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IBM, which expects to unveil better-than-expected quarterly figures, has announced it will spend some of its cash on incentives to encourage some of its largest partners to invest more in training and other areas.

On Wednesday, the company introduced a scheme to help its business partners who are cooperating on its New Enterprise Data Center strategy. The scheme involves incentives for IBM partners to improve their knowledge in three specific areas: virtualization and consolidation; energy efficiency; and business resiliency.

And Mike Bernard, general business and channels marketing leader at IBM, told ZDNet.co.uk that there is also a fourth area under consideration, but not yet announced: information infrastructure.

"Skills in those areas are what's most needed," Bernard said. "From that the clients will benefit as well as the partners."

There are two levels of incentive for training that partners can apply for: general specialty, for which they will receive $25,000, and specialty elite, for which they get $100,000.

Bernard said the scheme was open to any qualifying partner. "There is no qualification other than that they are undertaking work in the chosen areas. They do that and they qualify and they get the money for it," he said.

According to IBM the money is there to invest not only in marketing but in business-development activities, marketing intelligence, investment, and certification training and even personnel salaries. It will also offer access to IBM Labs, use of IBM tools and more sales support, the company said.

Colin Barker

In a fascinating letter from Sequoia Capital to the CEOs of its portfolio companies, Sequoia urges the obvious: be prudent and conserve cash. The counsel is obvious but largely unheeded in the technology industry, as well as throughout our economy: debt equals unhappiness, while profitability equals happiness (and flexibility).

Like every major shift in the environment, this one will offer opportunities as well as risks. JP Morgan was able to buy two great assets as substantial discounts with government assurances, precisely because they played the game frugally while others were more risk seeking...Many companies that thrived post 2001‐2003 were simply "Last Man Standing" in their industry. It doesn't sound all that glamorous, but it was the exact right strategy to deploy at the time.

As a result, Sequoia urges its companies to "(not) spend money until you have to," warning that "access to...capital...may be dramatically impacted" and that the "cost of capital is going way up."

I'm grateful to work for a company that has prudently managed its resources. Our CEO, the former COO of Business Objects, is very frugal and we've never hired in advance of the revenue to support those hires. Consequently, we have most of our venture money in the bank, as well as a profitable business that should get stronger during the downturn.

I've written before about how a recession would benefit open-source buyers, but it's also important to recognize how it benefits the vendors. Open-source vendors are demand-driven: the software is made available for download and customers find you. Alfresco routinely closes six-figure deals over the phone/e-mail in a 60- to 90-day sales cycle. Virtually none of our deals require an on-site visit.

This means we can invest more in our products while simultaneously charging less, which is what customers need in a tightening economy. Get more, pay less. That's the open-source value proposition for this recession-plagued economy. A subscription model helps, too, because it doesn't require the sale of new licenses, as a license-driven model like Microsoft's does. Red Hat could not sell a single new subscription this year and hold revenue steady. That's the power of open source.

But the fundamental premise underlying all of this is to operate one's business in a prudent and profitable manner.

Day after day this week, technology stocks got hammered: the CNET Technology Index, which tracks 66 publicly traded tech companies, dropped for the fourth straight day Thursday to hit its lowest level in more than three years.

Of course, tech stocks were not alone. Just when it seemed like it couldn't go any lower, the Dow Jones Industrial Average on Thursday fell below 9,000 for the first time in five years, and the Nasdaq and S&P 500 indexes all continued to slide.

But tech industry leaders, some of whom had thought their industry might be immune from the financial crisis, are seeing the week as a critical wakeup call. Even the healthiest of companies have seen their stocks being sold en masse. Google, for example, finished trading Thursday at about $329 per share, a new 52-week low and less than half the asking price for a Google share in November 2007.

So CNET contacted more than 20 tech executives, venture capitalists, and industry gurus to ask "How long and how bad this will be for the tech industry, and what should companies do about it?" Not so surprisingly, there was no consensus.

While nearly everyone ... Read more

Along with the economy, chip forecasts are heading south.

Following an outlook about weak chip industry capital spending from market researcher Gartner on Wednesday, iSuppli cut its 2008 IC revenue forecast to 3.5 percent from 4 percent on Thursday.

The memory chip industry is the canary in the coal mine. At least two memory chip manufacturers are on life support right now. Hynix, the world's second largest maker of memory, is trying to scare up cash by seeking buyers for a 36 percent stake in the company. The other ailing memory maker is Qimonda AG. Rumors have been rife that the manufacturing assets of the loss-ridden company will be snapped up.

Hynix and Qimonda won't get any help from the market in the coming months. Gartner said that the oversupply in memory, combined with a slowing consumer market, "gives little hope for an upside until 2010." Semiconductor industry capital spending is forecast to decline 25.7 percent in 2008--this would be the steepest decline since 2002--and another 12.8 percent in 2009, according to the market researcher.

The iSuppli report isn't any brighter. The outlook for memory revenue has been revised downward by 5.8 percentage points for 2008. iSuppli is citing the "credit crisis" as adversely affecting demand.

And let's not forget the Micron surprise on Thursday. The largest maker of memory chips in the U.S. said it would reduce its workforce 15 percent during the next two years. "Selling prices for NAND ... Read more

After cutting executive pay last week, Micron Technology is now paring staff as it scales back flash memory chip production.

On the heels of reporting a $344 million fourth-quarter loss last week--when Micron said it was cutting executive pay 20 percent--the Boise, Idaho-based memory chip maker said Thursday that it was restructuring its memory operations.

Micron will reduce its global workforce by approximately 15 percent during the next two years. Most of the workforce cuts will occur in Boise.

"The combination of declining customer demand and product oversupply in the marketplace has driven selling prices for NAND flash memory significantly below manufacturing costs," Micron said in a statement.

As a result, IM Flash Technologies (IMFT), a joint venture between Micron and Intel, will discontinue the supply of NAND flash memory from Micron's Boise facility. The NAND operation shutdown will reduce IMFT's NAND flash production by approximately 35,000 (200 millimeter) wafers per month, Micron said.

NAND flash is used in flash drives for digital cameras and digital music players as well as solid-state drives.

Micron and Intel have other facilities that make NAND flash, including one in Lehi, Utah.

"Micron is in a strong position relative to our competitors...but we are not immune to the difficult global market conditions that are affecting us all," said Micron CEO Steve Appleton in a statement.

Cash restructuring and other related expenses are anticipated to be approximately $60 million and "next year's cash operating margin benefit is expected to

Intel-backed start-up ZPower may be the first to introduce an alternative to the ubiquitous lithium-ion laptop battery, with a silver-zinc technology the company says will make its debut with a large laptop maker in 2009.

The company promises up to 40 percent more run time than current lithium-ion batteries, and says its batteries are 95 percent recyclable.

ZPower's silver-zinc battery

(Credit: CNET News)

ZPower made the announcement ahead of the Batteries 2008 conference in Nice, France, which began Wednesday, and where ZPower's chief executive, Ross Dueber, will be presenting ZPower's take on silver-zinc technology, also known as silver-oxide.

Silver-zinc batteries were initially developed for aircraft, and were used to power the Apollo spacecraft, as well as finding their way into torpedoes and the U.S. Alfa class submarine.

ZPower has also improved the batteries to be good for more than 200 cycles at full discharge. While this is an improvement over older silver-zinc technology, it is still lower than lithium-ion batteries, which laptop makers say should last for 300 to 500 cycles at full discharge. However, silver-zinc holds a charge longer, so you can use the battery for longer before it needs a recharge.

The lack of lithium and a water-based chemistry means silver-zinc batteries are not susceptible to the inflammability issues that have plagued some lithium-ion batteries, and that caused widespread laptop battery recalls last year, ZPower said.

Due to the high cost of silver, silver-zinc batteries have never come into large-scale consumer use except for ... Read more

The largest hard-disk drive maker is going solid-state. Slowly.

Seagate will enter the market for solid-state drives in 2009, as it slowly embraces a technology that will, in some cases, replace its bread and butter: hard disks.

"Our history is based on rotating magnetic media. But as solid-state comes online, we're embracing this new media type," said Rich Vignes, senior manager of market development at the Scotts Valley, Calif.-based company.

Seagate's first target market will be large enterprise customers. Consumer SSDs from Seagate will come later. The challenge is to convince large enterprise customers that SSDs are safe. Although hard-disk drives have endurance problems of their own, corporate customers must be convinced that a technology as new as solid-state storage is reliable.

"There isn't really a clear way of describing endurance or life expectancy of a solid-state drive. So, we're working on that as an industry standard," through JEDEC, a large standard body, Vignes said.

The presence of large players such as Seagate will allay fears, he believes. "As companies like Seagate start to demonstrate field-proven reliability and endurance in enterprise applications, we'll overcome those (solid-state drive) endurance fears."

Analysts are bullish that, with time, SSDs will catch on. "SSDs offer much better MTBFs (mean time between failures) than HDDs, although the endurance is an issue that has to be addressed," said Gregory Wong, an industry analyst at Forward Insights.

"IT managers tend to be conservative, so the qualification time will be quite long--nine ... Read more

Silicon Valley venture capitalist Ron Conway sent a sobering e-mail on Tuesday to the 130 start-up companies he's invested in: now is the time to hunker down.

Credit: Joi Ito

"You better rely
on your own
proactive action."

-Ron Conway

"In 2000 and 2001, the companies that hunkered the fastest were the companies that survived," said Conway in an interview with CNET News. "Get costs under control; make sure you have plenty of runway."

While that admonition from Conway, a noted investor who over the years has put early money into tech giants like Google and up-and-comers like Digg, was timely, it's hard to imagine that any tech executive who's been paying attention to the news needs to be reminded that rough economic conditions are most definitely ahead.

How bad those conditions will be and how long they'll last is anyone's guess. The CNET Technology Index, which tracks 66 publicly traded tech companies, dropped for the third straight day Wednesday to hit its lowest level in more than three years. Even the healthiest of companies are seeing their stocks being sold en masse. Google, for example, finished trading Wednesday down 2.28 percent to $338.11 per share; that's a new 52-week low and less than half the asking price for a Google share in November 2007

Bad news persists in the overall economy as well, despite continued attempts at government intervention. The Dow, Nasdaq, and S&P 500 indexes all continued to slide Wednesday; the Dow has now dropped 35 percent from its high a year ago.

CNET contacted more than 20 tech executives, venture capitalists, and industry gurus Wednesday to ask "How long and how bad this will be for the tech industry, and what should companies do about it?" Not so surprisingly, there was no consensus. While nearly everyone interviewed is concerned about the economy, their reaction to it and their plans to deal with it are across the map. Experienced investors like Conway and venture capitalist Larry Augustin of Azure Capital Partners are cautious, while some executives (at least in their public comments) are downplaying the risks to their businesses.

Credit: Susan Dove/CNET News

Update on October 9 at 9:00 a.m. with additional comments from Intel and AMD.

Advanced Micro Device's new manufacturing venture may come with some old baggage.

After AMD announced on Tuesday that it would spin off its manufacturing assets to a new company partially owned by the Abu Dhabi government, Intel was quick to warn AMD about patent and cross-licensing concerns.

AMD will own part of the new manufacturing entity, for the time being to be called The Foundry Company, while Advanced Technology Investment Co. (ATIC) will own the rest (55.6 percent) and have equal voting rights with AMD in The Foundry Company. The total investment is expected to come to approximately $8 billion.

Intel-AMD disputes are certainly not new. AMD sued Intel in 2005 alleging antitrust violations. But this time Intel has AMD in its sights.

At the moment, Intel is simply expressing concern about the deal, per the Patent Cross License Agreement between the two companies. (The two chipmakers have cross-licensing agreements that go back to 1976.)

The Agreement, which was signed in 2001 and expires in 2010, has restrictions related to the transfer of licenses and patents.

"We don't know enough yet. We have a lot of questions about how this deal is structured," said Intel spokesman Chuck Mulloy.

"According to the public statements they made in their press releases, they (ATIC) also have 50 percent voting rights. So we need to understand a lot more about it. We just have to ... Read more

Corrected at 8:11 p.m. PDT: See below for details.

Intel has tapped Senator Dianne Feinstein's chief of staff to head its Washington office.

Intel said Wednesday that Peter Cleveland, chief of staff to Senator Dianne Feinstein (D-Calif.) since 2006, will join the company as its new vice president for global public policy and head of the chipmaker's Washington, D.C., office. Cleveland will join Intel immediately after the November 4 presidential election.

"We're spending more energy telling our story," said Tom Waldrop, an Intel spokesperson. Waldrop said that Cleveland is "extremely well connected in Washington."

Prior to his role overseeing Feinstein's office, Cleveland was the senator's legislative director from 2004 to 2006. He has also served as staff to both the Senate Finance and Foreign Relations committees and as a corporate and government relations attorney for a "leading" international law firm, according to Intel. Cleveland holds a law degree from Georgetown University and an undergraduate degree from Columbia University. He is a member of the bar in New York and the District of Columbia.

"Peter Cleveland brings two decades of policy, legislative, regulatory, and legal experience to our Washington office," said Bruce Sewell, Intel senior vice president and general counsel, in a statement.

Intel has a long list of policies that it promotes including communications and broadband, intellectual property and patent reform, and education reform. Intel also has an ongoing challenge to educate Washington about its role in the U.S. economy. Intel ... Read more