Features

'Substantial doubt'

National | Once regarded as an AOL competitor, ExciteAtHome sits on the brink of financial extinction; online voting invites worldwide voter fraud; new technology deals music pirates another blow-but at what cost?

Issue: "Trial and terror," Sept. 1, 2001

DOMESTIC DISTURBANCE
With dot-coms in ruins, even top-rank tech companies are feeling serious pain as the economic downturn continues. Once considered invincible is ExciteAt-Home, which provides cable-modem service to 3.7 million people. The company released an annual report with a warning attached. An auditor's statement expressed "substantial doubt about the company's ability to continue as a going concern." After the announcement the stock fell to a measly 40 cents per share; in April 1999, the stock traded at almost $95 a share. The next day, ExciteAtHome executives fired their Ernst & Young auditors, but said the decision was unrelated to the "going concern" notice. Combining the Excite portal with At Home's Internet access was supposed to create a tough competitor for AOL. Now the company has laid off hundreds of employees and is trying to sell off assets, such as the Blue Mountain greeting cards site. ExciteAt Home lost $7.44 billion last year and $346.3 million in its most recent quarter. A bigger bellwether than ExciteAtHome is networking giant Cisco, which announced that earnings for the three months ended July 28 fell 99 percent to only $7 million. Executives said the storm isn't over. "While we would like to say the bottom has been reached in our industry, we don't think we are there yet," said Cisco CEO John Chambers. For a brief period during the tech boom, Cisco was the world's most valuable company. It acquired 71 companies between 1993 and 2000. This year the megapower slashed 8,500 jobs and took billions in inventory write-offs. Meanwhile, the agony in the PC industry continues: Hewlett-Packard reported that its profits slumped 89 percent in the three months ended July 31. Gateway said it was closing its European headquarters in Dublin, which means 850 layoffs. Dell, which has cut 5,000 jobs to save money, warned that its own financial numbers may yet disappoint. Some in the tech industry are optimistic despite the gloom. Thomas Siebel, chief executive officer of software maker Siebel Systems, told a Progress & Freedom Foundation conference that the tech sector would turn around in the third quarter of 2002. "THE ENTIRE PLANET CAN ATTACK THIS"
The Pentagon made famous the $640 toilet seat; now it's the $74,000 vote. A project last year to help soldiers stationed overseas vote in U.S. elections via the Internet cost taxpayers $6.2 million. Only 84 people cast ballots, but officials said they were simply trying to test online voting, not save money. It was part of the Defense Department's Federal Voting Assistance Program, which tries to raise voter participation among the 6 million soldiers and other Americans living abroad. So the Net was used as a possible replacement for slow and unreliable absentee ballots-not a bad idea in theory, given the problems with military ballots that last year's post-election battle in Florida revealed. The program's directors have not decided whether to continue the experiment in future elections. "If we're to go forward, we would have to recognize that there are these challenges that we'll have to confront," said Defense Department spokeswoman Susan Hansen. "There will be security risks that we'll have to take countermeasures for and look at their resulting effects." An online voting booth faces all the typical threats faced by computer networks-and it becomes a target for vandalism and tampering by its very nature. "Once you put something on the Internet, the entire planet can attack this," said Philadelphia computer consultant Rebecca Mercuri. CONQUERING THE PIRATES?
Even with Napster's music-swapping network shut down, a new battle is brewing in the war between record labels and a thriving subculture of music fans and computer geeks. Macrovision, a company whose anti-copying technology is stamped on over 3 billion videotapes, entered the fray with a product called SafeAudio. It is supposed to prevent copying without harming sound quality. Israel's Midbar Technologies boasts that its similar technology appears on over 1 million CDs in Europe and may appear soon in the United States. Reuters reported that major labels are quietly testing these schemes. They work by adding data errors to the disc that are minor enough to let them play music properly, but major enough to botch attempts to copy music to a computer hard drive. Those who try to get around the copy protection run up against the Digital Millennium Copyright Act, which bans "circumvention" of a "technological protection measure" used to protect intellectual property. Critics say that users have the right to make backup copies of their own CDs and that copy protection interferes with fair use. Meanwhile Napster's legal battle rages before U.S. District Judge Marilyn Hall Patel. The system itself went offline on July 2 to comply with a court order and improve filters that weed out copyrighted music.

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