Tech executives plan for economic troubles ahead

As consumers continue to take hits from rising gas and food prices, credit crunches and housing troubles, tech executives plan for more economic troubles ahead:

http://www.reuters.com/article/Technology08/idUSN2254961420080523

By Peter Henderson

NEW YORK (Reuters) - Technology executives around the world are preparing for economic troubles to deepen.

Many hope that their products will prove indispensable for customers and see emerging economies as sure-growth markets.

But low- and middle-income consumers in the United States are struggling, and the relative strength of U.S. corporations may not last, executives said at the Reuters Global Technology, Media and Telecoms Summit in Tokyo, Paris and New York this week.

Virgin Mobile USA Inc (VM.N: Quote, Profile, Research), the prepaid mobile phone service company, expects economic problems to last into the first half of next year for its mostly young customers.

Oil -- and gasoline -- prices keep breaking records, groceries are taking larger chunks of paychecks, and the mortgage crisis is still shuddering through the U.S. economy. That is especially difficult for low- and middle-income groups, said Virgin Mobile USA Chief Executive Dan Schulman.

"People are really and truly trying to make ends meet at the end of the month," he said. "There are debts to be paid."

Far beyond Main Street, the Wall Street banks and other financial titans will need room to raise new funds, since credit is tight, said Rick Simonson, chief financial officer of cell phone maker Nokia Oyj (NOK1V.HE: Quote, Profile, Research).

"It seems since last summer people have been trying to call the bottom for financials. It seems they haven't quite been found yet in terms of the restructuring and the capital raising that has to go on there," he said. Continued...

And even those who see a relatively strong corporate America still investing in products to cut risks or improve efficiency are girding for tougher times.

"If you read some of the written stuff, you would've expected that the U.S. basically spent absolutely no money in technology, and that is absolutely not true," said John Chen, chief executive of software maker Sybase Inc (SY.N: Quote, Profile, Research).

But he is not planning on an economic revival in the second half of the year. "I have to prepare. When I run a business I have to assume that it's not going to be pretty," he said.

Fujitsu Ltd (6702.T: Quote, Profile, Research) Senior Executive Vice President Chiaki Ito said he was concerned that the costs of absorbing the crisis in subprime mortgages -- the risky home loans that have gone bust for many U.S. and U.K. lenders -- could divert government funds usually spent on technology.

"I am extremely worried about the indirect effects of the subprime problem," he said. Meanwhile, manufacturing faces risks from rising food and fuel costs. "If costs go up, this could trigger a recession," he added.

The case of nerves has spread to many customers, executives agreed. "Most of the presidents (I've spoken to) have expressed concerns," said Tadahito Yamamoto, president of Fuji Xerox, the office equipment unit of Fujifilm Holdings Corp (4901.T: Quote, Profile, Research).

EMERGING GROWTH

Hope -- and success so far -- for many companies is based on smaller economies that are increasingly investing at home.

U.S. companies with wide international exposure like International Business Machines Corp (IBM.N: Quote, Profile, Research) have benefited from stronger economies and a weak dollar. Big Blue says that infrastructure projects in the developing world are key.
"If I were in a business model where I needed double-digit growth out of the G7 to drive my performance, I would be in a cold sweat," said IBM Chief Financial Officer Mark Loughridge, referring to the Group of Seven nations.

But Loughridge said an economic tremor in such big, advanced economies would not necessarily be felt by emerging ones. "I personally see less kind of linkage, dependency between the established markets and the high-growth markets," he argued.

Indeed, telecoms company Telstra Corp Ltd (TLS.AX: Quote, Profile, Research) said the Australian economy was booming. "They can't hire enough people," Chief Executive Sol Trujillo said.

In addition, many technology executives cling firmly to the belief that their products are must-haves -- whether they are cell phones that are kept when home phones are canceled, software to make vast computer "server farms" handle more work with less energy, or services to fend off vicious new attacks from hackers who are trying to steal money rather than just make trouble.

"We've seen no slowdown economically in IT (information technology) spending related to security. It's been a nice opportunity," said Dave Dewalt, chief executive of McAfee Inc (MFE.N: Quote, Profile, Research). "Am I nervous? Do I read the headlines, too? Yes."

(Additional reporting by Kirby Chien in Tokyo and Tova Cohen and Georgina Prodhan in Paris)

See also News on the Blue Marble

Why gas prices are hitting $4/gallon

NEW YORK (CNNMoney.com) -- It's hard to imagine now, but in 1999 gasoline sold for 90 cents a gallon. How'd we get from there to $4 a gallon?

There is no short answer - many things happened, and together they formed a chain of events from cheap gas to $100 tankfuls.

2004: Demand pressure
One of the most common reasons cited for the price jump is supply and demand - we are using more oil, which accounts for 70% of the price of gas, and finding less of it.

Why we are finding less oil and using more of it is partly a result of the low prices during the 1990s. Those low prices - partly caused by low gas taxes in the U.S. compared to other developed nations - both encouraged rapid consumption domestically (think SUVs) and underinvestment in new production by the world's oil companies.

By the time 2004 rolled around - and developing economies around the globe roared to life - the world was left in a pinch.

"Our demand has skyrocketed, but our ability to supply that demand has stagnated," said Stephen Schork, publisher of the industry newsletter The Schork Report. Gasoline prices topped $2 a gallon for the first time ever in May of 2004, "and we've been off to the races since then," said Schork.

As demand grew and the supply of oil remained relatively flat, the difference between the amount of oil the world could produce and the amount it consumed narrowed. That meant a supply disruption from one place in the world could not be easily covered with spare oil from another part.

2005: The storm
This was illustrated in September 2005, when Hurricane Katrina knocked out a significant chunk of U.S. refining and gasoline prices spiked above $3 a gallon for the first time ever.

"It exposed how little surplus refining capacity we have in the U.S.," said James Crandell, an energy analyst at Lehman Brothers.

A new refinery hasn't been built in the United States in three decades, although capacity at existing refineries has been expanded.

2006: Hot tempers
The lack of spare supply has kept other geopolitical events in the forefront for the last few years. Iran and the spat over its nuclear program dominated the news in early 2006, and combined with Israel's invasion of Lebanon in the summer of that year to cause another spike in gas prices to over $3 a gallon.

Geopolitical events need not be shooting wars to attract attention. Analysts say general resource nationalism since 2004 is partly responsible for high oil prices.

In the past few years, Iran's Mahmoud Ahmadinejad, Russia's Vladimir Putin and Venezuela's Hugo Chavez have all become more bellicose on the world stage - in some cases, seeking a bigger share of the profit from foreign oil firms or threatening to cut off oil supplies if attacked.

Some say the Bush administration's provocation of Iran and Venezuela, coupled with a botched occupation of oil-exporting Iraq, has contributed to the geopolitical tension. But defenders say that, in the long run, the administration's actions will eventually lead to a more democratic - and thus stable - global supply.

2007: Tight supplies
New supplies of oil from non-OPEC countries were supposed to come online in 2007 and ease some of these supply bottlenecks. But problems in Kazakhstan and Russia - as well as sweeping drilling bans in the United States - mean global consumption is growing twice as fast as non-OPEC production.

Analysts say OPEC, which hold two-thirds of the world's oil reserves but sees a global economy humming along despite $130 oil, has little incentive to increase production.

2008: Speculators swarm
Strong demand, tight supplies and a volatile marketplace have attracted the interest of investors - the last main contributor to high prices.

"The speculator has seized upon this opportunity," said Schork. "They have recognized there is something fundamentally flawed in this market."

Since 2003, the number of oil contracts exchanged on the NYMEX has more than doubled, said Schork.

Money flowing into oil - and commodities in general - has been especially sharp over the last 6 months as investors look for good returns amid falling stock prices and an inflation hedge against a falling dollar.

That's helped push oil prices to nearly $130 a barrel and gasoline to an average of nearly $3.80 a gallon - smashing previous records even when adjusting for inflation.

Why do you think gas prices are so high? Post a comment.

Whether this investor influx into the oil market is justified is matter of debate. Some see high oil prices as necessary to boost supply and limit demand.

"You can't just point the finger at speculators," Michael Haigh, head of U.S. commodities research at the investment bank Société Générale, recently told CNNMoney.com "Fundamentally, the markets are where they are supposed to be."

Others are less certain.

"The fundamental picture to us doesn't justify the price," said Lehman's Crandell. "It's kind of suggestive of a bubble."

CNN/Money

see also News on the Blue Marble

If we don't get it right we will simply lose ground

Is anyone listening here?

"McLEAN, VA - The U.S. is its own worst enemy when it comes to the desperately important task of recruiting immigrants as spies, analysts and translators in the war on terror, new Americans are telling intelligence officials. The government's policies raise suspicions and fear in the immigrants' home countries and disturb potential recruits here who might otherwise want to help.



The U.S. knows it needs the help. At the heart of a Friday summit with immigrant groups was a stark reality: The intelligence agencies lack people who can speak the languages that are needed most, such as Arabic, Farsi and Pashtu. More importantly, the agencies lack people with the cultural awareness that enables them to grasp the nuances embedded in dialect, body language and even street graffiti.

At the suburban Virginia summit, not far from the CIA and National Counterterrorism Center, officials gathered more than a dozen representatives of recent immigrant and other ethnic groups to get their recruiting assistance.

"We are going to ask you to open up your communities to us," said Ronald Sanders, an assistant national intelligence director, and the son of an Egyptian immigrant mother.

The officials got an earful in return — about immigration and hiring rules and foreign policies that make life harder in immigrants' old countries. The intelligence agencies' own practices also came under criticism: extraordinary rendition, holding prisoners at Guantanamo Bay in Cuba, harsh interrogation practices that some say amount to torture.

"Basically they've scared people," said Amina Khan, of the Association of Pakistani Professionals and an attorney formerly with the U.S. Energy Department.

Immigrants "have always seen and regarded the United States as a law-abiding country," Khan said in an interview with The Associated Press. "Now we are the only superpower in the entire world. For us, when we hear things like renditions or Guantanamo Bay, which for many is considered outside the letter of the law, there is an element of fear."

Many immigrants come to the United States already fearing the intelligence agencies of their home countries.

A man named Aung, from Myanmar, said his countrymen in the United States are spied on by Myanmar agents.

"Basically by attending this conference I myself am on the list," he said. It will complicate his visits home to see his father, he said, asking that his full name not be used.

"In our culture it is looked down on to be a ... spy," added Humira Noorestani, whose family is from Afghanistan.

Some U.S. policies after the 9/11 terrorist attacks made things worse, said Kareem Shora, of the American-Arab Anti-Discrimination Committee.

"The policy missteps and mistakes tended to alienate the very community they are now trying to approach and work with," Shora said. "The NSA wiretapping, rendition, waterboarding, linking the war in Iraq with the issue of radicalization and the terrorism threat. ... What I ask is that at some point that these conversations address these hard issues."

Even the Japanese-American experience of World War II haunts this conference. Larry Shinagawa, of the University of Maryland's Asian American studies program, said immigrant groups have reason to be suspicious of the government's sudden interest. The government admitted in 2000 after years of denials that census records were used to track down Japanese-Americans by name and address for imprisonment in internment camps during the war.

One major need now is for people who can speak the languages most needed in the anti-terror fight. The children of immigrants, even if they don't grow up speaking their parents' language, can learn it to the required level of proficiency in 16 weeks. It takes people without that cultural heritage about 63 weeks, according to Jean AbiNader, a government cultural trainer with IdeaCom. Inc.

And then there are cultural matters as well. Immigrants and their children don't need to learn these things; they can teach them.

The Department of Homeland Security and the FBI are collaborating on a summer internship program to begin to tap that expertise. Twenty college students are coming to Washington, D.C. for 10 weeks. They will get free Arabic classes in the morning at George Washington University and spend the afternoons working in the agencies' intelligence offices.

"We need these people, their expertise, their understanding of culture, of language. We don't have it today and it is a great deficiency," said Charles Allen, a long time CIA officer who is now the Homeland Security Department's intelligence chief. "This will be an enormous augmentation."

U.S. policies have until recently forbidden recruitment of first-generation Americans who have direct family ties abroad, a practice that began after World War II, despite the fact that many code breakers in that conflict were not born in America, said National Intelligence Director Michael McConnell.

New rules drop that obstacle, he said. Still, the security clearance process can take 12 to 18 months for a citizen without close ties abroad. It can go on for years for children of recent immigrants. McConnell wants to shorten that to 60 days.

The agencies will try to contain the risk of giving people with close foreign associations access to top secret information by increasing the scrutiny that all employees get once they are cleared, a practice known as life cycle monitoring.

McConnell told the meeting of immigrant community leaders that he is increasing sensitivity training for the intelligence agencies' 100,000 employees.

U.S. officials are trying to adjust how they talk about the war on terrorism so as not to alienate Muslims. That adjustment is needed, said Mohammed H. Ali, an imam with a Virginia Muslim community organization.

"I'm concerned about the language used to describe terrorism," he said.

McConnell said he is, too.

"We try not to refer to 'jihad' as something that's bad," McConnell noted, referring to a recent government communications policy.

It's a first and somewhat controversial step toward shaping the language the United States uses to compete with the international messages of al-Qaida. The terror group's messages are increasing: In 2005 it issued about 15 video or audio messages. In 2006, there were 50. In 2007 there were 97. There will probably be even more in 2008, including a fresh message from Osama bin Laden this week.

"We did a good job in the war against Communism. We have not done a halfway decent job of countering the virulence (of al-Qaida) and the message properly," Allen said.

"I never use the term 'global war on terrorism,'" Allen said. "I have never used it publicly, and I don't write it that way either."

"We have so much work to do because countering this ideology is absolutely central to everything that we do. This is our way of countering al-Qaida in the future. If we don't get it right and we don't do the outreach correctly, we will simply lose ground," Allen said.
"
Yahoo News AP

Acting Mexican police chief killed in front of home

Yahoo News: Acting Mexican police chief was killed by gunmen in front of his home in Mexico City Going to hell in a handbasket in another round of violence.

Hizbollah takes over large parts of Beirut

Reuters reports that Hizbollah has taken over large parts of Beirut. Reuters What can be done about this?