"The simple things you see are all complicated
I look pretty young, but I'm just back-dated, yeah"
--from the song "Substitute" by The Who
I called my bookie today. OK, I'm not a gambler and don't have a bookie, but I found one to call, anyway. I had just had the greatest idea ever. Here’s how the conversation went down:
Bookie: "Yo. Whattaya want?"
Me: "Um, yes, I'd like to place a bet, please."
Bookie: "Whaddaya wanna bet on? I ain't got all day."
Me: "College football. It's my favorite sport!"
Bookie: "Whatever, sunshine. Just place ya bet."
Me: "OK, here it is ... I want to bet on Michigan to beat Notre Dame."
Bookie: (After a pause) "You mean Penn State. Michigan to beat Penn State. This weekend. Michigan’s a six-point favorite. You wanna piece of that action? How much you gonna put down?"
Me: "Uhhh, no. I want to bet on Michigan to beat Notre Dame. In South Bend. I think Notre Dame’s the favorite. The Irish have the No. 2 team in the country."
Bookie: (After a longer pause) "What are you, some sorta moron? Michigan won that game a month ago. Big. Kicked Notre Dame all up and down the field. You can't bet on a game that's already been played. Whatta you tryin' to pull here? Do I need to send some of my associates to your residence to discuss this?"
Me: "No, no, that's OK, thanks. No associates necessary. I was just hoping I could 'backdate' my bet and be guaranteed to win."
Bookie: "Backdate? Who do you think you are, some Silicon Valley executive? You backdate me, and I'll have my boys break both ya legs."
Me: "Uh, right. Never mind then. Thanks anyway ...."
OK, so maybe the metaphor isn't totally air-tight, but it appears that a bunch of Silicon Valley executives, most recently top brass at McAfee and CNET, are taking the fall -- no doubt onto big, soft, expensive pillows -- for "backdating" their stock options. (In the case of McAfee CEO George Samenuk, now suddenly "retired," the backdating news came out just as he was busy accusing Microsoft of fixing the security market. Guess he thought long and hard about that "retirement," huh? And CNET's deposed CEO will remain on the company's board of directors.)
What these execs did, apparently, was artificially set the date for their stock options to a day when the stock was at a low point so that they could turn right around and sell the options for profit, as this excellent article from the San Francisco Chronicle explains: "Options give holders the right to buy company stock at a predetermined 'strike' price, generally what the stock traded for on the day of the award. Backdating involves keying that strike price to an earlier date when the stock price was low, allowing holders to buy company stock more cheaply."
Right. A nice little trick, that. And here comes the best part:
"The practice violates the law if the backdating is not properly disclosed and accounted for in financial statements."
So, apparently, you can bet on a game after it's been played if you account properly for your guaranteed win (which, really, is incredible enough if you think about it). The problems at McAfee and CNET -- unearthed by internal investigations thus far, although the Justice Department could eventually intervene -- seem to revolve around the fact that neither company properly reported these shady deals. Both companies are now talking about restating financial records from at least the last several years, if not much longer. McAfee is talking about wiping out $100 million to $150 million in earnings. Cnet took a hit on the stock market yesterday based on this and other bad news, but McAfee stock actually went up.
And those two companies are far from being alone in the tub of backdating hot water. Apple has struggled with a scandal of its own, and Adobe is now on the list of potential violators as well. As the Chronicle article states, one bad-boy exec even hid out in Africa -- presumably with Whitey Bulger, although we wouldn't know -- before getting nabbed: "The CNET and McAfee executives join a growing list of corporate bigwigs who have lost their jobs over stock-option irregularities, including one who went on the lam in Africa to avoid criminal charges. That executive, Jacob 'Kobi' Alexander, former CEO of Comverse Technology Inc., was apprehended in Namibia last month and is awaiting extradition."
What on earth? Had this happened in one company, it would have been an interesting little dish of dirt. Apparently, though, backdating has been standard practice in a big chunk of the industry for a while, and a bunch of companies are now going to have to tell us that they didn't really rack up the earnings that they said they did and that their execs have at best been unscrupulous and at worst criminals.
And that's probably the most disturbing thing about this brouhaha -- that so many execs from so many big companies thought that they could get away with an almost certainly unethical and possibly illegal practice. Maybe my bookie friend needs to send some of his associates to the Valley.
What do you think about backdating? Does it disturb you that so many industry leaders have engaged in this practice? Would you do business that way? Rant or retort here or at [email protected].
Posted by Lee Pender on 10/12/2006 at 1:19 PM3 comments
There’s buzz aplenty about Vista (again) now that
RC2 is out and mainly positive reviews of it are
pouring in. On the anti-piracy front, the freak out that
we mentioned last week continues, with those
pesky Gartner analysts suggesting that Microsoft should do more to compensate customers for the huge pain that Redmond’s new authentication scheme is sure to be. We’ve also got Microsoft
defending the decision to cripple Windows Defender in editions of Vista red flagged as non-genuine. None of this, of course, would really make any difference if Microsoft could just come up with built-in anti-piracy measures that actually worked (unlike the infamous mess that is Windows Genuine Advantage) rather than filling users’ and IT administrators’ (and partners’) lives with false alarms and management hassles. Don’t expect that to happen anytime soon, though. Anyway....
Pundits and commentators are increasingly labeling Vista as more evolutionary than revolutionary, despite what Microsoft wants the forthcoming OS to be. In fact, it’s the other cash cow, Office, that might prove to be more of a revolution than Vista -- for better or worse.
In any case, the imminent release of both Redmond revenue monsters begs the question of how much longer we’re even going to be installing big office suites in fat operating systems. In fact, a couple of Gartner analysts (they’re everywhere) pinned Steve Ballmer down on that very question at Gartner Symposium/ITxpo this week. Ballmer says that while distribution of functionality via the Internet is growing all the time, the client isn’t dead yet.
"The difference between software plus a service and software as a services is whether people will want to use the local intelligence in their phones, PCs, etc. Even if you look at some Internet services today, they all use power from the client.... AJAX uses the power of the client and the Instant Messenger clients from us and Yahoo and Google use the client," he’s quoted as saying in the story linked in the paragraph above.
For now, of course, he’s right. But while software as a service (or SAAS, as it’s much easier to write) might still be a gangly teenager in terms of development, it’s growing all the time. And by the time Vista and Office 2007 reach retirement age -- think five years or more from now -- SAAS should be a full-grown adult. By then, will we care about local compute power in our PCs and other devices, or will we just need a connection and a browser to user whatever apps we need with whatever functionality we require? And is Microsoft -- or anybody else -- prepared to serve its partners and customers in that world?
It’s hard for anybody to answer those questions right now -- although, to be fair, Microsoft is making massive investments in Windows Live and does seem to grasp the coming power of SAAS, even if its moneymakers are still the old-school OS and Office suite. In any case, as what might be the last of the great OS/office suite releases gets ready to roll, it’s time for innovators and market movers to stop thinking about the present and shift the paradigm (to use a great late-‘90s expression) to move to the computing model of the future. And it’s time for partners to think about how their strategies will change with the times.
Will Vista/Office 2007 be the last of the great OS/office suite releases? How are you preparing for software as a service? Post here or write to me at [email protected]. And coming Thursday, your reactions to the $100 office suite.
Posted by Lee Pender on 10/10/2006 at 1:19 PM3 comments
File
this one under completely unsurprising news updates.
Posted by Lee Pender on 10/05/2006 at 1:19 PM0 comments
Oh dear.
As if the furor over Windows Genuine Advantage -- which just keeps going and going -- wasn’t enough, Microsoft said this week that Vista (and Longhorn server, if it ever comes out) will include a whole slew of new, built-in anti-piracy protections. Vista, with these new protections embedded in it, will shut down or severely cripple critical elements of the operating system (think Aero and Internet Explorer) if a user’s copy trips the anti-piracy alarm as being unregistered or improperly activated. And this isn’t just a consumer thing. Business users and partners are going to have to mess with the new activation scheme, too. In fact, the whole thing is quite complicated, as Mary Jo Foley’s excellent Q&A explains ... and it’s eventually coming to every Microsoft product.
Let’s get the obligatory stuff out of the way right now. Yes, piracy is a problem. It costs partners money. It costs Microsoft money. It drives costs up for consumers and businesses. It’s rampant in "emerging markets" such as China and Russia and it’s not exactly unusual in the U.S. and Western Europe. Microsoft has a right and a responsibility to protect itself and its partners against piracy. Fine.
But you know what’s coming next: the freak out. As well it should. There is, as you might imagine, a lot of opposition to this new anti-piracy scheme, much of it hand-wringing over how much power Microsoft will have over its massive user base -- which includes pretty much everybody in the world -- and head-scratching over whether any of Microsoft’s new measures effectively amounts to a Vista "kill switch" (thanks to Michael for the link) that Microsoft can use to pull the computing rug out from under users whenever it darn well pleases. Some even question whether Redmond’s new anti-piracy effort will make potential customers think twice (or maybe three times, considering that many would probably have thought twice to begin with) before investing in Vista.
All of those concerns are legitimate, but the main problem, as we’ve said here before, is this: WGA doesn’t work, and very little about Microsoft’s record for reliability with first releases of software gives users and partners any reason to be confident that this new anti-piracy stuff will do what it’s supposed to do without being a massive and completely unnecessary pain in the you-know-where. In other words, expect problems, and expect Microsoft to have to scramble to solve them. And maybe enjoy using XP for a little while longer. At least it’ll keep working.
What do you think about Microsoft’s new built-in anti-piracy functions? Have any (more) WGA horror stories? Tell me here or at [email protected].
Posted by Lee Pender on 10/05/2006 at 1:19 PM5 comments
Not that they’re hurting or anything, but their
bonuses were down a bit for fiscal 2006, partly because the company’s stock lost value due to delays in releasing Vista. Makes you wonder whether there was any coincidence with
this story running in the press this week.
Posted by Lee Pender on 10/05/2006 at 1:19 PM0 comments
Seriously, do you think Steve Ballmer has ever
watched a NASCAR race? Just wondering ... maybe he’s a fan.
Posted by Lee Pender on 10/05/2006 at 1:19 PM0 comments
It’s getting nasty in Northern California. You know things are bad when your chairwoman and -- get this -- chief ethics officer (pause for laughter)
face felony charges. Right, HP?
Then there’s Apple -- Secret Diary of Steve Jobs, where have you gone? -- where the stock-options scandal has led to a resignation.
And people say that Microsoft is evil ....
Posted by Lee Pender on 10/05/2006 at 1:19 PM0 comments
"This royal throne of kings, this sceptred isle,
This earth of majesty, this seat of Mars,
This other Eden, demi-paradise,
Where you can buy a full office productivity suite for $100...."
OK, so maybe Willie Shakespeare didn’t write that last line when he penned "King Richard II," Act 2, Scene 1. But he could have if he had hung around until 2006. And wouldn’t that have made for better reading in high school English class?
Yes, it’s true. England will soon be home to a grocery store-brand office suite that will sell for about $100 and will compete with the Microsoft Office franchise. Go ahead and read that last sentence again. It’s entirely true. And you thought Microsoft was straying from its core competencies. Tesco, the UK retail giant (whose customers, we imagine, all look like this, or possibly like this) is going where many have gone but few have survived (right, Lotus and Corel?): right into the teeth of the Office beast.
Well, sort of. While Tesco’s cobbled-together suite will include everything but the contents of the produce section -- image-editing software and anti-virus applications are on offer alongside the classic Office-esque stuff -- it surely won’t quite have the depth of functionality that Office has. Then again, users are always saying that Office is too bloated and has too much functionality. Maybe Tesco won’t bring down the Office empire, but it might accidentally get Microsoft to thinking about lightening the contents of its own Office shopping basket a bit. Or, more likely, it’ll get chucked down the garbage disposal with the other pretenders to the Office throne.
By the way, if you don’t know Tesco, you might soon; it’s coming to America (check out the last sentence here).
Would you buy a $100 office suite? At the grocery store? Let me know at [email protected].
Posted by Lee Pender on 10/03/2006 at 1:19 PM0 comments
Symantec
isn’t the only security vendor making noise about Microsoft participating in unfair business practices.
In other completely unsurprising but related news, Microsoft is appealing its raft of fines from the European Union.
Incidentally, a couple of good e-mails came in over the issue of Microsoft closing the Vista kernel and possibly making development harder for third parties like its security rivals.
Rocky, possibly out of breath from running up the steps of the Philadelphia Museum of Art, says: "I've used Norton security for years and it runs like a dog. I think protecting the kernel is a good idea as with most 'real' operating systems."
Rees isn’t too happy, either:
"Symantec has been so focused on acquiring new companies that it has forgotten about its customers. Symantec Mail Security for Exchange (SMSME) version 5 is hideous. Version 4.5 and 4.6 were better. I have always assumed that it wants me to give up on SMSME and switch to Bright Mail, which costs more. The flagship product, Symantec AntiVirus Corporate Edition Version 10, kills performance when installed and no amount of excluding programs and tweaking seems to fix it. We have lived through numerous problems and updates to version 10. Each update requires a manual uninstall of the previous copy and a complete reinstall of the product. I have done both eTrust and Trend Micro installs lately and found that they are easier to use and don’t greatly impact performance. Don’t get me started on the equally hideous Backup Exec and its 'cosmetic errors' that seem to persist version to version. After years and years of Symantec loyalty, I am bailing out. The cost of researching new products and developing best practices for installation is a bitch, but I can’t install Symantec products and keep my customers happy."
Mark, on the other hand, has what sounds like a useful suggestion:
"IBM developed a way to do this at least two decades ago. The MVS OS used to be open. IBM eventually closed it by going to OCO (object code only). However, users still legitimately require a process to handle exceptions, modify responses, etc. What IBM did was publish 'exit' points, locations in the code where you could insert your modification and then return control to the OS. Of course different exit points related to different OS functions, so there were limits to what each exit could accomplish. Thus IBM kept control of the OS, prevented indiscriminate hacking and still allowed users to enhance or customize the OS. Perhaps some similar process would satisfy both sides to the open/closed debate on any OS."
Perhaps, Mark. Perhaps.
Thanks to all for your contribution. Keep those thoughts pouring in at [email protected].
Posted by Lee Pender on 10/03/2006 at 1:19 PM0 comments