The week in review: WorldCom chaos

One of the biggest accounting debacles in history rocks the tech world. Also, tablet PCs and wireless gadgets make noise at TechXNY.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
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Steven Musil
4 min read
The technology world was rocked this week after telecommunications giant WorldCom revealed that it had improperly accounted for almost $4 billion in expenses, representing one of the biggest accounting debacles in history.

The company fired its chief financial officer, Scott Sullivan, and announced the immediate reduction of 17,000 employees after an internal audit revealed that expenses had been booked as capital expenditures. Taking the new information into account, the company said it would have reported a net loss for 2001 and the first quarter of 2002.

The revelation rattled the telecommunications sector as many analysts noted that the company will have a tough time surviving. The revelation is only the latest and most dramatic example of financial chaos in a sector crumbling into bankruptcy and confusion. Massive debt overhang, falling revenues and domino-like collapses of network companies and vendors have left telecommunications as the blackest spot in an industry that remains clouded by dismal earnings and uncertain prospects.

The ripple effect is expected to go well beyond the telecommunications industry. Tech companies will be more closely scrutinized for a wide range of reasons, including ties to auditor Arthur Andersen and use of various earnings measures such as pro forma earnings and EBITDA (earnings before interest, taxes, depreciation and amortization).

Coming soon
Microsoft on Tuesday announced plans for a new version of its software cash cow, Office. The new version, being developed under the name Office 11, is scheduled to ship by mid-2003. That version will include better support for XML (Extensible Markup Language), an industry standard for data description and exchange and a key technology behind Microsoft's .Net Web services plan.

Microsoft also disclosed that three PC hardware makers--Toshiba, Acer and Fujitsu--will debut the first tablet PC models Nov. 7. Tablet PCs, in their most generic form, are modified notebooks; they will weigh about 3 pounds to 4 pounds, can connect to the Internet wirelessly, and may include keyboards.

Tablet PCs took top billing at TechXNY, the technology trade show formerly known as PC Expo, in New York this week. Also at the show, Hewlett-Packard, Sony and Kyocera Wireless introduced a slew of new handheld devices. For more news and video clips from the tech show, check out CNET News.com's special coverage of TechXNY.

In other product news, HP, which relies heavily on profits derived from its printer business, is revamping its entire line of consumer printers, with 50 new imaging and printing products planned for release between now and early 2003. The new printers will be capable of automatically tweaking photo images and detecting when the right paper is chosen. Many of the new models will have faster printing speeds and will range in price from $79 to $399.

September will be a make-or-break month for HP's new Personal Systems Group. That's when computer buyers will find out about the company's first completely new PCs since its merger with Compaq Computer. HP has released a small number of new PCs since the merger was sealed in May, but those were under development before the completion of the deal. The HP Pavilion PCs will range in price from $529 to $1,799 and will focus on digital imaging, while Compaq Presario machines will aim at the more value-oriented buyer and range in price from $549 to $1,199.

Game over?
One of the companies making Xbox "mod chips"--add-on components that modify the game machine so it can run illegally copied discs and homemade software--has gone out of business, possibly because of legal pressure from Microsoft. In May, shortly after the first Xbox mod chip went on sale, a Microsoft representative said the company was investigating legal avenues for shutting down such operations. Meanwhile, a gaming analyst said pirated games running on an altered Xbox are unlikely to have a significant effect on sales of legitimate games.

Remember old LED video games? A programmer and self-avowed fan of classic video games has created software for Pocket PC and Palm handhelds that faithfully recreates the breed of inexpensive handheld electronic games made popular by Mattel in the late 1970s and early 1980s.

The software, when run on a $600 Compaq iPaq, does a good job capturing the low-tech environment of the games, complete with blinking lights and high-pitched sound effects. At the time, such handheld games sold for around $20 and could be powered by a single 9-volt battery.

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Also of note
Retailers and distributors that had to wait weeks to buy new flat-panel iMacs after their January introduction now find the machines piling up as the consumer PC market slows to a crawl...The U.S. House of Representatives voted overwhelmingly to restrict computer-generated sex images of minors... Companies are cracking down on employees who use streaming media and swap MP3s at work...A group of publishers sued the Gator online advertising network in a bid to bar the company from serving pop-up ads on their Web sites without their permission...AOL Time Warner is quietly developing technology that aims to create supercharged network routers capable of moving large media files far more efficiently than is possible with current Internet technology.

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