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The week in review: Worm worries

A computer worm that spread to both servers and PCs running Microsoft software flooded the Internet with data, prompting the FBI to create a task force to investigate the attack.

A computer worm that spread to both servers and PCs running Microsoft software flooded the Internet with data this week, prompting the FBI to create a task force to investigate the attack.

Known as "Nimda," the worm spread by sending infected e-mail messages, copying itself to computers on the same network, and compromising Web servers using Microsoft's Internet Information Server (IIS) software.

As analysts called the worm "more aggressive than Code Red," FBI representatives said the agency was "assessing" the incident. So far, the agency has found no relationship between the online deluge and last week's terrorist attacks on the World Trade Center and the Pentagon.

Much of the worm's virulence is due to its automated spread. The e-mail attachment will open automatically under Microsoft's Outlook e-mail program if the program's security settings are at "low" and a security patch has not been installed. On PCs that don't use Outlook, the worm can still spread using its own e-mail engine, but it won't execute automatically.

In addition, the worm generates an avalanche of Internet traffic when it scans local chunks of the Internet for vulnerable servers to which it can spread. In the wake of the worm, Internet bandwidth slowed to a crawl and the automated scanning caused many connectivity problems for businesses.

As companies gradually got a handle on the virus, security groups worried that home computer users would become the next weak link. A coalition of government security officials and antivirus software industry experts released a warning to home computer users to take Nimda--and the security of their computer systems--seriously.

Terror and its aftermath
The stock markets fell sharply Monday after New York police officers and firefighters rang the opening bell, a sound that had not been heard since last Tuesday's terrorist attacks. At closing Monday, the Dow Jones industrial average and Nasdaq were down about 7 percent. During the course of the week, the Dow lost more than 1,370 points, or 14 percent, the greatest one-week slide since 1933.

In the wake of the attacks, the PC industry is bracing for continued difficult financial times. Although many economists and analysts expect a full-blown recession to follow the bombing, companies heavily involved in the PC business could experience more pain than other sectors.

Part of the reason lies in what could be called the September effect, the unusually high percentage of sales that typically occur in the last two weeks of the month. Although most quarters are "back-end loaded" in terms of sales, the third quarter is especially lopsided because of back-to-school sales and sales in Europe.

The online travel industry also is bracing itself for waning demand for airline tickets after last week's terrorist attacks, which already have dealt a severe blow to the nation's airlines. Several of the online travel agencies reported Monday that bookings of airline tickets were up slightly compared with last week's dismal numbers. U.S. bookings fell 74 percent between the time of last Tuesday's attacks and Friday, according to reservations system Amadeus.

In addition, many of the largest carriers have temporarily shelved one of their most effective promotions: e-fares. United Airlines, American Airlines, Continental Airlines, US Airways and TWA were among the carriers that posted notices on their Web sites announcing that they have suspended Internet-only discount fares since last week's terrorist attacks.

VeriSign halted some auctions of domain names in an effort to remove sites it finds "offensive." The move follows a weeklong rush by businesses and individuals to register domain names related to the disaster--some to commemorate the victims of the tragedy, and others to profit from its significance.

Not all the news from the tech sector was negative, as many companies formed a relief initiative and made substantial donations toward helping attack victims. In the latest online effort to raise money for disaster relief, eBay has launched a charity auction aimed at raising $100 million in 100 days.

eBay's "Auction for America" will benefit United Way's September 11 fund. The entire purchase price of the goods will benefit the fund, and eBay is waiving all of its listing and transaction fees on such charity auctions.

But in postings on message boards at eBay and on AuctionWatch, many eBay members attacked the effort, accusing eBay of hurting their for-profit sales by forcing them to compete with the charity auction. Sellers complained that eBay is requiring sellers in the auctions to pay for shipping their items, instead of charging buyers for that cost.

Reading Palm's future
Handheld computing leader Palm reported a fiscal first-quarter loss that was slightly narrower than expected, but pulled back on a number of wireless plans and slashed forecasts for the holiday season. However, the company slashed its sales forecast for the current second fiscal quarter, typically Palm's strongest, and said it now expects an operating loss, rather than the narrow operating profit it had predicted.

The earnings report came the same day that Palm officially launched the m125, a $249 handheld that resembles the entry-level m100 and m105 but adds a Secure Digital expansion slot, USB connection and the same connector for add-ons or syncing that is used on Palm's m500 series.

One analyst said the release of the m125 highlights a problem already hurting Palm--the erosion of prices and profit margins in the market for handhelds with black-and-white screens. The new $249 Palm m125, which offers a black-and-silver case, will cost $50 more than the comparable Handspring Visor Neo and low-end Sony Clie.

Palm has another obstacle in front of it because of a campaign the company hoped would clarify its marketing and protect its brand name but seems to have backfired. The company recently has been sending letters to a number of handheld enthusiast sites with "Palm" in their domain name, seeking to get the sites to change the reference to "Palm OS" by offering a free license to use that name instead.

However, some of those sites are changing their names to ones that avoid Palm entirely. Palmguru.com is changing its name to PocketAnywhere.com. Palmgoddess.com is now Pocketgoddess.com. And Palminfocenter's editor in chief said he is mulling over his options.

Coming soon
Microsoft revealed the name of its forthcoming Office suite for Apple Computer's Mac OS X operating system and firmed up the product's pricing and delivery date. The new product--code-named Office 10 and now officially called Office v. X for Mac--will ship sometime in November and cost as much as $499, although many current users could pay as little as $149.

No other Mac product released this year is likely to be more important to Apple than Office v. X, say some Mac users. With other major Mac developers--such as Adobe--lagging behind in getting out OS X products, Microsoft's support could be crucial to driving upgrades of the operating system. Apple released its next-generation Mac OS in March, although many important applications had not yet been written for the operating system.

Compaq Computer will announce next month that it will begin shipping two new iPaq handhelds using the new version of Microsoft's Pocket PC software and will offer a wireless communications expansion pack, sources say. The Compaq announcements will be part of Microsoft events in San Francisco and London where other partners, such as Casio, Hewlett-Packard, Intermec Technologies, Symbol Technologies and Toshiba, are expected to make similar announcements. Microsoft is expected to officially launch its new Pocket PC 2002 operating system, code-named Merlin, at that time. The new OS will come with new tools, such as wireless networking and security features, to make life easier for corporate workers.

Chipmaker Advanced Micro Devices will call its upcoming desktop processor the Athlon XP in what seems to be an odd marketing coincidence. AMD next month will release a 1.5GHz Athlon desktop processor. Unlike current chips that merely go by the name "Athlon," the new chip and its successors will carry the XP suffix, similar to Windows XP, the name of Microsoft's next operating system.

Although the chip's XP designation appears to have been inspired by Microsoft, that's not the case, sources say. Instead, AMD will adopt the new brand as part of a campaign to differentiate its chips from competing products from Intel.

Also of note
Government trustbusters and Microsoft failed to reach a consensus on how the landmark antitrust case should proceed before a new judge...Online news took a hit this week with Yahoo's acknowledgment that a hacker substantially altered a news story that appeared on its site...One of the last major legal roadblocks to mainstream music-subscription services on the Web appears ready to fall, with a tentative deal between music publishers and the big record labels on the table... Internet addresses under the new .info domain will be delayed as a result of last week's terrorist attacks.

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