Pain and gain

National | Telecom struggles, the pioneering supercomputer UNIVAC turns 50, and MP3 changes with the times

Issue: "Trading places," June 30, 2001

High-tech stress
The telecom industry is screaming in agony from the pain of the high-tech crash. Tens of thousands of skilled workers are losing their jobs as Nortel, Motorola, Lucent, and others struggle through financial distress. The fiber-optics and communications companies many thought would lead the digital revolution are now spilling blood in the streets. Explanations for the industry-wide downturn are numerous: misguided acquisitions at sky-high prices, destructive expansion, exuberant forecasts, and risky lending practices. Nortel Networks, for example, announced that its staggering second-quarter loss of $19.2 billion will result in 30,000 job cuts in a company that started the year with 94,500 workers. Competitor Lucent's financial problems led to the ouster of chairman and chief executive Richard McGinn in October 2000. In mid-June, Standard & Poors lowered the AT&T spinoff's credit rating to junk-bond status. If the Internet is changing the world, why would the infrastructural decline be so steep? Bret Swanson of the Gilder Technology Report argues that the companies focused on creating a glut of bandwidth at the expense of service. He compared the difference to that between a railroad and a freeway. "A railroad track supports a single train carrying a large payload," he wrote in The Wall Street Journal. "On a large highway, instead of a single track, you have many lanes. The automobiles traveling in each lane carry much less than the train, but if you add all the contents of all the autos in all the lanes, you can match the train's total capacity." He concludes that companies with more nimble products will beat Nortel and Lucent in the same way Intel and Microsoft beat Control Data and Cray. Birthday for a behemoth
Fifty years ago, a pioneering supercomputer was born that became a household word and changed how people think about technology: UNIVAC. The world's first commercial computer cost between $1 million and $1.5 million to build and weighed eight tons-and a simple PC can easily equal its processing power today. UNIVAC 's burst of publicity came when programmers used it to predict the outcome of the 1952 presidential election. The Census Bureau first used it, and the military and such major corporations as General Electric, U.S. Steel, and DuPont later adopted it. It became the first major example of what is now called enterprise computing, in which a large organization integrates technology into its day-to-day work. Only 46 of these computers were ever made, but that was a huge production run at the time. UNIVAC-like computers became part of popular culture, appearing in TV shows and movies as huge machines with lots of blinking lights. Its fame may have been too strong: Many people could not conceive that families would want or need computers at home. The team that developed UNIVAC had no idea that they were pioneers. They built the garage-sized machine as a hollow cube. Workers would enter doors and walk inside the computer. Engineers would even use the supercomputer's core as an extra office. "It was all vacuum tubes, and we just thought it was a big clunker and we thought we'd be out of work in a year," said Alan Gudknecht, a UNIVAC hardware production worker hired in 1950. No more free lunch
Could the Napster wars be headed for a truce? The unruly music-sharing software company cut a deal with three major record labels that are launching a music subscription service this summer. That development could mark the end of free music on the Net. A radically new Napster program is supposed to roll out in a few months that will try to ensure that artists and labels collect royalties. New features will include copy protection and ownership tracking of individual files. Since many users today expect to get any song they want for free, will they accept something that more closely resembles a CD shop? Gregor Rohda, a researcher at Webnoize, said the new Napster will have a hard time attracting the 2.4 million simultaneous users it had at its peak. Major labels will "come out with systems that are more difficult for consumers to use, have more restrictions than services in the past, and that users haven't adopted," he said. Meanwhile, the online music service MP3.com is still growing. The site deals mostly with music from independent artists who upload their own music to attract an audience. MP3.com claims that hundreds of bands have signed record deals after appearing there. It recently added its 1 millionth song to its library and agreed to be acquired by Vivendi Universal in a $372 million cash-and-stock deal. On the other hand, an ominous sign comes from SONICblue, maker of the Rio MP3 audio players. Company officials announced plans to cut their 813-person work force by 30 percent as part of a plan to achieve profitability by early 2002.

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