Archive for January 12th, 2005

Say hello to Justin and Sarah

Old buddies Justin Hibbard and Sarah Lacy, now safely grinding way and turning out good journalism at Business Week are the new entrants to the blogworld. Welcome … Check out their Deal Flow blog right here. Justin and I used to work at the (real) Red Herring. And Sarah I know from the press circles. More great stuff, I hope on VC and their inner workings from these two I hope. Justin gives me the props for SixApart-Live Journal scoop. Thanks. Link tip, who else, but Silicon Beat!

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A Small Exploding TV Reality Check

Lots of folks are talking about “exploding TV” right behind Mac Mini and other problems Apple is having with bloggers. Jeff Jarvis, Fred Wilson and Chris Anderson are leading the conversation. I don’t agree – I think the difference has to be made in TV (as we know it) and content created and distributed on the Internet by individuals and indies.

Here are some actual numbers which show that exploding TV is one with a really long and I mean long fuse. An average American watches four hours of television and assuming that he gets to pick and choose at a rate of 99 cents an hour, well his/her average spend is going to be about $1465 a year or about $120 a month. Add the download costs – say a good 6 megabits connection, which is about $50 a month, you are looking at $170 a month. Average cable bill is about $52 a month. Not including the cost of specialized gear like darling of the moment, Akimbo or TiVo, the delta is just too wide.

Unlimited television, which can be manipulated at say extra $10 a month if you get the cable DVR, versus a micro-niche download model? Take your pick! I guess, its safe to say that television is not going to change from being a push to pull model for some time. However, it might go from total push to some manipulate status. Remember, there are only 2 million TiVo customers – and given the time and marketing dollars that company has spent, it should be a cautionary tale. Moreover, it is a model which is very US centric. And one more thing….

In the US Digital TV report, eMarketer Senior Analyst Ben Macklin describes the slow start of VOD: “Watching any movie or TV show at any time of the day or night with full DVD functionality is undoubtedly an attractive proposition for most consumers, but VOD has not turned out to be the cash cow cable operators were hoping for, at least not yet. While VOD has become widely available across the cable footprint in 2004 (satellite TV operators, such as DIRECTV, do not have the bandwidth to offer on-demand services). eMarketer estimates less than 10% of cable TV households were regular users of the service in early 2004. Furthermore, cable operators are providing increasing amounts of VOD content for free, indicating, perhaps, that the future of VOD will primarily be a service to reduce churn rather than a significant revenue generator in the short term.” (eMarketer report link)

Does it mean it will never happen? Can’t say that, but safely can say this whole explosion might take at least five years at the very least. And like the Bells, I don’t take the television companies lightly – they always figure out a way to subsume the revolution.

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T-Mobile Finally Responds

T-Mobile has issued a press statement. Apparently they did the right thing.

Our investigation revealed that this third party was able to view the name and social security number of 400 customers. These customers were notified in writing of this incident. Customer credit card information was not accessed.


Safeguarding T-Mobile customer information is a top priority for the company. In late 2003, T-Mobile discovered that an unidentified person accessed a portion of one of its internal computer systems. We immediately took steps that prevented any further access to this system.

We immediately notified the United States Secret Service, and asked it to investigate this incident, and to find the hacker.

Our investigation revealed that this third party was able to view the name and social security number of 400 customers. These customers were notified in writing of this incident. Customer credit card information was not accessed.

In late 2004, with the assistance of T-Mobile, the Secret Service was able to apprehend Nicholas Jacobsen, the alleged hacker, who was recently indicted in California. We are pleased that he is being brought to justice.

This same person is also believed to be involved in other attempts to gain unauthorized access to customer information. The Secret Service is investigating these allegations, and T-Mobile is cooperating to the fullest extent, including with regard to the allegations that customer photos have been subject to unauthorized access.

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Write, Read, Write

A week ago I wrote about Videora, then followed up with an e-interview with Sajeeth and today Wired has a story on Videora. Write, Read, Write… the new relationship between blogs and publishing world?

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Three Strikes & You ‘R Out

One day, three senior level resignations amazing…. TiVo’s Michael Ramsey is going to do big strategy stuff… Motorola COO Mike Zafirovski resigned for now Ed Zander is firmly entrenched at the top… and Alcatel CTO Niel Ransom has had it with french food and dog shit on Paris streets and is moving back to the US. Actually this is a headhunter’s wet dream come true – three candidates, three jobs…

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AireSpace sold for $450 million

Om Malik | Wednesday, January 12, 2005 | 2:30 PM PT | 0 comments

The WLAN shakeout continues. Cisco just announced that it is buying AireSpace for about $450 million, in an attempt to fill a gaping hole in its WiFi product strategy. News.com had the story first. The Linksys could not really scale into the enterprise after all. WiFiNetworkingNews adds: “With Cisco’s expertise in the increasingly common 10 Gbps Ethernet switches and backbones, this should allow Airespace to more easily extend their intelligence without bogging down networks.” Going forward a quick back of the book analysis: The price was around 11x earnings or about $40 million in 2004 sales. This trims down the market to three major players now Cisco, Aruba and Colubris now. There are others who are desperately looking for exits. Meru is one, which might end up selling its IP, and Trapeze which is still in the game, but has been meandering so to speak. In short, expect Nortel and Alcatel to open up their pocket books. Two thirds of AireSpace sales were through Nortel and Alcatel Enterprise Divisionis getting is WLAN from Colubris. In related gossip, Nortel also kicked Accton out so that leaves them with Aruba as a partner of choice. My guess, Aruba goes to Nortel and Colubris to Alcatel.

Level 3 Shocker

Level 3 is cutting 12% of it workforce, a move it expects to save the company $60-to-$70 million a year. Why the cuts? Despite the promise of VoIP, CEO Jim Crowe says that the end demand from the customers of its wholesale customers is taking a little longer to materialize. Why am I not surprised? Two reasons. First, the VoIP hype has gotten ahead of the market realities. Remember there were only a million VoIP customers at the end of 2004. The market grows exponentially, lets say to 10 million by end of 2005, and each customer pays say $20 a month, or $240 a year, it will be a $2.4 billion a year market. Level 3’s cut is going to be a percentage of that. Second reason is that when you are a wholesale provider, then you are always at the mercy of your resellers. So that’s something Level 3 cannot do anything about. Last point – I have often said VoIP is a deflationary force – it will gain popularity but it will be tough to grow the revenues. Everyone will face the same problem going forward – its not rocket science, its simple logic. The bandwidth prices, while not declining as rapidly as say a year ago are still declining, and there is too much capacity. Having said that, Level 3 is making the right moves – managing itself and waiting for the end demand to come.

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Sidekick Hacked

sidekick_colorb.jpgA computer hacker had access to all the Sidekick related boxes at T-Mobile according to Security Focus. Which means the not only had access to all the pictures (naked I presume) Paris Hilton was taking of herself, Snoop’s dirty laundry but also customer passwords and social security numbers. In addition he had access to some US Secret Service emails as well. Not that secret at all. The hacker in question is 21-year-old Nicolas Jacobsen, who was quietly charged this past October. The big question is can you trust the wireless companies any more? Why did T-Mobile issue a notice? It is required to do so under California anti-identity theft law, SB 1386. This is a big big problem and I am pretty sure is going to raise its ugly head again.

According to court records the massive T-Mobile breach first came to the government’s attention in March 2004, when a hacker using the online moniker “Ethics” posted a provocative offer on muzzfuzz.com, one of the crime-facilitating online marketplaces being monitored by the Secret Service as part of Operation Firewall. “[A]m offering reverse lookup of information for a t-mobile cell phone, by phone number at the very least, you get name, ssn, and DOB at the upper end of the information returned, you get web username/password, voicemail password, secret question/answer, sim#, IMEA#, and more,” Ethics wrote.

It has been more than six hours since the Sidekick Hacked story started making the rounds of the Internet. T-Mobile USA has not issued a single statement or press release. It is clearly in breach of California law. The silence is deafening and maddening at the same time. Emails and voice mails have been dispatched to the PR departments, …. but nothing!

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ThinkSecret founder at risk?

Harvard Crimson has a report on student Nick Ciarelli and ThinkSecret founder’s legal chances.

Roger M. Milgrim, a New York intellectual property attorney and the author of Milgrim on Trade Secrets, said that Apple might be trying to scare off other sites from copying Think Secret’s tactics. “They figure that if they place financial pressures on this fellow, they’ll stop others from doing this same,” said Milgrim, who was unfamiliar with the case. “A preliminary injunction issued by a California court is useless against a Massachusetts or New York resident. But they seek damages and this young man will have to appear and he will have to hire a lawyer.” Milgrim and Harvard Law Professor Lloyd L. Weinreb, when told by a Crimson reporter about the case, said Ciarelli might have a difficult time defending his actions. “If that student is inviting people to give him information that was violating a trade secret he might be liable as a contributory infringer,” Weinreb said. An infringer violates the law directly, but a contributory infringer knows about the infringement and facilitates it in some way.

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Ed Zander is Everywhere

Ed_Zander.jpgBack in the boom-boom days, one of the companies I closely tracked was Sun Microsystems. There were three or four executives there, who were in my opinion, pretty straight-up with the press, and one of them was Ed Zander. The tough talking, straight shooting, Brooklyn born Zander was as candid as big company guys go. And he was really good at what he did. Well, when he took over the much-hated job as the CEO of Motorola, many did not know what to make of it. It was clear to me, that regardless of Motorola’s problems, Ed is going to cut through the fat, and get the company focused enough to inspire some faith on Wall Street. “He is shaking things up and is more assertive than previous management,” says Brian Modoff, an analyst at Deutsche Bank Securities in San Francisco. Seems he has done the job quite well. Stock price has nudged up nicely – 32% in 2004 -as well! The new phones are doing well, and are much in demand, and the company has stopped its market share loss to Samsung, at least for now. Media is glomming on the fact. A spate of recent cover stories and loving headlines tell you that Ed is the man. Newsfactor is the latest to gush. “It was like doing brain surgery and cutting blood vessels with a little knife,” he tells Newsfactor about the FreeScale spinoff, in his typical colorful manner. My Business 2.0 colleague Greg Pascal Zachary chatted with him about turning around the behemoth. Not sure what the real story is but today, the Motorola COO Mike Zafirovski resigned. He was seen at one time as the next CEO, but now with Ed in full control, doesn’t look like he had a shot. I guess, Ed is going to bring in his own people.

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