Slashdot Mirror

There goes SCO's stock price... those sons of bitches... it was down by 15% at about 12:30pm PST... Here's the link... I check it daily.

Since legally coipyright infringment damage can only me measured in economic terms of lost sales..
Disney just reported an increase in sales over the last year from $5.8 billion to $6.2 billion, "Fueled by gains in its film business and television networks." article If the rest of the entertainment industry has been that successful in this economy, then it's going to be difficult to prove that piracy is killing their business model. On the other hand, if the rest of the industry isn't doing as well, I wonder if the rest of the field will start marketing to children (perceived as being too young to pirate)?

WASHINGTON (CBS.MW) -- In a bitter 3-2 vote, the Federal Communications Commission agreed Monday to allow broadcasters to buy more television stations and permit a company to own newspapers and TV channels in the same city.

The move, which pitted the FCC's three Republicans against the two Democrats, casts aside decades-old government regulations and could spur more media industry mergers and acquisitions.

http://www.marketwatch.com/news/yhoo/story.asp?gui d={EA0D3D28-499C-433E-AC18-24EC8BD8B929}&siteid=my yahoo&dist=myyahoo

answer to our problems: yahoo is BLOCKING THE EMAILS AS SPAM

i used a yahoo email address

is the irony not entirely painful?

good gad ;-(

Anyways after reading THIS I have lost all faith in the supreme court to actually even know what the constitution is. What is it with these people, do they not realize that the constitution is the framework for our contry and not a spare roll of toliet paper.

The constitution is for freedom and those freedoms should be expressed in all parts of the government especially our centers of education. I'm tired of these conservative views being implemented on me. You don't want your children downloading porn, how about you try being a parent and stop relying on everyone else to do it for you.

I want something to restore my faith in the system, I really do.

This could be a reason why SCO is doing this whole thing... It seems to have started rising slightly since SCO started their claims back in Jan. or Feb., and started climbing even more rapidly once the issue intensified...

Two things: Regarding OS X being UNIX, how do you define UNIX? POSIX APIs? Check. Standard set of UNIX utilities included? Check. Runs most UNIX apps? Check. Standard UNIX filesystem layout? Check. Code derived from BSD? Check. UNIX was UNIX long before X11, but if you want an X server that is available as well. Check. What definition of UNIX does it not meet for you?

Regarding Apple's cash position, they actually have around 3.4 billion (yes, with a b) in the bank, according to their latest SEC filing. And they are profitable, so that is going up.

The inquiry is related only to some possible inconsistencies related to IBM's point of sale (POS) unit, which is only responsible for around US $300 million of revenue. The SEC has not revealed anything about the inquiry, but IBM has said that it stems from an earlier inquiry related to this business unit. More details here. Either way, anyone that is shouting "Enron!" at this is either foolish, uninformed, or possibly both.

currently trading at 5.94 down 10% today, 24% yesterday I believe.
CBS Marketwatch link to SCOX stock price: http://cbs.marketwatch.com/tools/quotes/quotes.asp ?symb=SCOX&siteid=mktw&dist=mktwqn

If you've been keeping up with the tech news, you know SCO is throwing around lawsuits and threats of lawsuits.

It all boils down to claims that someone put something in Linux that belongs to SCO.

Reports form SCO on what was inserted and by whom changes from day to day. All we've gotten from SCO is vague statements and shifting claims. Either this is a smear campaign against Linux and IBM, or SCO's executives have no real understanding of their company's technology, and can't speak consistently about what's going on.

They have, to date, refused to release the details, and restricted themselves to vague doublespeak worthy of a Dilbert comic.

I want SCO to tell us exactly what code violates their patents, copyrights, contracts or whatever the "They did bad" of the day is.

SCO's press releases have claimed ownership of IP and trademarks that are owned by Novell and the Open Group. Every time they are called to task they make a new string of claims.

And now, according to http://www.marketwatch.com/news/story.asp?guid=%7B C408959E-005A-4E93-9006-B32DCD1FCA22%7D&siteid=yho o

"McBride added that unless more companies start licensing SCO's property, he may also sue Linus Torvalds, who is credited with inventing the Linux operating system, for patent infringement."

This just days after Novell pointed out that SCO does NOT own any of the Unix patents. They are largely owned by Novell. It smells more like blackmail than anything else. If Linus Torvalds has infringed patents, why not just sue him? Why do these alleged patent infringements get ignored if enough people buy SCO licenses?

I want SCO to tell us what was done wrong.

I want to know what the actual violations are.

I want to see the details.

I want SCO to stop hiding behind press releases and lawyers and tell us what is going on.

Unless they show us the code, I'll be forced to conclude that this is the dying gasp of a doomed company, grasping at straws in a desperate effort to shift the blame for the company's death away from the executives running it.

SCOX ticker through MarketWatch

Once you've looked at the daily (yes that view is just today) expand to the week and then month and tell me if quite possibly the SEC may be taking a look at whether or not the CEO of SCO is deliberately making these superfluous announcements in order for someone to be cashing in on the entirely temporary jumps in their pathetic value.

... as you Americans would put it.

Check out SCO's sinking stock price (24% down when I posted).

In light of your writing above (excerpted by the Slashdot crew) and today's disclosure by Novell, I thought you might be interested in this news report.

Specifically, the threat made by SCO's chief executive Darl McBride today:

McBride added that unless more companies start licensing SCO's property, he may also sue Linus Torvalds, who is credited with inventing the Linux operating system, for patent infringement.

Stunning. Simply stunning.

In this article

CBS MARKETWATCH

it mentions at the very bottom that McBride is thinking of sueing Linus for patent infringement if more linux vendors/users don't agree to licensing?

Anyone have any more data about this? Seems like an under reported issue (or maybe i missed slashdot that day)

According to a story on Marketwatch, SCO is intent on suing Linus Torvalds eventually. Now I know his reputation for avoiding political issues, but this one may be nipping at his rear whether he wants it or not:
McBride added that unless more companies start licensing SCO's property, he may also sue Linus Torvalds, who is credited with inventing the Linux operating system, for patent infringement.

I doubt there would be grounds to sue Linus even if there was clear-cut evidence of patent infringement in the Linux kernel. Linus didn't put the supposedly offending code in there, but he's still liable? SCO seems to be really grasping at straws here; they know that the bluff has been called. I just hope they don't manage to do any more FUD-based harm to Linux before they die a merciful death.

I'm not a lawyer, so nobody use this as legal advice. If you want legal advice, go pay a lawyer.

The fact is that they did see sales growth. Try reading this.

Frankly, I cannot understand what their real motivation for removing the DRM is.

I'm shocked that the so called backlash has caused Intuit to do this. It flies in the face of yesterday's earnings news. According to the news Intuit sales on its tax preparation software increased dramatically over the same period last year. My assumtion being that the copy protection was indeed effective and caused many more people than usual to fork out their $14~$35.

This Slashdot story comes as a real shock after yesterdays market news. I'd really like to know some more accurate details on the decision.

Here you go, it's getting closer to being not funny

My numbers were off sorry.

The current P&e is at 32.78 see this

Also this is hardly what I would call a non recession year.

If you believe that stocks trading at 32 times earnings is a good deal then you should invest in the market otherwise stay out or seek other investments.

"it pays royalties to the troubled record industry."

The service will supposedly be easy to use and will offer a deep catalog and the ability to purchase single songs. Isn't this what everyone has been asking for?

watching his stake's value dwindle to $1.9 billion from $6.8 billion amidst the AOL imbroglio

Makes sense. That press release is from today, not Friday. After the press release was issued, Yahoo!'s stock was up 85 cents in morning trade.

Another link on their page:


Yahoo (YHOO) said it's kicking off a new search service, billed as faster and easier. [...] Shares of Yahoo fell 29 cents to $24.05 on Friday.

That'll teach them :)

... is dropping? So let me get this straight. The price of oil goes up *before* a war. Then when the war starts it goes *down*? Huh? Why on earth would it go down? Shouldn't oil go up even more? There is a war in the middle east afterall for crying out loud! They supply like a 1/3 of the worlds oil? Shouldn't investors be concerned about this?

Twilight of the CD? Not if It Can Be Reinvented
By LAURA M. HOLSON

LOS ANGELES

TONIGHT in Manhattan, rock stars, divas and rappers will descend en masse on Madison Square Garden, arriving at the Grammy ceremonies in a parade of glamour and attitude. But the excitement they create will only mask the growing anxiety in the recording industry about the future of its fundamental product, the CD, which is threatened with the same obsolescence that it long ago foisted on the LP and then the tape cassette.

Introduced in the United States 20 years ago, the CD is losing its allure. From 2001 to 2002, some 62.5 million fewer of them were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD.

Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense. In the meantime, the CD will remain the biggest source of revenue for both music retailers and recording companies, who will try to squeeze as much profit as they can out of each and every sale.

As a result, the CD is being rethought, repackaged and, in some cases, repriced.

Experiments to resuscitate this ailing product are growing. In January, Bon Jovi created a compact disc, with eight previously unreleased songs, exclusively for Target stores. Priced at $6.99, it was intended to help bolster sales of other Bon Jovi albums, including the newest, "Bounce."

Best Buy, the No. 1 electronics chain in the country, is selling prepaid cards good for 10 downloads that allow consumers to create compilations to play either on discs or on computers. And last year, the Interscope recording label gave a DVD to the first million buyers of "The Eminem Show" as an incentive to buy the CD.

All this is happening as the economic underpinnings of the CD continue to deterioriate, endangering the music business altogether. With the rising popularity of online music, much of it available free, technology-wise teenagers, the industry's most voracious buyers, can easily use CD-burning technology to make bootleg copies and sell them at school for as little as $1.

Companies are showing signs of cracking. Two industry veterans have recently lost their jobs: Thomas D. Mottola, the head of Sony Music Entertainment, which lost more than $132 million last year; and Jay Boberg, president of MCA Records. The music retailer Wherehouse Entertainment announced in January that it was filing for bankruptcy protection, partly because of lackluster sales. And the EMI Group, based in London, the only major music company that is not a part of a media conglomerate, is struggling with debt and is believed by analysts to be considering merger prospects.

"Large companies tend to wait until they feel pain to act," said Dan Hart, chief executive of Echo, a recently formed consortium of retailers that hope to sell music online. "Now they feel pain."

DOUG MORRIS, chief executive of the Universal Music Group, said: "We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward."

Compact disc sales have slipped for several reasons, not all of them related to piracy or online music swapping. Critics complain that there is a dearth of blockbuster acts these days and that those with hits, like Britney Spears, often have short-lived careers. And with the average price of a compact disc at $14.21, they contend that music is simply too expensive for frequent purchases.

But Hilary B. Rosen, chief executive of the Recording Industry Association of America, countered that a recent study by the association found that only 3 percent of the consumers polled said they were buying less music because prices were too high.

Still, there is no question that other activities are taking up listeners' time, thanks to the growth of electronic games and multichannel cable and satellite television. Perhaps most threatening is the popularity of the DVD, which emerged in the mid-1990's. By 1999, DVD players had gained mass-market appeal, and they now cost as little as $50, about the same price as a portable boom box. In some retail stores, DVD sales have surpassed those of CD's.

"The DVD is moving into the bedrooms of the next generation of young kids," said Gary L. Arnold, senior vice president for entertainment at Best Buy, which announced in January that it was closing 107 stores. The next generation of young people has no affinity for the compact disc. For them, he said, "it's about gaming and PlayStation."

TO thwart online swapping, several music companies, including Sony and Universal, have experimented with copy-protected compact discs, much to the ire of paying consumers, who complain that they cannot listen to some of those discs on their computers. The industry does not use a standard copy-protected format, so consumers do not know what kind of disc they are buying. Fearing a consumer backlash, the industry has slowed down those copy-protection efforts.

Software makers are trying to come up with alternatives that address the needs of both consumers and recording companies. At a recent music conference in Cannes, France, Microsoft said it had developed technology to allow music companies to record two sets of identical songs on a compact disc, one that could be played on a home or car stereo and the other, called second session, that could be copied to a personal computer. The second-session songs would have limitations, perhaps barring consumers from sharing files or copying songs onto another disc.

Recording companies probably placed too much hope on super audio CD's, which are said to have superior sound compared with regular CD's. The technology, introduced two years ago, has not taken off because super audio CD's cost nearly four times as much to buy as regular CD's -- and they require a special machine to experience the full impact.

And super audios, championed by Sony and Philips, are not alone in offering sound quality that surpasses that of the typical CD: a dueling new technology in DVD audio, supported by Panasonic and Pioneer, is setting up a battle reminiscent of the VHS-Betamax wars.

Until all these new technologies are sorted out, recording companies and retailers are betting on promotions and marketing deals to increase sales. Bruce Kirkland, a member of Bon Jovi's management team, said the album that Bon Jovi put together for Target had also increased sales of the "Bounce" album in its stores. In the first week of the promotion, Target's share of the market for "Bounce" for all retail stores jumped to 26.1 percent from 15.9 percent, he said.

"I think the onus is on the retailers to take care of this because the recording companies always shoot themselves in the foot," Mr. Kirkland said.

Mr. Arnold of Best Buy said he believed that DVD's could well replace the CD in the future because they play not only music but also video images. In the last 12 months, sales of DVD's have surpassed those of compact discs at Best Buy, he said.

But before they can become a new industry standard, he added, they will have to more adeptly meld music and video.

MUSIC distributors and retailers, battered by the slump in compact disc sales, are embarking on their own efforts to give consumers more and easily accessible music. Last month, six music retailers, including major outlets like Best Buy, Wherehouse and Tower Records, said they would form the Echo consortium to sell music on the Internet through their retail Web sites. As recently as a year ago, that would have been unthinkable, as retailers and music companies were at odds about how best to tackle online distribution.

In another joint effort, Anderson Merchandisers, one of the largest magazine and music distributors in the United States, bought technology from Liquid Audio, an online music pioneer that distributes 350,000 songs through retailers, in the hope of exploiting the growth in digital music.

"It has not been the norm that retailers should be the ones helping us rethink our business," said John Esposito, president of United States distribution for the Warner Music Group. "But retailers are telling us the current model does not work."

Best Buy has been one of the most active retailers in this regard. It recently began testing a program in 30 stores that allowed consumers to buy a card with a preset value that could be used to buy downloads to a computer or disc. Scott Young, vice president for digital distribution at Best Buy, said the experiment had had limited success and was under review.

Mr. Hart of Echo said retailers would primarily seek to sell downloads over their Web sites that consumers could call up from their homes. But as well as selling digital downloads, partners of Echo are likely to explore several options, including the use of store kiosks where consumers can make personalized compact discs.

Such a venture, like any in the digital music world, is fraught with risk. In 1999, Sony Music Entertainment tried a similar strategy but consumers did not respond, analysts said.

There are, of course, other problems facing distributors and retailers, most notably acquiring the rights to distribute whole catalogs of music online. The music companies faced that issue early on, when starting their own Web sites. Competing companies declined to offer all their music on both PressPlay, a joint venture of Sony Music and Universal Music, and MusicNet, which was formed by Warner Music, EMI and BMG. It took months for them to begin sharing music, leaving consumers disillusioned and frustrated.

For all of these ventures, companies will still have to grapple with why consumers would pay for music they can easily get free. One major retailer, according to a music executive, has suggested to several recording companies that it might put a cap on the price of any compact disc it sold in its stores. Only a store like Wal-Mart would have the strength the pull that off, he added.

"I think the biggest problem is, the industry doesn't know how to get started and take steps where you get an incremental gain," said Phil Leigh, a digital media analyst at Raymond James & Associates in Tampa, Fla. "If compact disc sales continue to drop and there is no increase in online sales, then artists will be mad and your bosses are mad, too. There is an old expression that pioneers are the ones with arrows in their backs. The one thing executives don't get paid for is rocking the boat."

Twilight of the CD? Not if It Can Be Reinvented
By LAURA M. HOLSON

LOS ANGELES

TONIGHT in Manhattan, rock stars, divas and rappers will descend en masse on Madison Square Garden, arriving at the Grammy ceremonies in a parade of glamour and attitude. But the excitement they create will only mask the growing anxiety in the recording industry about the future of its fundamental product, the CD, which is threatened with the same obsolescence that it long ago foisted on the LP and then the tape cassette.

Introduced in the United States 20 years ago, the CD is losing its allure. From 2001 to 2002, some 62.5 million fewer of them were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD.

Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense. In the meantime, the CD will remain the biggest source of revenue for both music retailers and recording companies, who will try to squeeze as much profit as they can out of each and every sale.

As a result, the CD is being rethought, repackaged and, in some cases, repriced.

Experiments to resuscitate this ailing product are growing. In January, Bon Jovi created a compact disc, with eight previously unreleased songs, exclusively for Target stores. Priced at $6.99, it was intended to help bolster sales of other Bon Jovi albums, including the newest, "Bounce."

Best Buy, the No. 1 electronics chain in the country, is selling prepaid cards good for 10 downloads that allow consumers to create compilations to play either on discs or on computers. And last year, the Interscope recording label gave a DVD to the first million buyers of "The Eminem Show" as an incentive to buy the CD.

All this is happening as the economic underpinnings of the CD continue to deterioriate, endangering the music business altogether. With the rising popularity of online music, much of it available free, technology-wise teenagers, the industry's most voracious buyers, can easily use CD-burning technology to make bootleg copies and sell them at school for as little as $1.

Companies are showing signs of cracking. Two industry veterans have recently lost their jobs: Thomas D. Mottola, the head of Sony Music Entertainment, which lost more than $132 million last year; and Jay Boberg, president of MCA Records. The music retailer Wherehouse Entertainment announced in January that it was filing for bankruptcy protection, partly because of lackluster sales. And the EMI Group, based in London, the only major music company that is not a part of a media conglomerate, is struggling with debt and is believed by analysts to be considering merger prospects.

"Large companies tend to wait until they feel pain to act," said Dan Hart, chief executive of Echo, a recently formed consortium of retailers that hope to sell music online. "Now they feel pain."

DOUG MORRIS, chief executive of the Universal Music Group, said: "We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward."

Compact disc sales have slipped for several reasons, not all of them related to piracy or online music swapping. Critics complain that there is a dearth of blockbuster acts these days and that those with hits, like Britney Spears, often have short-lived careers. And with the average price of a compact disc at $14.21, they contend that music is simply too expensive for frequent purchases.

But Hilary B. Rosen, chief executive of the Recording Industry Association of America, countered that a recent study by the association found that only 3 percent of the consumers polled said they were buying less music because prices were too high.

Still, there is no question that other activities are taking up listeners' time, thanks to the growth of electronic games and multichannel cable and satellite television. Perhaps most threatening is the popularity of the DVD, which emerged in the mid-1990's. By 1999, DVD players had gained mass-market appeal, and they now cost as little as $50, about the same price as a portable boom box. In some retail stores, DVD sales have surpassed those of CD's.

"The DVD is moving into the bedrooms of the next generation of young kids," said Gary L. Arnold, senior vice president for entertainment at Best Buy, which announced in January that it was closing 107 stores. The next generation of young people has no affinity for the compact disc. For them, he said, "it's about gaming and PlayStation."

TO thwart online swapping, several music companies, including Sony and Universal, have experimented with copy-protected compact discs, much to the ire of paying consumers, who complain that they cannot listen to some of those discs on their computers. The industry does not use a standard copy-protected format, so consumers do not know what kind of disc they are buying. Fearing a consumer backlash, the industry has slowed down those copy-protection efforts.

Software makers are trying to come up with alternatives that address the needs of both consumers and recording companies. At a recent music conference in Cannes, France, Microsoft said it had developed technology to allow music companies to record two sets of identical songs on a compact disc, one that could be played on a home or car stereo and the other, called second session, that could be copied to a personal computer. The second-session songs would have limitations, perhaps barring consumers from sharing files or copying songs onto another disc.

Recording companies probably placed too much hope on super audio CD's, which are said to have superior sound compared with regular CD's. The technology, introduced two years ago, has not taken off because super audio CD's cost nearly four times as much to buy as regular CD's -- and they require a special machine to experience the full impact.

And super audios, championed by Sony and Philips, are not alone in offering sound quality that surpasses that of the typical CD: a dueling new technology in DVD audio, supported by Panasonic and Pioneer, is setting up a battle reminiscent of the VHS-Betamax wars.

Until all these new technologies are sorted out, recording companies and retailers are betting on promotions and marketing deals to increase sales. Bruce Kirkland, a member of Bon Jovi's management team, said the album that Bon Jovi put together for Target had also increased sales of the "Bounce" album in its stores. In the first week of the promotion, Target's share of the market for "Bounce" for all retail stores jumped to 26.1 percent from 15.9 percent, he said.

"I think the onus is on the retailers to take care of this because the recording companies always shoot themselves in the foot," Mr. Kirkland said.

Mr. Arnold of Best Buy said he believed that DVD's could well replace the CD in the future because they play not only music but also video images. In the last 12 months, sales of DVD's have surpassed those of compact discs at Best Buy, he said.

But before they can become a new industry standard, he added, they will have to more adeptly meld music and video.

MUSIC distributors and retailers, battered by the slump in compact disc sales, are embarking on their own efforts to give consumers more and easily accessible music. Last month, six music retailers, including major outlets like Best Buy, Wherehouse and Tower Records, said they would form the Echo consortium to sell music on the Internet through their retail Web sites. As recently as a year ago, that would have been unthinkable, as retailers and music companies were at odds about how best to tackle online distribution.

In another joint effort, Anderson Merchandisers, one of the largest magazine and music distributors in the United States, bought technology from Liquid Audio, an online music pioneer that distributes 350,000 songs through retailers, in the hope of exploiting the growth in digital music.

"It has not been the norm that retailers should be the ones helping us rethink our business," said John Esposito, president of United States distribution for the Warner Music Group. "But retailers are telling us the current model does not work."

Best Buy has been one of the most active retailers in this regard. It recently began testing a program in 30 stores that allowed consumers to buy a card with a preset value that could be used to buy downloads to a computer or disc. Scott Young, vice president for digital distribution at Best Buy, said the experiment had had limited success and was under review.

Mr. Hart of Echo said retailers would primarily seek to sell downloads over their Web sites that consumers could call up from their homes. But as well as selling digital downloads, partners of Echo are likely to explore several options, including the use of store kiosks where consumers can make personalized compact discs.

Such a venture, like any in the digital music world, is fraught with risk. In 1999, Sony Music Entertainment tried a similar strategy but consumers did not respond, analysts said.

There are, of course, other problems facing distributors and retailers, most notably acquiring the rights to distribute whole catalogs of music online. The music companies faced that issue early on, when starting their own Web sites. Competing companies declined to offer all their music on both PressPlay, a joint venture of Sony Music and Universal Music, and MusicNet, which was formed by Warner Music, EMI and BMG. It took months for them to begin sharing music, leaving consumers disillusioned and frustrated.

For all of these ventures, companies will still have to grapple with why consumers would pay for music they can easily get free. One major retailer, according to a music executive, has suggested to several recording companies that it might put a cap on the price of any compact disc it sold in its stores. Only a store like Wal-Mart would have the strength the pull that off, he added.

"I think the biggest problem is, the industry doesn't know how to get started and take steps where you get an incremental gain," said Phil Leigh, a digital media analyst at Raymond James & Associates in Tampa, Fla. "If compact disc sales continue to drop and there is no increase in online sales, then artists will be mad and your bosses are mad, too. There is an old expression that pioneers are the ones with arrows in their backs. The one thing executives don't get paid for is rocking the boat."

Twilight of the CD? Not if It Can Be Reinvented
By LAURA M. HOLSON

LOS ANGELES

TONIGHT in Manhattan, rock stars, divas and rappers will descend en masse on Madison Square Garden, arriving at the Grammy ceremonies in a parade of glamour and attitude. But the excitement they create will only mask the growing anxiety in the recording industry about the future of its fundamental product, the CD, which is threatened with the same obsolescence that it long ago foisted on the LP and then the tape cassette.

Introduced in the United States 20 years ago, the CD is losing its allure. From 2001 to 2002, some 62.5 million fewer of them were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD.

Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense. In the meantime, the CD will remain the biggest source of revenue for both music retailers and recording companies, who will try to squeeze as much profit as they can out of each and every sale.

As a result, the CD is being rethought, repackaged and, in some cases, repriced.

Experiments to resuscitate this ailing product are growing. In January, Bon Jovi created a compact disc, with eight previously unreleased songs, exclusively for Target stores. Priced at $6.99, it was intended to help bolster sales of other Bon Jovi albums, including the newest, "Bounce."

Best Buy, the No. 1 electronics chain in the country, is selling prepaid cards good for 10 downloads that allow consumers to create compilations to play either on discs or on computers. And last year, the Interscope recording label gave a DVD to the first million buyers of "The Eminem Show" as an incentive to buy the CD.

All this is happening as the economic underpinnings of the CD continue to deterioriate, endangering the music business altogether. With the rising popularity of online music, much of it available free, technology-wise teenagers, the industry's most voracious buyers, can easily use CD-burning technology to make bootleg copies and sell them at school for as little as $1.

Companies are showing signs of cracking. Two industry veterans have recently lost their jobs: Thomas D. Mottola, the head of Sony Music Entertainment, which lost more than $132 million last year; and Jay Boberg, president of MCA Records. The music retailer Wherehouse Entertainment announced in January that it was filing for bankruptcy protection, partly because of lackluster sales. And the EMI Group, based in London, the only major music company that is not a part of a media conglomerate, is struggling with debt and is believed by analysts to be considering merger prospects.

"Large companies tend to wait until they feel pain to act," said Dan Hart, chief executive of Echo, a recently formed consortium of retailers that hope to sell music online. "Now they feel pain."

DOUG MORRIS, chief executive of the Universal Music Group, said: "We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward."

Compact disc sales have slipped for several reasons, not all of them related to piracy or online music swapping. Critics complain that there is a dearth of blockbuster acts these days and that those with hits, like Britney Spears, often have short-lived careers. And with the average price of a compact disc at $14.21, they contend that music is simply too expensive for frequent purchases.

But Hilary B. Rosen, chief executive of the Recording Industry Association of America, countered that a recent study by the association found that only 3 percent of the consumers polled said they were buying less music because prices were too high.

Still, there is no question that other activities are taking up listeners' time, thanks to the growth of electronic games and multichannel cable and satellite television. Perhaps most threatening is the popularity of the DVD, which emerged in the mid-1990's. By 1999, DVD players had gained mass-market appeal, and they now cost as little as $50, about the same price as a portable boom box. In some retail stores, DVD sales have surpassed those of CD's.

"The DVD is moving into the bedrooms of the next generation of young kids," said Gary L. Arnold, senior vice president for entertainment at Best Buy, which announced in January that it was closing 107 stores. The next generation of young people has no affinity for the compact disc. For them, he said, "it's about gaming and PlayStation."

TO thwart online swapping, several music companies, including Sony and Universal, have experimented with copy-protected compact discs, much to the ire of paying consumers, who complain that they cannot listen to some of those discs on their computers. The industry does not use a standard copy-protected format, so consumers do not know what kind of disc they are buying. Fearing a consumer backlash, the industry has slowed down those copy-protection efforts.

Software makers are trying to come up with alternatives that address the needs of both consumers and recording companies. At a recent music conference in Cannes, France, Microsoft said it had developed technology to allow music companies to record two sets of identical songs on a compact disc, one that could be played on a home or car stereo and the other, called second session, that could be copied to a personal computer. The second-session songs would have limitations, perhaps barring consumers from sharing files or copying songs onto another disc.

Recording companies probably placed too much hope on super audio CD's, which are said to have superior sound compared with regular CD's. The technology, introduced two years ago, has not taken off because super audio CD's cost nearly four times as much to buy as regular CD's -- and they require a special machine to experience the full impact.

And super audios, championed by Sony and Philips, are not alone in offering sound quality that surpasses that of the typical CD: a dueling new technology in DVD audio, supported by Panasonic and Pioneer, is setting up a battle reminiscent of the VHS-Betamax wars.

Until all these new technologies are sorted out, recording companies and retailers are betting on promotions and marketing deals to increase sales. Bruce Kirkland, a member of Bon Jovi's management team, said the album that Bon Jovi put together for Target had also increased sales of the "Bounce" album in its stores. In the first week of the promotion, Target's share of the market for "Bounce" for all retail stores jumped to 26.1 percent from 15.9 percent, he said.

"I think the onus is on the retailers to take care of this because the recording companies always shoot themselves in the foot," Mr. Kirkland said.

Mr. Arnold of Best Buy said he believed that DVD's could well replace the CD in the future because they play not only music but also video images. In the last 12 months, sales of DVD's have surpassed those of compact discs at Best Buy, he said.

But before they can become a new industry standard, he added, they will have to more adeptly meld music and video.

MUSIC distributors and retailers, battered by the slump in compact disc sales, are embarking on their own efforts to give consumers more and easily accessible music. Last month, six music retailers, including major outlets like Best Buy, Wherehouse and Tower Records, said they would form the Echo consortium to sell music on the Internet through their retail Web sites. As recently as a year ago, that would have been unthinkable, as retailers and music companies were at odds about how best to tackle online distribution.

In another joint effort, Anderson Merchandisers, one of the largest magazine and music distributors in the United States, bought technology from Liquid Audio, an online music pioneer that distributes 350,000 songs through retailers, in the hope of exploiting the growth in digital music.

"It has not been the norm that retailers should be the ones helping us rethink our business," said John Esposito, president of United States distribution for the Warner Music Group. "But retailers are telling us the current model does not work."

Best Buy has been one of the most active retailers in this regard. It recently began testing a program in 30 stores that allowed consumers to buy a card with a preset value that could be used to buy downloads to a computer or disc. Scott Young, vice president for digital distribution at Best Buy, said the experiment had had limited success and was under review.

Mr. Hart of Echo said retailers would primarily seek to sell downloads over their Web sites that consumers could call up from their homes. But as well as selling digital downloads, partners of Echo are likely to explore several options, including the use of store kiosks where consumers can make personalized compact discs.

Such a venture, like any in the digital music world, is fraught with risk. In 1999, Sony Music Entertainment tried a similar strategy but consumers did not respond, analysts said.

There are, of course, other problems facing distributors and retailers, most notably acquiring the rights to distribute whole catalogs of music online. The music companies faced that issue early on, when starting their own Web sites. Competing companies declined to offer all their music on both PressPlay, a joint venture of Sony Music and Universal Music, and MusicNet, which was formed by Warner Music, EMI and BMG. It took months for them to begin sharing music, leaving consumers disillusioned and frustrated.

For all of these ventures, companies will still have to grapple with why consumers would pay for music they can easily get free. One major retailer, according to a music executive, has suggested to several recording companies that it might put a cap on the price of any compact disc it sold in its stores. Only a store like Wal-Mart would have the strength the pull that off, he added.

"I think the biggest problem is, the industry doesn't know how to get started and take steps where you get an incremental gain," said Phil Leigh, a digital media analyst at Raymond James & Associates in Tampa, Fla. "If compact disc sales continue to drop and there is no increase in online sales, then artists will be mad and your bosses are mad, too. There is an old expression that pioneers are the ones with arrows in their backs. The one thing executives don't get paid for is rocking the boat."

Twilight of the CD? Not if It Can Be Reinvented
By LAURA M. HOLSON

LOS ANGELES

TONIGHT in Manhattan, rock stars, divas and rappers will descend en masse on Madison Square Garden, arriving at the Grammy ceremonies in a parade of glamour and attitude. But the excitement they create will only mask the growing anxiety in the recording industry about the future of its fundamental product, the CD, which is threatened with the same obsolescence that it long ago foisted on the LP and then the tape cassette.

Introduced in the United States 20 years ago, the CD is losing its allure. From 2001 to 2002, some 62.5 million fewer of them were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD.

Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense. In the meantime, the CD will remain the biggest source of revenue for both music retailers and recording companies, who will try to squeeze as much profit as they can out of each and every sale.

As a result, the CD is being rethought, repackaged and, in some cases, repriced.

Experiments to resuscitate this ailing product are growing. In January, Bon Jovi created a compact disc, with eight previously unreleased songs, exclusively for Target stores. Priced at $6.99, it was intended to help bolster sales of other Bon Jovi albums, including the newest, "Bounce."

Best Buy, the No. 1 electronics chain in the country, is selling prepaid cards good for 10 downloads that allow consumers to create compilations to play either on discs or on computers. And last year, the Interscope recording label gave a DVD to the first million buyers of "The Eminem Show" as an incentive to buy the CD.

All this is happening as the economic underpinnings of the CD continue to deterioriate, endangering the music business altogether. With the rising popularity of online music, much of it available free, technology-wise teenagers, the industry's most voracious buyers, can easily use CD-burning technology to make bootleg copies and sell them at school for as little as $1.

Companies are showing signs of cracking. Two industry veterans have recently lost their jobs: Thomas D. Mottola, the head of Sony Music Entertainment, which lost more than $132 million last year; and Jay Boberg, president of MCA Records. The music retailer Wherehouse Entertainment announced in January that it was filing for bankruptcy protection, partly because of lackluster sales. And the EMI Group, based in London, the only major music company that is not a part of a media conglomerate, is struggling with debt and is believed by analysts to be considering merger prospects.

"Large companies tend to wait until they feel pain to act," said Dan Hart, chief executive of Echo, a recently formed consortium of retailers that hope to sell music online. "Now they feel pain."

DOUG MORRIS, chief executive of the Universal Music Group, said: "We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward."

Compact disc sales have slipped for several reasons, not all of them related to piracy or online music swapping. Critics complain that there is a dearth of blockbuster acts these days and that those with hits, like Britney Spears, often have short-lived careers. And with the average price of a compact disc at $14.21, they contend that music is simply too expensive for frequent purchases.

But Hilary B. Rosen, chief executive of the Recording Industry Association of America, countered that a recent study by the association found that only 3 percent of the consumers polled said they were buying less music because prices were too high.

Still, there is no question that other activities are taking up listeners' time, thanks to the growth of electronic games and multichannel cable and satellite television. Perhaps most threatening is the popularity of the DVD, which emerged in the mid-1990's. By 1999, DVD players had gained mass-market appeal, and they now cost as little as $50, about the same price as a portable boom box. In some retail stores, DVD sales have surpassed those of CD's.

"The DVD is moving into the bedrooms of the next generation of young kids," said Gary L. Arnold, senior vice president for entertainment at Best Buy, which announced in January that it was closing 107 stores. The next generation of young people has no affinity for the compact disc. For them, he said, "it's about gaming and PlayStation."

TO thwart online swapping, several music companies, including Sony and Universal, have experimented with copy-protected compact discs, much to the ire of paying consumers, who complain that they cannot listen to some of those discs on their computers. The industry does not use a standard copy-protected format, so consumers do not know what kind of disc they are buying. Fearing a consumer backlash, the industry has slowed down those copy-protection efforts.

Software makers are trying to come up with alternatives that address the needs of both consumers and recording companies. At a recent music conference in Cannes, France, Microsoft said it had developed technology to allow music companies to record two sets of identical songs on a compact disc, one that could be played on a home or car stereo and the other, called second session, that could be copied to a personal computer. The second-session songs would have limitations, perhaps barring consumers from sharing files or copying songs onto another disc.

Recording companies probably placed too much hope on super audio CD's, which are said to have superior sound compared with regular CD's. The technology, introduced two years ago, has not taken off because super audio CD's cost nearly four times as much to buy as regular CD's -- and they require a special machine to experience the full impact.

And super audios, championed by Sony and Philips, are not alone in offering sound quality that surpasses that of the typical CD: a dueling new technology in DVD audio, supported by Panasonic and Pioneer, is setting up a battle reminiscent of the VHS-Betamax wars.

Until all these new technologies are sorted out, recording companies and retailers are betting on promotions and marketing deals to increase sales. Bruce Kirkland, a member of Bon Jovi's management team, said the album that Bon Jovi put together for Target had also increased sales of the "Bounce" album in its stores. In the first week of the promotion, Target's share of the market for "Bounce" for all retail stores jumped to 26.1 percent from 15.9 percent, he said.

"I think the onus is on the retailers to take care of this because the recording companies always shoot themselves in the foot," Mr. Kirkland said.

Mr. Arnold of Best Buy said he believed that DVD's could well replace the CD in the future because they play not only music but also video images. In the last 12 months, sales of DVD's have surpassed those of compact discs at Best Buy, he said.

But before they can become a new industry standard, he added, they will have to more adeptly meld music and video.

MUSIC distributors and retailers, battered by the slump in compact disc sales, are embarking on their own efforts to give consumers more and easily accessible music. Last month, six music retailers, including major outlets like Best Buy, Wherehouse and Tower Records, said they would form the Echo consortium to sell music on the Internet through their retail Web sites. As recently as a year ago, that would have been unthinkable, as retailers and music companies were at odds about how best to tackle online distribution.

In another joint effort, Anderson Merchandisers, one of the largest magazine and music distributors in the United States, bought technology from Liquid Audio, an online music pioneer that distributes 350,000 songs through retailers, in the hope of exploiting the growth in digital music.

"It has not been the norm that retailers should be the ones helping us rethink our business," said John Esposito, president of United States distribution for the Warner Music Group. "But retailers are telling us the current model does not work."

Best Buy has been one of the most active retailers in this regard. It recently began testing a program in 30 stores that allowed consumers to buy a card with a preset value that could be used to buy downloads to a computer or disc. Scott Young, vice president for digital distribution at Best Buy, said the experiment had had limited success and was under review.

Mr. Hart of Echo said retailers would primarily seek to sell downloads over their Web sites that consumers could call up from their homes. But as well as selling digital downloads, partners of Echo are likely to explore several options, including the use of store kiosks where consumers can make personalized compact discs.

Such a venture, like any in the digital music world, is fraught with risk. In 1999, Sony Music Entertainment tried a similar strategy but consumers did not respond, analysts said.

There are, of course, other problems facing distributors and retailers, most notably acquiring the rights to distribute whole catalogs of music online. The music companies faced that issue early on, when starting their own Web sites. Competing companies declined to offer all their music on both PressPlay, a joint venture of Sony Music and Universal Music, and MusicNet, which was formed by Warner Music, EMI and BMG. It took months for them to begin sharing music, leaving consumers disillusioned and frustrated.

For all of these ventures, companies will still have to grapple with why consumers would pay for music they can easily get free. One major retailer, according to a music executive, has suggested to several recording companies that it might put a cap on the price of any compact disc it sold in its stores. Only a store like Wal-Mart would have the strength the pull that off, he added.

"I think the biggest problem is, the industry doesn't know how to get started and take steps where you get an incremental gain," said Phil Leigh, a digital media analyst at Raymond James & Associates in Tampa, Fla. "If compact disc sales continue to drop and there is no increase in online sales, then artists will be mad and your bosses are mad, too. There is an old expression that pioneers are the ones with arrows in their backs. The one thing executives don't get paid for is rocking the boat."

Twilight of the CD? Not if It Can Be Reinvented
By LAURA M. HOLSON

LOS ANGELES

TONIGHT in Manhattan, rock stars, divas and rappers will descend en masse on Madison Square Garden, arriving at the Grammy ceremonies in a parade of glamour and attitude. But the excitement they create will only mask the growing anxiety in the recording industry about the future of its fundamental product, the CD, which is threatened with the same obsolescence that it long ago foisted on the LP and then the tape cassette.

Introduced in the United States 20 years ago, the CD is losing its allure. From 2001 to 2002, some 62.5 million fewer of them were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD.

Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense. In the meantime, the CD will remain the biggest source of revenue for both music retailers and recording companies, who will try to squeeze as much profit as they can out of each and every sale.

As a result, the CD is being rethought, repackaged and, in some cases, repriced.

Experiments to resuscitate this ailing product are growing. In January, Bon Jovi created a compact disc, with eight previously unreleased songs, exclusively for Target stores. Priced at $6.99, it was intended to help bolster sales of other Bon Jovi albums, including the newest, "Bounce."

Best Buy, the No. 1 electronics chain in the country, is selling prepaid cards good for 10 downloads that allow consumers to create compilations to play either on discs or on computers. And last year, the Interscope recording label gave a DVD to the first million buyers of "The Eminem Show" as an incentive to buy the CD.

All this is happening as the economic underpinnings of the CD continue to deterioriate, endangering the music business altogether. With the rising popularity of online music, much of it available free, technology-wise teenagers, the industry's most voracious buyers, can easily use CD-burning technology to make bootleg copies and sell them at school for as little as $1.

Companies are showing signs of cracking. Two industry veterans have recently lost their jobs: Thomas D. Mottola, the head of Sony Music Entertainment, which lost more than $132 million last year; and Jay Boberg, president of MCA Records. The music retailer Wherehouse Entertainment announced in January that it was filing for bankruptcy protection, partly because of lackluster sales. And the EMI Group, based in London, the only major music company that is not a part of a media conglomerate, is struggling with debt and is believed by analysts to be considering merger prospects.

"Large companies tend to wait until they feel pain to act," said Dan Hart, chief executive of Echo, a recently formed consortium of retailers that hope to sell music online. "Now they feel pain."

DOUG MORRIS, chief executive of the Universal Music Group, said: "We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward."

Compact disc sales have slipped for several reasons, not all of them related to piracy or online music swapping. Critics complain that there is a dearth of blockbuster acts these days and that those with hits, like Britney Spears, often have short-lived careers. And with the average price of a compact disc at $14.21, they contend that music is simply too expensive for frequent purchases.

But Hilary B. Rosen, chief executive of the Recording Industry Association of America, countered that a recent study by the association found that only 3 percent of the consumers polled said they were buying less music because prices were too high.

Still, there is no question that other activities are taking up listeners' time, thanks to the growth of electronic games and multichannel cable and satellite television. Perhaps most threatening is the popularity of the DVD, which emerged in the mid-1990's. By 1999, DVD players had gained mass-market appeal, and they now cost as little as $50, about the same price as a portable boom box. In some retail stores, DVD sales have surpassed those of CD's.

"The DVD is moving into the bedrooms of the next generation of young kids," said Gary L. Arnold, senior vice president for entertainment at Best Buy, which announced in January that it was closing 107 stores. The next generation of young people has no affinity for the compact disc. For them, he said, "it's about gaming and PlayStation."

TO thwart online swapping, several music companies, including Sony and Universal, have experimented with copy-protected compact discs, much to the ire of paying consumers, who complain that they cannot listen to some of those discs on their computers. The industry does not use a standard copy-protected format, so consumers do not know what kind of disc they are buying. Fearing a consumer backlash, the industry has slowed down those copy-protection efforts.

Software makers are trying to come up with alternatives that address the needs of both consumers and recording companies. At a recent music conference in Cannes, France, Microsoft said it had developed technology to allow music companies to record two sets of identical songs on a compact disc, one that could be played on a home or car stereo and the other, called second session, that could be copied to a personal computer. The second-session songs would have limitations, perhaps barring consumers from sharing files or copying songs onto another disc.

Recording companies probably placed too much hope on super audio CD's, which are said to have superior sound compared with regular CD's. The technology, introduced two years ago, has not taken off because super audio CD's cost nearly four times as much to buy as regular CD's -- and they require a special machine to experience the full impact.

And super audios, championed by Sony and Philips, are not alone in offering sound quality that surpasses that of the typical CD: a dueling new technology in DVD audio, supported by Panasonic and Pioneer, is setting up a battle reminiscent of the VHS-Betamax wars.

Until all these new technologies are sorted out, recording companies and retailers are betting on promotions and marketing deals to increase sales. Bruce Kirkland, a member of Bon Jovi's management team, said the album that Bon Jovi put together for Target had also increased sales of the "Bounce" album in its stores. In the first week of the promotion, Target's share of the market for "Bounce" for all retail stores jumped to 26.1 percent from 15.9 percent, he said.

"I think the onus is on the retailers to take care of this because the recording companies always shoot themselves in the foot," Mr. Kirkland said.

Mr. Arnold of Best Buy said he believed that DVD's could well replace the CD in the future because they play not only music but also video images. In the last 12 months, sales of DVD's have surpassed those of compact discs at Best Buy, he said.

But before they can become a new industry standard, he added, they will have to more adeptly meld music and video.

MUSIC distributors and retailers, battered by the slump in compact disc sales, are embarking on their own efforts to give consumers more and easily accessible music. Last month, six music retailers, including major outlets like Best Buy, Wherehouse and Tower Records, said they would form the Echo consortium to sell music on the Internet through their retail Web sites. As recently as a year ago, that would have been unthinkable, as retailers and music companies were at odds about how best to tackle online distribution.

In another joint effort, Anderson Merchandisers, one of the largest magazine and music distributors in the United States, bought technology from Liquid Audio, an online music pioneer that distributes 350,000 songs through retailers, in the hope of exploiting the growth in digital music.

"It has not been the norm that retailers should be the ones helping us rethink our business," said John Esposito, president of United States distribution for the Warner Music Group. "But retailers are telling us the current model does not work."

Best Buy has been one of the most active retailers in this regard. It recently began testing a program in 30 stores that allowed consumers to buy a card with a preset value that could be used to buy downloads to a computer or disc. Scott Young, vice president for digital distribution at Best Buy, said the experiment had had limited success and was under review.

Mr. Hart of Echo said retailers would primarily seek to sell downloads over their Web sites that consumers could call up from their homes. But as well as selling digital downloads, partners of Echo are likely to explore several options, including the use of store kiosks where consumers can make personalized compact discs.

Such a venture, like any in the digital music world, is fraught with risk. In 1999, Sony Music Entertainment tried a similar strategy but consumers did not respond, analysts said.

There are, of course, other problems facing distributors and retailers, most notably acquiring the rights to distribute whole catalogs of music online. The music companies faced that issue early on, when starting their own Web sites. Competing companies declined to offer all their music on both PressPlay, a joint venture of Sony Music and Universal Music, and MusicNet, which was formed by Warner Music, EMI and BMG. It took months for them to begin sharing music, leaving consumers disillusioned and frustrated.

For all of these ventures, companies will still have to grapple with why consumers would pay for music they can easily get free. One major retailer, according to a music executive, has suggested to several recording companies that it might put a cap on the price of any compact disc it sold in its stores. Only a store like Wal-Mart would have the strength the pull that off, he added.

"I think the biggest problem is, the industry doesn't know how to get started and take steps where you get an incremental gain," said Phil Leigh, a digital media analyst at Raymond James & Associates in Tampa, Fla. "If compact disc sales continue to drop and there is no increase in online sales, then artists will be mad and your bosses are mad, too. There is an old expression that pioneers are the ones with arrows in their backs. The one thing executives don't get paid for is rocking the boat."

I have been a fan of Square and Enix for many, many years. I still remember playing the very first Dragon Warrior (or, as the Japanese call it, "Dragon Quest") game on my Nintendo Entertainment System, not to mention Final Fantasy I, II, III, IV (which Americans know as "Final Fantasy II"), V, VI (which Americans know as "Final Fantasy III"), VII, VIII, IX, and X! Have you seen Final Fantasy XI yet? It's outstanding.

• IGN PS2: Square and Enix to merge
• CBS Marketwatch: Square, Enix to merge next year
• Games Asylum: Square and Enix, up a tree
• Ferrago: Square and Enix to merge
• Mainichi Shimbun (in Japan) : Dark age forces role-playing giants to join forces
• IGN GameCube: Square and Enix to merge

Microsoft ruling sparks late rally
MS closed at 53 even.

Kmart asked the court to overrule Microsoft's objection, saying the licenses the software maker referred to were not part of the sale. Kmart said the sale included one server license and 25 desktop licenses it bought from Microsoft.

It sounds like Kmart and Microsoft agree about what Kmart can or cannot do with the licenses and that it was merely a case of KMart not specifying that the licenses being talked about were not part of the sale.

I had to see if I could find something more recent from him after getting this info. I'll have to read some more, but this seemed pretty recent. An interview video. I didn't want to download RealPlayer just to view this, but there were some interesting tidbits here. For instance he has a new book coming out in December.

Courtesy of the NYT Random Login Generator, here is the article:

[Original Source: http://www.nytimes.com/2002/09/27/technology/27FRE E.html

New Software Quietly Diverts Sales Commissions
By JOHN SCHWARTZ and BOB TEDESCHI

Some popular online services are using a new kind of software to divert sales commissions that would otherwise be paid to small online merchants by big sites like Amazon and eToys.

Critics call the software parasite-ware and stealware. But the sites that use the software, which is made by nearly 20 companies and used by dozens, say that it is perfectly legal, because their users agree to the diversion.

The amounts involved are estimated by those in the industry to have mounted into the hundreds of thousands of dollars and are likely to continue to grow -- in part because most users are unaware that the software is operating on their computers.

There is no cost to the customer, but those who run small Web sites that funnel sales to the big merchants say that they are being hurt. "It's painful when someone walks in and takes sales right from under me," said Shawn Collins, who runs a number of sites that feed customers to Amazon and other merchants. "I probably saw a drop-off of 30 percent in income for the past six months."

The diversion begins when consumers get software from the Internet that helps them swap music or other files, or find bargains online. As they install the software, they are asked whether they would also like to show support for the software maker by shopping through an online affiliate program. These programs typically give a percentage of each purchase back to the affiliate -- in this case, the software maker -- as a commission.

What the consumers are not told clearly is that if they agree to participate, their computers may be electronically marked: all future purchases will look as if they were made through the software maker's site, even if they were not.

In many versions of the software, a purchase will look as if it was made through the software maker's site even if the shopper came in through another site that has its own affiliate agreement with the online store in question. Those affiliate sites include small businesses and even charities that use affiliate links as fund-raisers.

Some version of the diversion software is used by some of the most popular music trading sites that have tried to fill the void left by the collapse of Napster, including Morpheus, Kazaa and LimeWire. The companies say their software has been downloaded by tens of millions of Web surfers.

Although estimates are hard to come by, those in the business say that the amount of money involved could be large. The affiliate market, in which smaller sites funnel sales to larger ones in return for commissions, accounts for roughly 15 to 20 percent of the estimated $72 billion online market, said Carrie Johnson, an analyst with Forrester Research. A successful affiliate Web site can make $60,000 a month from referrals alone, said Haiko De Poel Jr., chief executive of Abestweb, an online forum devoted to affiliate marketing. He has organized owners of sites to fight Morpheus and others.

A spokeswoman for Amazon, which has 800,000 affiliate sites feeding it customers, said the company worked to protect those sites from hijacking. "We don't allow sites that use a download or a tool to redirect a shopping session to their account if they do not initiate the shopping session," said the spokeswoman, Patty Smith. "We've kicked out a number of sites for doing that."

Last week, Amazon cut off affiliate payments to Morpheus, one site that employs the shopping software, said an online executive. Coldwater Creek, an online clothing store, has also blocked Morpheus.

Some companies that make and use the diversion software said they were rewriting the programs so that they would no longer take money intended for others. But these changes may not affect copies of the software already installed on millions of computers. "We're not interested in stealing any Web site's revenue," said Greg Bildson, chief operating officer for LimeWire. "We know that this is sort of a new and sort of strange area, but we're interested in doing the right thing." He referred calls to TopMoxie, the maker of the software that LimeWire uses to get affiliate money.

Patrick Toland, a vice president for sales and marketing at TopMoxie, said that the company did not intend for its software to displace other affiliates' rights and that his company had altered the software in the last two weeks to stop substituting its affiliate identification code for those of other sites. "The second we realized this is a problem, we turned that boat around and said, `Let's get this out,' " he said. He added that the amount of money involved was minuscule.

Mr. Toland attributed the losses that the Web sites claimed to a tougher marketplace for small players.

Morpheus referred inquiries to Wurld Media, which operates its shopping rebates program. Kirk H. Feathers, the chief technical officer of Wurld Media, said that it had been wrongly accused of stealing and that the company would readily go to court to defend itself.

He acknowledged that an earlier version of the company's software did divert commissions away from other affiliate sites but said that new versions dealt with that situation. Now, the company said, the softwareoffers a choice to the consumer before each purchase: whether to give the commission to the affiliate or to himself in the form of a rebate, with a portion of the rebate going to Morpheus. The software does not misrepresent the user's computer to sellers' sites, Mr. Feathers said.

Arguments that the diversions are somehow the fault of an unintentional flaw do not persuade Erik Petersen, the chief technical officer at an Internet security company, Polar Cove, in Providence, R.I. Mr. Petersen said that he had received complaints about TopMoxie and LimeWire from friends and took a closer look. After conducting a detailed analysis of the software, he concluded that the TopMoxie program was intricately designed to substitute its affiliate identification code for that of other sites as transactions were made. He said that the program remained on the computer even if the user removed the original LimeWire music sharing software. "I don't buy their explanation," he said. "What kind of accident is that?"

Mr. Petersen also pointed to a statement made in an online forum where the technology was discussed, in which a LimeWire developer characterized accusations that the software diverts money as "pretty accurate," but said, "While I agree that this is really a bit of a scam, it is a way for us to pay salaries while not adversely affecting our users."

A chief executive of one software company was similarly unapologetic about the diversion of commissions. "We look at affiliates as competitors," said Avi Naider, the chief executive of WhenU.com, which makes the diversion software used by the music swapping services Kazaa and BearShare. The software, he said, provides services to users and money to each company "so it doesn't have to charge" for the currently free software and services.

The companies also argue that consumers give consent to the terms of the contract when they download the software, whether they read the agreement carefully or not. An expert in online consumer protection said the companies had a point. In the case of the LimeWire agreement, for example, "there does seem to be some indication to the user of what's going on," said David Medine, a Washington lawyer and former Federal Trade Commission official.

Mr. Medine said that he was, however, uncomfortable with the degree of disclosure. "The question is whether the quality of the notice is as good as it could be," he said. "They don't tell you that it's interfering with other business relationships."

Jeff Pullen, the president of Commission Junction, a company that helps link affiliates with Web sites, said that he was not inclined to cut off companies that divert commissions if the customer has agreed to the diversion. "The tactics that they use, maybe they're on the edge," he said. "Maybe, personally, I don't find them particularly attractive. But if they aren't illegal, it's hard for me to point to my public service agreement and say, `I have a reason to kick you off my network.' "

Still, other online merchants are taking action after being confronted by angry affiliates -- and they find that they are dealing with a moving target. TigerDirect, an online computer and electronics store, blocked Morpheus from its program earlier this year after discovering that the company was diverting online commissions. "I obviously thought it wasn't honorable," said Andy Rodriguez, the company's manager of affiliate marketing. "They said, `It's our right.' I said, `It's our right to remove you.' "

Morpheus changed its software, Mr. Rodriguez said, but a few weeks ago TigerDirect noticed that sales through Morpheus were "going through the roof" at the same time that many affiliates were complaining of a drop in commissions. So he blocked them again. "Guys at Morphus wanted a piece of the pie for each of our sales," he said. "I'm sorry. Absolutely not.

The diversion programs have made life difficult for affiliate marketers in the last year, said Steve Messer, chief executive of LinkShare, a company that runs a major affiliate network. But he sees a silver lining. "It's showed affiliate marketing has come of age," Mr. Messer said. "If you look at it, the volume of transactions passing through LinkShare's affiliate marketing got so big that when affiliates get upset, the largest merchants in the world react. If it's just a few dollars, nobody would've noticed."

LinkShare is working with other companies in their market to come up with industry standards to govern ethical practices in online advertising, Mr. Messer said. "For some people, WWW stands for the Wild, Wild West," he said. "Hopefully, that's coming to an end."

A Software Cleanup

Computer users who want to remove shopping software from their machines can do so in a few steps. Instructions for removing three of the most common programs:

BUYERSPORT - The shopping software with Morpheus:

Click the Start button.

Click on Find.

Click on Find Files or Folders.

Type in mbho.dll. Click on find now. When the file appears in the directory window, drag mbho.dll into the trash.

LIMESHOP - The software with LimeWire:

Click the Start button.

Click on Settings.

Click Control Panel.

Double-click Add/Remove Programs.

Click LimeShop.

Click Add/Remove.

SAVENOW - The software used by Kazaa:

Click on Start.

Click Settings.

Click on Control Panel.

Double-click on Add/Remove Programs.

Click SaveNow.

Click on Add/Remove

I wonder if this announcement will offset the news that they've become one of the latest corporations to come under review for shady accounting practices.

... here and here.

While I was merely poking fun at WCOM's spin doctors and their attempt to mask what appears to be massive fraud as innocent error, it appears you took me too seriously.

So I'll return the favor. In answer to your question -- as a matter of fact...

Reuters Business Report: WorldCom Shares Sink After Fraud Report

Dow Jones Business News: CNBC sources report "massive fraud" at Worldcom

CBS Marketwatch: WorldCom fraud shreds stock.

...yes. All reports from last night, within an hour of the release.

Take a look at the complete absence of any relationship between Noam Chomsky's rhetoric and what anyone can see for him or herself in the business press every day.

His anecdotal profiles of geeks who were not nearly as smart as they thought they were

Employees were obsessed with their stock holdings and with Amazon's almost desperate efforts to expand into new realms to justify the fanatic faith of early Net-believers.

Inflated financials

Interesting how you're ignoring the fact that they adjusted their net income upwards to the benefit of $1.3 million over three years. link and another

Enjoy your game of turok, and I hope you get over your bitterness at TDFX death soon.

Idiot. It's a press release.

The link was to moneycentral. You can find the same article at Yahoo!, CBS Marketwatch, ClearStation and any other financial news site you care to read.

This must be their new business plan to recover from their 54 billion dollar loss from last quarter. I guess classic business models don't work anymore; have to accuse millions of a crime that doesn't exist.
"It's not our fault we lost 54 billion! They didn't watch the commercials!!!"

IBM and Hitachi are *merging* their disk business so that IBM gets a 30% stake (and Hitachi, 70%). The story's comment "They plan to sell 70% of the their HD business to Hitachi." seems incorrect to me; IBM is simply estimating that its current disk business is worth 30% of the joint disk business. Also, note that Hitachi has a very strong storage systems business HDS (right behind EMC) that is very profitable (also resold by SUN as Storedge9900 series datacenter/enterprise storage products, I believe), so big blue may have merged their disk business with a view to ensuring future profitability in the overall storage space.

Well, I was actually referring to the articles in the Wall Street Journal that said Newspapers were dramatically cutting newsprint usage. The Myth of Paperless Office is using data from before the market correction. If I recall, they used paper consumption studies from 1999.

They reported the results of a boom cycle. We are now in a cost cutting cycle. Paper producers (IP) have reported slowing sales in a slowing economy.

Considering the major changes in the economy, it is likely that this book hit the market at the peak of the per capita paper consumption curve.

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."