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Tech Industry

Week in review: Washington to tech's rescue?

The tech industry tried to do business as usual this week with product launches and confabs, but an elephant remained in the room: the U.S. financial meltdown.


The technology industry tried its best this week to do business as usual, with new product announcements, industry conferences, and talks of mergers and acquisitions.

But a huge elephant remained in the room, that being the U.S. financial meltdown and Congress' just-passed $700 billion plan to bail out Wall Street in an effort to stabilize the overall economy.

And the tech industry is far from immune to the crisis. Credit troubles affect everything from large Silicon Valley stalwarts down to scrappy Web 2.0 start-ups.

Stomachs really started to churn on Monday when, after the House of Representatives failed to pass the bailout plan, shares of technology companies took a serious beating.

When the dust settled at the end of the trading day, the Dow Jones industrial average was down 777.68 points, a record point decline, with the index down nearly 7 percent from Friday. The S&P 500 Index dropped 106.46 points, or 8.8 percent, to close at 1,106.55, while the tech-heavy Nasdaq Composite Index dropped 199.61 points, or more than 9 percent, to close at 1,983.73--the first time it dipped below 2,000 since 2005.

Among the hardest-hit individual stocks was Apple, which also was hit with a pair of analyst downgrades. Shares of the Mac and iPhone maker closed at $105.26, down $22.98, or almost 18 percent. They were further hit on Friday by a faulty rumor that CEO Steve Jobs had suffered a heart attack. Also hard-hit were the stocks of chipmaker Advanced Micro Devices, which was down nearly 17 percent, while Google dropped more than 11 percent to close at $381.

Following a break for the Jewish New Year, the Senate passed a bailout bill on Wednesday, and then the House of Representatives passed it Friday, after a number of businesses, including Microsoft, called for the House to reconsider its earlier actions and approve the measure.

The approved bill is bigger, broader, and beefier than the original proposal. It includes a variety of other measures, including billions of dollars in tax cuts, along with authorization for the Treasury Department to take $700 billion off the books of financial institutions. It also devotes a large chunk of money to green technology.

Even with the bailout, the whole mess has some wondering whether we're in for an economic depression. That may be overstating it, but signs are pointing toward a recession: auto sales are down; manufacturing activity is down; housing foreclosures are still high, while housing prices are down; and construction spending has tanked.

And while that all sounds unrelated to technology, it means that credit is harder to get--whether you're a giant company looking to make capital expenditures on things such as new server farms, or a start-up looking to buy office furniture or put money down for rent, as CNET News' Jim Kerstetter wrote this week.

"Wall Street has always been a cutting-edge technology buyer, and that spigot is all but shut off, for now. Universities and states are announcing plans to trim or freeze spending, and private customers probably aren't far behind," he wrote, also noting the resulting effect on venture capital spending, mergers and acquisitions in tech, and successful initial public offerings.

Click here for a roundup of stories on this week's financial news and its effect on the tech industry.

Amid the heated debate on the bailout plan, Washington politicians also worked on a law that lays the groundwork for Web radio stations to negotiate reduced royalty rates for songs they stream over the Web. The U.S. Senate passed the Webcaster Settlement Act bill Tuesday. It had already passed in the House on Saturday and is now headed to the White House, where President Bush is expected to sign it.

"I'm relieved, optimistic, and grateful to our listeners," said Tim Westergren, founder of Pandora, a Web radio station and music-suggestion engine.

Webcasters have long complained that the royalty rate to stream music is too high for Web radio stations to generate any profit. Representatives from Internet radio and the music industry have been in negotiations for more than a year. Recently, the two sides have gotten closer to an agreement, and both say they are confident that a deal is within reach.

The deal needs the blessing of Congress because the parties seek a statutory license. Under such a license, any Web station is allowed to play songs that fall under the license without seeking permission. In return, Webcasters are required to pay the negotiated rate.

And the presidential race, too, grabbed some of the news spotlight, particularly Thursday night's first and only debate between the two vice presidential candidates, Sen. Joe Biden and Gov. Sarah Palin. Neither technology nor the tech industry came up in the debate, however, issues of alternate energy and oil dependence were brought up several times.

For a debate recap, click here for a Webcast produced jointly by CNET and CBS News. Or click here for more election news for the digerati.

A Cea of gadgets
Although some participants were feeling the credit crunch, the annual parade of gadgets that is Ceatec generated much industry buzz. The electronics show in Japan, although a bit smaller this year, remains the place to see highly imaginative prototypes, as well as get a glimpse of what will actually be on U.S. stores shelves in the coming year.


The most prevalent theme among the electronics giants: thin TVs. Just like at the Consumer Electronics Show in Las Vegas, IFA in Berlin, and CEDIA Expo this year, they're jostling with each other in a race to see who can make the largest screen on the skinniest panel.

Sony, for example, continued to push its current 11-inch OLED TV model, the XEL-1, and showed the prototype 27-inch version. But the company also showed an even thinner prototype, whose display is a mere 0.3 millimeters thin.

Many companies also showed new types of interfaces, such as gesture-based technology. Panasonic showed its connected-home concept, which included an impressive video wall. Users could theoretically call up an exercise program onto the wall, and a video of an instructor would appear and respond to users' movements. Hitachi showed digital signage technology that used human gestures to play games and create interactive advertisements.

Panasonic also tried its hand at reinventing the TV remote control. It showed the EZ Button Remote, which removes most buttons from the face and utilizes two touch pads instead. It seemed to impress the gadget guru panel assembled by Ceatec, which awarded the Best in Show prize to the prototype remote.

3D displays are gaining in popularity, and it's something we'll definitely see more of at CES. Thankfully, more than a few companies are showing 3D displays that don't require plastic 3D glasses to get the stereoscopic effect. KDDI, Pioneer, and NEC had prototypes of small 3D displays, ranging from 3 inches to more than 10 inches in size and meant for small portable gadgets.

Click here for a roundup of Ceatec news.

Also of note
Bowing to continued demand, Windows XP gets another lifeline...Famed social engineer cum hacker Kevin Mitnick tells his cautionary tale about the dangers of traveling into the U.S. with a laptop...Apple and other music retailers won't have to pay higher royalty rates...Microsoft introduces SearchPerks, a sort of "frequent flier" program that lets people cash in for every search they do...Apple decides to end the nondisclosure agreement attached to software that has already been released for the iPhone...Google Chief Executive Eric Schmidt touts a 22-year fix for the country's energy problems...Sprint Nextel starts lighting up its first 4G wireless network using WiMax, but what's the big deal about WiMax?...Nintendo vows to ship more Wii consoles to retailers this holiday season than last.