Seeking Financial Guidance on the Web

Are you still using paper bank statements and Excel to manage your money, or do you trust a Web site to help you out? Amid the big slump, many people are turning to the Web, as I wrote in an article on Saturday. Disillusioned by banks and the stock market, they are logging on to sites that pull together their financial data from across the Web, help them create budgets and offer a community where they can talk about their finances with others.

Here is a roundup of several of the dozens of new personal finance sites:

Mint: Give Mint the log-in information for your bank, credit card and brokerage accounts, and each night it pulls in your data and arranges it in charts to show you how much you are worth and where you spend your money. Users can text “Balance” to MYMINT to get their account balances on their cell phones, or download the brand new iPhone application. Mint says it will never add a social networking component. You get a lot of bad personal finance advice from random other people,” said its founder, Aaron Patzer.

Wesabe: Like Mint, Wesabe aggregates your financial accounts and enlightens you about your spending patterns. But it also offers a social network, where people can chat with others online, anonymously, about how much they have lost in their retirement accounts or how to cut spending, for example. Users can add transactions to their Wesabe accounts on the go by using Twitter, with a message like “Wesabe $2.95 Starbucks.”

Quicken Online: Sites like Mint and Wesabe originally sprang up as alternatives to Quicken, the bookkeeping software for PCs from Intuit. Quicken responded with its own Web-based version. Quicken also offers mobile applications, like Quicken Beam, which allows people to view their last five transactions from their phones.

Cake Financial: Cake aggregates all of your brokerage accounts and makes recommendations based on high-performing portfolios on the site. People can talk about questions like, “Are we all better off in cash right now?” Unlike other stock message boards, Cake shows whether people own the stocks they are talking about and how their portfolios have performed. The new Investor Quick Check benchmarks your portfolio against the market and other investors.

PearBudget: This simple tool guides you through a budgeting spreadsheet. You can use it free for 30 days and then pay $3 a month (in exchange, it doesn’t show ads for financial services and products, as many of the other sites do). It does not pull your account balances in from the Web – you have to enter them. “If the program is doing all of the work for you, it doesn’t help you know where your finances stand,” said Charlie Park, its founder.

Credit Karma: Unlike other credit score sites that charge users or limit the number of times per year they can check their credit score, Credit Karma lets people check their scores as much as they want, free. Users can track their scores over time and talk with others about how to improve them.

SmartyPig: At this virtual piggy bank, users set savings goals, and the site withdraws money from their checking accounts each month and holds it in an account that currently earns 3.9 percent a year. Users share their accounts with family and friends, to solicit donations or moral support, and add widgets to their social network profiles or blogs. When it’s time to cash in, they have the option of getting retailer gift cards worth a few percentage points more than they saved.

Need a Ride? Check Your iPhone

SOON you may no longer need to stick out your thumb to catch a ride. Instead, you may get one by tapping your fingers on your iPhone.

Avego, based in Kinsale, Ireland (www.avego.com), is demonstrating an iPhone application intended to let drivers and prospective passengers connect and share rides.

When the program is available, drivers who want to offer rides will first download the app, then record their preferred route, said Sean O’Sullivan, managing director of Avego and executive chairman of Mapflow, Avego’s parent company, based in Dublin.

“You put the iPhone on the dashboard, and it records the entire trip and sends the route to our network,” he said. The system stores the route, adding it to its menu of paths and pick-up points and offering them automatically to interested riders.

Drivers must have an iPhone in order to use the service, but if passengers don’t, they will be able to look for a ride on the Avego Web site or call or send a text message, Mr. O’Sullivan said. Drivers and riders can identify one another by photographs displayed on their iPhones, as well as by PINs that verify identities and authorize the transaction.

Avego will charge 30 cents a mile, he said, with 85 percent going to the driver to recover some of the commuting costs and 15 percent to the company. All payments will be handled by automated online accounting.

It will take a while to establish a critical mass of drivers and passengers, Mr. O’Sullivan acknowledged. But he hopes that the chance to defray expenses will change the entrenched habits of many drivers who treasure their solitude. “It will require behavior changes on the part of drivers and riders,” he said.

Although there is anecdotal data that carpooling rose during the recent spike in gasoline prices, American drivers have historically preferred solo trips. About three-quarters of workers in the United States drive alone, said Dr. Mark Mather, associate vice president for domestic programs at the Population Reference Bureau, a research organization in Washington.

From 1980 to 2007, workers were carpooling in decreasing numbers, he added. About 20 percent of workers carpooled in 1980, versus just 10 percent last year. “Trip chaining — running errands on the way to and from work,” was part of the reason, he said. “You can’t do that if you are with five other people.” Dr. Mather’s figures are based on the 2007 American Community Survey of the Census Bureau.

But systems like Avego’s might work for people who don’t want to commit to a daily carpool, yet at the last moment decide that they are willing to share on a particular day, said Susan Heinrich, the 511 ride-share and bicycling coordinator at the Metropolitan Transportation Commission in Oakland, Calif. (The service, which uses the 511 phone listing, offers transportation information and ride-sharing resources for nine counties in the San Francisco Bay Area.)

Ms. Heinrich particularly likes Avego’s combination of text messages and colorful mapping. “I also like it that passengers do not need to have an iPhone to use this system,” she said. “I would love to incorporate this technology somehow within our services in the Bay Area.”

At University College Cork in Ireland, Stephan Koch, commuter plan manager, is giving Avego a trial early next year. The university has about 17,000 students and 2,600 staff members, he said; about 70 percent of the staff members use a car to get to the campus, as do about 36 percent of the students. “But the road capacity simply isn’t there,” he said of the often clogged, tortuous commute.

Mr. Koch hopes that Avego’s system, which he calls “computer-driven hitchhiking,” will help, in conjunction with bicycling facilities, improved public transportation and other initiatives.

“This is another option for staff and students other than a single-occupancy car on their daily commute,” he said. “The second person won’t need to bring a car, and there’s one less car in the carpark and on the road.”

A FREE ride-sharing application for the iPhone, Carticipate (www.carticipate.com), was released in October, and already has had more than 10,000 downloads, said Steffen Frost, chief executive of Carticipate in San Francisco.

After you register with Carticipate and set up a profile, he said, “other people with iPhones that have the application can search for you and find you.”

A prospective passenger will see, for instance, that someone is going to Poughkeepsie, N.Y., he said, and read the profile. “If they are comfortable with that and want a ride, they can organize from there,” he said. “We are a matching service.”

Hendrik J. Hilbolling, who lives in The Hague in the Netherlands, uses Carticipate regularly. “My lover lives in France and I go there frequently,” he said. Through Carticipate, he shared one of his recent trips to Paris, as well as the expenses for the journey, with a teacher and a film director.

“Trains are expensive,” he said. “This is a nice ride, we can talk, and this way is much cheaper.”

A Wrench in Silicon Valley's Wealth Machine

A year ago there were reports that Digg had hired investment bank Allen & Co. to put the popular news aggregation Web site on the block with an asking price of $300 million. Bloggers predicted that buyers could "easily justify" the price given Digg's popularity, although no deal was ever consummated. Now that number looks like a relic from a bygone era. On Sept. 24, Highland Capital Partners and three other venture capital firms invested $28.7 million in Digg. The specific terms were not disclosed, but that investment implied a valuation of $167 million for the startup, according to one person who has seen the terms of the agreement. Digg executives declined to comment on the company's valuation.
It's no surprise that the value of tech startups is falling. With the deepening recession, even the stocks of highfliers such as Google (GOOG) and Apple (AAPL) have tumbled more than 50%. Still, this is a sharp reversal for a generation of companies that seemed poised to inherit the mantle of leadership in the tech industry. Top Web 2.0 companies such as Digg and Facebook, which built their business on persuading users to participate in their Web sites, were showered with attention and millions of dollars in investment based on the expectation they would be able to cash in by creating the next blockbusters of the Internet. Now those high hopes are coming back to earth.
Declining valuations are throwing a wrench into the gears of Silicon Valley's wealth machine. In the worst cases, the money dries up and startups are shut down. But even for fortunate companies such as Digg that can still raise money, complications abound. Falling prices can make it harder to attract the best and brightest. Morale can suffer, and workers with stock options underwater may be less likely to stick around. Such pressures can force companies to grant new options at lower prices or reprice existing options, which can infuriate venture capitalists backing the company.
WAIT AND SEE
Falling values can also cause merger-and-acquisition prospects to dry up. Skittish buyers often wait for prices to drop even further. "This is the worst time to [sell]," says Raj Kapoor, managing director of venture firm Mayfield Fund. "The feeling amongst buyers is that there will be better value if they wait until 2009."
Jay Adelson, Digg's chief executive, says it's clear the environment has changed for all startups. With venture money harder to come by, entrepreneurs have to concentrate on building their businesses. He says Digg is dialing back some expansion plans and trying to reach profitability as soon as possible. "All I care about is making sure the business foundation is solid," Adelson says.
He adds that the valuation of Digg today isn't that important, since it just raised money and is not for sale: "We know [that] if we are a profitable business, then the valuation will ultimately follow." Moreover, Adelson says he sees no need to make changes to Digg's stock option program. "Our employees are in this for the long term," he says. "[Employees] love the upside opportunity with their stock options."
Digg Director David Sze, a partner with venture capital firm Greylock Partners, acknowledges the value of his firm's Digg investment has likely dropped even since the September venture investment. "If I had to sell Digg today, I would probably not be getting the valuation I got earlier this year," he says.
One reason may be that Digg's public profile is much larger than its financial might. Last year the company lost $2.8 million on $4.8 million in revenue, according to Digg financial statements reviewed by BusinessWeek. In the first three quarters of 2008, Digg lost $4 million on $6.4 million in revenue. Adelson declined to comment on the figures.
NO TURNAROUND IN SIGHT
The valuations of tech startups are apt to keep falling, say some investors and lawyers. In September 18% of the financing rounds for venture-backed startups were for a lower value than the previous round, according to a survey from law firm Fenwick & West. In the fourth quarter that figure "could easily double," says Fenwick & West attorney Barry Kramer.
In one extreme case, the software startup BitTorrent recently tore up an agreement signed earlier this year that would have given it $17 million in venture money. Instead, the company took $7 million, laid off two-thirds of its 60 employees, and slashed its valuation from $177 million to just $35 million.
Investor Sze says he isn't worried that Digg's value may have dropped since September. He feels bullish because big media players are refocusing on their own core businesses and new entrants are less able to raise capital. Sze figures Digg has plenty of money to ride out the bad times. "If you have the cash and are building a good business and can get to breakeven in a reasonable time, this is where you make hay," he says.

Oracle Hits Its Mark

During the tech industry's last big slump, software and hardware vendors were slow to cut costs as falling demand pummeled profits.
This time around, Oracle (ORCL) isn't taking chances. Oracle, the world's No. 2 software company, hit Wall Street's earnings target when it reported fiscal second-quarter results on Dec. 18, by aggressively cutting research and development, travel, and other costs as its customers curtail spending.
Amid a global economic slowdown that's sapped business demand for computers and software, Oracle widened operating margins in the quarter ended Nov. 30 to 46%, compared with 41.3% a year earlier. While the software maker missed Wall Street's estimates for total sales and new software bookings, its earnings of 34¢ a share, excluding certain items, met analysts' projections. Better still, Oracle issued a third-quarter earnings outlook roughly in line with Wall Street estimates.
Shares of Oracle gained 4% in extended trading, after closing Dec. 18 down 13¢, or 0.8%, at 16.61. The shares have lost 2.4% in the past month, compared with a 4.7% gain for the Nasdaq Composite Index.
Wide Range of Products Helps
Oracle displayed a knack for slicing costs while offering customers a wide range of products that it's assembled through a slew of acquisitions the past four years, analysts said. "This company can hold the bottom line better than anyone," says Brent Thill, Citigroup's (C) software research director, who rates Oracle's stock a buy.
Analysts said Oracle has cut expenses in sales and marketing, and overseas R&D, and reduced sales and back-office expenses from its January acquisition of BEA Systems. A wide breadth of products lets Oracle salespeople zero in on where customers are still spending. "It all goes back to the all-you-can-eat buffet at Oracle," Thill says. "You can pick one thing or everything, and they have something they can talk to a client about."
The appetite for cost-cutting is catching across tech. Dell (DELL) beat Wall Street's profit forecasts in its third quarter, reported Nov. 20, by taking an ax to expenses, despite ringing up sales that were more than $1 billion short of expectations. Troubled computer maker Sun Microsystems (JAVA) in November said it plans to cut up to 6,000 jobs, or 18% of its staff. Tech firms including Adobe Systems (ADBE) and Western Digital (WDC) have announced plans to shed workers as well.
Net Income Falls amid Sales Slowdown
"Within technology we're seeing revenue weakness but good profitability," says Andy Miedler, a senior technology analyst at Edward Jones, who has a buy rating on Oracle. "Companies are more aggressive with cost-cutting during this downturn due to the lessons they learned with cutting costs too slowly during the tech wreck last time."
Cost-cutting aside, sales still take a hit when customers slash information technology budgets. Oracle's net income fell 0.5%, to $1.27 billion, in the second quarter, and sales were up 5.5%, to $5.6 billion, vs. analysts' consensus estimate of $5.84 billion. New software license revenue, an indicator of future sales, was down 3% to $1.6 billion. The closely watched metric fell far short of Oracle's forecast three months ago, when it said new license revenues would rise 2% to 12%. The bookings are a key measure of Oracle's performance, since they often produce additional tech support revenue.

Behavioral screening -- the future of airport security?

TEL AVIV, Israel (CNN) -- Keep your shoes and belts on: Waiting in long airport security lines to pass through metal detectors may soon be a thing of the past.

Security experts say focus is shifting from analyzing the content of carry-ons to analyzing the content of passengers' intentions and emotions.
"We are seeing a needed paradigm shift when it comes to security," says Omer Laviv, CEO of ATHENA GS3, an Israeli-based security company.
"This 'brain-fingerprinting,' or technology which checks for behavioral intent, is much more developed than we think."
Nowhere is the need for cutting-edge security more acute than Israel, which faces constant security threats. For this reason, Israel has become a leader in developing security technology.
Several Israeli-based technology companies are developing detection systems that pick up signs of emotional strain, a psychological red flag that a passenger may intend to commit an act of terror. Speedier and less intrusive than metal detectors, these systems may eventually restore some efficiency to the airplane boarding process.
One firm, WeCU (pronounced "We See You") Technologies, employs a combination of infra-red technology, remote sensors and imagers, and flashing of subliminal images, such as a photo of Osama bin Laden. Developers say the combination of these technologies can detect a person's reaction to certain stimuli by reading body temperature, heart rate and respiration, signals a terrorist unwittingly emits before he plans to commit an attack.
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With these technologies, the emphasis is on speed and seamlessness. Ehud Givon, CEO of WeCU, envisions a day when a passenger can breeze through a security checkpoint in 20 to 30 seconds.
Although traditional security profiling can discriminate by race and religion, security experts say behavioral profiling is more fair, more effective and less expensive.
WeCU has received grants from the Transportation Security Administration within the U.S. Department of Homeland Security, which hopes to implement a system to pinpoint internal threats such as airline employees intending terrorist acts.
Once these technologies are in place, a passenger may pass through a security screening without realizing it. For example, passengers could use an automated check-in system or gaze at a screen with departures information without realizing they've just been exposed to the words "Islamic jihad" written in Arabic.
These stimuli, explains Givon, will intrinsically elicit some sort of biometric response -- whether the passenger knows it or not -- that can be picked up by WeCU's strategically placed sensors.
"I believe that we introduce a new layer in security," Givon says. "This is something that couldn't be done in the past: finding the connection between a certain individual and the intent to harm."
The Orwellian-sounding startup has gone further to develop a system that detects a passenger's behavioral intentions by scanning their every step, literally. While walking around certain parts of the airport terminal, a passenger may not realize he has stepped on a "smart carpet" filled with hidden biometric sensors.
The technology is still under development, says Givon, who believes it will be strong enough to pick up biometric information from a footstep. If a passenger is wearing heavy hiking boots, for example, WeCU will rely on biometric sensors combined with video and thermal biometric imaging to detect malicious intent.
Another option from WeCU is a "smart seat," or cushion full of hidden biometric sensors that could provide a more detailed read on someone sitting in an airport waiting area, Givon says.
While the technology sound like something from a James Bond flick or even "A Clockwork Orange," Givon insists that passengers will not find the techniques intrusive. "We don't want you to feel that you are being interrogated," he says.
Givon is negotiating contracts with airports worldwide and believes his company's technology may be implemented as soon as 2010.
Nemesysco, another Israeli-based technology company, believes the key to a person's emotions and intentions lies in their voice. The company's patented LVA, or Layered Voice Analysis, technology can pick up verbal cues from a passenger who may pose a threat.
Unlike a polygraph test, which checks for lies, Nemesysco's systems work as an "emotion detector," says Nemesysco CEO Amir Liberman. In other words, it's not what passengers say, but how they say it.
Nemesysco's devices use a series of patented signal-processing algorithms that can differentiate between a "normal" voice and a"'stressed" voice. If emotional stress is detected, officials can determine if the passenger should be taken aside for further questioning.
The system works on the premise that all voices have a certain frequency, and any deviation of that baseline frequency can indicate stress.
Liberman says it takes approximately five to 10 seconds for their system to capture a "normal" voice in casual conversation, which establishes a baseline. Their system then measures changes from the baseline voice that signify an increase in stress, excitement, anticipation, hesitation or other emotions that can indicate a potential terrorism threat.
A computer processes the voice patterns and then flashes words such as "high risk," "medium risk," "excited" and "highly stressed." Through his system, Liberman says, he "can see what's going on in your brain."
Versions of Nemesysco's system already have been successfully tested at Moscow Domodedovo International Airport, where officials used it to target criminals and drug traffickers. A version was recently implemented at another major international airport which Liberman declined to identify.
Layered Voice Analysis also has been used to test for insurance fraud and on the TV program "Big Brother Australia."
Layered Voice Analysis has limitations, including the inability to trace the vocal patterns of a person with a speech impediment. But the system is more effective than current security measures, claims Liberman, who believes a terrorist currently can pass through airport security with explosive material "that can take down any plane."
In fact, many experts express little confidence in the current state of airport security.
Philip Baum, London-based editor of Aviation Security International magazine, says would-be terrorists could easily slip through security checkpoints, even with new regulations that check for liquids.
"The archaic system of an X-ray machine and metal detector cannot pick up other potential threats posed by passengers," Baum says. "I can have a ceramic weapon or chemical weapons and walk through an archway metal detector and it won't be picked up. Yet we have huge faith in these metal detectors that can only pick up one substance."
Laviv, whose consulting firm focuses on securing mass transportation systems, is equally skeptical.
"It is possible today to hijack an aircraft using only five or six able-bodied passengers who are well-trained in Kung Fu fighting," he says. "There is no technology in place in airports to detect a threat like that.
"The question is, should our desire be to look for each and every threat agent, rather than focus our efforts on identifying the [violent] intention of the passenger?"

Rough road, high stakes for WiMax

NEW YORK (Fortune) -- For the last couple years, depending on who you asked, WiMax was either bound for spectacular success or it was dead on arrival.
Well, the wireless technology that promises faster Internet speeds has finally arrived. The city of Baltimore now has WiMax coverage and Portland, Ore. will get it in early January. More cities are expected to follow.
After some sturm and drang, the stars are finally aligning for Clearwire (CLWRD), the wireless broadband provider that is leading the WiMax charge. Earlier this month, Clearwire completed its merger with Sprint's WiMax unit. And the Kirkland, Wa.-based company, founded by telecom pioneer Craig McCaw, has secured $3.2 billion in funding from Google (GOOG, Fortune 500), Intel (INTC, Fortune 500) and Comcast (CMCSA, Fortune 500), among others.
The stakes are high. Mobile technology is marching toward the point where faster Internet connections are ubiquitous, so we're not just making phone calls from anywhere to anywhere but pumping huge amounts of data too. Infonetics Research estimates the WiMax market will grow to $7.7 billion in 2011.
But the companies behind WiMax aren't the only ones who want to build a vast wireless network. WiMax naysayers point to a rival technology called LTE, or Long Term Evolution, as WiMax's biggest threat. Like WiMax, LTE is known as fourth-generation, or 4G, which is just the cellphone industry's way of describing the next stage of faster speeds on mobile devices. (The current cellular network we use to make calls is 3G, or third-generation.)
Verizon (VZ, Fortune 500) and AT&T (T, Fortune 500) have declared their allegiance to LTE, with Verizon saying it will have the technology deployed somewhere in the United States by this time next year. But LTE is still behind WiMax in development, and given the time it also takes for device-makers to line their products behind a new technology, mass adoption is at least a couple years away.
Room for two
Clearwire, meanwhile, says it has lined up more than 80 vendors that are supporting WiMAX, including Samsung, Nokia, and Motorola.
But like any new standard, WiMax must confront the old chicken-and-egg problem: enough device makers have to design products for WiMAX for the technology to take off, but those vendors have to be convinced first that the WiMAX network will be widely available.
"If you have huge swaths of the world covered in 3G standard," said Jeff Belk, a former senior vice president of strategy and market development at Qualcomm, "and you have tiny little islands starting in WiMax, it's silly strategically to commit to the tiny little islands when you have hundreds of millions of devices you want to sell."
In the end the two technologies might just coexist. Clearwire CEO Ben Wolff has suggested as much, saying: "This isn't the technology war that some have made it out to be."
When Wi-Fi first appeared, there was plenty of handwringing over whether the market could sustain both Wi-Fi and 3G. "When people said Wi-Fi was going to crush 3G [third-generation wireless broadband], I wrote a paper saying they're going to be complementary over time," said Belk.
Belk was right. Today cellphone users can access the Internet not just with Wi-Fi but also 3G networks. The iPhone, for instance, can communicate wirelessly using four different technologies: two versions of 3G, Wi-Fi and Bluetooth, which enables short-range connections.
Credit crisis headwinds
Clearwire argues that WiMAX promises an unusually broad platform, since the technology is designed for going online and delivering data. "Anything an Internet application can do, we can do too," said Scott Richardson, chief strategy officer for Clearwire.
That means WiMax-enabled devices could one day be used for mobile calls over the Internet, mobile broadband, home broadband, or even video conferencing, all on one network. This is in part why you see a company like Comcast backing WiMax. It's a way to keep selling broadband to customers, even after they've left their homes.
LTE's backers hope someday to funnel that much data as well, but for now WiMax has a crucial headstart.
WiMax's biggest rival is the current 3G cellular network. Verizon, for instance, makes it easy for customers to make the most of its 3G network, called EV-DO: if you're taking a train from New York to DC and want to access the Internet from your laptop, you need a $60 monthly data plan plus a 3G plug-in card that Verizon sometimes offers free with a rebate. The connection speeds are slower than WiMax and what you get at home through a wired broadband connection, but your laptop will work in most populated parts of the country.
On a recent trip from New York to Baltimore, the WiMax service then operated by Sprint (and now folded into Clearwire) worked flawlessly. But out of Baltimore city limits, it was back to 3G.
When asked about this, Clearwire's Richardson says upcoming devices that support both 3G and WiMax will give people flexibility to move around there's a wider WiMax network. On Wednesday Sprint unveiled its first dual-mode modem.
Can WiMax go nationwide and convince device-makers to go along? Clearwire will need much more than $3.2 billion from its supporters to build nationwide infrastructure, and this is a tough time to raise money. But Julie Ask, an analyst with Forrester, points to WiMax's powerful backers. "I wouldn't underestimate what they're willing to do to make this work," she said.

Cochlear implant maker says hi-fi bionic ear will help the deaf hear music

• Cochlear implant celebrates 30th anniversary
• "Hi-fi" bionic ear will help deaf hear music
• Also enables users to discern specific voices

THREE decades ago Prof Graeme Clark made it possible for the deaf to hear. Now he is working on giving them music.

To celebrate the 30th anniversary of the world's first cochlear implant, Prof Clark unveiled a prototype of the next-generation "hi-fi" bionic ear he is now developing at La Trobe University.

The device will see the number of electrodes feeding information to the ear jump from 22 to 50, allowing users to discern music as well as specific voices in noisy rooms.

Prof Clark celebrated yesterday with Christine Zygmunt, whose father, Rod Saunders, the professor helped become the world's first bionic ear recipient.

"It was the most complex package of electronics ever put into a patient and I was told I could have killed my patient, so it was traumatic," Prof Clark said.

"When we did work it out almost exactly 30 years ago, I asked my audiologist to test to see if he could hear real speech, and when he did I stepped quietly into the room next door and burst into tears of joy."

Chinese espionage fears on broadband frontrunner Singtel Optus

• "Shady" link to broadband frontrunner
• "Spy fears" could threaten bid
• Frontrunner, Singtel Optus, tight-lipped

NATIONAL security concerns about Chinese espionage could threaten the new frontrunner for Australia's $15 billion publicly backed national broadband network, The Australian reports.

Security agencies will closely examine the bid lodged by Singtel Optus, which is believed to propose the involvement of Chinese telecommunications equipment-maker Huawei Technologies to help build its network.

Opposition communications spokesman Nick Minchin has called on the Government to explain the allegations.

Communications Minister Stephen Conroy must state whether Optus had close links to Huawei, Senator Minchin said, adding that Australians needed to be assured the new network was free of any potential for cyber espionage.

Huawei was the subject of a US congressional investigation on national security grounds this year after legislators expressed concern about its links to the Chinese military and intelligence apparatus.

The concerns led Huawei to withdraw from its joint $US2.2billion ($3.3billion) bid to buy a stake in US internet router and networking giant 3Com.

Optus emerged this week as the surprise frontrunner for the national broadband network tender when the Government excluded Telstra from the tender process after its bid failed to meet some of the project's stated requirements.

Huawei, the shadowy company based in Shenzen and founded by former People's Liberation Army officer and Communist Party member Ren Zhengfei, has triggered debate in the US, Britain and India about whether it is a legitimate international telecom player or a company bent on doing Beijing's bidding.

Intelligence agency concerns about Chinese cyber-espionage prompted India to scrap a planned $US60 million Huawei investment in its telco in 2005.

Britain granted the company a $US140 million contract in that same year to build part of British Telecom's 21st Century Network.

Many mainstream global telecommunications companies, including Singtel Optus, already have close links with Huawei.

Optus last month gave the Government its 900-page bid for the new national broadband network, which is understood to propose Huawei as one of several vendors to set up the network.

A spokeswoman for Optus confirmed the company had been working with Huawei as part of trials for the network, but would neither confirm nor deny Huawei was part of last month's final bid.

Chris Illingworth faces court over baby-swinging video on LiveLeak

• Man allegedly shared clip of baby being swung
• Faced court today over "child abuse material"
• Espionage: Fears of Chinese spies shake broadband bid

A MAN charged over a video of another man swinging a baby around like a rag doll, says he'd be happy with a trial by jury.

Christopher Charles Illingworth, 60, of Maroochydore, briefly appeared in Maroochydore Magistrates Court today charged with two counts of using a carriage service to transmit child abuse material.

His lawyer told the court the matter would be strenuously defended.

The case was adjourned to February 19, 2009, to allow the prosecution to gather more evidence.

The freelance journalist and father of four allegedly shared the video using the website Liveleak, a site similar to YouTube but mainly carrying short videos relating to news and current affairs.

Mr Illingworth's home was raided in November by police officers from Taskforce Argos, which targets child pornography and abuse.

He was not involved in making the three-minute video, which is understood to have originally been uploaded by a Russian circus performer.

It features a man in a lounge room swinging what is believed to be a nine-month-old baby boy.

Outside court, Mr Illingworth he would defend the charges.

"My name and health has been damaged - I'm going to do something about this," he said.

"If anything, I want this to go to trial by jury - 12 adults, 12 parents are going to see the stupidity of this.

"Bring it on, bring it on with all your might."

He said supporters had raised around $500,000 to cover his legal costs.

Ms Emery said the case had wide implications for all internet users.

"I've not heard of anyone being charged with anything similar to this before," she said.

"It's a very unusual case - it potentially presents enormous difficulties for internet users."

Scientist calls for robot ethics guidelines

• Robots expected to become more mainstream
• Scientist concerned about social impact
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A SCIENTIST is calling for immediate introduction of robot ethics guidelines amid surging use of the machines and concern about their lack of human responsibility while caring for children or the elderly.

In an article published in the journal Science, Noel Sharkey, a professor of artificial intelligence and robotics at the University of Sheffield, argues that the steady increase in the use of robots in day-to-day life poses unanticipated risks and ethical problems.

The human touch

Outside of military applications, Prof. Sharkey worries how robots — and particularly the people who control them — will be held accountable when the machines work with "the vulnerable," namely children and the elderly, stressing that there are already robotic machines in wide use such as the Japanese meal assistance robot "My Spoon."

Robots could also soon be entrusted by parents to guard and monitor their children, replacing a flesh-and-blood nanny but posing potential problems in long-term exposure to the machines.

"There are already at least 14 companies in Japan and South Korea that have developed child care robots," according to Prof. Sharkey.

"The question here is, will this lead to neglect and social exclusion?"

He said short-term exposure "can provide an enjoyable and entertaining experience that creates interest and curiosity."

But "we do not know what the psychological impact will be for children to be left for long hours in the care of robots," he said.

Experiments conducted on monkeys suggest there is reason for concern, Prof. Sharkey said. Young monkeys left in the care of robots "became unable to deal with other monkeys and to breed," he said.

Rise of the machines

With prices plunging by 80 percent since 1990, consumer sales of robots have surged in the 21st century, reaching nearly 5.5 million in 2008, and are expected to double to 11.5 million in the next two years.

"They are set to enter our lives in unprecedented numbers," said Prof. Sharkey, expressing fear that an absence of ethical rules fixed by international bodies could mean the machines' control will be left to militaries, the robot industry and busy parents.

The scientist also points to the remarks of Microsoft founder Bill Gates, who he said predicted that "over the next few years robots may be a pervasive as the PC."

"We were caught off guard by the sudden increase in internet use and it would not be a good idea to let that happen with robots," Prof. Sharkey said.

"It is best if we set up some ethical guidelines now before the mass deployment of robots rather than wait until they are in common use."

He said it was vital that action be taken on an international level as soon as possible, "rather than let the guidelines set themselves."

For Prof. Sharkey, who has studied robotics for 30 years, such standards are compatible with the rise of robots, of which he is an enthusiastic defender. He stressed the benefits that robots can bring "to dangerous work and medicine."

Prof. Sharkey shrugs off doomsday scenarios in books such as Isaac Asimov's I, Robot about the threatening interaction between robots and humans, or in movies such as the The Terminator in which robots take over the world.

Such story lines will remain firmly in the realm of fantasy, even as societies hurtle towards greater automation, he said.

"I have no concern whatsoever about robots taking control. They are dumb machines with computers and sensors and do not think for themselves despite what science fiction tells us," he said.

"It is the application of robots by people that concerns me and not the robots themselves."

US 'unprepared for cyber 9/11'

THE US is unprepared for a major hostile attack against vital computer networks, government and industry officials said after a two-day "cyberwar" simulation.

The game involved 230 representatives of government defense and security agencies, private companies and civil groups. It revealed flaws in leadership, planning, communications and other issues, participants said.

The exercise comes almost a year after President George W. Bush launched a cybersecurity initiative which officials said has helped shore up U.S. computer defenses but still falls short.

"There isn't a response or a game plan," said senior vice president Mark Gerencser of the Booz Allen Hamilton consulting service, which ran the simulation.

"There isn't really anybody in charge," he told reporters afterward.

Democratic U.S. Rep. James Langevin of Rhode Island, who chairs the homeland security subcommittee on cybersecurity, said: "We're way behind where we need to be now."

Dire consequences of a successful attack could include failure of banking or national electrical systems, he said.

"This is equivalent in my mind to before September 11 ... we were awakened to the threat on the morning after September 11."

Officials cited attacks by Russian sympathisers on Estonia and Georgia as examples of modern cyberwarfare, and said US businesses and government offices have faced intrusions and attacks.

Billions of dollars must be spent by both government and industry to improve security, said Dutch Ruppersberger, the Democratic chairman of the intelligence subcommittee on technical intelligence.

The war game simulated a dramatic surge in computer attacks at a time of economic vulnerability, and required participants to find ways to mitigate the attacks - using real-life knowledge of tactics and procedures where they work.

It was the broadest such exercise in terms of representation across government agencies and industrial sectors, officials said.

Alarm raised on teenage hackers

Increasing numbers of teenagers are starting to dabble in hi-tech crime, say experts.

Computer security professionals say many net forums are populated by teenagers swapping credit card numbers, phishing kits and hacking tips.

The poor technical skills of many young hackers means they are very likely to get caught and arrested, they say.

Youth workers added that any teenager getting a criminal record would be putting their future at risk.

Slippery slope

"I see kids of 11 and 12 sharing credit card details and asking for hacks," said Chris Boyd, director of malware research at FaceTime Security.

Many teenagers got into low level crime by looking for exploits and cracks for their favourite computer games.

Communities and forums spring up where people start to swap malicious programs, knowledge and sometimes stolen data.

For a kid, getting a criminal record is the worst possible move Graham Robb, Youth Justice Board

Some also look for exploits and virus code that can be run against the social networking sites popular with many young people. Some then try to peddle or use the details or accounts they net in this way.

Mr Boyd said he spent a lot of time tracking down the creators of many of the nuisance programs written to exploit users of social networking sites and the culprit was often a teenager.

From such virus and nuisance programs, he said, many progress to outright criminal practices such as using phishing kits to create and run their own scams.

"Some are quite crude, some are clever and some are stupid," he said.

The teenagers' attempts to make money from their life of cyber crime usually came unstuck because of their poor technical skills.

"They do not even know enough to get a simple phishing or attack tool right," said Kevin Hogan, a senior manager Symantec Security Response.

"We have seen phishing sites that have broken images because the link, rather than reference the original webpage, is referencing a file on the C: drive that is not there," he said.

Symantec researchers have collected many examples of teenagers who have managed to cripple their own PCs by infecting them with viruses they have written.

Video choice

Chris Boyd from FaceTime said many of the young criminal hackers were undermined by their desire to win recognition for their exploits.

Many teenage hackers publicise their exploits on YouTube

"They are obsessed with making videos of what they are doing," he said.

Many post videos of what they have done to sites such as YouTube and sign on with the same alias used to hack a site, run a phishing attack or write a web exploit.

Many share photos or other details of their life on other sites making it easy for computer security experts to track them down and get them shut down.

Mr Boyd's action to shut down one wannabe hacker, using the name YoGangsta50, was so comprehensive that it wrung a pledge from the teenager in question to never to get involved in petty hi-tech crime again.

Mathew Bevan, a reformed hacker who was arrested as a teenager and then acquitted for his online exploits, said it was no surprise that young people were indulging in online crime.

"It's about the thrill and power to prove they are somebody," he said. That also explains why they stuck with an alias or online identity even though it was compromised, he added.

"The aim of what they are doing is to get the fame within their peer group," he said. "They spend months or years developing who they are and their status. They do not want to give that up freely."

Graham Robb, a board member of the Youth Justice Board, said teenagers needed to appreciate the risks they took by falling into hi-tech crime.

"If they get a criminal record it stays with them," he said. "A Criminal Record Bureau check will throw that up and it could prevent access to jobs."

Anyone arrested and charged for the most serious crimes would carry their criminal record with them throughout their life.

Also, he added, young people needed to appreciate the impact of actions carried out via the net and a computer.

"Are they going to be able to live with the fact that they caused harm to other people?" he said. "They do not think there is someone losing their money or their savings from what they are doing.

"For a kid, getting a criminal record is the worst possible move."

Code-cracking and computers

Bletchley Park is best known for the work done on cracking the German codes and helping to bring World War II to a close far sooner than might have happened without those code breakers.

But many believe Bletchley should be celebrated not just for what it ended but also for what it started - namely the computer age.

The pioneering machines at Bletchley were created to help codebreakers cope with the enormous volume of enciphered material the Allies managed to intercept.

The machine that arguably had the greatest influence in those early days of computing was Colossus - a re-built version of which now resides in the National Museum of Computing which is also on the Bletchley site.

Men and machine

The Enigma machines were used by the field units of the German Army, Navy and Airforce. But the communications between Hitler and his generals were protected by different machines: The Lorenz SZ40 and SZ42.

The German High Command used the Lorenz machine because it was so much faster than the Enigma, making it much easier to send large amounts of text.

"For about 500 words Enigma was reasonable but for a whole report it was hopeless," said Jack Copeland, professor of philosophy at the University of Canterbury in New Zealand, director of the Turing Archive and a man with a passionate interest in the Bletchley Park computers.

Bletchley employed thousands of code breakers during wartime

The Allies first picked up the stream of enciphered traffic, dubbed Tunny, in 1940. The importance of the material it contained soon became apparent.

Like Enigma, the Lorenz machines enciphered text by mixing it with characters generated by a series of pinwheels.

"We broke wheel patterns for a whole year before Colossus came in," said Captain Jerry Roberts, one of the codebreakers who deciphered Tunny traffic at Bletchley.

"Because of the rapid expansion in the use of Tunny, our efforts were no longer enough and we had to have the machines in to do a better job."

The man who made Colossus was Post Office engineer Tommy Flowers, who had instantly impressed Alan Turing when asked by the maverick mathematician to design a machine to help him in his war work.

But, said Capt Roberts, Flowers could not have built his machine without the astonishing work of Cambridge mathematician Bill Tutte.

"I remember seeing him staring into the middle distance and twiddling his pencil and I wondered if he was earning his corn," said Capt Roberts.

But it soon became apparent that he was.

"He figured out how the Lorenz machine worked without ever having seen one and he worked out the algorithm that broke the traffic on a day-to-day basis," said Capt Roberts.

"If there had not been Bill Tutte, there would not have been any need for Tommy Flowers," he said. "The computer would have happened later. Much later."

Valve trouble

Prof Copeland said Tommy Flowers faced scepticism from Bletchley Park staff and others that his idea for a high-speed computer employing thousands of valves would ever work.

Colossus kept valves lit to ensure they kept on working

"Flowers was very much swimming against the current as valves were only being used in small units," he said. "But the idea of using large numbers of valves reliably was Tommy Flowers' big thing. He'd experimented and knew how to control the parameters."

And work it did.

The close co-operation between the human translators and the machines meant that the Allies got a close look at the intimate thoughts of the German High Command.

Information gleaned from Tunny was passed to the Russians and was instrumental in helping it defeat the Germans at Kursk - widely seen as one of the turning points of WWII.

The greater legacy is the influence of Colossus on the origins of the computer age.

"Tommy Flowers was the key figure for everything that happened subsequently in British computers," said Prof Copeland.

After the war Bletchley veterans Alan Turing and Max Newman separately did more work on computers using the basic designs and plans seen in Colossus.

Turing worked on the Automatic Computing Engine for the British government and Newman helped to bring to life the Manchester Small Scale Experimental Machine - widely acknowledged as the first stored program computer.

The work that went into Colossus also shaped the thinking of others such as Maurice Wilkes, Freddie Williams, Tom Kilburn and many others - essentially the whole cast of characters from whom early British computing arose.

And the rest, as they say, is history.

Helping the web to understand

Sometimes using a search engine can be maddening. Especially when the keywords you expect to lead straight to the pages detailing what you seek turn out to be only tangentially related to that subject.

Completing the task means finding the words a search engine associates with a subject, rather than those used by ordinary folk to describe the same thing.

The slipperiness of language is at the heart of such troubles.

Many expect that improvements in the way the web works and, in particular, greater use of the so-called semantic web will make those frustrations a distant memory.

Early work on the semantic web stressed the importance of tagging - labelling all the elements on a webpage so computers can work out what they are for and how they inter-relate.

But, said Dr Christian Hempelmann from semantic search engine Hakia, that approach has its limitations.

"It works well on pre-structured data," he said. "It works well in limited domains where the corpus of tags that exists is very well defined.

"But," he added, "it does not do well with the free rein of language."

What scuppers the approach is the ambiguity of language and the fact that people rarely tag consistently.

"It has to try to represent the dirtiness of natural language," he said.

Making meaning

Instead some are using semantic technology in a way that does not try to impose meaning on data. Instead it teases out the sense by seeing how it is used.

Semantic technology can handle the ambiguity of language

"It's all about trying to find a way to give data a consistent meaning," said Keith Walker, spokesman for semantic web firm Metatomix.

Some of the first users of this novel application of semantic technology have been large corporations and organisations that generate huge amounts of data as they go about their business.

Workers can be stumped when searching through that pile of data for the information they need, said Mr Walker.

"It's not easy to find what you are looking for when you are bombarded with raw data and too little understanding," he said.

To help with that, Metatomix builds a database known as a semantic ontology, which attempts to capture how all the different parts of an organisation understand a particular thing.

Some courts in the US have become the first users of semantic ontologies to help all those involved in the judicial process manage the information collected about the people that pass through the courts.

Mr Walker said a "criminal" means very different things to the police, defence lawyers, prosecution team and victims - even though it is the same person under scrutiny.

Understanding that ambiguity can help smooth the flow of data across formerly incompatible computer systems and ensure that nothing is lost as a case comes to a conclusion.

A more tangible example is aerospace giant Airbus, which has created a semantic ontology to help it understand what a wing means to the different groups of engineers engaged in making new aircraft.

For Airbus, data about a wing is generated by many different groups involved in modelling and design.

"Airbus has no formal way of consistently sharing information across these different disciplines today," said Mr Walker.

"There's a need to share so it optimises designs and short circuits the design life cycle which is hugely long and complicated," he added.

Early work using semantic technology to understand the knock-on effects of design choices has helped Airbus work out which will be the most costly, said Mr Walker.

And, he said, sharing that data is not just about helping to cut costs. There are other benefits to developing a greater understanding of what a "wing" means.

"Engineers tend to take design choices they have already done as opposed to investigating alternatives," said Mr Walker. "However, innovation comes from iterating around design choices."

Smarter web

John Davies from telecoms giant BT said this semantic technology could make search engines far more useful.

Efforts to make AI useful could be aided by semantic technology

Rather than typing in a few keywords, the semantic technology will be able to glean the meaning behind the query and reach accordingly, he said.

"It's an information-centred approach in a form you want rather than leaving you to do the analysis when you get the list of links back," he said.

Typing a restaurant name could return a link to a website, add maps, reviews, user ratings and recommended dishes from the latest menu. The search engine will be hard to fool and should be able to discern, much more readily, the intent behind search terms.

For Dr Hempelmann from Hakia this use of semantic technology goes further than just helping companies get to grips with the mountains of data they produce.

"We are giving the machine knowledge and that knowledge enables the machine to understand and act on that," he said.

Applying this technology could mean machines achieve significant insights into the way people understand the world. It could feed a breakthrough in an area of science that has long frustrated mankind.

"What we are talking about is AI," he said. "After all, to fool a true semantic web engine means fooling a human-like intelligence."

Serious security flaw found in IE

Users of Microsoft's Internet Explorer are being urged by experts to switch to a rival until a serious security flaw has been fixed.

The flaw in Microsoft's Internet Explorer could allow criminals to take control of people's computers and steal their passwords, internet experts say.

Microsoft urged people to be vigilant while it investigated and prepared an emergency patch to resolve it.

Internet Explorer is used by the vast majority of the world's computer users.

"Microsoft is continuing its investigation of public reports of attacks against a new vulnerability in Internet Explorer," said the firm in a security advisory alert about the flaw.

Microsoft says it has detected attacks against IE 7.0 but said the "underlying vulnerability" was present in all versions of the browser.

Other browsers, such as Firefox, Opera, Chrome, Safari, are not vulnerable to the flaw Microsoft has identified.

Browser bait

"In this case, hackers found the hole before Microsoft did," said Rick Ferguson, senior security advisor at Trend Micro. "This is never a good thing."

As many as 10,000 websites have been compromised since the vulnerability was discovered, he said.

"What we've seen from the exploit so far is it stealing game passwords, but it's inevitable that it will be adapted by criminals," he said. "It's just a question of modifying the payload the trojan installs."

Said Mr Ferguson: "If users can find an alternative browser, then that's good mitigation against the threat."

But Microsoft counselled against taking such action.

"I cannot recommend people switch due to this one flaw," said John Curran, head of Microsoft UK's Windows group.

He added: "We're trying to get this resolved as soon as possible.

"At present, this exploit only seems to affect 0.02% of internet sites," said Mr Curran. "In terms of vulnerability, it only seems to be affecting IE7 users at the moment, but could well encompass other versions in time."

Richard Cox, chief information officer of anti-spam body The Spamhaus Project and an expert on privacy and cyber security, echoed Trend Micro's warning.

"It won't be long before someone reverse engineers this exploit for more fraudulent purposes. Trend Mico's advice [of switching to an alternative web browser] is very sensible," he said.

PC Pro magazine's security editor, Darien Graham-Smith, said that there was a virtual arms race going on, with hackers always on the look out for new vulnerabilities.

"The message needs to get out that this malicious code can be planted on any web site, so simple careful browsing isn't enough."

"It's a shame Microsoft have not been able to fix this more quickly, but letting people know about this flaw was the right thing to do. If you keep flaws like this quiet, people are put at risk without knowing it."

"Every browser is susceptible to vulnerabilities from time to time. It's fine to say 'don't use Internet Explorer' for now, but other browsers may well find themselves in a similar situation," he added.

Apple to ditch Macworld gathering

In a surprise move, Apple said it is to abandon its annual tech gathering Macworld after this January's event.

Meanwhile news that the keynote address will not be given by ceo Steve Jobs has reignited speculation about his health following cancer four years ago.

Concern was raised earlier in the year when Mr Jobs appeared at the firm's developer conference looking gaunt.

Apple spokesman Steve Dowling refused to discuss the issue and said shows like Macworld were no longer relevant.

"Apple is steadily scaling back on trade shows and in recent years is reaching more people in more ways than ever before," Mr Dowling told BBC News.

"Every week 3.5 million people visit our retail stores. And like many companies, trade shows are a minor part of how Apple reaches its customers."

Mr Dowling also said that as the company had scaled back on such shows, it had ramped up "stand-alone launch events like the September iPod launch seen by millions of people on the internet".

IDG which runs the show put a brave face on things.

"We are on track for a terrific show with strong attendance numbers and nearly 500 exhibitors showcasing their products," Paul Kent, general manager of Macworld Expo told the BBC.

"The conference and expo has thrived for 25 years due to the strong support of tens of thousands of members of the Mac community worldwide. We are committed to serving their interests," he said.

"Greatly exaggerated"

Macworld is regarded as a highlight for Apple fans with new product launches fronted by Mr Jobs.

Mr Jobs managing to see the funnier side over stories about his health

When Mr Jobs went on stage at Apple's world wide developer conference in June, his physical appearance shocked many. He appeared thin and emaciated and speculation became rife that he had suffered a setback after a bout of pancreatic cancer in 2004.

Later in the year, he joked about it on stage in San Francisco when he launched the new range of iPods. At one point in his demonstration he appeared in front of a giant screen that displayed the words "the reports of my death are greatly exaggerated".

This was in reference to an obituary that had been mistakenly published.

But analysts are again pointing to the possibility that Mr Jobs's health is an issue.

"I think Steve's health is a factor," analyst Gene Munster of Piper Jaffray told MarketWatch.

"I think it means there's a change of power at Apple... Steve Jobs is playing less of a role. And that is not up for debate.

"Apple could have dismissed a lot of rumours by having him give the final keynote and they opted not to."

The keynote will be presented by Phillip Schiller who is Apple's senior vice-president of worldwide product marketing.

Falling share price

It has not been a good week for Apple.

The laptop weighs 1.3 kilograms and costs £1,200

Earlier Goldman Sachs analyst David Bailey downgraded the stock, cut his estimate for Apple's 2009 profit and warned "some nicks have started to emerge".

Mr Bailey pointed out that the first two quarters of next year would be tough for the company with deteriorating consumer demand.

"Shipments of MacBooks, iPod nanos and iPhone were all slightly lower than what was expected going into the [December] quarter," he wrote in a note to clients.

However he said Apple's ability to innovate would keep it ahead of the competition.

Sales of Macs in US stores last month fell 1% from a year ago, while industry-wide PC sales rose 2%, according to research firm NPD Group Inc which tracks retail sales.

Shares of Apple fell just over 5% in after hours trading on the news of the Macworld announcement to close at more than $99.444 (£58).

Apple Tweaking iPhone App Store: Good News For Shoppers, Developers

(alleyinsider.com) -- Apple (AAPL) is tweaking the way its iPhone/iPod touch app store looks in iTunes. This is good news for users, who will, in theory, get a better experience. (And might download/buy more apps.) It's also good news for app developers, who have complained that the app store too heavily favors a tiny cross section of all available software.

AppleInsider: TouchMeme's Krishna Vegesna tipped AppleInsider off to the overnight design tweaks, which "accomplished three important things," according to the iPhone app developer. First, he said, Apple now highlights the most popular applications on each category page.

As part of this new grouping, the Cupertino-based company has also separated the most popular Free Apps -- which previously dominated the most popular listings -- from most popular Paid Apps, breaking each out into separate sidebar modules that flank the general listings for each category.

What the new layout doesn't appear to do, yet: Give higher priced apps an advantage over cheap, $0.99 apps, which many developers have complained about. If you haven't yet read iPhone developer Craig Hockenberry's manifesto yet, it's a good one. The gist: Because Apple's "most popular" list, where many/most purchases come from, favors the apps that have been downloaded the most -- not the ones that've brought in the most revenue -- it's riskier to fund more expensive, higher quality software.

Hockenberry: We have a lot of great ideas for iPhone applications. Unfortunately, we're not working on the cooler (and more complex) ideas. Instead, we're working on 99 titles that have a limited lifespan and broad appeal. Market conditions make ringtone apps most appealing.

Before commencing any new iPhone development, we look at the numbers and evaluate the risk of recouping our investment on a new project. Both developers and designers cost somewhere between $150-200 per hour. For a three man month project, let's say that's about $80K in development costs. To break even, we have to sell over 115K units. Not impossible with a good concept and few of weeks of prominent placement in iTunes.

But what happens when we start talking about bigger projects: something that takes 6 or even 9 man months? That's either $150K or $225K in development costs with a break even at 215K or 322K units. Unless you have a white hot title, selling 10-15K units a day for a few weeks isn't going to happen. There's too much risk.

HCL's Leveraged Leap to India's Top Tech Circle

In borrowing the cash to take over Axon Group, HCL Technologies is challenging the cozy worlds of SAP installation and Indian tech finance

By Steve Hamm

India's tech industry has emerged on the global scene with an aggressive deployment of highly trained, low-cost labor to serve Western clients. Now HCL Technologies is out to prove that its savvy use of interest-rate arbitrage can finance a broader second wave of growth.

HCL isn't one of India's technology brand names. Even though it has more than 50,000 employees and operates in more than a dozen countries, the Noida-based company has worked in the shadows of such tech giants as Tata Consultancy Services, Infosys Technologies, and Wipro (WIT). But, now, with a $650 million acquisition of Britain's Axon Group that's scheduled to close Dec. 15, HCL is poised to join India's tech big leagues. "We now have a capability the others don't have," says HCL Chief Executive Vineet Nayar. "We can compete with Accenture and IBM."

Axon is a medium-sized IT consulting firm that focuses on installing applications made by corporate software giant SAP (SAP) of Germany. HCL is folding its own SAP-focused business into Axon to create a $600-million-a-year division that ranks as the only Indian company among the top 10 global SAP installers.

SAP welcomes new installers

Now that HCL owns Axon, its strategy is to approach corporations and offer to provide them with a combination of SAP installation services and remote management of their computing systems from India. This way, Nayar says, he can bring the cost-saving benefits of doing business in India to a realm of IT services long dominated by IBM (IBM), Accenture (ACN), EDS (EDS), and other Western companies. If successful, HCL could put pricing pressures on the major players.

While analysts don't expect HCL to have an immediate negative effect on the giants, they see its growth as a threat to be monitored. "These guys can bring the Indian efficiencies to these kinds of services," says Bruce Richardson, an analyst at market researcher AMR Research. He says SAP is frustrated with the fact that companies that install its software often charge $5 for every dollar the customers pay for the software itself. "It would be good for SAP to have low-cost companies playing a bigger role in this market."

IBM says it isn't spooked by HCL's move. IBM spokesman Tim Blair says HCL can't match IBM's breadth of capabilities, which include 9,000 software programmers and consultants who specialize in dealing with SAP applications worldwide. That includes a cadre of business consultants who not only advise clients about technology matters, but help them deal with business challenges and opportunities. "We have a different business model," Blair says. "We deliver high-value solutions to our clients. A race to the bottom on pricing is not our business model."

Leveraged expansion has been rare

But IBM ought to beware complacency. Since mid-September, HCL has been offering a deal combining SAP installation with remote management of hardware and software. Nayar says he has landed more than $1 billion in new orders this quarter, compared with $270 million the previous quarter. HCL promises customers it will trim routine IT systems management costs by 20%—while changing their technological and business procedures to reap big longer-term savings in efficiency and gains in productivity.

The early results have convinced Nayar that buying Axon was a sound move. "We're buying Axon because they're smart and we're not," he says. "They have a consulting capability that we don't have."

To pay for Axon, Nayar took unusual advantage of HCL's healthy balance sheet, which showed about $500 million in cash and no debt. Few Indian tech outfits use debt to finance acquisitions or fund expansion, but Nayar borrowed money to make his takeover offer. He says he'd rather hold onto his cash—and rake in interest of 10% to 11% from it—while borrowing dollars at little more than 5% interest to finance additional acquisitions and pay for overhauls of clients' software. He says that with his AAA credit rating, HCL will have no problem raising money in the U.S.

Developer strikes it rich with iPhone game

(CNN) -- With its glassy touch screen, powerful graphics, crisp sound and tilt feature, the iPhone is more than a smart phone for some users -- it's a portable entertainment system.

"Trism" developer Steve Demeter demonstrates his game via webcast to CNN.com's Nicole Lapin.

It's also become a potential gold mine for entrepreneurs who create games for the device. Just ask Steve Demeter, developer of the popular puzzle game "Trism."

A former ATM software designer for a large bank, Demeter created "Trism" in his spare time and pitched it to Apple last spring. The company made the game available for download with the July launch of its App Store, an online provider of applications for its iPods and iPhones.

Priced at $5, "Trism" earned Demeter $250,000 in profits the first two months.

"It's done phenomenal business," said Demeter, 29, who lives in the California's San Francisco Bay area. "I'm very honored that so many people would enjoy my game. I get e-mails from 50-year-old ladies who say, "I don't play games, but I love Trism.' That's the coolest thing."

It can take dozens of professional developers and millions of dollars to create a video game for a traditional console such as a PlayStation or an Xbox. But the iPhone and the App Store have helped democratize game development by opening the field to any software coder with talent and a clever idea, industry observers say.

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"A single one of these titles can be turned around for pennies by comparison in just weeks by a single hobbyist working in their off-hours," said Scott Steinberg, publisher of DigitalTrends.com and author of "Get Rich Playing Games." "The overhead and barriers to entry are so low that virtually anyone can afford to take a crack, if not several, at hitting a home run."

Demeter took his crack after attending an iPhone conference in the summer of 2007. He spent months afterward brainstorming, by himself and with friends, about how to create an original game for the device. Once he got the idea for "Trism" in February he spent another four months coding the game on nights and weekends.

The result is a puzzle game, like "Bejeweled," in which players manipulate a colorful grid of triangles. Players score points by lining up three or more like-colored triangles in a row, with an iPhone twist: The triangles rearrange themselves depending on which way the player rotates the phone.

"I did the game myself, basically. I had a buddy of mine who actually came up with the name 'Trism.' I paid him a couple of grand. But other than that it [was] just me," Demeter told CNN. "It's a very simple-to-learn, hard-to-master puzzle game. It wasn't as hard [to develop] as a 3-D, gun-and-battle kind of game. But for the one-man team that I was, it was definitely a challenge."

Demeter quit his bank job two months ago and has launched a company, Demiforce, to develop more electronic games. Now he has a salaried staff, five games in development and two coming out by Christmas, including a spinoff to "Trism" called "Trismology."

"Apple has made it so easy to put [game publishing] in the palms of developers," he said. "You just make it and then you submit it to Apple. If you have a relevant, fun game or application, I don't see any reason why it shouldn't be approved."

Developers earn 70 percent of App Store proceeds from the sale of their games, with Apple taking 30 percent.

The field is getting crowded, though. There now are more than 1,500 iPhone games available from the App Store, up from about 900 two months ago.

Richard Solo 1800 Backup Battery

Product summary

The good: The Richard Solo 1800 Backup Battery successfully powers your iPhone when it needs an emergency charge. It has an easy-to-use design, and it offers a flashlight and a laser pointer.

The bad: The Richard Solo 1800 Backup Battery is a little unwieldy when attached to your iPhone.

The bottom line: The Richard Solo 1800 Backup Battery is on the expensive side, but you get a lot of bang for your buck.

The popularity of the iPhone has led to a gallery of iPhone accessories, from cases to speakers to backup batteries. We think the latter category has the most practical products, especially when you consider the iPhone 3G's variable battery life, so we've made an effort to review various models like the Mophie Juice Pack and the iPhoneck. Richard Solo, a small company based in California's Marin County, has jumped into the space as well. Its newest product, the 1800 iPhone Backup battery, builds on the success of its earlier models, the 1200 Backup Battery and the original Backup Battery. It offers a slimmer shape, plus a small flashlight and a laser pointer. And, of course, it will zap your iPhone 3G or iPhone classic back to life when needed. At $69.95, it's a bit more expensive than comparable products, but it delivers the goods.

Like its predecessors, the Solo 1800 is more of a secondary battery for your iPhone, rather than an emergency charger. That means you'll need to charge it before it can deliver the needed juice to your handset. That may sound inconvenient, but we think that it is a workable arrangement. The Solo 1800 measures 4.41 inches by 2 inches by 0.51 inch and weighs just 2.3 ounces. That makes it compact and portable by all accounts; we had no trouble stashing it in a bag or pocket. The casing is plastic, but it feels sturdy in the hand.

The Solo 1800's connection port sits at its top end. Since it protrudes slightly from the battery, Solo included a plastic cover to protect the connection pins from accidental flexing. The battery also comes with two "support braces" (one for the iPhone classic and one for the iPhone 3G) that will hold your handset firmly in place during the charging cycle. On the bottom of the Solo 1800's front face are three indicator lights and the buttons for the integrated flashlight and laser pointer. Directly opposite, on the rear face, you'll find a power switch for the light and laser. And at the bottom end, there's the flashlight, the laser, and the mini-USB port for the charging cable.

The Solo 1800 is compatible with not only iPhones, but also with iPod devices. The catch is that with some iPods, the headset jack won't be accessible when you're using the battery. With any device, however, the charging process is the same. First, power the Solo 1800 battery with a full charge from a standard electrical outlet, a cigarette lighter, or a computer. The retractable charging cable stretches up to 2.42 inches, and although separate adapters are required for electrical outlet and cigarette lighter charging, they come included in the box. The wall charger also has a 110-to-240-volt converter for international travel.

It should take about 5 hours to fully charge the Solo 1800 on your initial use, but subsequent chargers may take less time. An indicator light will let you know when it's ready to go. Once charged, however, the Solo 1800 will hold its charge more or less indefinitely. You then can use it to top off your iPhone for brief periods or give it a full charge when it's about to die. We fully charged our iPhone in 90 minutes when we had less than 10 percent of battery life left. You can charge both devices at once: your iPhone will charge first and the backup battery second. You also can use your iPhone with the Solo 1800 attached, but it is pretty cumbersome.

The Solo 1800 has a capacity of 1,800 mAh. Solo doesn't give any promises on how many hours of talk time the 1800 will deliver, but we were able to get a day of heavy use on our iPhone, which is pretty much standard. Of course, your actual battery life will depend on how you use the phone (3G use, screen brightness, etc.). Also, while Solo promises that the backup battery can last through 300 complete charge/discharge cycles, its lifespan also will depend on how you use it. As with a cell phone, it's best to use it fully and give it a complete recharge the majority of the time.

Like the Solo 1200, the 1800 offers a small flashlight, but it also adds a small laser pointer. They worked exactly as you might expect; just remember that you need to flip the power switch to use them. We're not sure why you need a flashlight and a laser pointer in a backup battery, but they are there for the taking. In any case, the Solo is a convenient and easy-to-use way to power your precious iPhone.