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The week in review: Napster's days are numbered

A court ruling allows Napster users to continue swapping music for now but opens the door to millions of dollars in damages that could cripple the service.

Napster had its day in court this week, but the future of the popular file-swapping service is still up in the air.

A panel of appeals judges stopped short of shutting down Napster, and sent a lower court ruling back to a district court with instructions to create a narrower ruling that would still require Napster to block the trading of copyrighted music.

The judges also warned that Napster could be liable for huge financial damages--a weight that just might sink the service for good.

Late Thursday, the Recording Industry Association of America (RIAA) filed suggestions in federal court on what kind of restrictions should be imposed on Napster. Several hours later, the music-swapping service announced plans to use digital copy-protection technology that would prevent such activities as burning CDs.

Despite the recent news, peer-to-peer networks are far from dead--just more cautious. The ruling has forced some services to take a hard look at what types of files are shared over such networks, and whether they too could be held liable for trading copyrighted materials.

Policing such networks will also become a major issue in the future, as technology and methods used for such a task have yet to be perfected.

Trouble rushes the Net
A virus posing as a photo of Russian tennis star Anna Kournikova spread aggressively across the globe this week. Although the outbreak spread quickly, most companies were prepared to contain the virus and experienced little downtime as a result.

A Dutch virus writer known as OnTheFly admitted to writing the virus, and soon after was arrested by Dutch police authorities. The FBI has also opened an investigation into the case.

Experts claimed that the virus spread nearly as widely as the Melissa virus that hit the Net almost two years ago. The Computer Emergency Response Team (CERT) Coordination Center at Carnegie Mellon University said that more than 100 sites reported encountering the virus on the first day of the outbreak.

Earnings meltdown
PC companies sounded a somber note this week with a number of earnings warnings and shortfalls. For one, Dell Computer missed lowered fourth-quarter projections and revised its guidance for the current quarter.

Like many other PC makers, Dell issued an earnings warning last month, citing the sluggish U.S. economy and slowing PC sales. And as previously reported by CNET, Dell said it will cut 1,700 permanent jobs, its first major layoff since the company's founding in 1984.

Hewlett-Packard matched lowered analyst expectations for its fiscal first quarter but told investors to anticipate only single-digit revenue growth this year. CEO Carly Fiorina said her efforts to spur server sales partly backfired when HP salespeople started treading on the turf of sales channel partners that sell HP equipment.

Canadian communications equipment powerhouse Nortel Networks issued a profit and revenue warning, blaming the slowing U.S. economy for hurting the company's sales. Nortel previously lowered its financial performance estimates, but executives now believe the situation is more dire than expected.

Nortel also said it expects to lay off 10,000 employees, up from previously announced numbers. Nortel's news shook markets on Friday, leading other telecommunications equipment makers lower.

Coming attractions
Photo giant Eastman Kodak unveiled a portable device that combines a digital camcorder, an MP3 player and a digital still camera. The new Kodak mc3 lets people preview and review both video and photos. With the device, consumers can record up to 20 minutes of video using Apple Computer's QuickTime on a 64MB Compact Flash card.

Toshiba publicly unveiled Advanced Lithium Batteries (ALB), which will allow electronics manufacturers to create small devices with the staying power of larger ones. Similar to lithium-polymer batteries, which are made of a gel, ALB technology derives its power from a polymerlike liquid. Both can be molded to about 1 millimeter, compared with standard lithium-ion batteries that are about 5 millimeters thick.

ZF Linux Devices, which makes a low-cost microprocessor called the MachZ, has developed a blueprint for an inexpensive PC called the Z-Port. By buying MachZ chips from the company and adopting the Z-Port blueprints, Internet service providers can put together a PC for $250--a cost that could be subsidized through long-term contracts with subscribers.

And in other gadget news, Apple is touting its new iDVD software as a way to create movies that people can watch on consumer DVD players, but not all machines actually support discs made with Apple's new recordable DVD drive. The issue apparently isn't with Apple software, but with the DVD-R standard used by the SuperDrive, a drive from Pioneer that plays and writes both CDs and DVDs. Last week Apple posted a of compatible players, as well as some known not to work with the SuperDrive.

Also of note
Microsoft is pushing to sell developers on an upcoming set of Web services building blocks code-named Hailstorm that could be used as part of a new offensive against America Online and its dominance in instant messaging...Internet veteran sold off the last of its parts to relative newcomer Google, ending a long and troubled run as an advertising-supported also-ran...Tax preparation site e1040 mistakenly switched off its encryption software, leaving customers' Social Security numbers and passwords exposed on the laid off its entire staff and shut down operations one month after the San Francisco-based company's workers were scheduled to vote on union representation.