, nobody knows what music is worth in digital form. "If they come in and charge a Napster user a subscription fee of $7.50 a month to continue what they're doing ... if that price does not come out of a very well-constructed piece of research, they don't have any idea if that's too high," Luby said.
"They also don't know if they could be charging them $11 or $12 for the same thing, or whether they should be charging them nothing and charging them on an individual by-usage basis, or even advertising," he added. "There's a lot of different revenue streams open to try to get money out of this."
And if there are a thousand-and-one ways to charge for the service, there are a million-and-one ways to package it. Online, the report says, the only real constraints are the capacity of a users' hard drive, the quality of the Internet connection, and their ability to produce their own tapes or CDs.
"Finally freed from the constraints of vinyl and its successors," the report says, "record companies can bundle music as they see fit in order to exploit customers' desires. Redefining these bundles attractively will be at the heart of any successful strategy for the online sale of music, because the possibilities - in terms of unit size, artists, genres, etc.- are nearly limitless."
But the issues are so complex, Luby says, that the danger for BMG and Napster, and for any other music industry player, is that they will fall back on the known and the familiar, trying to overlay outworn concepts on a new medium where, Luby suggests, the old ideas can't work.
"If they take a known model, if they take elements that we're all familiar with and mix them together - the tired subscription and usage model - they're making a big mistake," Luby said.
They'd be making just as big a mistake, Luby says, if they continue the more than 40-year-old music industry practice of selling music primarily in album form. In the digital world, he pointed out, music can be sold as songs, or as radio-style play lists of favorite tunes, or as small packages of music in the old extended play (EP) format. Or, choose your own possibility.
"The only thing they have to go on is this accumulated, dusty collection of experience of doing the same old thing, whether it's on CD or vinyl or cassette, since LP records first came out," Luby said. "They've got to make a break with that, and that's the hardest amount of work.
"If they blow it," he added, "it's anybody's guess what happens next."
The problem is, according to Luby, they could blow it. "'Blowing it' could be that they come up with something that doesn't click because they don't do their homework," he said. "To 'blow it' could be that they don't do anything at all and the whole thing falls through. And 'blow it' means that they could do something that's only halfway there."
Music is more than the mere contents of a CD, says Luby. It's concerts, it's merchandise, it's liner notes, it's community. It's an experience, both shared and individual. Breaking the industry mold means truly recognizing and understanding and integrating all those factors into a Web business that takes full advantage of the medium's opportunities, Luby said.
"Now," he said, "they've got an opportunity to find a way to really capture that systematically. As an avid music fan, I've got my fingers crossed that they do it right. But that's where the road is hard."
"It's hard," he said, "because they've got so many options. And we're afraid they're going to go a different shade of vanilla."
Return to afternoon news headlines
Intersections, nVault Get More Tangled
By Michael P Bruno, Washtech
CHANTILLY, Va. (NB) -- Moving in the direction of an anticipated acquisition, consumer protection services provider Intersections Inc. has tapped the leader of Toronto-based nVault Technologies Inc. to be its chief technology officer.
Shiraz Bardai, nVault cofounder, president and chief executive, will continue working at both companies, shuttling between Intersections' Chantilly, Va., headquarters and Canada each week, Intersections Chief Financial Officer Kenneth D. Schwarz said in an interview today.
The hiring follows a partnership unveiled two weeks ago where Intersections will license and market the Canadian company's credit, privacy and credit card fraud and loss management software - with the intent of taking over the firm within three years, Schwarz said.
Founded in 1998, though not launched, nVault has developed secure online services to benefit consumers in dealing with privacy and credit card fraud and loss issues. Schwarz said the two companies were introduced last spring by a financial institution known to both, and eventually the they decided on the partnership rather than nVault launching on its own.
"Our intent is to buy," Schwarz said about nVault. Terms of the deal involve an undisclosed "cash deal for a set amount," which is expected to occur in the next three years, he said.
Meanwhile, the partnership with nVault will let Intersections speed development to more efficiently and securely deliver products online, as well as provide its customers with increased online services and wireless alert messaging, Intersections said.
"They are really are our development team, in Canada," Schwarz said, further describing the current relationship as an outsourcing model.
Created in 1996, privately held Intersections provides consumers with products to protect and manage credit-related financial information. Offerings include credit protection and notification services, identity theft insurance programs and online privacy protection.
Intersections has about 175 workers, according to its Web site. Loeb Holding Corp., Conning Private Capital LP, RS-Co Investment Fund (Robertson Stephens fund) and its own management have all pitched in around $50 million in invested capital, the site said.
Joining Bardai as a new Intersections employee will be Robert LaFin as chief marketing officer.
Return to afternoon news headlines
Privista Soups Up ID Theft Monitoring Service
By Sylvia Dennis, Newsbytes
NEW YORK (NB) -- Privista has launched a privacy protection service called ID Guard. In return for $19.95 a year, the service allows users to be kept aware of changes to their credit profile, as well as alerts them to any changes to their personal profile.
ID theft is now a growing problem in the US credit industry, with several hundred people a month discovering that their identity has been "borrowed," usually for thieves to rack up large debts on credit cards and personal loans.
By maintaining a close watch on a users' credit profile, Privista says it can keep a watch on someone's identity and alert them, usually via e-mail, if something odd happens.
A spokesperson for the company told Newsbytes that the service uses credit profiles maintained by Equifax, sending a weekly update to subscribers, and monitoring up to 15 of their credit file attributes.
Originally launched in a beta test version last October, ID Guard has now been enhanced as a commercial offering, allowing users to monitor for suspicious changes in their credit file, such as changes to their address, a new account being opened, unusual credit card account changes, and a change in the subscriber's Social Security number.
The updated ID Guard now flags unusual changes to individual credit cards, not just changes to a customer's combined credit balance.
With this enhancement, Privista says that online users can better manage their spending, as well as more quickly identify potential credit fraud.
Since launching the trial version of ID Guard last October, Privista says that around 10,000 people have registered for the service.
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eToy Eyes Struggling eToys' Domain
By Martin Stone and Steven Bonisteel, Newsbytes
SAN DIEGO (NB) -- As online toy store eToys Inc. [NASDAQ:ETYS] struggles to pay its bills, a Swiss online artist cooperative is turning to a US court in a bid to take the retailer's Internet address and quash its trademarked name.
The move, announced Thursday by Zurich-based etoy (all lower case - no "s"), came on the same day that Los Angeles-based eToys said it had lost nearly $86 million in its last quarter and now has only enough cash to keep its doors open until about the end of March.
EToys said it is meeting with creditors in an attempt to sort out its debt. However, the new lawsuit casts a shadow on what is seen as one of the company's valuable assets - its etoys.com domain name (although it also holds toys.com).
The lawsuit, filed in a US District Court in San Diego, appears to mark the rejection of a settlement offer made by eToys early last year when it was the retailer who was the instigator of legal action.
At that time, eToys dropped a lawsuit it had filed in September 1999 and which accused etoy of trademark infringement. The US company had already gained a preliminary injunction ordering the closing of the Swiss group's etoy.com Web site before the high- flying retailer had a change of heart, dropped the suit and offered to pay up to $40,000 to the Swiss group to help it cover its legal fees.
But the new lawsuit alleges that the "etoys" trademark owned by the retailer violates Swiss etoy's rights in its own "etoy" trademark.
The artists' group says it wants eToys' trademark cancelled and it wants to be awarded control of the retailer's etoys.com domain name.
"Nobody invests to lose money," said a spokesman for etoy. "We have attempted to negotiate a solution to this dispute for several months without success. We have several projects on hold until this situation is resolved. It just doesn't make business sense to spend money to promote a global brand when there is a dispute over its ownership. We owe it to all of our stakeholders to invest our resources wisely."
EToys told its own investors Thursday that a group of major creditors - including toy companies such as Mattel, Hasbro, and Lego Systems - will wait until the end of this month before taking any action on the debts.
Etoys said sales for the most-recent quarter (its third) totaled $131.2 million, a 23 percent increase over revenue of $106.8 million in the same period a year ago. However, it also reported a net loss of $85.8 million, worse than the $75.5 million it lost in the third quarter of 1999. That loss works out to 62 cents a share.
Excluding deferred compensation, amortization costs and other one- time items, eToys' loss was calculated as 52 cents a share, higher than the 46 cents a share analysts surveyed by First Call/Thomson Financial were predicting.
Analysts' expectations had already been lowered by a warning from the company in December. Early this month, eToys said it would lay off some 700 workers, abort its efforts in Europe and close some warehouses in the US.
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E-mail Scammer Targets AOL Users
By Martin Stone, Newsbytes
DULLES, Va. (NB) -- Investigators at America Online [NYSE:AOL] are attempting to track down a suspected scammer who sent e-mails this morning to an as yet undetermined number of AOL subscribers, informing them they had won a prize in a random selection.
The e-mail, which reads, "Congratulations (You've won!) Was posted about 2 a.m. EST Friday morning and originates with a sender known as "Wooouuuu".
The letter contains the message, "Dear AOL Member, we at AOL are now selecting random user's (sic) to win prizes, and you were one that we picked, we pick 50 members each month! To claim your prize, just Click Here..."
Clicking on the hyperlinked line sends users to a Web page at http://www.cybcity.com/whoo/0.htm, which appears to be a legitimate AOL site, sporting the company logo and hot linked to several AOL channels. The message on the page asks winners to submit their screen name and password in order to claim their prize. The information is claimed to be addressed to SteveCase@aol.com, AOL's founder and CEO.
An e-mail query by Newsbytes to Case's office produced the reply that, "The letter in question is not legitimate. None of the statements are credible and we would urge you not to comply with its instructions in any way.
"Please be aware that an AOL representative will never ask for your password or billing information online. On a similar note, an AOL representative will never send you a file attached to an unsolicited email."
The reply also requests that any AOL member receiving a suspicious e-mail, especially one requiring an attachment download, should forward the message to TOSFILES, and report all inappropriate activity to NOTIFY AOL.
Earlier, an AOL spokesperson told Newsbytes the company is not running a contest, had no knowledge of the e-mail or the site and stressed that AOL representatives never ask members for their passwords. She said the information would be passed along to the company's operational security department, which is presently attempting to establish the site's legitimacy.
As of 3 p.m., CST, the questionable site was still up and accessible.
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Hackers Attack Vatican Radio Web Portal
By Sylvia Dennis, Newsbytes
VATICAN CITY (NB) -- Vatican Radio, the official radio broadcaster of the Vatican, has been hacked, although the site was only disrupted for a short time Thursday.
A report in Il Messaggero, the Italian daily newspaper, today, says that disruption on the busy site was minimal.
The Vatican's press office said that, since the site handles reports from 200 journalists around the world and broadcasts more than 42,000 hours a year of radio transmissions in 40 languages, the system hack was picked up very quickly.
Il Messaggero says that the hackers are thought to originate from Brazil. Sources suggest that Interpol and the Brazilian authorities are now investigating the hackers, who are known to have attacked other religious sites around the world.
Hacker sources suggest that the Brazilian hacker group carried out a number of attacks on the Vatican Radio Web site, culminating in a distributed denial of service (DDOS) attack.
However, because the site handles such a high volume of traffic, the DDOS attack only appears to have been partially successful.
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Autodesk Steers Into Automobile Navigation
By Sylvia Dennis, Newsbytes
LONDON (NB) -- Autodesk [NASDAQ:ADSK] is putting more of the "auto" back into its business plan by branching out into the wireless location industry. Autodesk has partnered with Ericsson [NASDAQ:ERICY]; Targa Services, a division of the Fiat motor company, and Geodan Mobile Solutions, to offer in-car navigation services.
The firm has formed a new division, Autodesk Location Services, and plans to tap its software development expertise for what it says is an high growth, high value market.
Autodesk says that the new division is taking a business-to-business- to-consumer (B2B2C) approach that targets wireless carriers/operators and vertical markets that in turn will provide location services to mobile users.
Plans call for the firm to officially announce Autodesk Location Services at the 2001 GSM World Congress when it opens in Cannes, France, on Feb. 20.
Carol Bartz, the company's chairman, said that the wireless generation presents an enormous opportunity for Autodesk. "We've got the right mix of experience, technology and business relationships to seize and define this emerging market," she said.
Autodesk says that it is no stranger to the telecommunications software industry, having provided technology to customers such as AT&T, Sprint and Telia for five years.
The firm says it is already working with Targa Services to deploy wireless location-based services under Targa Connect brand that will soon be available in the new Alpha Romeo 147 car.
Plans call for the Targa Connect services to allow carriers/operators to send information directly to an in-car information system for selection of preferences and navigation. Both firms say they are working to extend these services to users of cellular phones and other wireless devices.
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SEC Report Asks Online Broker-dealers To Reassess
By Staff, Newsbytes
WASHINGTON, D.C. (NB) -- Brokerage houses offering online trading need to do a better job of making sure their systems work as promised. And they should seek to better educate their customers about the benefits - and potential limitations - of online investing.
Such are the views contained in a study by the Securities and Exchange Commission (SEC) of more than 200 online trading firms. In it, regulators say that the most common investor cokmplaints have been failures or delays in processing their orders online, difficulty in accessing their online accounts, and errors in processing orders.
The SEC estimates that roughly 7.8 million investors have taken to trading online, making an average of 807,000 trades per day. Yet, the commission has also received a large volume of investor complaints that would appear to indicate that many investors are somewhat new to investing - particularly the online variety - and could use a bit more guidance.
For example, many customers have complained that they did not understand some of the essential terms of their margin accounts. The SEC found that about one-third of firms did not provide or make available any information about margin accounts, aside from the information contained in the margin agreement itself.
Many of those that did try defining the terms of margin investing did so in somewhat lopsided ways, the report notes. One firm, for example, defined a margin balance but left out the definition of a margin call, the crucial moment when a broker-dealer asks for additional cash or collateral to guarantee performance on an investment that has tanked. According to the SEC, more than a few investors have been outraged to learn that their margin accounts have been liquidated without having been given the change to provide additional funds.
As a result, the SEC is asking firms to reevaluate the margin information they provide to make sure it is easy to find and written in plain English.
The SEC report also documented numerous complaints about duplicate and misplaced orders, as well as cancellation orders, which were never processed. The commission also warned brokerage firms against hosting online chat rooms or bulletin boards where specific recommendations were made by participants in response to questions posed by other chat-room occupants.
"If firms do not intend to endorse the statements of forum participants, they should consider placing a prominent disclaimer at the forum's point of entry and on the banner along with the firm's name and/or logo indicating that the firm does not intend to make or endorse the recommendations made in the forums," the report notes.
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Lawmaker Demands Info-Security Report Status
By Brian Krebs, Newsbytes
WASHINGTON, D.C. (NB) -- The chairman of the House Commerce Committee today demanded to know the status of an overdue report on the Clinton administration's efforts to protect the nation's most critical computer systems from cyber-attacks.
In a letter addressed to Richard Clarke, the national coordinator for security, Commerce Committee Chairman W.J. "Billy" Tauzin and ranking Democrat John Dingell, D-Mich., urged Clarke - a National Security Council veteran - to report back on the whereabouts of the study that now is nearly two weeks overdue.
The 200-page study was reportedly finished more than a week before Clinton left office, but never was signed by Clinton or forwarded to Congress, as required by law.
The letter also touched on Clarke's appointment as head of the newly created National Infrastructure Assurance Council, a group conceived of in 1997 by White House advisors as a collection of leading corporate CEOs representing virtually every major infrastructure sector - including energy, telecommunications, transportation and banking. The council was designed to advise the US president of a cyber-attack on one or more of these critical sectors.
While Clinton signed an executive order in July 1999 to create the NIAC and assign its members, he delayed naming them until his final day in office, an action that was condemned as a mean-spirited partisan jab that could endanger the group's legitimacy with the Bush administration.
"As the committee with jurisdiction over many such systems, I am concerned that President Clinton waited until his last full day in office to finally appoint the first group of members to this critical council," the two lawmakers wrote.
The committee asked Clarke to provide a copy of the report, and to indicate which agency or entity recommended each of the of 21 NIAC appointees.
In an interview Tuesday, John Tritak, the head of the Critical Infrastructure Assurance Office - an agency that acts as a liaison between the White House and various government agenices on information security matters - said the action was unfortunate; not because of the quality of the people chosen, but because its timing.
"This organization should have been stood up a long time ago, and the fact that it was not raises the issue of why the administration is doing so on its way out the door," Tritak said. "It boils down to a question of propriety of an outgoing administration picking a team that's going to advise a new administration."
While the Bush administration will inherit Clinton's appointees, he is in no way bound by those choices, as the NIAC was created by a presidential directive whose charter expires in July 2001.
"My guess is President Bush will decide by that time whether he intends to proceed on this issue and, if so, he will probably hand pick those he feels are best suited to the task and to his purposes," Tritak said.
The Commerce Committee asked that Clarke submit the relevant information by Jan 30.
Clarke could not be reached for comment.
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