Daily Archives: July 27, 2006

CA Could Shed Up to 1,000 Employees Within Two Weeks

Financial and operational problems continue to hobble CA. Reports from eWeek and other sources now indicate that those problems will result in as many as 1,000 CA employees losing their jobs, perhaps within the next two weeks.

According to the eWeek report, “sources close to CA” say the restructuring plans haven’t been solidified, but that the layoffs could represent five or six percent of the company’s workforce.

In late June, the company advised financial analysts that it discovered evidence of stock-option backdating and an understatement of approximately $40 million in revenue. Taken together, those problems could see CA restate hundreds of millions of dollars in past financial results.

As the eWeek article notes, CA’s list of recent problems include missing a deadline of June 29 for filing its fiscal 2006 10K statement, now expected to be filed July 31; the reorganization of its sales force; and the departure of a top sales executive, which is never a good sign. The company’s CFO Bob Davis also left under a cloud, allegedly “by mutual agreement,” an and its COO Jeff Clarke bolted for the doors last spring.

The company also bungled an overhaul of a sales-force compensation program, awarding double commissions to some account managers.

CA is thought to have reached a crossroads, presented with a dilemma of choosing between potential growth at the risk of severe earnings depletion or profitability through cost reductions at the cost of growth. After considering the matter at length, the company’s braintrust is said to have concluded that cost-cutting had to take precedence, at least for the intermediate term. For the time being, it doesn’t believe it can portray itself credibly as a growth vehicle. More to the point, it doesn’t believe the results would withstand investor scrutiny.

Although the eWeek article, quoting an analyst at Susquehanna Financial Group, indicates cuts will come from R&D, as well as from sales and marketing, other sources say cuts will come across the board, spanning most divisions and geographies.

Gates Vacations in Africa as Ballmer Goes Solo with Analysts

With Bill Gates on vacation in Africa, Steve Ballmer took center stage and went solo for the first time at Microsoft’s annual meeting with market analysts.

Ballmer told the assembled throng that he would be the "primary champion of innovation in our company." Perhaps that comment — who sees Steve Ballmer as a champion of innovation? — and another Microsoft executive’s reluctance to commit to firm ship dates for the commercial and consumer versions of Vista, the next version of the Windows operating system, hurt Microsoft’s stock price and technology shares in general; both were down on the day.

Regarding sticking to the release dates for Vista, Kevin Johnson, co-president of the company’s Platforms & Services Division, had this to say:

"At this point in time, there is no data that says we won’t ship Vista to businesses in November and consumers in January. . . . "Vista will ship when it is ready. Quality is job one."

There’s nothing like a dollop of ambiguity to mess with the minds of market analysts. Their cognitive dissonance then reverberated across the universe of technology stocks.

Kazaa Settlement Reached; Can Zennstrom and Friis Return to USA?

As news broke today of the $100-million settlement between the music industry and peer-to-peer file-sharing service Kazaa, now owned by Australia’s Sharman Networks, I wondered how it might affect the travel itineraries of Niklas Zennstrom and Janus Friis.

After launching Kazaa, and being sued by the recording industry for copyright-piracy violations, Zennstrom and Friis founded Skype, now enveloped within eBay, and are said to be preparing to launch a Web-based video-distribution platform codenamed "The Venice Project."

With lawsuits in the USA hanging over their heads, Zennstrom and Friis have avoided the country in their commercial travels. Rather than physically appear there, Zennstrom has remotely delivered keynote addresses to US-based industry events using videoconferencing. Perhaps now, after several years, he and Friis finally can return to the USA in pursuit of business and pleasure.

As for the Kazaa settlement itself, it might be much a case of much ado about nothing — except the money, of course. Under terms of the settlement, Sharman Networks will pay the world’s four major music companies — Universal Music, Sony BMG, EMI and Warner Music — more than $100 million in damages. In addition, Kazaa also has agreed to restrict the sharing of copyrighted material on its network.

I tend to think the folks at Techdirt have the right take on this story. Techdirt opines that, while it would be great to see the emergence of a viable new model for downloading and buying creative content, other attempts at reforming formerly successful P2P scofflaws haven’t provided reason for optimism.

Email Reputation Vendors Suffer Self-Inflicted Reputation Loss

Earlier today, I was startled to find an article on the BBC’s site headlined, "More than 95% of e-mail is ‘junk‘." At first, just scanning the headline alone, I thought the article might be a commentary on the pathetic state of literacy, or what passes for it, throughout much of the industrialized world.

It turns out, however, that the article was quoting email-reputation services that claimed more than 95% of all email traffic today is composed of spam, error-return messages, and viruses.

Even more astounding, one of those email-reputation vendors, Return Path, said 99% of the email-sending computers that it monitors have become "zombies," commandeered by spammers or virus writers for nefarious commercial purposes. Return Path made this assertion not once, but twice, putting forward the same argument to a reporter at CNET News.

What an outlandish claim for Return Path to make. Remarkably, though, Return Path isn’t the only vendor making such a charge.

Habeas, which promotes itself as a "email trust authority" and touts the industry’s largest email-reputation database, also says that more than 99% of the 140 million email-sending IP addressees that it monitors "are evil." There’s a slight difference between what Habeas is saying and what Return Path has told the BBC and CNET, and that difference, as I will explain shortly, is what separates fact-based exaggeration and hyperbole from egregious misrepresentation, respectively.

Could it really be true, as Return Path would have us believe, that practically all of the Internet-connected computers that send email are controlled by malevolent parties, bent on Internet hegemony?

In a word, no.

What’s happening here is sensationalist marketing at its absolute worst. If we take a look at how Return Path arrived at its figures — and the same no doubt holds true for Habeas, too — we can see why.

What these companies monitor are the reputations of IP addresses that send email, as Habeas acknowledged. Now, remember that there is not a one-to-one correlation between your computer on the Internet and a static IP address. The IP addresses you use, especially if you use a portable computer such as a notebook PC, change constantly and have been used by many people (and their computers) before and will be used by many more people after you’re done with them.

On a typical service-provider network, dynamic IP addresses are issued to identify non-permanent devices such as personal computers. Dynamic allocation of IP addresses, typically using a server or servers running the Dynamic Host Configuration Protocol (DHCP), allows service providers to save money by assign a limited pool of addresses to a larger number of customers. Of course, DHCP and dynamic allocation of IP addresses also are common on private networks, which also have a limited number of IP addresses within an administrative domain.

So, if you follow logic, the IP addresses you and I are using at the moment might not be the IP addresses we use the next time we turn on or plug in our PCs. They most certainly will not be the addresses we’ll be using if we pick up our laptop and walk down to the corner coffee shop to avail ourselves of their WiFi connectivity while enjoying a caffeinated beverage.

The point, simply put, is that there are many computers and not enough IP addresses for one to be statically mapped to each of them. As such, a limited number of IP addresses made the rounds, promiscuously attaching themselves,  for varying durations, from one computer to the next.

All of this is not to say that zombie PCs are not a problem. They are a problem, one made worse by service providers who have taken a laissez-fair attitude toward protecting their subscribers against malware and further exacerbated by individual PC owners who have fail to take the necessary precautions against email-borne scourges. It also doesn’t help that malware practitioners have gotten more sophisticated, devising new exploits capable of circumventing and occasionally disarming the conventional defenses, such as antivirus software, deployed to repel them.

That would be complicated for Return Path and Habeas to explain, though, and it wouldn’t serve their purpose, which, unfortunately, appears to involve using scare tactics to sell their respective email reputation services. It is worse than deplorable that they have the gall to peddle this nonsense to the mainstream news media, and it is maddening that they would attempt to foist it on a trade press that should know better.

In the final analysis, we’re left to conclude that at least a couple purveyors of email-reputation services apparently have no interest in maintaining their own reputations for integrity and trust.

Does Open-Source Software Threaten Cisco’s Routing Dominance?

On Monday, a San Mateo-based networking startup called Vyatta released what it bills as the "first enterprise-grade, open-source router platform."

While Linux distributions, running atop industry-standard x86-based servers, are not new to routing — the Quagga routing suite is a notable technical example, though its market penetration has been modest — Vyatta suggests that it is making unprecedented strides beyond initial community-based efforts. Its intention, it is clear, is to become the open-source world’s routing equivalent of Red hat in computing, Asterisk in IP-based telephony, and Sourcefire in intrusion prevention.

Vyatta has a long way to go. The company says its 10,000 copies of its beta software have been downloaded during the past few months, and the first official release (1.0) of its Open Flexible Router (OFR) just occurred this week. According to the company’s strategy VP, initial interest in the routing code has come primarily from small- and medium-size enterprises, though some large ISPs are said to have downloaded the code. About half of its beta users are US-based, but there has also been interest in France, as well as users in Russia, China and Japan.

Formed in April, 2005, Vyatta has about 20 employees. The company has repeatedly refused, in multiple interviews and on its website, to disclose how much funding it has raised. According to a Red Herring article, investors include JP Morgan Partners, Arrow Path, and ComVentures. Seed-stage financing was provided by Panorama Capital, one of whose venture partners, Allan Leinwand, founded Vyatta and now sits as its chairman.

Vyatta’s software combines a modified version of Linux with code developed using the eXtensible Open Route Platform (XORP), an open-source routing-software project that Vyatta supports with funding and equipment. To put together a Vyatta router, a user downloads a CD image from the company’s website and installs it on an industry-standard, x86-based server, with minimum hardware requirements specifying a PC with at least a 500-MHz processor, 256 Mbytes of RAM, 500 Mbytes of free disk space, and a PCI-based T1 interface card.

Now that OFR 1.0 is out the door, the product roadmap calls for incorporation of new functionality in areas such as IP multicast routing, additional firewall capabilities, IPSec VPN support, WAN optimization (which makes a lot of sense), intrusion prevention and detection, and server load balancing. Vyatta is taking enhancement and feature requests on its website.

The business model, explained on another page at Vyatta’s site, involves selling value-added services and support to OFR users, mimicking a tried-and-true approach for major Linux distributions and other open-source success stories. Depending on customer requirements, service subscriptions — comprising software upgrades, maintenance, and support — are priced between $497 and $647 annually.

In addition to the VC funding, the company has a seasoned management team, including a mix of executives who have experience in the open-source world as well as at routing kingpin Cisco Systems.

To succeed, and to attain its aspiration of becoming the next major open-source business phenomenon, the company must continue to enhance the functionality of its software, which it seems to be doing through regular consultations with its user community and prospective customers. It also needs to focus on markets and users where it is likely to achieve success, namely midsize and smaller enterprises as well as regional offices of larger firms.

It should forget, for now, about the large enterprise headquarters and the service providers, and don’t even think about the carriers, who have the capacity and the predilection to drain small companies of all their resources while offering little in return.

Vyatta also need to wrap its software in an appliance, which it has plans to do. The company has indicated that the appliance will carry the Vyatta brand and will be resold by a hardware vendor, much as IBM resells Red hat software running on its appliances. IBM would be a natural partner, since it already is committed to open-source software in so many other areas of its business. Neither Vyatta nor IBM, however, would be likely to pursue an exclusive arrangement.

An appliance is absolutely essential, though, since network managers and IT administrators would have a difficult time justifying the decision to run their company’s routing infrastructure on a discarded or recycled piece of hardware. The optics aren’t good, and perception matters when one’s bosses are asking questions and wondering about one’s critical judgment.

Is Vyatta a threat to Cisco? No, at least not today and not for a while.

However, if the company focuses on its early adopters in mid-size and , smaller enterprises, avoids distractions (such as carriers), establishes an good channels program, and gets its software running on hardware appliances — preferably in business arrangements that also provide it with the marketing and sales muscle of an IBM or an HP — it could make gradual inroads into the approximately $4-billion market for routers sold to midsize and smaller enterprises and deployed at regional offices of larger enterprises.